Economy/Resources - 129. page
QQ Finance: The Biggest Secret in China’s Real Estate
Tencent (QQ) Finance published an article revealing the "Biggest Secret in China’s Real Estate." It is that the companies that have recently set records for the price of land purchases are actually State-Owned Enterprises (SOEs). They are doing it just to create the illusion that the real estate market is doing well. The following is from the article.
For example, two companies, China Electric Power Construction Group and Guangzhou Fangrong Real Estate Corporation bid 8.29 billion yuan (U.S. $1.3 billion) to win "A816-0060," a commercial and residential land development project in Longhua district, Shenzhen. The first company is clearly an SOE. After tracing the parent company of Guangzhou Fangrong several levels up, the owner of the second company was found to be China Sinochem, which is also an SOE.
The average purchase price per construction area was 56,781 yuan (U.S. $8,735) per square meter. Excluding general facilities that can’t be sold, it would be over 60,000 yuan per square meter for the sellable construction area. The land is not downtown; it is 12 km (8 miles) away from downtown. Residential buildings in this area currently sell at 50,000 – 75,000 yuan per square meter. It is hard to believe that the developers would be able to make a profit if they bid so high on the price of land.
Then, why would SOEs pay a record high amount to buy land?
The answer is simple. They are just collaborating with the local government to create the illusion that real estate prices will keep going up; they do it to cheat people.
China Times reported this practice back in 2014. "When the market is slow, the local government will ask SOEs to bid a high price for land purchases to create an artificially high market. To the government, the left hand pays the money to the right hand. There is no real gain or loss."
Another trick the government uses is to get a high bidding price but return a substantial amount of money back to the developer later. "Some companies may receive a return of nearly 50 percent of the purchase price. If the land was related to re-developing shantytown, the return might be 80 percent."
Source: Tencent, June 5, 2016
http://finance.qq.com/a/20160605/014662.htm
Google CEO: We Want to Return to China in a Significant Way
NetEase (163.com) reported that, at the Code Conference on June 1, Google CEO Sundar Pichai expressed his interest in Google returning to China. He said that he wanted Google’s return to happen in a significant way, but we’re "being thoughtful about [the return]." "It depends. We are open [to the idea]."
Google closed its search engine in China in 2010. Though Chinese manufacturers are using its Android system, many Google services such as the Play app store are not available in China.
[Editor’s Note: There were reports that Zhou Yongkang and Bo Xilai expelled Google from China as part of a deal they made with Baidu. in exchange Baidu then posted negative information about Xi Jinping and their other political rivals. Recently, Baidu has been under scrutiny from both the government and from netizens for irresponsibly selling forums and search ads.]
Source: NetEase, June 2, 2016
http://tech.163.com/16/0602/10/BOI1V19S00097U7R.html
Caixin: May Manufacturing PMI Showed Continued Slowdown
State Council Introduced a New Research Funding Management Policy
Guangming Daily reported that, on June 1, the State Council introduced a new set of regulations which include a shift in the funding ownership from the central administration to the research institute in order to allow more flexibility in funding management. The policy also increased the allocation in hiring of research staff from 5 percent to 20 percent of the total indirect expense. Prior to this, the central administration and local government introduced a number of policies which were meant to correct the rigid management policy and the repetitive application process, as well as inadequate management of the funding. According to the statistics, from 2006 to 2014, the Ministry of Finance increased the science and technology funding from 1 trillion yuan (US$0.15 trillion) to 2.9 trillion (US$0.44 trillion). The statistics from the Ministry of Statistics suggested that total research and development spent in 2015 was 14 trillion (US$2.13 trillion) where 11 trillion (US$1.67 trillion) came from companies and 3 trillion (US$0.46 trillion) came from a government research institute and from colleges.
Source: Guangming Daily, June 3, 2016
http://edu.gmw.cn/2016-06/03/content_20401516.htm
SASAC to Find solutions for SOEs That Have Financial Trouble
Recently, Xinhua reported on a news conference that the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) held. According to Xinhua, 12 SOEs went through restructuring in 2015. More SOEs will go through the merger and acquisition process in 2016. The article also said that SASAC is determined to spend the next three years finding a solution for 345 SOEs that are in financial trouble. It will also bring down the production volume in the coal mine and steel industries by 10 percent in the next two years. Another proposal to improve the profitability and efficiency of the SOEs is to reduce the number of management levels to no more than 3 or 4 levels while striving for lean and efficient management during the upcoming SOE reforms.
Source: Xinhua, May 23, 2016
http://news.xinhuanet.com/fortune/2016-05/23/c_129006195.htm
Xinhua: Coal Mine Companies in Shanxi Province Are in Serious Financial Trouble
Xinhua reported that, by the end of 2015, seven major coal mine companies in Shanxi Province were carrying 11 trillion yuan (US$1.69 trillion) in debit, an increase of 10.2 percent compared to 2014. Their debt to asset ratio grew from 81.16 percent in 2014 to 82.3 percent in 2015. Meanwhile the operating cash flow dropped from 16 billion yuan (US$2.45 billion) to a negative 4.81 billion yuan (US$.76 billion). The article said that most of the employees were forced to take a pay cuts or were not paid on time. Statistics showed that, by the end of the first three quarters of 2015, the coal companies owed 3.5 billion yuan (US$.54 billion) in pay compensation and 10.9 billion yuan (US$1.67 billion) in social security funding. The human resource report from one of the coal mine companies said that its workers had to take an involuntary or voluntary work force reduction option or relocate to work on different projects. Among the seven coal mine companies, six of them rely on financial support from the government, which has grown 21.5 percent to 5.6 billion yuan (US$.86 billion). According to the statistics from the Ministry of Human Resources and Social Security, among the 1.8 million coal and steel industry workforce to be relocated, 1.3 million of them are coal mine workers.
Source: Xinhua, May 17, 2016
http://news.xinhuanet.com/local/2016-05/17/c_128988204.htm