Economy/Resources - 184. page

On July 17, 2013, 21cbh.com, a professional financial news website under the 21st Century Media Group in Mainland China, published an article titled, “The Potential Risks that China’s Financial System Faces.” According to the article, China’s financial system faces three potential risks: 1) the real estate market (real estate bubble); 2) local governments’ financing used for investments in land and real estate (the accumulated debt has reached over 12 trillion Chinese yuan); and 3) shadow banking.

Source:  21cbh.com, July 17, 2013
http://epaper.21cbh.com/html/2013-07/15/content_70897.htm?div=-1

During the 2nd weekend of July 2013, Xia Bin, a councilor of China’s State Council, delivered a keynote speech at the 2013 APEC CEO China Forum. According to Xia, a financial crisis already exists in China right now. Xia told the audience, "We need to find ways to let the bubble burst and write off the losses we already have as soon as possible to avoid an even bigger crisis. … The deep adjustment means that economic growth will slow as expenses are paid; it will mean hard days; it will mean bankruptcy for some companies and financial institutions; and it will mean reform."

Source:  Beijing Times & MNI News, July 14, 15, 2013
http://epaper.jinghua.cn/html/2013-07/15/content_8994.htm
https://mninews.marketnews.com/content/china-govt-advisor-says-economy-crisis-debt-costs-spiral

Xinhua recently reported on some research that the firm Grant Thornton, an international organization of independent audit, tax, and advisory firms, had done on the business indicators of a number of Chinese companies. The study titled, International Business Report (IBR), revealed that 40 percent of the surveyed Chinese companies found the uncertainty that the economy faced was having a major impact on the growth of their businesses. The research results also showed that four percent of the companies felt optimistic about the future. This number had dropped 21 percent from the first quarter to the second quarter of this year. The study indicated that expectations of company sales, product prices, export volume, hiring plans, and profits had all dropped from the first quarter. Especially for the indicators of exports, employment, and profitability, the companies’ level of confidence dropped to a two-year low. Investments in research and development declined by 14 percent in the past 12 months; most of the companies were increasing their cash reserves. Grant Thornton concluded that there is no clear sign of an economic recovery for the Chinese market. The same report for the U.S. market showed a dramatic increase of 24 percent in the confidence level.

Source: Xinhua, July 11, 2013
http://news.xinhuanet.com/fortune/2013-07/11/c_116499670.htm

On Wednesday, July 10, the General Administration of Customs (GAC) released data showing that, in June, the total value of China’s imports and exports was two trillion yuan (US$0.3 trillion), down two percent from the same month last year. The decline in exports was as high as 3.1 percent. The data was beyond analysts’ expectations. Many expected China’s exports to grow at about four percent in June. Meanwhile the imports in June also fell by a lesser amount of 0.7 percent, indicating a weakness in China’s domestic demand.

Zheng Yuesheng, an official at GAC, worries about the severe challenges that China’s foreign trade faces. He predicted more difficulties in the second half. Zheng suggested that China needs to adjust the structure of its foreign trade to protect its products in the global market.

Source: BBC Chinese, July 10, 2013
http://www.bbc.co.uk/zhongwen/simp/china/2013/07/130710_china_export.shtml

On July 8, 2013, Chi Fulin, President of the China Institute for Reform and Development in Hainan Province wrote a commentary for China Business News entitled, “The Challenges and Trends in China’s Economic and Social Transformation.”

Chi stated that it was his understanding that the new Chinese government has established the goal of doubling China’s per capita GDP and per capita income by 2020. “Currently, both the international environment and the China’s domestic economic and social transformation are right in the middle of complicated, profound changes. Three key elements will determine whether or not China can achieve this goal. The first is whether China can objectively handle the challenges it faces; second is whether China can seize the opportunities available to it; and third, the key is whether China is able to speed up transformation and reform.”

Chi identified three challenges to social transformation: (1) the gap between rich and poor is quite conspicuous; (2) the social structure is irrational. So far, according to the National Bureau of Statistics, China’s middle-income groups account for about 23 percent [of the population]; and (3) as a result, social conflicts and social risks continue to increase.”

Source: China Business News reprinted by Finance (Jingrongjie), July 8, 2013
http://opinion.jrj.com.cn/2013/07/08072415493871.shtml 

The Chinese Family Finance Investigation and Research Center of South Western University recently conducted a research study on lending. The results disclosed that 33.5 percent of Chinese citizens utilize private lending channels. The total amount channeled through the private lending business has reached 8.6 trillion yuan (US$1.4 trillion). Of this amount, 3.8 trillion (US$0.62 trillion) was used in home financing, 3 trillion (US$0.49 trillion) was for agriculture and business financing, and the rest was used for auto equity and education. It was believed that these results indicated that the financial services in China’s banking sector have not been able to meet public demand.

Source: Guangming Daily, July 5, 2013
http://finance.gmw.cn/2013-07/05/content_8180051.htm

On July 2, 2013, National Business Daily published a commentary on the impact that banks’ tightening of credit will have on rail expansion.

China is transitioning from a country on tires to one on the rails. High-speed railways, urban subways, and light rails are becoming the primary mode of transportation. The total rail length will reach 6,000 kilometers by 2020, requiring an investment of 3 to 4 trillion yuan.

According to the commentary, real estate appreciation has become the most important element in funding rail transit construction. The rail transit companies that the local authorities control first acquire some land. Then they start to develop real estate, followed by construction of a rail transit system and other infrastructure in the area. This leads to anticipated appreciation of the land they own. The increase in the real estate market allows the rail transit companies to make the money needed to cover the cost of all the construction and to repay the debts they owe for rail transit. 

The commentary concluded that, as banks tighten credit by evaluating the financials of prospective rail transit projects, a few planned rail transit projects will not make it. 

Source: National Business Daily, July 2, 2013
http://ntt.nbd.com.cn/articles/2013-07-02/754446.html