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Scholar: Low Compensation for Land Acquisition a Cause for Social Conflict

An article in Beijing Times reported on a scholar who criticized the low and inadequate compensation for land acquisition. The scholar said it was a major problem with China’s current massive land seizures. The compensation that local governments give when they grab land from farmers is very low. Then they sell it to developers at a price ten or dozens of times higher, leading to acute social conflicts.

Zheng Fengtian, a professor at Renmin University of China said that the major problem with China’s rural land acquisition is that the standard for compensation is too low. A survey conducted by the Development Research Center of the State Council found that 40 to 50 percent of the value-added part of land acquisition goes to investors, 20 to 30 percent goes to the local government, 25 to 30 percent goes to the village organizations (grassroots government body), and the farmer who sold the land receives only 5 to 15 percent of the entire pie.

Zheng added that the huge amount of revenue that local governments receive gives them a fervent appetite for grabbing land and reselling it, resulting in massive and rapid use of arable land for non-agricultural occupation. Since 1990, China has been suffering an average loss of 10 million mu (1 mu equals to 667 square meters) of arable land per annum.

Source: Jinghua Times, November 29, 2012
http://news.jinghua.cn/351/c/201211/29/n3814339.shtml

China Review News: The Fiscal Pitfall of Urbanization

On November 24, 2012, China Review News published an article titled, “The Fiscal Pitfall of Urbanization.” According to the article, the rapid urbanization in China, which relies on land sales and financing (borrowing money), may lead to a big debt crisis.

Source: China Review News, November 24, 2012
http://www.zhgpl.com/doc/1023/1/5/4/102315497.html?coluid=53&kindid=0&docid=102315497&mdate=1124082302

Xinhua: Unliquidated Bonds Reached RMB 23 Trillion

Xinhua recently reported on a warning regarding the scale of China’s unliquidated bonds. The Asian Development Bank (ADB) issued the warning in a report on its findings after monitoring all bonds. As of the end of September, China’s unliquidated bonds reached RMB 23 trillion yuan, which is the equivalent of fifty percent of China’s total GDP. The report suggested that the proportion of unliquidated bonds equals about half that of the bonds for the entire “Emerging East Asia Region.” Among the 23 trillion, 17 trillion are government bonds, while 7 trillion are corporate bonds, which is a rapidly growing section in China’s bond market. The ADB called for caution against the potential risks. The top ten corporate bond issuers are all China’s national level state-owned companies. Zhu Haibin, J.P. Morgan Chase’s Chief Economist for the Chinese Market, suggested that corporate bonds are becoming the primary new borrowing channel for local governments given the environment in which land sales for real estate developments have suffered a sharp decline.
Source: Xinhua, November 26, 2012
http://news.xinhuanet.com/fortune/2012-11/26/c_124000966.htm

 

The Beijing News: Emigration of Chinese Merchants’ Is Increasing, Threating Economic Environment

Chinese News Review carried a commentary that was originally published by The Beijing News, about the increase in the wave of emigration of China’s rich and powerful merchants. According the article, 70 percent of China’s rich and powerful people have emigrated or are considering emigrating overseas. As a result, China has become the country having the largest number of people emigrating overseas. As to the reason for their leaving China, the article cited two causes: lack of security and a desire to improve life satisfaction.

According to the article, when those emigrants leave China, they also take their wealth with them. It was estimated that between 1997 and 2010 over 17 trillion yuan (US$2.73 trillion) left China. The number has grown even larger since 2010. The article stated that the domestic inflation that has occurred in recent years has had a negative impact on ordinary Chinese people’s wealth. As more and more of China’s rich and powerful merchants choose to leave, it will be more and more difficult to increase domestic demand.

Toward the end, the article raised a question of what can be done to keep people from leaving China. Based on the 2011 China Private Wealth Report published by China Merchants Bank (CMB) and Bain & Company, 27 percent of Chinese merchants having personal assets over 100 million yuan (USD$16 million) have already emigrated while 47 percent are considering emigration.

