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Sinchew: Most of the Contractors of “The Belt and Road Initiative” Are Chinese

Major Singapore newspaper Sinchew recently reported that, based on a U.S. think tank study, China’s grand “The Belt and Road Initiative” which pushes infrastructure work across Eurasia has largely contracted out work to Chinese bidders. Among the 34 current projects in Europe and Asia, around 89 percent have been contracted to Chinese construction companies and only 11 percent have been given to contractors from other countries. This dramatic difference made the lofty tone of the Belt and Road Initiative look questionable, especially when China is counting on the Plan to win friends in over 70 countries. International analysts have expressed their concern about this China-centric approach, since more and more countries are rethinking their support for the grand Chinese Plan. Compared to the Chinese way of favoring its own contractors, contracts that the West has funded, typically under the World Bank and the International Monetary Fund (IMF), are more neutral toward the bidders and the grants have been more diversified. The study showed that 41 percent of these grants were given to local contractors, 29 percent went to Chinese contractors, and 30 percent went to a bidder from a third country.

Source: Sinchew, January 25, 2018
http://bit.ly/2rJLUtN

Briefings | | |   Economy/Resources Geo-Strategic Trend Government/Politics

More Fake GDP Numbers Reported in China

Xinhua reported that, recently, the Inner Mongolia Autonomous Region and Tianjin City revised down their 2016 GDP numbers. Inner Mongolia adjusted down its public budget revenue by 26.3 percent, or 53 billion yuan (US$8.5 billion) and industrial added value down by 40 percent, or 290 billion yuan (US$46 billion). Tianjin lowered its Binhai District’s GDP from the previous amount of 1 trillion yuan (US$160 billion) down to 665 billion yuan (US$106 billion), a cut of one-third.

These are the second and third cases in which local governments have revised the 2016 level they reported for GDP. The first to admit reporting an inflated GDP was Liaoning Province in early 2017, when it said that its GDP in 2016 actually went down 23 percent from the 2015 level.

It has long been known that China inflates its GDP. Cheng Xiaonong, a political and economic researcher, provided two reasons why the local governments are now willing to admit faking GDP:

First, Xi Jinping’s administration no longer uses the GDP growth rate to evaluate local officials. The newly appointed officials feel that they don’t have to carry the weight that the incumbent left them because they may not be able to make that fake number anyhow. If they cut down the previous year’s number, they can show a growth in their years.

Second, with a lower GDP, the local government can show the central government that they had less money and can request more financial help from the central government.

Sources:

1. Xinhua, January 21, 2018
http://www.xinhuanet.com/fortune/2018-01/21/c_1122289640.htm
2. Epoch Times, January 20, 2018
http://www.epochtimes.com/gb/18/1/20/n10073822.htm

Briefings | | |   Economy/Resources Government/Politics

Xinhua: Chinese SOEs Are “Big but Not Strong”

According to an article that Xinhua published, in 2002, only 11 Chinese companies made the Fortune Global 500 list, but, in 2017, 115 Chinese companies made the list compared to 132 U.S. companies. Most of the Chinese companies are from the bank, insurance, telecommunication, and electric grid industries while 60 percent of the companies were SOEs (state owned enterprises) and accounted for over 80 percent of the net capital and total income. However the article called these SOEs “big but not strong.” They lacked the ability to be competitive, especially in value creation ability. The article stated that the Chinese companies lagged behind in Internet, information technology, pharmaceutical, automotive, military, semiconductor, and chip industries when compared to the Western companies. Among those 109 Chinese companies on the Global Fortune 500 list, the Return of Asset rate was only 1.65 percent compared to 4.79 percent for the U.S. companies. Chinese SOEs are behind in the high end core technology and the spare parts industry and there are no companies that are even comparable with the Western companies in the pharmaceutical and semi-conductor industries. The article reported that the Chinese SOEs need to make breakthroughs in renovation and resource dependency and to rely less on core product imports while improving on brand position and quality.

Source: Xinhua, January 15, 2018
http://www.xinhuanet.com/politics/2018-01/15/c_1122258015.htm

Briefings | | |   Economy/Resources

Duowei: Another Case of a Local Chinese Government’s GDP Data Fraud

Duowei news reported that, following the three northeastern provinces, another act of “cheating the Party Central Committee” had occurred. In recent days, one of China’s local governments was exposed for committing GDP data fraud. Officials from Inner Mongolia admitted that they had committed massive falsification of financial and economic data. Those responsible had artificially increased the industrial added value in 2016 by 40 percent. The falsified accounts amounted to an addition of 290 billion yuan (US$44.69 billion), which was the equivalent of the total GDP of Inner Mongolia’s capital city Hohhot. On January 7, Chinese media reported that Inner Mongolia, after the financial department’s repeated auditing corrections, had to reduce its income from its public budget in 2016 by 53.0 billion yuan (US$8.16 billion), accounting for 26.3 percent of the total. The industrial added value in 2016 should be reduced by 290 billion yuan, accounting for 40 percent of the industrial added value for the entire region.

