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Wen Jiabao: Stick to the Housing Market Control Strategy

On April 13, 2012, Chinese Premier Wen Jiabao chaired an Executive Meeting of the State Council. Measures discussed included planning near term policies for China’s macro economy. Among all of the decisions made, the key one was to stick to the current policies controlling the housing market. Wen emphasized the requirement of ensuring that those polices would not suffer any level of roll back. The Executive Meeting also identified some other near term challenges: the global financial crisis has not ended; the European debt crisis still persists; the Chinese domestic economy is declining; the pressure of inflation is increasing; small-sized businesses are having a tough time obtaining financial help; and Chinese exports are slowing down. In addition to the housing market policies, the meeting focused on policies in 9 economic areas, which included enlarging the domestic consumer market.

Source: China Review News, April 14, 2012
http://www.zhgpl.com/doc/1020/7/4/9/102074989.html?coluid=151&kindid=0&docid=102074989&mdate=0414090603

CRN: China International Investments Lack Risk Management

China Review News (CRN) recently published an article discussing key issues related to China’s overseas investments. The article referred to the World Investment Report 2011 released by the United Nations Conference on Trade and Development (UNCTAD), which indicated that the total for all global overseas investments in 2010 was US$1.32 trillion. China’s direct overseas investments ranked number five in this report, surpassing traditional investors such as Japan and Britain. Enterprises owned by China’s central government were the primary force in overseas investments. However these investments also experienced a large amount of losses. Since last May, the State-Owned Assets Supervision and Administration Commission (SAC) has released two risk management regulations. SAC recently issued a new order to further control the risks by banning state-owned companies from investing outside of their primary line of business. The article also pointed out another key issue. China lacks a global strategy to balance investments in the areas of research, manufacturing, sales, resources, trade, finance, and information.

Source: China Review News, April 14, 2012
http://www.zhgpl.com/doc/1020/7/4/9/102074945.html?coluid=53&kindid=0&docid=102074945&mdate=0414074702

China Foreign Trade Faces Major Pressure in Three Areas

Yu Benlin, the Deputy Director General of the Ministry of Commerce’s Bureau of Fair Trade for Imports and Exports, spoke at the “Expansion of Sino-US Economic and Trade Cooperation Forum” that was held during the 111th Chinese Imports and Exports Fair (the Canton Fair) on April 15, 2012. Yu explained that Chinese foreign trade is facing major pressure in three areas: increased external attacks, a tighter export environment, and international strategic planned pressure. 1) Increased external attacks: The U.S. has implemented both an anti-dumping and an anti-subsidies policy on imports from China. As an example, Yu mentioned the 2011 anti-dumping and anti-subsidies investigation on China’s solar products. 2) A tightened export market: World market demand remains weak. Taking the E.U. as an example, growth in E.U. countries is slower than expected, the manufacturing industry is shrinking, and its first quarter growth may be weak. 3) Increased International pressure: The world media has shifted its media campaign on China from the “China Threat” to “China Accountability.” Different countries have demanded that China take responsibility for things that are beyond China’s economic capability.

Yu also pointed out that the U.S. has misapplied its regulations to China’s imports according to its own wishes. As an example, he mentioned the “substitution country” used during the anti-dumping investigation. In addition to India, which the U.S. used previously, it has started to use Indonesia and Thailand (for importing goods). The anti-dumping duties that the U.S. imposed during its investigation of Chinese imports were normally above 100 percent.

Source: Xinhua, April 15, 2012
http://news.xinhuanet.com/fortune/2012-04/15/c_111782252.htm

Qiushi: Widening Disparity of Income with a Very Small Middle Class

Qiushi published a commentary with an analysis of income distribution in China. This analysis showed that the wealth of local residents increased rapidly in a relatively short period of time as the result of economic development and the economic transformation. While relative to other countries, the inequality in the distribution of property of China’s residents is not very great, the inequality is growing very rapidly. … From the wealth distribution chart, [it is clear] the so-called middle class remains very small.”

