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Economy/Resources - 152. page

Record Drought Worsens in Northeast China

Xinhua reported that, this year, the major grain producing areas in Liaoning Province and Jilin Province in northeast China have suffered the rarest drought in over half a century. Crops have withered away and rivers have dried up. Even drinking water is in short supply. 

On August 14, Vice Minister of Agriculture Yu Xinrong said that since August, the amount of precipitation in northeast China has significantly declined. In some areas the reduction is as much as 79 percent compared to last year. In Inner Mongolia, Jilin and Liaoning provinces, more than 34 million mu have been hit by drought, with more than 15 million suffering from severe drought. “The drought situation is very grim,” Yu said. 
Based on meteorological records, since July, Liaoning Province’s rainfall has been the lowest since 1951. Also starting in July, the drought-hit area has been growing by about 1 million mu per day. 
In Jilin Province, the average rainfall since late July has been 65 percent lower than the same period last year, the second driest in history. The drought-hit area is growing rapidly. In some heavily hit drought areas, the relative humidity in the soil is below 40 percent. Even in non-drought areas, it is declining daily by one to two percentage points. 
Precipitation in some areas of the Inner Mongolia Region has also hit the lowest on record since the same period in 1961. 
Source: Xinhua, August 14, 2014 
http://news.xinhuanet.com/local/2014-08/14/c_1112083359.htm
Briefings | | |   Economy/Resources

Xinhua: China’s Four Largest Banks Suffered a Big Decline in Savings Deposits

Xinhua recently reported that, during the month of July, the four largest Chinese commercial banks saw a significant decline in the amount of RMB 1.5 trillion (around US$244 billion) in savings deposits. Based on an analysis of the inter-bank market, the flow of money was found to be growing tighter during the month of July. Experts said they have noticed a trend. The general public’s savings rate has been dropping and banks have been facing tougher and tougher competition for customers. Since the central bank expressed the concern that the market already consumed the excessive credit volume from the second quarter, all financial organizations are expecting a tighter situation in the third quarter. 
Source: Xinhua, August 5, 2014
http://news.xinhuanet.com/fortune/2014-08/05/c_126832187.htm
Briefings | | |   Economy/Resources

Seventy Percent of Coal Mining Companies Are in the Red

The level of the inventory in China’s coal mining industry reached a record high in the first half of 2014 in spite of measures to reduce the price and to restructure production. Seventy percent of these companies are in the red.

Recently, the largest 14 coal mining companies agreed on four measures. They agreed that, for the second half of 2014, they would reduce the output of their production by 10 percent; they would reduce the June level of their inventory by 50 percent; they would regulate and standardize coal imports and they would establish a self-regulatory mechanism within the coal mining industry. 
According to the statistics that the China Coal Industry Association released on July 12, 2014, as of the end of June 2014, China’s coal inventory had reached 99 million metric tons. Nine provinces had experienced industry wide losses in coal mining. Twenty out of 36 of the largest coal mining companies are in the red. Nine of those are on the brink of bankruptcy. Seventy percent of the coal mining companies in China are in the red. 
Sources: 
Securities Daily reprinted by People’s Daily, July 29, 2014 http://energy.people.com.cn/n/2014/0729/c71661-25361362.html 
Economic Information Daily, July 28, 2014 
http://news.xinhuanet.com/fortune/2014-07/28/c_126803768.htm
Briefings | | |   Economy/Resources

In the Economic Downturn, Local Governments Increase Tax and Fines

According to Xinhua, the Ministry of Finance recently released statistics showing that China’s national revenue increased by 8.8 percent in the first 6 months of 2014, as compared to the same period in 2013. Of the national revenue increase, tax revenue grew by 8.5 percent and non-tax revenue by 11.1 percent. The national GDP increased by 7.4 percent. 

According to Zhou Tianyong, an official from the Chinese Communist Party Central Party School, the tax rate was 36 percent in 2013, but was increased to 44 percent in the first 6 months of 2014, an increase of 8 percentage points. This increase occurred in spite of slower GDP growth, slower consumption and investment growth, and a negative growth in exports. 
Zhou asked, “What does this tell us? Local governments are increasing taxes and fees right in the middle of the economic downturn. It is, in fact, a fiscal mechanism of local governments based on fines and tax increases.” 
 Source: Xinhua, July 30, 2014 
http://www.js.xinhuanet.com/2014-07/30/c_1111858664.htm
Briefings | | |   Economy/Resources

Tough Issues for Balance Sheets of Local Governments

In a recent article in China Finance, which Xinhua then reprinted, Ma Jun, the chief economist for China’s central bank, the Bank of China, wrote about the balance sheets of local governments and related issues. 

