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Survey Finds Sixteen Percent of the Land in China is Polluted

On April 17, China’s Ministry of  Environmental Protection, the Ministry of Land and Resources released an "Official Report on National Soil Pollution," based on an eight-year survey of over 6.3 million square kilometers of land across the country. The report found that about 16 percent of the country’s soil and 19 percent of its arable land were polluted to one degree or another. The vast majority of the pollution came from cadmium, nickel, copper, arsenic, mercury, lead, DDT and PAHs. The latest results contrast with the situation in October 2011, when 8.3 percent of the arable land was polluted.

In his government report earlier this year, Chinese premier Li Keqiang announced the initiation of a "Soil Remediation Project." However, Chinese scholars estimated that soil pollution prevention and remediation demands trillions or even tens of trillions in investment, while the central government’s budget for soil remediation during the twelfth five-year plan period, or 2011 to 2015, is only 30 billion yuan (US$4.8 billion).

Source: China Youth Daily reprinted by Xinhua, June 6, 2014 
http://news.xinhuanet.com/2014-06/06/c_126585250.htm

China’s Agricultural Population May Decline to 10 Percent

According to Ministry of Housing and Urban-Rural Development, China‘s agricultural population may decline to about 10 percent.  Currently, about 40 percent of China’s population is engaged in agriculture.

Zhao Hui, an official from the Ministry of Housing and Urban-Rural Development, stated in an interview that as urbanization continues, fewer and fewer people will engage in farming. It is likely that the agricultural population will drop to about 10 percent of the total population. The land used for rural development, however, is about 3.5 times the land used for urban development. That is, it is 70 percent of the total land for development is used for rural development. To avoid having 10 percent of the population use 70 percent of the land, Zhao urged that China should have breakthrough in the institutional mechanisms to allow a rational allocation and flow of population and resources.  
Source: Beijing Business Today reprinted by Xinhua, June 6, 2014 
http://news.xinhuanet.com/2014-06/06/c_126584660.htm

China’s 2013 Gold Production Topped the World for the Seventh Year

People’s Daily reported that China has been the world’s largest gold producer for seven years in a row. In 2013, its gold output reached 428.16 tons. According to the president of China’s Gold Association, "China’s 2013 gold production increased by 6.23% over last year, a new historic record."

As of the end of 2012, China’s gold reserves of 8,196.24 tons ranked second in the world. In addition, for the first time, China’s gold consumption, which was 1176.40 tons in 2013, jumped to world’s top spot. According to an official from the Ministry of Industry and Information Technology, "For the first time, China’s gold consumption has surpassed India. With an increase of 41.3 percent over last year, China has become the world’s largest gold consumer." In 2013, China’s gold consumption was about 27 percent of the global consumption of physical gold.

Source: People’s Daily Online, June 5, 2014
http://finance.people.com.cn/n/2014/0605/c1004-25105841.html

Problems in China’s Outbound Investment in the Mining Industry

According to a Xinhua report, over the past five years, over 95 percent of the overseas mergers and acquisitions made by Chinese companies in the mining industry ended in failure.

A major problem is that most individual Chinese companies lack an in-depth understanding of the political, economic, legal, and cultural differences in the host countries. Another issue is the proportion of stock ownership on the Chinese side. A higher Chinese ownership simplifies the decision making process and streamlines the operations. However, it invites opposition from the host countries and may even result in a lower market valuation. Chinese companies have also complained about fraudulent mining data and exaggerated mining exploration statistics.

In 2013, China topped the world in both production and consumption of iron ore, crude steel, steel, and non-ferrous metals. Chinese outbound investment in the mining sector jumped from US$4.2 billion in 2007 to 20.2 billion in 2013.

