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Economy/Resources - 179. page

China’s Local Government Debts Result from the Government’s System

On September 24, 2013, Gao Peiyong, Director of Institute of Finance and Trade Economics of the Chinese Academy of Social Sciences (CASS) spoke at an economic forum in Beijing. At the forum, Gao stated that the ultimate risk that occurs as a result of local governments’ debts is not due to the size of the debts themselves, but to the nature of the government system.  

Gao indicated that it is because the local governments lack awareness of the standard of “living within their means” and recognizing an obligation to pay off their debts. “Only by improving local governments’ financial systems can local debt risks truly be resolved.” “The greater problem is that almost all of the local governments give little thought to and have no consideration for how to repay their debts.” Gao said that if a person never wants to pay back his debts or never wants to take his obligations seriously, that person’s actions result in the greatest risk, which is the system’s problem and its most fundamental problem. 

According to Gao, the reason why local governments are such debtors is directly linked to Communist China’s financial system. In the eyes of the central government, local governments are children that need to be controlled. They do not have a separate, sound personality for dealing with self-finance. 

Source: Xinhua, September 24, 2013 
http://news.xinhuanet.com/yzyd/local/20130924/c_117490452.htm
Briefings | | |   Economy/Resources

Economic Bubble: China’s Economic Growth Model Faces a Serious Challenge.

On September 19, 2013, 21cbh.com, a professional financial news website under the 21st Century Media Group in Guangdong Province, published an article titled, “The Economic Bubble: China’s Economic Growth Model Faces a Serious Challenge.” According to the article, China’s export-oriented economy is going nowhere because China’s strength in its large population of cheap labor, its vast cheap land, and the government controlled depreciated RMB exchange rate no longer exist. China is now experiencing an economic bubble:

  1. In 2012, the ratio of broad money supply (M2) to GDP reached 188 percent in China, while the ratio of M2 and GDP in the U.S. was only 90 percent.
  2. In 2012, the ratio of investment in fixed assets to GDP in China was over 70 percent.
  3. China’s PPI has been declining over the last 18 consecutive months, since March of 2012. Meanwhile, China’s CPI has been increasing sharply. The prolonged divergence between PPI and CPI, which has not happened before in history, indicates a prolonged excess production capacity and lingering inflation, with a huge credit expansion.

Source: 21cbh.com, September 19, 2013
http://finance.21cbh.com/2013/9-19/2OMzcxXzc3NTU2OA.html

Briefings | | |   Economy/Resources

Xinhua: Survey Showed 67.6 Percent of People Found Housing Prices Unacceptably High

Xinhua recently reported on the results of a housing market survey that the Chinese central bank conducted during the third quarter of 2013. 67.6 percent of the people surveyed suggested that the current housing prices are “too high” and are “unacceptable.” Only 2.1 percent of the sample population found them to be “satisfactory.” Around 77 percent of the residents of the “top tier cities” (such as Beijing and Shanghai) expressed the belief that prices were “too high.” Regarding the future, 35.8 percent of those who responded expected a trend toward increased growth and 45.2 percent expected the level of prices to remain steady. Only 6.5 percent of the sample expected a drop in prices. The survey also covered spending plans. 45.2 percent of the people surveyed plan to “increase their savings,” and 17.5 percent expect to spend more. 36.3 percent of those surveyed plan to do more “investing.” The top three investment channels are: investment funds, real estate, and bonds. 
Source: Xinhua, September 21, 2013
http://news.xinhuanet.com/house/bj/2013-09-21/c_125419261.htm
Briefings | | |   Economy/Resources

Total Donations Declined for Two Consecutive Years

According to the 2012 China Charity Donation Report which was published on September 21, the total charitable donations in 2012 amounted 81.7 trillion yuan (US$13.35 trillion), down 3.31 percent from 2011. 2012 was the second consecutive year that saw a decline in charitable donations. According to the report, the contributing factors included the slowdown in the economy, fewer natural disasters, and people not trusting in the accountability of charitable organizations.

