Economy/Resources - 135. page

China National Radio (CNR) recently reported that Xing’ang Shoes Industry announced that the Taiwanese capital based company will cease operation starting February 10. Xing’ang is located in Dongguan, Guangdong Province and was founded 13 years ago. The Taiwanese owner of the company, Xing’ang International, is one of the top 10 largest shoe makers in the world. It has over 500 shoe stores across Mainland China. For many years, Dongguan Xing’ang has been a main manufacturer for well-known world class brands like Nike, Prada, and Rockport. According to the company, the direct cause of the close-down was the increase in labor costs. In the past three years the company suffered an annual labor increase rate of 15 percent. Last year, the company saw a profit decline of 50 percent. The company said that its manufacturing capacity is being moved to Southeast Asian countries. 

Source: China National Radio, January 12, 2016

http://finance.cnr.cn/gs/20160112/t20160112_521118309.shtml

Li Wei, head of the Development Research Center of the State Council (DRC), recently expressed the view that it will be "very difficult” for China to maintain a GDP growth rate of 6.5 percent in 2016 because the Chinese economy faces three constraints.

“The first is a tightened external demand from the global market. Since the 2008 financial crisis, although major economies have initiated a series of stimulus measures for economic recovery, … it will still take time to see a new round of high growth. The IMF lowered [its forecast] for the world’s economic growth in 2016 from 3.8 percent to 3.6 percent.

“The second is the kink in the population structure, which results in escalating labor costs. With an aging population and a rapid decline in the active labor force, the competitiveness of Chinese laborers has weakened.

“The last is the pressure on the environment and resources. For a long time, China’s arable lands have been decreasing due to industrialization and urbanization, directly threatening China’s food security. A development model that neglects the cost to the environment cannot last.”

The DRC is a ministerial level government policy research and consulting institution directly under the State Council.

Source: China Securities Journal, January 11, 2016

http://www.cs.com.cn/xwzx/hg/201601/t20160111_4881221.html

People’s Daily recently reported that the Chinese currency, the RMB, underwent a rapid pace of depreciation at the beginning of the new year, which caused a serious disturbance in the investment market. This negative wave impacted many individuals. Subsequently, reporters observed a sharp increase in personal exchange transactions for foreign currencies in banks in major cities like Shanghai and Shenzhen. Since many of the personal transactions occurred online, some banks suffered slowness and even breakdowns of their online systems. Managers of major banks such as the Bank of China, China Merchants Bank, the Industrial & Commercial Bank of China, and the Agricultural Bank of China all told reporters that the flood of customers who were exchanging RMB for U.S. Dollars or Hong Kong Dollars was “scary.” Many banks started to set caps and other restrictions on personal foreign exchange requests. 

Source: People’s Daily, January 8, 2016

http://money.people.com.cn/bank/n1/2016/0108/c202331-28027995.html

China News recently reported that Chinese President Xi Jinping attended an economic development strategy Forum for the Yangtze River Basin. At the Forum, he emphasized that the Yangtze River is the “mother river” of the Chinese civilization and is a key supporting resource for the future developmental roadmap for China’s economy. Xi pointed out that the Yangtze River ecological system repair work must be given an “extremely” high priority and that the “Ecology First, Green Development” strategy should be implemented not only immediately but for a long period of time into the future as well. He asked all provinces and cities along the Yangtze River to focus on “Grand Protection” plans instead of “Grand Development” ones. Xi suggested that China must optimize the urban agglomeration along the River and sort out the current disorderly development of local industries and ports. Top leaders of Shanghai, Jiangsu, Zhejiang, Anhui, Jiangxi, Hubei, Hunan, Chongqing, Sichuan, Guizhou and Yunnan attended the Forum. These are key regions in the Yangtze River ecological system.

