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Russia Continues to Be China’s Largest Oil Supplier

Well-known Chinese news site Sina recently reported that, based on data from China’s General Administration of Customs, Russia was China’s largest oil supplier in 2018, reaching 1.49 million barrels. This represents a 19.7 percent year-over-year increase. Russia has owned the top supplier title for the past three consecutive years. Russian oil represented 15.5 percent of China’s total oil imports last year. For many years, Saudi Arabia was China’s largest oil provider. However, starting in 2015, Russia expanded its reach into the Chinese market, especially in the segment of local smaller refineries. Also, the second Russia-China oil pipeline was formally put in use in January 2018. Saudi Arabia remains as China’s second largest oil provider. China used to be one of the biggest oil buyers for the United States. However, last December, China did not import any oil from the U.S.

Source: Sina, January 25, 2019
https://finance.sina.com.cn/money/future/fmnews/2019-01-25/doc-ihrfqzka0877418.shtml

Chinese Economy Is Increasingly Dependent on Real Estate Market

Security Times reported that, in the first 11 months of 2018, the sales of housing reached 12.95 trillion yuan ($1.94 trillion), breaking the 10 trillion mark for the third consecutive year. In the article, it stated that, as the real estate industry has been growing, domestic economic land dependence has become more and more serious. Looking at the ratio of housing sales revenue to GDP over the years, in 2017, the ratio reached 16.16 percent. This data means that real estate generated approximately 16 yuan per 100 yuan of GDP.

In 2009, the domestic housing sales ratio and the ratio of real estate development investment to GDP, both exceeded 10 percent for the first time in history. It is known that 2009 was the first year that the 4 trillion economic stimulus plan was launched. Between 2008 and 2017, sales of housing only declined. In 2014 and in 2017 it increased by more than 433 percent compared to 2008, while total real estate investment surged to nearly 11 trillion yuan in 2017, an increase of 252 percent.

According to the National Bureau of Statistics, sales of housing in the first 11 months of 2018 reached 12.95 trillion yuan, an increase of 12.1 percent. If we use 10 percent of the growth in housing sales for the full year of 2018 and a GDP growth rate of 6.5 percent, the ratio of housing sales to GDP would have reached a record 16.7 percent last year. Meanwhile according to the statistical data, in recent years, the ratio of state-owned land use rights as a percentage of national finance revenue, has continued to exceed 20 percent, or even 34 percent. Taking 2017 as an example, the state-owned land use rights transfer accounted for 28.97 percent of the national fiscal revenue. This data means that the government has generated 29 yuan per 100 yuan in revenue from sale of the land.

Source: Security Times, January 18, 2019
http://news.stcn.com/2019/0118/14807368.shtml

With Economy Slowdown, China’s Local Governments Cut Revenue Targets

Due to the downward pressure on China’s economy in 2019, as well as the central government’s tax cut effort, China’s provinces and cities have lowered their fiscal revenue growth targets. Many places have planned to tighten their belts.

Provinces such as Jiangsu, Beijing, Sichuan, Henan, Hebei, and Fujian have lowered their 2019 revenue growth targets, vis-a-vis the 2018 growth rate.

Sichuan’s budget report states that the economy faces a large downward pressure in 2019, and this makes fiscal revenue growth more difficult. At the same time, with the implementation of a large scale tax cut and fee reduction policy, the public budget of 898.4 billion yuan (US$132 billion) for the whole year still cannot make ends meet. The growth of Sichuan’s public budget revenue in 2018 was 9.3 percent; in 2019 it was down to 7.5 percent.

The growth of Beijing’s 2019 fiscal revenue target was also reduced to 4 percent from 6.5 percent growth last year. 2019 will see a reduction of Beijing’s fiscal income of about 30 billion yuan (US$4.4 billion). With even more aggressive tax cuts and fee reduction measures, pressures will continue on the growth of fiscal revenue.

Jiangsu lowered its revenue growth target from 5.6 percent in 2018 to 4.5 percent in 2019.

