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China’s Food Security Problem

The Sun, a Hong Kong newspaper, published a commentary stating that food security has become a real threat to China. If the Sino-U.S. relationship went south, the U.S. could use the food weapon and "win over China without a war." 

"For the first time, the first government directive in 2015, titled, ‘The Opinion on Deepening Countryside reforms and Accelerating Agricultural Modernization,’ listed the potato as the fourth staple food for China. In the past, the list included only three staple foods: rice, wheat, and corn."

"At the recent meeting of the Central Financial and Economic Affairs Leading Group, Xi Jinping put food security in a prominent position. It was prior to energy security, which indicated that China’s food problem is more severe than what the outside world thought."  

"The North China Plain is the main production area for wheat, but the production of wheat has been decreasing year by year due to the contamination of underground water. Hunan Province is a main production area for rice, but its rice has become carcinogenic due to heavy metal pollution."

An earlier China Review News article on China’s food problem mentioned four challenges for China’s agriculture industry:
1. High Prices: The prices of major agricultural products in China exceed their international prices.
2. Increasing Costs: The costs of agricultural products keep increasing.
3. "The Yellow Line" for Subsidies: China’s commitment to the WTO means the country can no longer increase its subsidies to the agriculture industry.
4. "Red Light" on the ecological environment: In its agricultural decisions, China has to pay more attention to the ecological environment.

Sources:
1. The Sun Online, February 17, 2015
http://the-sun.on.cc/cnt/china_world/20150217/00674_001.html
2. China Review News, January 27, 2015
http://hk.crntt.com/doc/1035/9/3/0/103593027.html?coluid=151&kindid=11511&docid=103593027&mdate=0127102620

Briefings | | |   Economy/Resources

Xinhua: China’s Luxury Market Is Cooling Down

Xinhua recently reported that, in the year 2014, China’s market in luxury goods saw a one percent decline from 2013. The report was based on Bain & Company’s latest research results. The research showed that the market suffered mainly from the anti-corruption campaign, overseas spending, and the proliferation of counterfeit goods. However, in the meantime, Chinese consumers were responsible for around 30 percent of all luxury spending globally. Chinese buyers combined domestic and overseas spending increased by nine percent. This is the first time in eight years of Bain’s research history that the Chinese domestic market has declined. The decline was seen mainly in the sector of men’s products. The year 2014 also saw the highest number of luxury store closures. For example, Hugo Boss closed seven stores, Ferragamo closed six, Zegna closed six, and Burberry closed four stores. 
Source: Xinhua, February 15, 2015
http://news.xinhuanet.com/fashion/2015-02/15/c_1114367560.htm
Briefings | | |   Economy/Resources

Xinhua: HSBC January Chinese Manufacturing PMI Read Low

Xinhua recently reported that HSBC released its January PMI final number for the Chinese manufacturing sector. The number 49.7 represents the second month in a row that the figure remained below 50. The sub-indicator of employment is 49.5. Many experts suggested that the government may have to adjust its policies, which means possible interest rate cuts in the first quarter or some other similar policies. Some read the new PMI number as a sign of an “unexpected low level of economic activities.” According to Qu Hongbin, HSBC Chief Economist of the Grand China Region, both new domestic orders and export orders are declining. The unemployment number reached a 15 month low. The manufacturing sector is still suffering from a low level of demand. Qu suggested that the government should relax both its currency and its financial policies. PMI is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline.
Source: Xinhua, February 2, 2015 
http://news.xinhuanet.com/fortune/2015-02/02/c_127448257.htm
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Xi Jinping: If a Great Famine Occurs, Money Will Be Useless.

On February 1, 2015, China Gate published two articles on the No. 1 Official Document of 2015, which the Chinese Communist Party (CCP) Central Committee had released. The first article included the original content of the document with the title, “The Release of the CCP Central Committee No.1 Official Document of 2015; One Picture (the Table of Contents) Tells You All.” The second article was an analytical article about the message included in the No. 1 Document. It had the title “Zhongnanhai (the headquarters of the CCP) Is Hiding a Big Problem behind the CCP No.1 Document.” The No.1 Document focused on China’s agriculture issues. Some Chinese scholars told the media that, “Something must be wrong with China’s grain reserves. The CCP Central Committee just does not want to admit it openly. They are hiding the problem.” Actually, Xi Jinping openly expressed his worries about food safety on multiple occasions back in 2013: “If a Great Famine Occurs, Money Will Be Useless.”

