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Bureau of Statistics: February CPI Reached Ten-Month High

The Chinese National Bureau of Statistics recently released the official CPI (Consumer Price Index) number for February. The CPI increased by 3.2 percent, which is the highest in ten months. Among the different components of the CPI formula, the food price index increased six percent, which included a 10 percent increase in fresh vegetables. The prices of rice and of fruit increased by 5.1 percent and 3.7 percent, respectively. Some experts expressed the belief that the Chinese New Year was the main cause of the increase in the February CPI. However, the numbers still caused widespread concern among economists about inflation. The Chinese government injected a large amount of currency into the economy in the past twelve months in order to deal with the economic downturn. The CPI calculation does not include housing prices.
Sources: 
National Bureau of Statistics, March 9, 2013
http://www.stats.gov.cn/tjfx/jdfx/t20130309_402878616.htm
Xinhua, March 10, 2013
http://news.xinhuanet.com/fortune/2013-03/10/c_124437884.htm
Briefings | | |   Economy/Resources

New Housing Regulation Triggers Surge in Divorces

On March 1, 2013, China’s State Council issued a new measure to reinforce the control of housing prices, including a capital-gains tax of 20 percent on profits from the sale of a family’s second home.

This provision immediately triggered shock waves in the secondary housing market, leading to many divorces of couples who owned two or more homes. China currently allows a couple with two houses to allocate one house to each at the time of divorce. If a couple intends to sell their second hone without being taxed, they can divorce so that the house to be sold goes to one spouse, who is able to sell that house as the only family home so as to avoid the 20 percent tax. Then the couple can remarry.

The divorce procedure in China is relatively simple. Cities, including Shanghai, Guangzhou, Harbin, and Ningbo, saw a surge in the rate of divorce immediately after the new regulation went into effect. Three years ago, another a policy restriction on the purchase of second homes also led to waves of divorce. In recent years, China’s divorce rate has continued to rise: about 2.87 million couples divorced in 2011, a jump of 7.3 percent over 2010.

Source: BBC Chinese, March 6, 2013
http://www.bbc.co.uk/zhongwen/simp/china/2013/03/130306_property_divorce.shtml

Briefings | | |   Economy/Resources

Xinhua: With Rapid Urbanization, Who Will Grow Grain in China?

By the end of 2011, the number of Chinese in urban areas reached 51.3 percent of the population; more than 250 million migrant workers from the countryside reside in cities. “To solve the problem of ‘who will grow grain’ tomorrow is an urgent priority.”

“On the one hand, rapid urbanization has resulted in the loss of high quality arable land, a mass departure of rural young adults, a continuous increase in labor costs, and a lack of successors for food production. On the other hand, with rapid economic growth and rising incomes, the structure of the Chinese diet has been changing rapidly. The amount that many families spend on meat exceeds their spending on staple foods, which has caused a surge in the demand for feed grain.”

Source: Xinhua, March 3, 2013
http://news.xinhuanet.com/fortune/2013-03/03/c_114869161.htm

Briefings | | |   Economy/Resources

HSBC February PMI Number Reached a Four-Month Low

Economic Information, a daily newspaper under Xinhua, recently reported on the February HSBC PMI (Purchasing Managers Index) number for the Chinese manufacturing industry. The February number was 50.4, which was the lowest in four months. Experts expressed the belief that the primary cause of the decline in the PMI was the high pressure on the export side, especially as the demand from the United States suffered a decline. Some also thought the slowness caused by the Chinese New Year celebration was another factor affecting the low PMI number. Many small and mid-sized manufacturers in the Chinese coastal area are experiencing difficulties in their operations. PMI is an indicator of financial activity reflecting the purchase managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline.
Source: Economic Information, February 26, 2013
http://dz.jjckb.cn/www/pages/webpage2009/html/2013-02/26/content_71548.htm?div=-1
Briefings | | |   Economy/Resources

