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State Media: Bank of China Engages in Money Laundering

The state’s media, China Central Television (CCTV), reported that the Bank of China, one of the four major state banks, engages in money laundering. In violation of government control of cross-border fund transfers, it transfers large amounts of cash abroad for clients who plan to emigrate overseas. 

"’Regardless of where and how you get your money, we can help you get it out [of China].’ The staff from a Bank of China branch said that it does not matter how black or dishonorable the money is; the bank has a way to clean it and get it overseas safely.” 
At a recent immigration expo in Beijing, an immigration agent explained that due to government control of fund transfers by individuals, one may be able to transfer up to $50,000 a year. In order to apply for investment immigration, one must transfer large amounts to accounts designated by foreign governments. To do that, one must go to the Bank of China. The Bank of China representative at the expo confirmed this information. “We help you convert such a large amount [of yuan] into foreign currencies and transfer it out in one transaction. That is the step we handle.” According to CCTV, the Bank of China charges its clients a 0.3 to 0.4 percent handling fee for these types of transfers. 
Source: Xinhua, July 9, 2014 
http://news.xinhuanet.com/2014-07/09/c_126731280.htm

Underground Electronics Recycling Sites Annual Production Close to 100 Billion Yuan

Guangming Daily recently published an article on electronics recycling. According to the article, there is an underground electronics recycling chain that covers an area from Beijing and Hebei to Guangdong Province. Its high profitability propels an annual production that is close to 100 billion yuan (US$16 billion). Meanwhile, the officially registered recycling companies lack sufficient business and their recycling processing lines sit idle. Xiejia Village, which is located 6 kilometers (4 miles) north of Beijing, is the largest electronics recycling center in the Beijing area. From there, most of the electronic boards go to Guiyu County in Shantou City, Guangdong Province while home appliances containing plastic, aluminum, and copper go to Shi Jia Zhuang Village in Shi Jia Zhuang City, Hebei Province. According to the article, a manager from Huaxin Green Spring Environmental Development Company stated the reason that the underground recycling centers are more profitable than the officially registered recycling sites. He said their company makes almost zero profit after paying for the costs and the taxes on their profit. However the unregulated underground recycling sites often do not adopt proper environmental measures and they use a process that causes serious air, water, and soil pollution. According to statistics, between 50 million and 80 million electronic appliances and electronic productions are scrapped each year in China; the number is expected to exceed 160 million by 2015. The article stated that how the electronic waste can be recycled properly and how the recycling industry is managed have become major issues.

Source: Guangming Daily, July 4, 2014
http://tech.gmw.cn/2014-07/04/content_11837397.htm

China’s Growing Dependence on Foreign Energy

A Chinese Academy of Social Science report, "World Energy and the Outlook for China, 2013 – 2014" made an assessment that China’s dependence on foreign energy will go up from the current 9 percent to 11 percent in 2015 and 26 percent in 2020. 
Oil. At present, the three largest countries from which China imports oil are Saudi Arabia, Angola, and Iran. Several years ago, in 2010, imports from these three countries accounted for 40 percent of the total oil imports. Geographically, the Middle East accounted for 50.1 percent of total Chinese oil imports, Africa 30.2 percent, followed by Latin America, the Commonwealth of Independent States, and Southeast Asia. Dependence on foreign oil is expected to grow from 55 percent in 2011 to 60 percent in 2015.
Iron ore. China is the world’s largest importer of iron ore. Its total imports of up to 440 million tons in 2008 accounted for 52 percent of the world’s seaborne iron ore. The sources are concentrated in a few countries: Australia, Brazil, and India.
Natural gas. More than 80 percent of China’s natural gas imports are from Australia. The dependence on foreign natural gas will increase from 19 percent today to 35 percent by 2015, and 40 percent by 2020.
Copper ore. China currently accounts for 17 percent of global copper consumption. It is the world’s largest consumer of copper and importer of copper concentrate.
Bauxite. Chinese bauxite resources are not scarce, but in recent years the country launched a large number of electrolytic aluminum projects, resulting in a surge in consumption. China is becoming a net exporter of bauxite.
Coal. Since 2002, Chinese coal imports have increased rapidly. In 2011, China surpassed Japan to become the world’s largest coal importer. The major coal exporters to China include South Africa, the USA, Canada, Colombia, Australia, Indonesia, Mongolia, Vietnam, and Russia.
Source: Guangming Daily, July 3, 2014
http://theory.gmw.cn/2014-07/03/content_11821154.htm

China Stock: Growing the RMB’s Global Presence

After the global financial crisis, a new trend developed in the world: the establishment of a "currency swap network." The U.S., in particular, established a Dollar Liquidity Swap Line among the U.S. Federal Reserve and the central banks in Europe, Canada, the United Kingdom, Switzerland, and Japan. The U.S. dollar still plays a dominant role.