Source: Xinhua, June 1, 2014
http://news.xinhuanet.com/fortune/2014-06/01/c_126570335.htm

Corrupt Officials Are behind the Housing Market Downturn

New regulations have been proposed, to be implemented by the end of 2014, requiring the registration of real estate. Corrupt officials are trying to sell their real estate before the regulations take effect. According to Zhongyuan, a leading real estate brokerage firm in China, the effort to sell quickly has played a large role in the downturn of the housing market. Zhongyuan, one of the largest brokerage firms in China, has tens of thousands employees in over 30 major cities throughout China. Shi Yongqing, Zhongyuan’s founder, is pessimistic about the prospects for the housing market. “There are three indicators of a real estate bubble: over-building, excess credit, and prices that are too high. China’s housing market has all three. None of these problems can be solved easily.” 

According to Zhongyuan’s real estate brokers, “Officials are selling, and not just a few of them. The purchasing power of these officials is evaporating. They have become a driving force pushing the market downward." One observation is that the upcoming implementation of real estate registration has prompted these officials to get rid of houses they obtained using questionable means. On May 14, 2014, the Ministry of Land and Resources announced that real estate registration will be a priority for its rulemaking in 2014. The objective is to release a final draft by the end of June. 
Sources: 
First Financial Daily reprinted by China Economy, May 29, 2014 http://www.ce.cn/macro/more/201405/29/t20140529_2891382.shtml 
People’s Daily, May 27, 2014 
http://house.people.com.cn/n/2014/0527/c164220-25068014.html

Pessimism in China’s Housing Market Continues

Since January, the housing market has been experiencing a sharp downturn due to the facts that, in addition to other factors, banks have been tightening credit and inventory has increased. Commodity housing sales in large and medium sized cities slid by 20 to 30 percent with some down as much as 40 to 50 percent. 

In Shanghai, for example, new housing transactions were down 25.56 percent for the first 21 days in May, compared to the same period in April, and down by 34.86 percent compared to same period last year. 
Market analysts believe that, were the banks to loosen credit, the pessimism in the housing market would not change. In fact, it is almost impossible for banks to loosen credit to stimulate the housing market. A reduction in housing prices seems to be the only option to deplete the existing inventory. 

Source: 21st Century Business Herald, May 29, 2014
http://fangchan.21cbh.com/2014/5-29/5MMDA1NzFfMTE4MjM5MA.html

China Daily: China To Allow Ten Provinces and Cities to Issue Bonds

China Daily recently reported that China is planning that, later this year, the first group of ten provinces and cities will be allowed to issue their own bonds. The bonds will be modeled after the “Western municipal bonds.” The plan includes Zhejiang, Jiangsu, Shandong, Guangdong and two other less-developed provinces. It also includes the cities of Beijing, Shanghai, Shenzhen, and another coastal city. The report estimated that the announcement would be made near the end of May and that the bond issuance might happen in July. Currently, China’s local governments are not allowed to issue bonds directly, at least not officially. The new plan will also include a rating system for the local bonds. However all these are still pending approval of the National People’s Congress (NPC). The scale of this first wave of local bonds is still unclear.
 
Source: China Daily, May 19, 2014
http://caijing.chinadaily.com.cn/2014-05/19/content_17518160.htm

Ten Local Governments Allowed to Issue Bonds to Repay Debts

According to China’s Ministry of Finance, the State Council has approved 10 local governments as part of a pilot program to give them the authority to issue municipal bonds and be responsible for the repayment of their debts. 

Prior to the pilot program, the central government was responsible for the payments of interest and principal on the bonds that the local governments issued. These payments were then deducted from the funds the central government allocated to the local governments. 
The 10 local governments are Shanghai, Zhenjiang Province, Guangdong Province, Shenzhen, Jiangsu Province, Shandong Province, Beijing, Jiangxi Province, Ningxia Autonomous Region and Qingdao. Of these 10 governments, Ningxia and Jiangxi are considered to have a strong solvency. Their 2013 debt ratios were 50.5 percent and 68 percent respectively. The estimated value of the bonds may reach 150 billion yuan and they may mature in five, seven, and 10 years. These bonds will become part of China’s first-ever municipal bond market. 
Source: China Securities, May 21, 2014. 
http://www.cs.com.cn/zq/zqxw/201405/t20140522_4397444.html