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Wen Jiabao: What Will We Leave to Future Generations?

In Stockholm recently, Wen Jiabao met with local Chinese companies, overseas Chinese and representatives of Chinese students. In his discussion he raised the question of China’s future. He also pointed out a number of issues related to China’s economic development. He stated, “In a nutshell, our economic development is neither balanced nor coordinated; nor is it sustainable. (The problems) relate mainly to the widening income gaps between rural and urban areas and between different regions, to expanding inequality in income distribution, to over-consumption of resources, to  energy, and to severe environmental pollution. These problems lead us to think about what we will leave to future generations.” Wen stated that sustained growth “relies not only on economic development, but also on progress in society, on the quality of our people, and on the power of morality. No one would be able to beat such a country (that had those qualities).

Source: China News Service, April 25, 2012
http://www.chinanews.com/gn/2012/04-25/3843708.shtml

China’s Central Bank’s Increased Issuance of RMB Leads to Domestic Inflation

According to Beijing News, the People’s Bank of China (China’s central bank) ranks No. 1 in assets in the world and last year printed money equal in value to half of the total currency printed in the world. The latest statistics released by the central bank show that, as of February 2012, its assets reached 28,330 billion RMB (about $4,500 billion), surpassing the U.S. Federal Reserve Bank and the European Central Bank. In the past five years, its assets increased by 119% and M2 by 146%. Due to the exchange control and the fact that the RMB is not an international currency, the increased RMB circulated only inside China. Thus those in China bore the full inflationary impact. “China is way behind the United States in terms of total GDP, economic power, personal income, and the overall wealth of the country. In 2011, the ratio of China’s M2 to GDP reached 189% while the ratio of M2 to GDP in the U.S. was about 64%. This showed the power of the RMB to boost inflation.”

Source: The Beijing News reprinted by Xinhua, April 24, 2012
http://big5.xinhuanet.com/gate/big5/news.xinhuanet.com/politics/2012-04/24/c_123025821.htm

China’s First Quarter Tax Revenue Growth Slows

On April 24, 2012, the Chinese Ministry of Finance released a report on the first quarter’s tax revenue, showing a tax revenue of 2.58 trillion yuan (US$409 billion), 10.3% higher than the same period last year. However the growth rate was down 22.1 percentage points; it was the lowest in the past three years.

The data show that from January to March, on a year-over-year basis, the domestic value-added tax, consumption tax, business tax, and corporate income tax increased by 5.4%, 15.1%, 7.6% and 20.5% respectively. The growth rates dropped 17.8, 6.4, 18.7 and 17.4 percentage points respectively from the same period last year. The import taxes and tariffs increased by 13.0% and 9.6% respectively, 35.8 and 37.9 percentage points lower than the same period last year.

It is noteworthy that real estate related tax revenue growth fell sharply. For the first quarter, the deed tax and the real estate sales tax decreased by 13.6% and 17.5%, respectively, 41.1 and 45.8 percentage points lower than the same period last year. The land appreciation tax increased by 4.5%, 108.4 percentage points lower than the same period last year. In addition, personal income tax revenue declined by 6.2% year-on-year, down 43.2 percentage points from the same period last year.

A Ministry of Finance official attributed the decline to the slowdown of domestic economic growth, as well as tax cut practices implemented in the fourth quarter of last year.

Source: Xinhua, April 24, 2012
http://news.xinhuanet.com/2012-04/24/c_111836288.htm

Qiushi: The Western Hand behind the Break-up of State-owned Enterprises

Qiushi publish an analysis that criticized the “noises that demonize the public ownership system and state-owned enterprises.” The article, entitled, “The Western Hand behind the Break-up of State-owned Enterprises,” expressed the belief that foreign investment may have become a national economic security issue. “Statistics show that, of the 28 major industries in China, 21 are controlled by foreign investment through (the foreign companies’) right to a majority of the assets. Foreign investments control the top 5 enterprises in almost every industry that has been opened up. These 21 industries are those where state-owned enterprises have withdrawn. China’s privately owned companies are not able to form an effective force to compete with the wolves of the Western multi-national corporations. … State-owned enterprises are the only major force in the market that can compete and fend off the multi-national corporations that Western monopolistic capital controls. … In any country, when foreign investments control an industry, it is likely to become a national economic security issue.”