China Stock published an article suggesting the steps China should take to grow the RMB’s global presence. First, China should participate in the U.S.-dominated “network of bilateral swap lines.” This would allow China to obtain dollars easily when money flows out of China. Second, China should advance the "The Chiang Mai Initiative Multilateralization" mechanism, turning this loose network of bilateral support into a tight multilateral capital rescue mechanism. Third, China should establish an RMB swap funding pool, to support the clearing of the RMB’s swap with other currencies.

Source: China Stock Online, June 26, 2014
http://news.cnstock.com/news/sns_jd/201406/3075560.htm

Central Bank: Q2 Employment Expectations Hit Three-Year Low

China’s central bank, the People’s Bank of China, recently released a report that showed the results of a survey on customer expectations on employment. According to the report, 12.5 percent of the Chinese residents responding to the survey held an optimistic view of the current job market. 43.8 percent of the sampled population either felt uncertain or found the current employment situation to be “very challenging.” This is the lowest number since the second quarter of 2011. 63 percent of the people surveyed agreed that the current prices for housing are still too high, while 34.2 percent thought they were “acceptable.” The survey also covered bankers, 72 percent of whom said the current currency policies are “appropriate.” Entrepreneurs sampled by the survey mostly (62.2 percent) suggested the economy is performing “normally.” However 36.1 percent of them thought the economy was “cooling down.” The Bank’s Entrepreneur Confidence Index dropped 2.1 percent from the first quarter of this year. 
Source: Sina Finance, June 25, 2014
http://finance.sina.com.cn/money/forex/20140625/173919520651.shtml

The Minimum Wage Went Up an Average of 14 Percent

Xinhua carried an article that was originally published in Economic Information Daily. According to the article, in the first half of 2014, the minimum wage in 12 provinces and cities went up an average of 14 percent. The Ministry of Human Resources and Social Security will soon be releasing more information. This increase is the lowest in recent years. The article stated that it was 22 percent in 2011; it was 20.2 percent in 2012; and it was 17 percent in 2013. The article also stated that, even though the “Minimum Wage Guideline” declared that the minimum wage increase was supposed to take place once every two years, from 2010 to 2014 the actual wage increases occurred once every 1.2 years.

Source: Xinhua, June 30, 2014
http://news.xinhuanet.com/fortune/2014-06/30/c_1111370014.htm

RFA: It May Cost 300 Million Yuan to Demolish a 270 Million Yuan Project Built Three Years Ago

Radio Free Asia reported that an order was given to demolish a tourist project in Hekou County, Yunnan Province that cost 270 million yuan (US$43 million) to build just three years ago. The cost of the demolition may be as much as 300 million yuan (US$48 million), which is higher than the cost of construction. The total loss of 600 million yuan is around three times Hekou County’s annual fiscal income for 2013. The report stated that the tourist project sits on the Hong River that separates China from Vietnam. It is 1 kilometer (0.62 miles) long covering 16,000 square meters (3.95 acres) and includes 150 commercial stores that can be rented. Initially, many parties objected to the project, but somehow, it was later approved at several upper levels. Currently about two thirds of the commercial space remains vacant.

Many people believe that it has become a major problem that the district government shows off its political accomplishments while wasting resources. A businessman from Guangdong Province told RFA that this is common, especially in rural areas. Another professor from the University of South Carolina said that China lacks a system to allow a stable investment environment for businesses. The government took the lead on this project and then revoked its previous commitment, a phenomenon that may harm social development.

Source: Radio Free Asia, June 20, 2014
http://www.rfa.org/mandarin/yataibaodao/kejiaowen/xql-06202014133916.html

China to Tighten Control over Land Use

On June 19, 2014, China’s Ministry of Land and Resources held a press conference to explain the new regulation issued on May 22 which will tighten control of the use of land in China. 

Analysts expressed concern that changes in the supply of land will affect the housing market. An official from the Ministry of Land and Resources responded that control of the use of land in major cities will not increase the housing market. 
Statistics indicate that about 40 percent of urban land in China is used inefficiently. Between 10 and 15 percent of residences in the countryside remain unoccupied. About 5,000 square kilometers of urban and industrial land is under construction, which is equal to about 11 percent of the entire urban land in China that has already been built up. Wang Shouzhi, head of the Policy and Regulation Department in the Ministry of Land and Resources said that there is a need to regulate the overall land use on a macro level in order to prevent some locals from making a quick buck in economic development in their blind pursuit of revenue. 
Sources: 
Ministry of Land and Resources, June 20, 2014 http://news.mlr.gov.cn/xwdt/jrxw/201406/t20140620_1321128.htm 
Xinhua, June 20, 2014 
http://news.xinhuanet.com/2014-06/20/c_126646825.htm