In their preliminary work, most of the local governments completed the balance sheets in accordance with generally accepted international principles. Yet, the process also presented problems unique to China in terms of the scope, valuation methods, and accounting standards. Ma stated that in dealing with these issues, one should first consider the major objective for compiling the balance sheets, which is to help evaluate the debt risks that the local governments face and their future ability to repay these debts. 
Specifically, there are three major questions. First, should State-own enterprises be included in the balance sheets and how? Second, should special assets be included in the balance sheets? Special assets include debt-free public infrastructure (such as roads, bridges, and parks), minerals and other natural resources, and cultural assets. Third, should the balance sheets include pension liabilities? 
Source: China Finance reprinted by Xinhua, July 18, 2014 
http://news.xinhuanet.com/fortune/2014-07/18/c_126768371.htm
Briefings | | |   Economy/Resources

In the Second Half, China’s Economy Faces Three Big Risks

According to Economic Information Daily [under Xinhua], in the second half, China’s economic performance needs to be alert to the following three risks, as the economy is still facing downward pressure. The first risk is "deflation" in the industrial and manufacturing sectors. As of June this year, China’s PPI showed 28 months of continuous negative growth. The second risk is increased pressure due to the policy adjustments in the real estate market. The adjustments in the real estate market are expected to continue into the second half. The third risk is the number of defaults in market debt. 

Source: Xinhua, July 22, 2014 
http://news.xinhuanet.com/fortune/2014-07/22/c_1111727356.htm
Briefings | | |   Economy/Resources

China’s Junk Bond Crisis Is Looming

On July 22, the Chinese media wallstreetcn.com reported that, with the frequent defaults on debt in China, 2014 is becoming the year of defaults for the Chinese financial market. 

It has been 26 months since June 2012, when the Chinese version of junk bonds (bonds issued by mid and small businesses) were first introduced in the capital market. With a typical two year maturity, 46 junk bonds, with a total value of 4.143 billion yuan (US$670 million) and an average yield of 8.79 percent, are about to reach maturity. 
In April of this year, "13 Zhong Sen" was about to default on 180 million yuan (US$29.05 million) of its interest payments when its guarantor stepped in to commit to making the payments. When it was unable to make payments on its bonds, Zhejiang Huatesi Polymer Technical Co Ltd., the issuer of “12 Huatesi” went bankrupt. The court ordered it to restructure. 
In July, “12 Kim Tae” failed to meet its July 10 obligation to make its principal and interest payments. The issuer of another junk bond “12 Jin BBDO,” with a nne percent yield, is expected to default on the payments of principal and interest due on July 28. Its State-owned guarantor, Tianjin Hi-tech Investment Management Co., Ltd., is in the middle of its own crisis. In 2013, it had issued a guarantee for a total of 7.592 billion yuan (US$1.23 billion), which was 13 times the amount of its security deposits at the bank. 
Source: wallstreetcon.com, July 22, 2014 
http://wallstreetcn.com/node/100649 http://wallstreetcn.com/node/100657
Briefings | | |   Economy/Resources

The State Council Approved the Pearl River West River Economic Belt Development Plan

China Review News carried an article that was originally published in People’s Daily about the development plan for the “Pearl River West River Economic Belt.” According to the article, the Guangdong Development and Reform Commission has received approval from the State Council to proceed with the development plan. The plan makes eco-environmental protection a prerequisite, while focusing on the development of infrastructure, urbanization, and public services in the Pearl River and West River regions. According to the article, the plan will help to increase the effort of environmental protection while promoting economic exchanges in the inland region. According to the approval that the State Council issued, the municipal governments of Guangdong and Guangxi provinces will collaborate in carrying out the execution of the development plan. The Guangdong Development and Reform Commission will also be responsible for supervision and inspection.

Source: China Review News, July 20, 2014
http://hk.crntt.com/doc/1032/9/5/8/103295866.html?coluid=151&kindid=11511&docid=103295866&mdate=0720115937

Briefings | | |   Economy/Resources