Source: China News, January 7, 2016

http://www.chinanews.com/gn/2016/01-07/7706502.shtml

Well-known Chinese financial site Caixin recently released its official Chinese Manufacturing PMI index number for December 2015, which was 48.2. The Caixin PMI was formerly known as HSBC PMI, which was a well-respected economic indicator monitored globally by financial institutions. The new Caixin PMI indicated that the Chinese manufacturing industry has been declining for ten consecutive months. The index showed weakened foreign demand. New export orders shrank, which impacted the overall new business volume for the month. Further analysis demonstrated that domestic demand was declining as well. In December, employers in manufacturing continued to reduce headcounts. In the meantime, manufacturers remained conservative in their procurement activities. However, data showed a lowered average cost across the industry even though the inventory level had a slight increase. PMI (Purchasing Managers Index) is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline. 

Source: Caixin, January 1, 2016

http://pmi.caixin.com/2016-01-04/100895398.html

Well-known Chinese news site Sina recently reported that the government of the United States warned the European Union not to grant Market Economy Status to China. The U.S. cautioned that conferring this Status could damage the effort to prevent China from dumping underpriced goods into the EU and the U.S. markets. Obtaining the Market Economy Status via the World Trade Organization (WTO) is one of China’s core strategic goals. In addition to other ways in which the Chinese side would benefit, it would be much harder for the EU and the U.S. to collect high tariffs on Chinese goods. Among EU members, Germany and Britain are supporters of granting China this Status. However, the majority of the rest of the EU countries, headed by Italy, are strongly against the idea. More and more labor unions and traditional industries such as Iron & steel, ceramics, and textiles support these countries. China argued that China should automatically be granted the Status based on its WTO sign-on agreement. However, many lawyers have observed that the government exercises significant control of the Chinese economy. The EU seems to be leaning towards granting the Status but no final decision has been made.

Source: Sina, December 28, 2105

http://finance.sina.com/gb/economy/sinacn/20151228/08011392247.html

China News recently reported that one of the key 2016 goals set by the Central Economic Work Conference is to absorb the housing market inventory. The Conference clearly pointed out that real estate developers are encouraged to “reasonably” reduce the prices of commercially available assets. In the meantime, the government will discontinue “some outdated” policy constraints. The pricing recommendations are also to allow mergers to happen among real estate developers to improve “industrial concentration” in that market segment. In order to build up a new buyer’s base in the housing market, the central government is relaxing the restrictions that traditionally barred the agricultural population from gaining city resident status. However, the Conference warned that farmers working in industrial sectors in cities may have limited buying power – and they should not be pushed too hard into taking out loans for real estate purchases.

Source: China News, December 21, 2015

http://www.chinanews.com/cj/2015/12-21/7681286.shtml

While the Central Economic Work Conference, which started on December 18, 2015, was underway, the National Development and Reform Commission (NDRC), directly affiliated with the State Council, submitted a report to the central government. The NDRC report noted, "Despite the fact that online stores, courier delivery services, and associated new lines of business have created some jobs, one must not ignore their impact on physical retail stores, which are being replaced." 

While people have been cheering the record setting one-day sale of RMB 91 billion (US$14.05 billion) on November 11 at the Tmall online website, which the Alibaba Group owns, retail outlets for books, clothing, and household appliances have been hit very hard. There are even cases in which retail stores have closed en masse. Some traditional department stores have also lost their appeal. This trend has negatively impacted the employment outlook in areas where it has occurred. 

On the one hand, the commentary did not challenge the claim that Ma Yun (Jack Ma), chairman of the board of the Alibaba Group, made. Ma claimed that Alibaba’s online e-commerce platform has 8.5 million active vendors, who directly created 10 million employment positions and indirectly created 3.5 million more. Ma categorized this group as "online merchants." They include merchants with well-known brands; vendors specializing in channel marketing and logistics; and indirect participants doing outsourcing work in communications, design, and sales. 

On the other hand, the commentary focused on the retail sector, spanning urban communities as well as rural areas. It raised the question about whether those who the e-commerce platform, such as Tmall, has displaced are in any position to get into logistics, manufacturing, or name branding due to such barriers as technology and intellectual property. 

The commentary looked to the government to offer assistance to people losing their retail jobs.

Source: The Economic Observer website, December 21, 2015 

http://www.eeo.com.cn/2015/1221/281974.shtml