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Xinhua: Chinese SOEs Are “Big but Not Strong”

According to an article that Xinhua published, in 2002, only 11 Chinese companies made the Fortune Global 500 list, but, in 2017, 115 Chinese companies made the list compared to 132 U.S. companies. Most of the Chinese companies are from the bank, insurance, telecommunication, and electric grid industries while 60 percent of the companies were SOEs (state owned enterprises) and accounted for over 80 percent of the net capital and total income. However the article called these SOEs “big but not strong.” They lacked the ability to be competitive, especially in value creation ability. The article stated that the Chinese companies lagged behind in Internet, information technology, pharmaceutical, automotive, military, semiconductor, and chip industries when compared to the Western companies. Among those 109 Chinese companies on the Global Fortune 500 list, the Return of Asset rate was only 1.65 percent compared to 4.79 percent for the U.S. companies. Chinese SOEs are behind in the high end core technology and the spare parts industry and there are no companies that are even comparable with the Western companies in the pharmaceutical and semi-conductor industries. The article reported that the Chinese SOEs need to make breakthroughs in renovation and resource dependency and to rely less on core product imports while improving on brand position and quality.

Source: Xinhua, January 15, 2018

Duowei: Another Case of a Local Chinese Government’s GDP Data Fraud

Duowei news reported that, following the three northeastern provinces, another act of “cheating the Party Central Committee” had occurred. In recent days, one of China’s local governments was exposed for committing GDP data fraud. Officials from Inner Mongolia admitted that they had committed massive falsification of financial and economic data. Those responsible had artificially increased the industrial added value in 2016 by 40 percent. The falsified accounts amounted to an addition of 290 billion yuan (US$44.69 billion), which was the equivalent of the total GDP of Inner Mongolia’s capital city Hohhot. On January 7, Chinese media reported that Inner Mongolia, after the financial department’s repeated auditing corrections, had to reduce its income from its public budget in 2016 by 53.0 billion yuan (US$8.16 billion), accounting for 26.3 percent of the total. The industrial added value in 2016 should be reduced by 290 billion yuan, accounting for 40 percent of the industrial added value for the entire region.

Source: Duowei, January 8, 2018

CNFOREX: China May Become World’s Largest Natural Gas Importer in 2018

China’s largest online portal for foreign exchange related news, CNFOREX, recently reported that, in 2018, China may surpass Japan to become the world’s largest importer of natural gas. China is currently the world’s largest importer of oil and coal. China is also the third largest natural gas consumer, after the United States and Russia. However, China’s domestic supply cannot meet its consumption needs. Today, around 40 percent of China’s natural gas depends on foreign suppliers. Thomson-Reuters-Eikon data showed that China’s combined pipeline and Liquefied Natural Gas (LNG) imports in 2017 showed a year-over-year increase of 25 percent. In 2017, to remedy air pollution issues, the Chinese government has been pushing hard on the “Coal to Natural Gas Conversion.” If the movement continues, and based on the fact that China surpassed Japan in September and November on natural gas imports, it is reasonable to expect China will become the largest natural gas importer (pipeline and LNG combined) in 2018.

Source: CNFOREX, January 3, 2018

RFA Commentary: What It Means When China Limits the Outflow of Currency

Radio Free Asia published a commentary reporting that the State Administration of Foreign Exchange recently issued a notice that, starting January 1, 2018, each year, a Chinese citizen, when in a foreign country, will only be able to withdraw 100,000 yuan (US$15,415) cash using a debit card or credit card that a Chinese bank has issued. They will also be limited to a cash withdrawal of 10,000 yuan (USD$1,541) each day and will be prohibited from using other people’s cards or letting other people borrow their card to withdraw the cash. The article said that the tightened cash policy is an indication that the Chinese economy may appear strong from the outside but it is weak on the inside. The article stated that forcing the “low end” population to leave big cities and to limit the cash flowing out of country, are both indications that China’s political climate is far more serious than what has been reported. The article said, “There was a prediction that the bubble in China’s economy might burst soon. Even though it has not happened yet, it could only be a matter of time and will catch people off guard because some of the real issues are being pushed aside and have still not been resolved.”

Source: Radio Free Asia, January 1, 2018

SWIFT: RMB Global Presence Sliding Further Down

Well-known Chinese news site Sina recently reported that SWIFT (Society for Worldwide Interbank Financial Telecommunication) mentioned in its October report that the global usage of the Chinese currency continues to decline. The report shows that the volume of RMB international transactions fell to 1.46 percent in October. The RMB is now ranked number seven among all currencies, down from number six in October 2016. This is the lowest point since April 2014. The top three most widely used currencies are the US Dollar (39.79 percent), the Euro (33.05 percent) and the British Pound (7.71 percent). The Chinese RMB is now between the Canadian Dollar (1.60 percent) and the Australian Dollar (1.43 percent). The US Dollar also reached its lowest point since November 2013.

Source: Sina, November 30, 2017

People’s Daily: China Needs More Higher Level “Opening Up”

People’s Daily recently reported that Ning Jizhe, Deputy Director of China’s National Development and Reform Commission, mentioned in a speech that China must raise its level for its “Opening Up” long-term policy. Ning pointed out that the Chinese economic growth is now switching its focus from speed to quality, which calls for more exchange on the technology, capital, talent, management, and information level. Chinese competitiveness must improve to break out of the medium or lower level in the international value chain. China’s sustained growth depends on efficient development of the international market and the strength of innovation. Ning recommended that “Opening Up” on a higher level should include a balance between imports and exports, should encourage and help capable domestic companies to expand their international reach, should connect domestic regional development and international marketing, and should look inland and push more towards the west side of China.

Source: People’s Daily, November 12, 2017

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