Source: Duowei, January 8, 2018
http://news.dwnews.com/china/news/2018-01-08/60034109.html

Briefings | | |   Defense/Military Economy/Resources

CNFOREX: China May Become World’s Largest Natural Gas Importer in 2018

China’s largest online portal for foreign exchange related news, CNFOREX, recently reported that, in 2018, China may surpass Japan to become the world’s largest importer of natural gas. China is currently the world’s largest importer of oil and coal. China is also the third largest natural gas consumer, after the United States and Russia. However, China’s domestic supply cannot meet its consumption needs. Today, around 40 percent of China’s natural gas depends on foreign suppliers. Thomson-Reuters-Eikon data showed that China’s combined pipeline and Liquefied Natural Gas (LNG) imports in 2017 showed a year-over-year increase of 25 percent. In 2017, to remedy air pollution issues, the Chinese government has been pushing hard on the “Coal to Natural Gas Conversion.” If the movement continues, and based on the fact that China surpassed Japan in September and November on natural gas imports, it is reasonable to expect China will become the largest natural gas importer (pipeline and LNG combined) in 2018.

Source: CNFOREX, January 3, 2018
http://www.cnforex.com/news/html/2018/1/3/02cb9e6d56a5d2e49cea5d13dcfd3aa2.html

Briefings | | |   Economy/Resources

RFA Commentary: What It Means When China Limits the Outflow of Currency

Radio Free Asia published a commentary reporting that the State Administration of Foreign Exchange recently issued a notice that, starting January 1, 2018, each year, a Chinese citizen, when in a foreign country, will only be able to withdraw 100,000 yuan (US$15,415) cash using a debit card or credit card that a Chinese bank has issued. They will also be limited to a cash withdrawal of 10,000 yuan (USD$1,541) each day and will be prohibited from using other people’s cards or letting other people borrow their card to withdraw the cash. The article said that the tightened cash policy is an indication that the Chinese economy may appear strong from the outside but it is weak on the inside. The article stated that forcing the “low end” population to leave big cities and to limit the cash flowing out of country, are both indications that China’s political climate is far more serious than what has been reported. The article said, “There was a prediction that the bubble in China’s economy might burst soon. Even though it has not happened yet, it could only be a matter of time and will catch people off guard because some of the real issues are being pushed aside and have still not been resolved.”

Source: Radio Free Asia, January 1, 2018
http://www.rfa.org/cantonese/commentaries/kl/com-01012018081148.html

Briefings | | |   Economy/Resources

SWIFT: RMB Global Presence Sliding Further Down

Well-known Chinese news site Sina recently reported that SWIFT (Society for Worldwide Interbank Financial Telecommunication) mentioned in its October report that the global usage of the Chinese currency continues to decline. The report shows that the volume of RMB international transactions fell to 1.46 percent in October. The RMB is now ranked number seven among all currencies, down from number six in October 2016. This is the lowest point since April 2014. The top three most widely used currencies are the US Dollar (39.79 percent), the Euro (33.05 percent) and the British Pound (7.71 percent). The Chinese RMB is now between the Canadian Dollar (1.60 percent) and the Australian Dollar (1.43 percent). The US Dollar also reached its lowest point since November 2013.

Source: Sina, November 30, 2017
http://finance.sina.com.cn/stock/usstock/c/2017-11-30/doc-ifyphxwa7086317.shtml

Briefings | | |   Economy/Resources

People’s Daily: China Needs More Higher Level “Opening Up”

People’s Daily recently reported that Ning Jizhe, Deputy Director of China’s National Development and Reform Commission, mentioned in a speech that China must raise its level for its “Opening Up” long-term policy. Ning pointed out that the Chinese economic growth is now switching its focus from speed to quality, which calls for more exchange on the technology, capital, talent, management, and information level. Chinese competitiveness must improve to break out of the medium or lower level in the international value chain. China’s sustained growth depends on efficient development of the international market and the strength of innovation. Ning recommended that “Opening Up” on a higher level should include a balance between imports and exports, should encourage and help capable domestic companies to expand their international reach, should connect domestic regional development and international marketing, and should look inland and push more towards the west side of China.

Source: People’s Daily, November 12, 2017
http://finance.people.com.cn/n1/2017/1112/c1004-29640729.html

Briefings | | |   Economy/Resources Government/Politics