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People’s Daily: Revenue from Land Sales Was 33 Percent of National Financial Income

People’s Daily published an article titled, “It Is a Dangerous Sign that Revenue from Selling Land Has Become the Major Source of Income for Municipal Governments.” The article said that, according to the statistics published by the Ministry of Land and Resources, in 2013, income from land sales was 4.1 trillion yuan (US$0.67 trillion) which was 33 percent of the national income. The article stated that, ten years ago, the cost of land was 20 percent of the cost of housing. In recent years however, it has grown to be 60 percent or even higher. The article pointed out, “Land sales may appear positive but it sends many dangerous signals. … The municipal government can easily rely on land as its income source rather than developing its own economy or making changes to its economic structure. This also increases the financial risk while it impairs the stability and safety of the tax revenue.”

Source: People’s Daily, February 23, 2014
http://finance.people.com.cn/n/2014/0223/c1004-24436578.html

Briefings | | |   Economy/Resources

China’s Housing Prices Have Quietly Started to Slump; Banks Prepare for the Worst

On February 16, 2014, dahe.cn published an article titled, “China’s Housing Prices Have Quietly Started to Slump; in Some Cities the Sales Volume Has Decreased 50 Percent.” China is facing an economic slowdown, overcapacity, local debt problems, and over-printed currency on the market (leading to inflation and soaring prices). In the next two to three years, the excess housing supply will be the biggest problem. Property sales have decreased in 9 out of 10 cities; some cities’ property sales volume has dropped to half the volume of the previous year. Many banks are preparing for the worst as they predict a drop in housing prices is just around the corner.

Source: Dahe.cn, February 16, 2014
http://news.dahe.cn/2014/02-16/102636587.html

Briefings | | |   Economy/Resources

Xinhua: Shortage of Workers May Be a Problem

Xinhua recently reported that, for the past several years, the shortage of workers in China’s developed regions has been troublesome and may become a big problem after the Chinese New Year. Workers from inland typically go home for the New Year’s celebration. Many of them choose not to go back to their previous work largely due to the fact that they have found more and more opportunities in many under developed regions. The increase in the cost of living in those large cities has made it hard to justify the return unless a significant pay increase is offered. Based on the independent research of several companies, it is not unusual for a 20 percent base salary increase to be required to retain workers. The small towns in Mid-West China are becoming more and more attractive to workers. Many workers also decided to work near their homes in rural villages in order to stay closer to their family members, especially the kids. Another important factor in the worker shortage issue is the lack of experienced workers. The new generation workforce is getting younger and the quality of education they receive has been, on average, fairly low. Meanwhile, the new workers expect a much higher pay level than their parents. The report concluded that all these factors have added to the cost of labor in China’s manufacturing industry.
Source: Xinhua, February 15, 2014
http://news.xinhuanet.com/fortune/2014-02/15/c_126138836.htm
Briefings | | |   Economy/Resources

CRN: The Missing Piece before China Becomes the Top Trading Country

China Review News (CRN) recently published a commentary on China’s import and export structure. In 2013, the value of China’s total imports and exports reached $4.16 trillion. It is becoming a sure thing that China’s physical goods trade volume will surpass the United States. However, the commentary expressed the belief that China is still far behind the U.S. in terms of trade services. The commentator suggested that the focus of global economic competition has shifted to trade services. China has to become a strong service provider in order to achieve its goals. Based on official statistics, the Chinese trade volume for services was $520 billion in 2013, which translates into an eleven percent increase over the previous year. However, compared to the leading countries, China’s trade volume for services was small and, in general, suffered from low quality. The author found that the global services market is getting deeper and deeper into knowledge, technology, and capital investments. Meanwhile the key fields China is currently playing in are still transportation and tourism. The commentary concluded that, unless China adjusts its services export structure, it will ultimately suffer an overall trade decline.
Source: China Review News, February 14, 2014
http://hk.crntt.com/doc/1030/2/2/0/103022053.html?coluid=53&kindid=0&docid=103022053&mdate=0214085447
Briefings | | |   Economy/Resources

New study: Beijing Not Fit for Human Habitation Due to Severe Pollution

The Shanghai Academy of Social Sciences released a new study of 40 major cities around the world, ranking them according to their environment. The study ranked Beijing as the second worst, stating that Beijing’s pollution has made the city nearly “uninhabitable for human beings.” 

