Economy/Resources - 131. page

China Youth Daily published an article that reported on the publicly traded State Owned Enterprises (SOEs) that had released their annual reports. By April 16, among 1,725 SOEs, after their nonrecurring profits and losses, 144 of them showed a negative net profit for three consecutive years. The cumulative loss totaled 140 billion yuan. Most of these companies were in the steel, chemical, coal, cement, and glass industries. Half of them incurred losses exceeding hundreds of millions of yuan each year. The report indicated that, out of these 144 “zombie companies,” 122 of them relied on supplemental funding from the government to survive. That total amounted to 30.7 billion yuan (US$4.74 billion) over the past three years. The article reported that, since April 30 is the deadline for filing their annual reports, there will be more zombie companies that have not yet filed. Therefore, the total number of zombie companies could be as high as 270 this year.

Source: China Youth Daily, April 18, 2016
http://finance.youth.cn/finance_gdxw/201604/t20160418_7874215.htm

According to statistics that the China’s Ministry of Water Resources released, over 80 percent of the water from underground wells is unfit to drink. In 2015, the study tested 2,103 wells in the populous plains of China where the underground water resources are well developed, yet heavily polluted. Tests were conducted in shallow underground waters which are susceptible to soil or surface water contamination. The study of the Ministry of Water Resources concluded, “The evaluation showed the overall poor quality of these water resources.”  

Xinhua recently published an article about the salaries that the CEOs of 48 publicly traded State Owned Enterprises (SOEs) received. The analysis pointed out that of the 48 CEOs of publicly traded SOEs, 18 of them saw their salaries drop while four companies saw salaries increase over the rate of 100 percent. The gap between the highest and lowest paid CEOs is six million yuan (US$930,000). The report indicated that the pay rate was directly tied to the financial performance of the company. It further stated that the change in the rate of pay started at the beginning of 2015 following the launch of a salary reform plan. The result appears to be a healthy trend. The next phase is expected to be among the second and third tier of the SOE companies and local SOEs.

Source: Xinhua, April 11, 2016
http://news.xinhuanet.com/fortune/2016-04/11/c_128881758.htm

An article that spread widely on the Internet argued that, without human rights and a system of law, there will be no economic prosperity. Therefore, there is no solution for China’s economic problems.

"A mainstream of belief in finance is that currency is created by credit. "How is credit created? ‘Human rights create a market and the rule of law creates credit.’ The foundation of a market economy is equal exchange. Without human rights how can you and I accomplish an equal exchange?

"Only when the king cannot take over your property at will can he be forced to buy it from you. Then a market economy will exist. If there is a super power, not only will the super power not trade with you equally, but neither will anyone in the market. If the king can just confiscate people’s property at will, why should a person try to work hard to make money? Wouldn’t it be faster if that person just flattered the king so he would confiscate some other people’s money instead? Therefore, without human rights, the order of a market economy will be damaged. People will go after power. They will not use the means of fair competition to make money.

"Human rights creates equal trade; trade creates a market. It is just that equal trade is not enough. If people trade with each other equally, then they can cheat each other equally, too. This will make the cost of trade too high. How can they expand credit? They can’t just rely on conscience; they must also rely on the rule of law. The rule of law can create a modern financial system. China’s financial system is not fully developed. The main reason is it lacks the rule law.

"China’s law system is not just unable to support the modern financial system; it is unable to support even basic credit activities."
 
Source:  Amazon
https://s3.amazonaws.com/letscorp_archive/archives/103240

According to the McKinsey Global Institute, in 2015, China’s debt, including the financial industry’s debt, increased to US$28.2 trillion, or 282 percent of its GDP level. Its debt was US$7.4 trillion in 2007, as reported in a Caijing article.

"In a few years, real estate development, local government’s heavy borrowing, and the rapid expansion of "shadow banks" (institutes that function as banks but without a government permit) have turned China into a country of heavy debt. Most worrisome is that much of the money that is owed will never be paid back. Local governments have taken on so many projects that not only are they unable to pay the interest, but they are also unlikely to give back the original principle that was invested."

Source: Caijing, April 1, 2016
http://blog.caijing.com.cn/expert_article-151640-89838.shtml

People’s Daily reported that, according to the statistics that the State Administration of Foreign Exchange published, in 2015, Chinese citizens spent US$133 trillion using their credit cards in transactions overseas. The foreign countries include Hong Kong, Macau, the U.S., Japan, and Korea. The category that had the largest spending was consumable goods, which accounted for 63 percent or 83.6 trillion while the second largest amount was cash withdrawals, which amounted to 23.1 trillion or 17 percent. The balance of the money, that is, the amount over that 80 percent, was spent on lodging, meals, transportation, education, and other services.

Source: People’s Daily, April 1, 2016
http://finance.people.com.cn/n1/2016/0401/c1004-28242926.html