Source: Qiushi, April 18, 2012
http://www.qstheory.cn/jj/jt/201204/t20120418_151879.htm

BBC: China’s Macroeconomic Numbers Show Irregular Combination

BBC Chinese recently reported on the macroeconomic numbers that the National Bureau of Statistics released on China’s first quarter of 2012. The GDP growth of 8.1% is lower than the market expectation of 8.4%. However it is better than the annual expectation of 7.5% that the government predicted. Another important number also released was the Consumer Price Index (CPI) of 3.8%, which is considered high even though it is below the government goal of 4.0%. Well-known economist Dr. Zhang Wei, from the University of Nottingham, suggested that it is more important to examine the fact that the combination of the GDP and the CPI numbers is irregular. Usually a lowered growth rate is coupled with a lowered inflation rate. However the latest Chinese number showed that a lowered growth rate actually brought about higher inflation. He believed that this means the central government’s economic policies will become harder to implement and the Chinese economy is facing a much bigger challenge.

Source: BBC Chinese, April 13, 2012
http://www.bbc.co.uk/zhongwen/simp/chinese_news/2012/04/120413_china_economy.shtml

China’s Economic Growth Slows Down

According to the Ministry of Statistics, GDP growth in first quarter of 2012 was 8.1 percent. Since the fourth quarter of 2010, this was the 5th quarter to see a decline. The growth in the eastern region showed a larger decline, while the middle west region appeared to be stable. According to Peng Xinyun, an economist at the Chinese Academy of Social Sciences, the decline was due to a number of factors: the macro policy adjustment on real estate and fixed asset investment, currency contraction measures, as well as the economic crisis in the E.U. and the slow recovery of the U.S. economy.

Many economists believe that the GDP in the first quarter was lower than expected, but it is expected to improve in the second quarter. Premier Wen Jiabao delivered the 2012 Government Work Report, which set the target for the 2012 GDP at 7.5 percent.

Source: Xinhua, April 21, 2012
http://news.xinhuanet.com/fortune/2012-04/21/c_111821226.htm

Bo Xilai’s Financier, the Dalian Shide Group, May Face Bankruptcy

According to The Beijing News, the Dalian Shide Group, a Chinese private enterprise whose chairman is Xu Ming, is reportedly being investigated for economic problems. It has used up most of its stock ownership in banks as collateral for loans and has borrowed more than 6 billion yuan in funds. Meanwhile, within this coming month, the company has over 800 million yuan in payments to make on its loans; the monthly interest rates run as high as 4.5%. It is reported that the company has started preparations in anticipation of filing for bankruptcy.

Xu Ming established Shide in Dalian in 1992. In 2005, Forbes ranked Xu as China’s eighth richest man. It has been reported that Xu has close ties with Bo Xilai, the former Party Secretary of Chongqing City, Sichuan and has provided him with financial support. On March 15, 2012, the CCP leadership removed Bo from his position and he is currently under investigation. Shortly thereafter, Shide lost contact with Xu Ming, whom many believe is also under investigation or arrest in connection with Bo.

Source: The Beijing News, April 19, 2012
http://www.bjnews.com.cn/finance/2012/04/19/194671.html

BBC’s Report on the Investigation of 10,800 Corrupt Officials in Guangdong Province

According to a report on the BBC Chinese website on April 14, 2012, since January 2010, Guangdong Province has investigated and taken disciplinary action against over 10,800 corrupt officials. The total amount of bribes that these officials accepted exceeds 1.1 billion yuan. An official from the Guangdong Provincial Commission for Discipline Inspection said that the above anti-corruption action has restored nearly 1.8 billion yuan (US$285.5826 million) in economic losses. He did not disclose the total amount of economic losses that resulted from these corrupt officials’ actions.

Source: BBC Chinese Website, April 14, 2012
http://www.bbc.co.uk/zhongwen/simp/chinese_news/2012/04/120414_china_corruption.shtml