The ecological factors in the survey included habitability, environment, and pollution. Beijing was rated the second worst, according to the study, because “Beijing’s habitability is far below average and the city is considered not habitable; its environment is about half way below the average, meaning it is far from meeting the [safety] standards; pollution is extremely severe, and is much worse than the average. It has even reached the extent that it is not fit for human habitation.” 
According to the official release of the Beijing authorities early this year, in 2013 the city had 176 days of good weather and 58 days of severe pollution. 

Source: Finance, February 12, 2014 
http://finance.jrj.com.cn/2014/02/12114516651875.shtml

Briefings | | |   Economy/Resources

Outflow of Wealth Accelerates as More Chinese Emigrate

Xinhua recently reported on information from the annual blue book on Chinese International Migration (2014), released by the Center for China & Globalization (CCG). According to the blue book, a huge number of emigrants have left China taking 2.8 trillion yuan with them. 

The blue book stated that as of 2013, emigrants to overseas had reached 9,343,000, an increase of 128.6 percent in 23 years. These emigrants brought 2.8 trillion yuan (US$46 billion) with them when they left China, thus making China the 4th largest source of emigrants. 
According to the blue book, in 2011, those people who had over 6 million yuan available for investment had a total assets of 33 trillion yuan in China. Of that amount, 2.8 trillion has since been transferred out of China, accounting for about 3 percent of China’s GDP in 2011. 

Hong Kong, the United States, and Canada have become the main destinations for the transfer of assets, accounting for 22 percent, 21 percent and 16 percent respectively, followed by Switzerland (9 percent), Singapore (6 percent) and Australia (5 percent). 

Source: Xinhua, February 7, 2014 
http://news.xinhuanet.com/house/sh/2014-02-07/c_119231579.htm
Briefings | | |   Economy/Resources

Wu Jinglian: Chinese Economy This Year Will Face Difficulties

At the annual conference of Chinese Economists forum 50, Wu Jinglian, a prominent economist and a fellow at the Development Research Center of the State Council, expressed his view that China’s economy in 2014 will face difficulties and that what’s most important is to let the market play a decisive role in allocating resources. Wu believed that the debate around whether real estate is a "pillar industry" is by itself planned economy thinking. If the central bank continues to print money, housing prices will continue to climb. Wu noted that a very important aspect of furthering the reform is to prevent the outbreak of systematic risks. Regarding the local governments, he believes that the transition of their functions involves a lot of personal power and interests. Wu said that China’s economy this year will face difficulties because many problems, accumulated over the decades, need to be sorted out and resolved. For state-owned enterprises (SOE) reform, Wu believes it is important to pay attention to "near-death" enterprises, as a large number of highly indebted SOE’s still rely on subsidies to survive.

Source: Xinhuha, February 11, 2014
http://news.xinhuanet.com/2014-02/11/c_126111686.htm

Briefings | | |   Economy/Resources

CRN: China’s Macroeconomy Faces Three Major Risks

China Review News (CRN) recently published a commentary analyzing the “cyclical fall back” of the Chinese macroeconomy as well as the much needed structural adjustments. The commentary focused on the “imbalance risks” and identified three major ones: 1) The volume of China’s exports is not in sync with the trend of the global economic recovery. The author expressed the belief that this was caused by the rebound in U.S. manufacturing, the increased costs in Chinese manufacturing, the appreciation in China’s currency, competition from other emerging economies, and new international trade agreements in which China does not participate. 2) China’s domestic economy suffers a significant imbalance between the real economy and the virtual economy. The financial industry and the housing industry are the primary contributors to economic growth, while the manufacturing industry is seeing minimal profits. 3) China’s actual interest rate is moving in the opposite direction from that of the global interest rate. While most of the countries in the world are maintaining zero or near-zero interest rates, China’s actual interest rate is growing rapidly. This significantly increases the cost of financing. Government branches, companies, and financial organizations are suffering from across-the-board debt increases.
 
Source: China Review News, February 7, 2014
http://hk.crntt.com/doc/1030/1/0/4/103010469.html?coluid=53&kindid=0&docid=103010469&mdate=0207092022
Briefings | | |   Economy/Resources