CRN: China Is Tightening Its Currency Policy

China Review News (CRN) recently reported that the Chinese central bank has started withdrawing RMB 910 billion yuan from the open market. Experts expressed the belief that this is a sign that the Chinese government is tightening up its currency policy. There are three forces behind this move: (1) Since the last quarter of 2012, capital inflow has significantly increased; (2) The interest rate before the Chinese New Year has remained stable, which indicates an ample currency supply; (3) There is an expectation of increased inflation and real estate prices are high. It seems the central bank is attempting to limit the currency supply in order to control the level of money lending activities. However, since the economic recovery is still weak, it may be too early to predict an interest rate hike. 
Source: China Review News, March 2, 2013
http://www.zhgpl.com/doc/1024/5/5/1/102455150.html?coluid=53&kindid=0&docid=102455150&mdate=0302082735
Briefings | | |   Economy/Resources

Scholar: 80 Percent of China’s Sludge Not Processed

He Yue, a professor from China’s Tianjin University, recently said that, according to the China’s Sludge Treatment and Disposal Market Analysis Report, China’s annual urban sewage treatment capacity is equivalent to the total storage capacity of the Three Gorges Reservoir. However, 80 percent of the sludge from this "reservoir" is not dealt with, easily causing secondary pollution to the environment. "A large amount of toxic and harmful sludge has become a time bomb for the urban environment." He said that the sludge contains nitrogen, phosphorus, potassium, heavy metals, parasite eggs, and germs. It will not only endanger the environment of the underground water, rivers, and farmland, but also human health through the food chain. "China’s sewage treatment industry has developed rapidly, but the byproduct sludge has not been disposed of reasonably and safely." He said, this "sewage reservoir" produces nearly 22 million tons of dewatered sludge annually, of which only 20 percent receives the necessary processing. It has been estimated that by 2020 China will see as much as 60 million tons of sludge per year.

Source: People’s Daily, March 4, 2013
http://politics.people.com.cn/n/2013/0304/c70731-20660367.html

Briefings | | |   Economy/Resources

Xinhua: New Regulations Announced to Control the Housing Market

Xinhua recently reported that the State Council announced a new five-point regulation of the real estate market. The announcement caused a sharp drop in housing stocks and triggered the largest slide in the Shanghai Stock Exchange in 15 months. After the second half of last year, the housing market enjoyed a rebound. In January, real estate prices increased in over one hundred main Chinese cities. With this development, the new regulation was designed to apply more control to the market and cool down housing prices. The key point of the new regulation is to expand the real estate tax on high end properties in order to constrain speculation-oriented investments. Many people believe there is a high probability that the State Council will come up with more restrictions in the future.
Source Xinhua, February 22, 2013
http://news.xinhuanet.com/house/2013-02/22/c_124374182.htm
Briefings | | |   Economy/Resources

CRN: Overview of Accomplishments of RMB Internationalization in 2012

China Review News (CRN) recently published a commentary in which it attempted to summarize the core accomplishments of the effort to internationalize the Chinese currency, the RMB. First, as an important element of the overall effort, marketization of the domestic interest rate made significant progress. This is one aspect of the market that had a high expectation. However the reform is still incomplete; for example, there is a lack of personal savings insurance. Second, the RMB exchange rate is having a bigger floating range (against US Dollar) and is more market-oriented. Offshore RMB exchange and trading centers are being established in addition to that in Hong Kong. Competitors include London, Paris, Taiwan and Singapore. Third, capital account openness reforms are also under way, though slowly. This is a major step towards a fully exchangeable currency. It also exposes a weaknesses of the Chinese financial system to the external world. China does not have a complete law and enforcement system for that matter. Lastly, China has signed multiple nation-to-nation currency exchange and settlement agreements with some key countries such as the BRICS countries and Australia.
Source: China Review News, February 22, 2013
http://www.zhgpl.com/doc/1024/4/6/1/102446184.html?coluid=53&kindid=0&docid=102446184&mdate=0222080943
Briefings | | |   Economy/Resources