Source: Qiushi, April 10, 2012
http://www.qstheory.cn/jj/xsdt/201204/t20120410_150235.htm

Xinhua: First Quarter Job Market Still Tough

Xinhua recently reported on the state of the Chinese job market during the first quarter of 2012. According to the report, general economic growth in China is slowing down. People in society are experiencing widespread worry about the job market. The spokesman for the Ministry of Human Resources and Social Security predicted that the market will be challenging this coming year; he stated that 25 million new jobs are needed for 2012. The primary problem in the Chinese job market is the mismatch between position requirements and the skill sets available. The first quarter figures showed that a large number of companies cannot find qualified, skilled technicians, while millions of college graduates cannot find jobs. Researchers suggested that the best immediate solution to enable the creation of new jobs would be to cut taxes for small businesses. They also suggested that the government needs to promote free secondary vocational education and to concentrate its resources on training migrant workers.

Source: Xinhua, April 7, 2012
http://news.xinhuanet.com/fortune/2012-04/07/c_111748444_2.htm

State Council: Four Policies to Improve Imports

China Economy recently reported that the State Council Executive Meeting released new policies to improve China’s imports. The primary goals are to ease the pressure of a “resource bottleneck,” to improve domestic consumption, and to reduce trade friction. Four new policies are: (1) Reducing tariffs (temporarily) on energy resources, raw materials and some daily consumer products; (2) Encouraging commercial banks to increase loans to support imports, especially in the areas of advanced equipment, key manufacturing parts, and energy resources; (3) Improving the efficiency of customs and inspection and quarantine authorities by allowing 24-hour appointments and eliminating unreasonable charges; (4) Reducing import operational costs by introducing better administrative improvements such as making more use of custom’s special supervisory areas and bonded supervisory areas.

Source: China Economy, March 31, 2012
http://intl.ce.cn/sjjj/qy/201203/31/t20120331_23205172.shtml

Wen Jiabao: Communist Leaders Have Agreed to Break the Banking Monopoly

During his trip to southern China, Chinese Premier Wen Jiabao stated that the top national banks in China have too much power and have made too much money, and that their monopoly must be broken. “As for financing costs, actually let me speak frankly here. Our banks make a profit too easily. Why? It is because a few large banks are in a monopoly position. People can only obtain loans from these banks. It is very difficult to obtain loans from other sources. Now private capital has entered into the financial market. Fundamentally speaking, [we] have to break the monopoly. The Communist Party’s Central Committee has reached a unanimous agreement to carry out a pilot project in Wenzhou. A successful Wenzhou pilot project should be promoted across the country. Some (features of the project) can be implemented immediately throughout the country. "

Source: Beijing News, April 4, 2012
http://finance.sina.com.cn/roll/20120404/034011744163.shtml

Red Flag Manuscript: Confidently Make State-owned Enterprises Bigger and Stronger

A high profile article titled “Confidently Make State-owned Enterprises Bigger and Stronger” recently appeared on Red Flag Manuscript, a core publication of the Chinese Communist Party’s Central Committee.

The author, a director at the policy making State Development and Reform Committee, refuted voices in favor of privatization. “Some people want the state-owned sector, as a percentage of GDP, to fall to 10%, the U.S. standard, and ‘exit the competitive sector.’ Some have asked the state-owned enterprises to exit the basic industries and the service sector, in the name of ‘antitrust.’ Some advocate that the state only control the land and financial sectors and completely retreat from the business world.” The article argued, “The experiences of Eastern Europe and Latin America have shown that a market oriented toward privatization will leave the national economy unprotected; its property rights and even its economic lifeline will then be controlled by foreign capital.”

The author emphasized that the state-owned enterprises should maintain an advantageous and dominant position in the following sectors: (1) strategic areas related to national security: defense and the science & technology industry (nuclear, aerospace, weapons, ships, and military electronics); national infrastructure (such as the communications and broadcasting, electricity, and railway networks and important transportation facilities); key urban infrastructures (water supply, drainage, electricity, gas, and roads); the financial sector; and bulk agricultural commodities. (2) important basic industries: such as power, telecommunications, energy, and key petrochemical and metallurgy industries. (3) non-renewable strategic resources: mining, oil and gas resources. (4) pillar industries and the high-tech industry: mining, metallurgy, petrochemical, machinery, and transportation equipment; and high-tech industries (new materials, new energy, electronic communications, aerospace, biomedical, etc.

Source: Red Flag Manuscript, March 26, 2012
http://www.qstheory.cn/hqwg/2012/201206/201203/t20120326_147755.htm