Rice, wheat, and corn have been China’s staple food. This year, potatoes will be included as the fourth-largest staple food in China. According to a Chinese scholar, either industry has used up China’s surface water or it is severely polluted. Groundwater is also very limited now. Potato’s production is relatively high and can sustain drought. Using potatoes as a staple food will help to alleviate the food crisis." The article concluded, “Almost all of the downfalls of the dynasties in China’s history started with a Great Famine.”

Source: China Gate, February 1, 2015
http://www.wenxuecity.com/news/2015/02/01/3998139.html 
http://www.wenxuecity.com/news/2015/02/01/3996483.html

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NBD: State Council Pushes Industrial Exports

National Business Daily (NBD), one of the three major comprehensive financial and economic dailies in China, recently reported that the State Council Executive Meeting just passed the decision to push industrial level exports in the areas of railway building, nuclear power plants and construction material assembly lines. The goal is to lift the level of international industrial cooperation and to identify new export growth channels. Chinese Premier Li Keqiang suggested that China should push hard on industrial upgrades and the Chinese exports should expand on the sides of medium and high end large equipment. Also in the plan of the “new international cooperation models” are high speed railways and trains, aviation, and telecommunications. The State Council expressed the belief that, in addition to “product exports” and “capital exports,” it is time for “industrial exports.”
Source: National Business Daily, January 29, 2015
http://www.nbd.com.cn/articles/2015-01-29/894243.html
Briefings | | |   Economy/Resources

Shanghai Gave up Its Official GDP Goal

Well-known Chinese news site Sina recently reported that the City of Shanghai officially announced it was giving up on the 2015 GDP growth goal it had set earlier. This is the first large city in China to stop using GDP as one of the primary indicators to measure its economy. The mayor set a new goal, which is to maintain “stable growth” and to continue with economic optimization and quality improvements. The Chinese GDP growth rate used to be one of the highest in the world. However the rate has been declining in recent years. Chinese President Xi Jinping suggested last year that China cannot continue measuring economic growth simply by looking at GDP numbers. In the past, GDP had become the single most important measurement of the government’s performance. This resulted in a large number of inefficient investments and in the loss of balanced development. The Chinese central government typically announces its GDP goal in March at the National People’s Congress conference.
Source: Sina, January 26, 2014
http://finance.sina.com/gb/wsj-ftchinese/ftchinese/20150126/01461200323.html
Briefings | | |   Economy/Resources

Five Economic Challenges that China Faces

Daily Economic News predicted five macro-economic challenges in 2015; these will come primarily from external pressure and from internal economic drivers losing steam. 

First, an increase in money supply may not be sufficient to help revive businesses. Second, exports continue to decline. Of the economic drivers, exports have been the first to lose power. Third, as banks tighten credit, the demand for credit will be difficult to satisfy. Thus the probability of default will increase. Fourth, real estate developers will not reap the high returns that they did before and will be very cautious. A high inventory in the housing market also de-incentivizes new starts. Fifth, the central government is tightening local governments’ programs so as to reduce local government’ debts. Without the endorsement of local governments, private investment in city infrastructure will not be able to obtain favorable extensions from the bank to handle their debt servicing, thus increasing the likelihood of default. 
Source: Daily Economic News reprinted by Study Times, January 26, 2015 http://www.studytimes.cn/shtml/xxsb/20150126/9265.shtml
Briefings | | |   Economy/Resources

Study Times: China Should Create State Enterprises

Study Times republished an article from Beijing Youth Daily arguing that China should create a number of state enterprises. According to the author, state enterprises are different from State-Owned Enterprises (SOEs). The latter are companies that the government owns, but state enterprises are companies, whether private or state-owned, that are a symbol of the country or that represent its country in certain industries.

For example, Samsung is the state enterprise of South Korea, Daimler AG is of Germany, and Apple and Google are of the U.S. The author suggested that Huawei (an IT industry) and the newly formed CRRC Corp. (in the railway industry) are the two best candidates to become state enterprises of China, as they are both strongly competitive in their fields. Huawei also needs the government’s backing to compete in the international market and to deal with other governments.

As a result of their monopoly positions, many large SOEs, such as those in the oil, electricity, and banking industries, have substantial revenues and a large market share in China. However, they do not have the ability to compete in global markets, and thus cannot become state enterprises in a real sense.

Source: Study Times, January 19, 2015
http://www.studytimes.cn/shtml/xxsb/20150119/9154.shtml

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