In Hubei, the level of three major types of public expenses – buying and using government cars, overseas trips, and official receptions – face a projected reduction of 5.6 percent.

Source: Central News Agency, January 24, 2019
http://https://www.cna.com.tw/news/acn/201901240168.aspx

Xiang Songzuo: Four Reasons China’s Economy Slid in 2018

Xiang Songzuo is a Chinese academic and an economist. He serves as the Chief Economist of the China Agriculture Bank and is a professor at the Renmin University School of Finance. He has become known for asserting that China’s GDP growth was only 1.67 percent in 2018.

Recently, Xiang made another speech on the reasons why China’s economy slid so badly in 2018:

First, tightened government financial control caused many companies to face a shortage of capital supply. However, this was not the main reason.

Second, China’s stock market dropped 30 percent and lost 7 trillion yuan (US $1 trillion) in value in 2018. Xiang felt that the scale of the stock market crash in China over the past ten years is comparable to the drop in the U.S. in 1929. Xiang pointed out that, in the past ten years, Chinese companies’ growth has not been based on improvements in technology or growth in profits or assets, but rather on borrowing from banks. He quoted Zhu Yunlai, son of former Primer Zhu Rongji, who stated that China’s total debt exceeds 600 trillion yuan (US $90 trillion). Chinese companies just do not make money. However, this was still not the main reason.

Third, the government’s inclination to eliminate private ownership and expand state owned companies has greatly hurt private companies’ confidence and their incentive to grow. In Xiang’s view, this was the most important reason.

Fourth, the trade war with the U.S. was an external reason.

Xiang also warned that nowadays Chinese have become addicted to playing with debt and high leverage financing. This is actually a mirage and will collapse soon. When all people all of sudden realize that the assets (e.g. real estate property or financial products) that they bought are not worth that much, everyone will try to escape (and avoid big financial losses), but by then nobody will be able to escape.

YouTube Video Revealed That China’s Economy Went Downhill Dramatically

A YouTube video showed a Chinese person commenting that, in 2018 the economy in Liaoning Province went downhill dramatically. The setting was in a meeting, but the person’s identity is unknown. From the way he talks, he may be a member of the People’s Political Consultative Conference (PPCC) or a government official.

He stated that Shenyang, the capital city of Liaoning, didn’t make its GDP target in 2017 and then its economy slid downhill in 2018 (this means that it didn’t make the 2018 goal either, since Chinese officials always want GDP to surpass the previous year).

“When the PPCC members came (to the meeting), they all lowered their heads and avoided the question of making money this year. There were no such scenes (as in early years) where one said ‘I made 50 million yuan (US $7.5 million)’ and another one said ‘I made 800 million.’”

“I take full responsibility to tell you all, that all I gained in 2018 was only age but no wealth. However much you invested, that is how much you would lose. We now claim (Shenyang) made 1 trillion yuan (US $150 billion) in GDP (in 2018). Dalian city’s economic situation was much better than (Shenyang), but it only reported 700 billion yuan. We shouldn’t give too excessively big a number in our government report.”

Alibaba Cuts Costs on Hiring and Travel Fronts

Well-known Chinese technology news site Tencent News recently reported that, since the US-China trade war started, China’s economic crisis has impacted the top Chinese Internet giant, the Alibaba Group. Signs are showing that the impact intensified very recently. According to anonymous sources, new hires have been told they could not start their work before the next fiscal year begins in April. Some new hires said the Alibaba Group is reducing headcounts across the board. All business lines are now having hiring freezes. The Group is also cutting business travel funds even for management personnel. For example, now one can only use business class for air travel once every five trips and these trips have to exceed 20 hours per round trip. The Alibaba Group (NYSE: BABA) is China’s largest online service provider. In 2015, Alibaba’s online trade volume exceeded RMB 3 trillion (US$442 billion), making the Group the largest retailer in the world. Alibaba Group’s financial health is often seen as a barometer of the Chinese economy.

Source: Tencent News, January 18, 2019
http://tech.qq.com/a/20190118/007919.htm