Social organizations received over 70 percent of the total charitable donations to all organizations. A number of foundations ranked as the top donation recipients. They received over 30.5 trillion yuan (US$4.98 trillion) which accounted for 37.4 percent of the total charitable donations. Business enterprises remained as the top donors with total donations of 47.4 trillion (US$7.74 trillion). Of those, 57.98 percent or 27.5 trillion (US$4.49 trillion) came from private enterprises. It was also noticed that the amount of donations made online in 2012 exceeded 2011, thus establishing a new trend in the donation market.

Source: Xinhua, September 21, 2013
http://news.xinhuanet.com/politics/2013-09/21/c_117441606.htm

Briefings | | |   Economy/Resources

Severe Air Pollution in Northern China

On September 18, 2013, six cities and regions in the northern part of China signed an agreement with the Ministry of Environmental Protection to control and prevent air pollution. The six cities and regions are Beijing, Tianjin, the provinces of Hebei, Shanxi, and Shandong, as well as the Inner Mongolia Autonomous Region – regions that are suffering from severe air pollution. 

“In recent years, frequent occurrences of fog and haze have become a shadow in hearts of the people of Beijing, Tianjin, and the surrounding areas. Data show that in August of this year, only 34.6 percent of the days in the month met the safety quality standard, while 65.4 percent did not meet the standard and 2.7 percent were in severe pollution.” 
Source: Xinhua, September 18. 2013 
http://news.xinhuanet.com/2013-09/19/c_117428247.htm
Briefings | | |   Economy/Resources

Datong’s Deep Debts Amount to 13 Billion Yuan

According to China Business, as of 2013, the City of Datong, Shanxi Province had accumulated debts exceeding 13 billion yuan. Datong paid off 2 billion in the first half of the year, with over 110 billion still outstanding. A few municipal construction projects have been suspended due to lack of funding. 

 A Datong city official indicated that the debts are reasonable as long as the local government can handle them. Last year Datong issued bonds in the amount of 600 million yuan. Bank loans make up the rest of the debts. In 2012 Datong had about 8 billion yuan of fiscal revenue. 
Datong is urgently looking for buyers or investors for its State-owned assets. These include more than 100 State-owned enterprises, 30,000 mu of reserve land, real properties held by financing platform companies, as well as tourist attractions such as the Yungang Grottoes. These assets are valued at 38 billion yuan. 
Source: China Business, September 18. 2013 
http://www.cb.com.cn/economy/2013_0918/1013726.html
Briefings | | |   Economy/Resources

Former SAC Director: State-Owned Companies Failed Due to Government Intervention

China.com recently reported that Li Rongrong, former director of the State-owned Assets Supervision and Administration Commission of the State Council (SAC), spoke at the World Economic Forum on the issues that Chinese state-owned companies face. Li suggested that the key cause of the Chinese state-owned companies’ failures is that there are too many government interventions. He also expressed the belief that the biggest crisis these companies suffer is a trust crisis, which is reflected in the areas of poor quality control, untruthful advertising, and an unwillingness to serve the customers. Li called for providing full freedom to the state-owned companies to compete in the global market and to learn the lessons they need to learn.
Source: China.com, September 11, 2013
http://finance.china.com.cn/news/special/2013dws/20130911/1805761.shtml
Briefings | | |   Economy/Resources

CRN: Chinese Economy Suffered More Structural Problems

China Review News (CRN) recently published a commentary analyzing the “better than expected” economic numbers from August. In the week of September 9, China officially released statistics on the economy (as of the end of August). On nearly all fronts the Chinese economy showed better than expected numbers. Key indexes such as industrial growth, consumer spending, investments, and international trade all demonstrated higher growth rates. Goldman Sachs, Bank of America, and Merrill Lynch all adjusted their forecasts higher for the third quarter. However the commentary did a deeper analysis and suggested that the two primary drivers of the high growth were banknote based financing and real estate investments. A large number of companies and banks took advantage of operational holes in various types of banknotes to finance short-term cash flow needs. This introduced high risks into to the financial market while boosting the illusion of an actively growing market. The housing market improved recently due to further borrowing into the existing bubble, making the bubble even bigger. The author concluded that the optimistic economic data proves that the structural problems in the economy have only gotten worse.
Source: China Review News, September 13, 2013
http://www.zhgpl.com/doc/1027/3/9/3/102739352.html?coluid=53&kindid=0&docid=102739352&mdate=0914075030
Briefings | | |   Economy/Resources