Source: China News Review, November 25, 2012
http://www.zhgpl.com/doc/1023/1/5/4/102315489.html?coluid=53&kindid=0&docid=102315489&mdate=1124081454

China News: Number of Half or Fully Shutdown Companies Reached a 3-Year High

China News recently reported on research results that the China Entrepreneurs Survey System (CESS) had released. The CESS is a research institute jointly established by the Development Research Center of the State Council, the National Bureau of Statistics, and four other government agencies. According to the research, 23.1 percent of the company owners surveyed claimed that, at the time of the survey, their companies were either “shutdown” or “semi-shutdown.” This number is the highest in three years. The key reasons cited for the situation were a decline in orders, inventory pressure, and dropping prices. The health of privately owned companies was worse than for those that were state-owned. Most of the troubled companies were small to medium sized ones. Over a quarter of the companies expressed the belief that their inventory level was “higher than usual.” Half of the companies suffered a “lower than usual” order level. Most of the troubled companies were in mining, chemical fiber, non-ferrous metals, general equipment, and automobile and other transportation equipment industries. 
Source: China News, November 17, 2012
http://finance.chinanews.com/cj/2012/11-17/4336528.shtml

People’s Daily: China’s Dependence on Foreign Oil Will Reach 60%

People’s Daily recently reported on the First China International Petroleum Trade Conference. According to experts attending the conference, China’s oil consumption is expected to increase to half a billion tons in 2013. Meanwhile, China’s dependence on foreign oil will reach 60 percent next year. China is currently the primary source of demand for global oil market growth. In the year 2002, China became the second largest oil consuming country in the world (after the United States). According to experts, in the next five years, China’s oil imports will maintain a growth rate of eight percent annually, while the average annual growth rate for global oil consumption will remain at 1.2 percent. The decline of oil imports in North America and the geopolitical situation in the Middle East will be the two main factors that will impact the international oil market the most. However, more than half of China’s foreign oil supply comes from the Middle East. This adds a lot of uncertainty to China’s energy safety. 
Source: People’s Daily, November 15, 2012
http://finance.people.com.cn/n/2012/1115/c1004-19594376.html

CRN: Keeping RMB Stabilized is a Long Term Strategy

China Review News (CRN) recently published an article discussing the current appreciation of the Chinese currency (the RMB), which has caught some people unprepared. The article expressed the belief that there are four reasons: (1) The U.S. dollar depreciated; (2) More capital flowed into the emerging markets; (3) Short-term domestic demand for RMB increased; (4) The Chinese central bank did not actively interfere with the RMB exchange rate. Since China is moving towards a market based RMB exchange rate management model, the author suggested that it is very important to ensure, as a long term strategy, that the RMB remains stable. It also serves as a foundation for the internationalization of the Chinese currency. All major international currencies such as the U.S. Dollar, the British Pound, the Euro and the Japanese Yen have this foundation. The article concluded that, although the RMB is currently going up, the goal for the long run should be maintaining stability.
Source: China Review News, November 8, 2012
http://www.zhgpl.com/doc/1022/9/5/9/102295964.html?coluid=53&kindid=0&docid=102295964&mdate=1108074009

Disposable Personal Income Lagged Behind GDP Growth

On October 31, 2012, Securities Times published a report on the National Bureau of Statistics of China’s recently released statistics on China’s revenues. According to the statistics, during the 10 years from 2002 to 2011, the personal disposable income of urban residents increased 1.8 times. In the same period, national fiscal revenue increased 4.5 times and domestic GDP went up 3.6 times. “This wide gap shows that during the past 10 years, most of the newly created wealth was distributed outside the reach of China’s residents. Considering the multiple of 4.5 times in the increase in fiscal revenue, it can be said that the government received a much larger share of the benefits than ordinary residents. In fact, on average, urban residents’ income increased by 10 percent per annum, while fiscal revenue went up by as much as 20 percent per annum.”

Source: Securities Times, October 31, 2012
http://news.stcn.com/content/2012-10/31/content_7280245.htm