Briefings - 397. page

The Central Bank has published recent statistics which show that the rate of personal savings of Chinese residents has dropped. Xinhua reported that in August of 2018, the deposit balance in financial institutions in China increased by 8.3 percent compared to the same period last year. In the past 39 years, the growth rate of the deposit balance of financial institutions has never fallen below 9 percent. Meanwhile the growth of the personal saving rate dropped from 18 percent in 2008 to 7 percent in 2018. According to the article, the reason for the drop in the saving rate was attributable to increases in consumption, to a diversion from savings to wealth investment products and to home purchases.

According to the latest statistics from the National Bureau of Statistics, in the first half of the year, the per capita disposable income was 14,063 yuan (US$2,047), a year over year increase of 6.6 percent, continuing its steady growth since the first quarter, but it is still less than 9.4 percent of the year over year growth in the consumption rate.

Since the beginning of this year, even though the interest rate of wealth investment products has fallen below 5 percent, people still chose to invest because it is nonetheless higher than the rate the bank offers. According to WIND, which provides the statistics for financial data analysis services, at the end of 2017, the size of the money fund assets was 7.1 trillion yuan (US1.03 trillion). Since the beginning of this year, the size of the money fund has been rising, reaching 8.4 trillion yuan in August (US$1.22 trillion).

Buying a home has become another important channel for the placement of resident’s saving. According to the semi-annual reports that a number of banks released this year, the scale of real estate loans from banks is still high. Among 26 listed banks, 19 banks have real estate industry loan balances higher than the same period last year; only 7 bank loan balances have declined. It is dominated by small and medium-sized banks, especially in the third and fourth-tier cities. Down payments and monthly payments quickly consume household savings.

The August financial statistics that the Central Bank released showed that, in August, RMB loans increased by 1.28 trillion yuan (US$186 billion). In terms of sectors, the household sector loans increased by 701.2 billion yuan (US$102 billion), of which short-term loans increased by 259.8 billion yuan (US$37.8 billion) and medium- and long-term loans increased by 4415 million yuan (US$642 million).

The financial expert warned that the risk of decline in the personal savings rate could increase the pressure on the whole society for debt repayment and make it more difficult for the financial system to bear the risk.

Source: Xinhua, October 1, 2018
http://www.xinhuanet.com/fortune/2018-10/01/c_1123512146.htm

Aboluowang published an opinion article titled, “China’s Private Businesses Feel the Squeeze from All Sides.” The translation follows:

As the trade situation between the U.S. and China deteriorates, China’s debate on the role of private and state owned enterprises in the economy has become more intense. Analysts suggest that the debate has even raised concerns about the possibility that the communist government may decide to nationalize private companies.

Under Xi Jinping’s leadership, especially after he abolished restrictions on the term limit of the president, thus allowing him to be in power for life, the party has begun to re-emphasize its leadership at all levels of society, including business.

In June this year, the party announced that it would require all publicly listed companies to set up party organizations. In the past two weeks, with the intensification of tension between Beijing and Washington, articles on the Internet have suggested that private companies should retreat to second line status, and China should move toward a large-scale centralized public-private partnership economy.

In one article, Wu Xiaoping, a senior financial specialist, wrote that the private economy has fulfilled its mission of helping the public economy and should withdraw from the historical arena.

Frank Xie, an associate professor at the University of South Carolina, said that although Wu’s article was strongly opposed, and that even the official media criticized it, the article was not immediately deleted because the government wanted to test public opinion.

Recent remarks that Qiu Xiaoping, the deputy director of the Ministry of Human Resources and Social Resources Protection made, were also slammed. Qiu Xiaoping said that private enterprises should be more democratic and called on the Party to lead workers to manage private enterprises jointly and to share profits with each other.

Last week, however, in Northeast Liaoning, Xi Jinping encouraged private companies to be confident. Xi also promised that the Party will resolutely develop, support, guide and protect the private sector. It is unclear whether his remarks meant that the government would be more involved in private companies.

Lu Suiqi, an associate professor at the School of Economics at Peking University, said, “In the context of the US-China trade war, there are concerns that China’s economy will shrink and that the leaders of the Party may sacrifice private enterprises to support state owned enterprises. Although the government has stated that the development of private enterprises is guaranteed, the guiding position that state owned enterprises enjoy should not change.”

Chinese state owned enterprises have long enjoyed a monopoly in important and lucrative areas. They are also hotbeds of corruption, but even though they have 70 percent of China’s financial resources, they only account for about 30 percent of the economic contribution. Private companies receive less money but create 80 percent of jobs and contribute to 60 percent of economic growth.

Many people in China and abroad believe that the state owned enterprises are dragging China’s economy and are an obstruction to free trade. The U.S. in particular is dissatisfied with Chinese state owned enterprises in terms of trade, but the Party may still expand the scale of state owned enterprises.

“The purpose of either nationalizing private companies or expanding the size of state owned enterprises is to increase (the party’s) control,” said Darson Chiu, a scholar at the Taiwan Economic Research Institute. From China’s perspective, “expanding the size of state owned enterprises will enhance the planned economy and make it easier to avoid risks.”

Frank Xie, however, said that if China takes this path, China and the U.S. will have conflicts because this is contrary to what Trump wants China to do. Xie said, “This will only encourage Trump to continue to the next step and then tax the balance of US$ 267 billion worth of goods.”

The major risks China faces, of course, are not just the trade wars. China’s stock market has fallen to its lowest point in four years, and industrial growth has slowed for four consecutive months.

Its economy is facing many problems, including large scale government and corporate debt, as well as tight liquidity.

Last week, Yu Liang, head of China’s real estate giant Vanke, said at a regular meeting that the main goal of the company now is “to live.”

In the auditorium of Vanke, a red banner with two characters “to live” was hanging on the wall. Yu Liang said that China has reached a turning point and no industry can be immune from a negative a economic impact.

Source: Aboluowang, October 3, 2018
http://www.aboluowang.com/2018/1003/1183080.html