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Shanghai Pilot Project of Free Trade Zone to Open September 29

Guangming Daily reported that, according to Securities Daily, Wang Xinkui, President of the Shanghai WTO Affairs Consultation Center and Director of the Counselor’s office announced on September 12 that the Shanghai pilot program of a free trade zone will officially open on September 29. Wang stated that the pilot zone is a new strategy to further promote the open door policy and test China’s ability to manage the investment field by following the international standard. It will also improve the business climate and further facilitate trade. Moreover, Wang said, foreign banks will see fewer restrictions in the future. HSBC, Standard Chartered, and the Bank of East Asia are the first three foreign banks to have been approved to open for business in the free trade zone.

Source: Guangming Daily, September 13, 2013
http://economy.gmw.cn/2013-09/13/content_8895648.htm

Briefings | | |   Economy/Resources

Population to Be Relocated to Fill the Ghost Town of Ordos

Ordos, a major subdivision of Inner Mongolia in China, is known for its coal production and lavish government projects. One is the new City of Ordos, a large city with abundant infrastructure that residents seldom use and which has frequently been described as a "ghost town." 

In 2012, developers completed the construction of about 4.33 million square meters. However, the demand was weak. For example, in one development, since the second half of 2010, only two of the 25 completed buildings have been available for sale. The Ordos government has taken action to establish non-coal industries and to re-locate its rural population to the city. The entire population in Ordos is about two million. The authorities estimate that if all are relocated to the city, it would create a demand for 6,000 square meters of housing, assuming a usage of 30 square meters per person. 
Source: China Securities reprinted by Xinhua, September 12, 2013 
http://news.xinhuanet.com/fortune/2013-09/12/c_117339671.htm
Briefings | | |   Economy/Resources

Xinhua: BRICS Countries Establish Emergency Reserve

According to Xinhua, at a recent G20 press conference, Zhou Xiaochuan, Governor of the Chinese central bank, discussed the BRICS countries establishing a shared reserve fund. He expressed the belief that such a reserve arrangement represents a major milestone that would also contribute to global financial stability. Zhou suggested that the reserve is an important development in terms of “tangible” cooperation between the BRICS countries as it offers a much better capability to defend against “external shocks.” Zhou revealed that the new reserve arrangement involves a multi-nation currency cooperation based on the currency exchange mechanism. The initial scale of the reserve is US$100 billion with China holding the largest share. Zhou also discussed the negative impact of the U.S. exit strategy from its Quantitative Easing (QE) program. The BRICS countries are Brazil, Russia, India, China, and South Africa. Goldman Sachs was first to use the term.
Source: Xinhua, September 6, 2013
http://news.xinhuanet.com/world/2013-09/06/c_117253284.htm
Briefings | | |   Economy/Resources

Sale of High Priced Items Slow as Mid-Autumn Festival Approaches

As China’s Mid-Autumn festival is approaching, the Central Commission for Discipline Inspection recently issued a notice to be strict in prohibiting the use of public funds for luxury gifts, food, and entertainment. Reports indicate that the market for high priced moon cake, mitten crab, cigarettes, and alcohol has been slow this year. Some food vendors have complained about the slow moving inventory and some expect that sales may be down as much as 10 percent compared to last year.

Source: People’s Daily, September 8, 2013
http://politics.people.com.cn/n/2013/0908/c1001-22843015.html

Briefings | | |   Economy/Resources

China News: Foreign Exchange Balance Declined Starting Two Months Ago

China News recently reported that, based on data released by the Chinese central bank, the Chinese foreign exchange reserve has been shrinking rapidly for two months now. In July alone, the total declined by RMB 24.5 billion (around US$4 billion). This could be one of the key causes of tight market liquidity. Experts expressed the belief that the foreign exchange balance decline could be the result of two forces: (1) the US Federal Reserve clearly intends to exit its QE (Quantitative Easing) strategy; (2) the Chinese State Administration of Foreign Exchange is requiring banks to increase their foreign exchange reserve. It is widely expected that international “hot money” will be leaving emerging markets and this trend will continue to impact the Chinese market where the expectation of depreciation in the Chinese currency is high.
Source: China News, August 21, 2013
http://finance.chinanews.com/cj/2013/08-21/5186110.shtml
Briefings | | |   Economy/Resources

People’s Daily: China’s Shipbuilding Industry Makes No Profit

People’s Daily recently reported on the tough situation the entire Chinese shipbuilding industry faces. According to the data that the China Association of the National Shipbuilding Industry (CANSI) released, the industry is suffering a major decline in profits. By the end of July, 80 key companies that the association monitored had a total profit of only RMB 200 million yuan (around US$33 million). At the same time, these companies are unable to collect the pending payments that their customers owe them. As of now, the industry is owed payments totaling RMB 100 billion (US$16.33 billion). This financial dead lock was partially caused by the recent sharp decline in shipbuilding prices. This has led many customers to believe that their original contract price was unfairly high. Cash flow in the shipbuilding industry is becoming a major challenge, making it much harder to get a loan from any bank. Competition from Japan is also an important factor. Since the beginning of the year, the Japanese yen has depreciated 20 percent.
Source: People’s Daily, August 22, 2013
http://gz.people.com.cn/n/2013/0822/c194844-19370272.html
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Standard for China’s Minimum Wage Jumped in First Half of Year

According to the Ministry of Human Resource, since the beginning of this year, China’s minimum wage standard has increased an average of 18.4 percent in 22 regions. Shanghai has the highest monthly minimum wage standard which is 1,620 yuan per month (US$265).Beijing and Xinjiang have the highest hourly wage standard at 15.2 yuan (US$2.5). It was estimated that, in the second half of this year, some businesses will face an increase in layoffs, delayed wage payments, and conflicts between the demand for wage increases from employees and employer’s inability to meet those demands.

Source: Xinhua, August 23, 2013
http://news.xinhuanet.com/fortune/2013-08/23/c_117058634.htm

Briefings | | |   Economy/Resources

Experts Suggest Measures to Limit the Risks Caused by Local Governments’ Debt Crises

China Review News published an article on the financial risks China faces because of the magnitude of local governments’ debts and suggested ways to deal with the issue.

According to the article, local governments’ debts surpass that of the central government. Many of them face financial deficits, while the debt risk is much higher than the estimates. Reports indicate that, by the end of 2012, local governments’ debts reached 12 trillion yuan ($US1.96 trillion), which was 23.3 percent of GDP while the central government debt was 15 percent of GDP.

Several solutions were suggested on how to ease the local government debt crisis. First, local governments should be allowed more financial rights such as the right to receive increases in their share of tax revenues. Second, local governments must control their spending. Third, local governments should improve their financial capacity in developing basic infrastructure while assisting in the development of private businesses. Finally, local governments must be transparent in their financial spending and strengthen the system of checks and balances.

Source: China Review News, August 26, 2013
http://www.chinanews.com/gn/2013/08-26/5203417.shtml

Briefings | | |   Economy/Resources