Economy/Resources - 200. page

On May 9, 2012, days after high-level US-China economic talks took place in Beijing, the Federal Reserve approved an application from the Industrial & Commercial Bank of China (ICBC) to buy a majority stake in the U.S. subsidiary of the Bank of East Asia. The transaction will make ICBC the first Chinese state-controlled bank to acquire retail bank branches in the United States.

ICBC has total assets of roughly $2.5 trillion. It will buy up to 80 percent of the U.S. branch of the Hong Kong-based Bank of East Asia, which operates 13 branches in New York and California.

In other Fed board decisions, the Bank of China, the country’s third-largest bank, won approval for a branch in Chicago. The Agricultural Bank of China, the fourth-largest bank, is set to establish a branch in New York City, where it already operates a representative office.

Source: International Herald Leader under Xinhua, May 21, 2012
http://ihl.cankaoxiaoxi.com/2012/0521/40050.shtml

On May 15, 2012, China Daily published a report titled “Market Sells Fake Pig Ears.”  According to the article, the pig ears purchased in a market in Ganzhou, the second largest city in Jiangxi Province, were made from gelatin and sodium oleate. “According to food safety regulations, sodium oleate cannot be used as a food additive.” The pig ears pose a potential health hazard.

Source: China Daily, May 15, 2012
http://www.chinadaily.com.cn/china/2012-05/15/content_15301283.htm

According to the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC), the net profits for central government enterprises amounted to 253 billion yuan (US$40 billion) for the period from January to April 2012, down 13.2 percent from the same period last year. The previous report, which was for the first quarter of 2012, suggested that the central enterprises showed an end to the growth that had occurred over the last two years and showed a decline for the first time since November of 2009.

The decline was due to a number of external factors such as an increase in the prices of energy, raw materials, and agricultural products. Other external contributors included an excess of administrative layers, poor management skills, and harsh internal competition. Some experts also indicated that the “good old days” of central enterprises were due to the 4 trillion yuan (US$633 billion) from the economic stimulus plan that followed the 2008 economic crisis. It is expected that the net profits will continue to decline in the near future.

Source: China Economy, May 19, 2012
http://economy.gmw.cn/2012-05/19/content_4177619_2.htm

On May 14, 2012, Study Times, the publication of the Party School of the Central Committee of the Chinese Communist Party, reprinted an article originally published on March 25, 2012, in Southern Metropolis Daily. The article questioned the whereabouts of the huge profits that the enterprises that China’s central government owns have earned.

According to the article, at the start of 2012, the central government owned 963 enterprises, a few more than last year. In 2011, the net profit from these enterprises was 852.27 billion yuan (US$134.9 billion). However, they only submitted 75.736 billion yuan of their profits to the government and project they will only submit 82.3 billion yuan in 2012. That means that each central government owned enterprise submits less than 100 million yuan per year to the government. Yet even the Agricultural Bank, one of the least profitable central government owned enterprises in China, made 300 million yuan per day. The article concluded with a question: “We would like to ask these central government owned enterprises: ‘Where do your profits go?’”

Source: Study Times, May 14, 2012
http://www.studytimes.com.cn:9999/epaper/xxsb/html/2012/05/14/12/12_39.htm

Qiu Shi, a magazine of the CCP Central Committee, published an article that accused the West of giving Chinese state-owned enterprises (SOE’s) a bad name. The article claimed that there has been a recent wave of propaganda in the West suggesting that the Chinese government subsidizes SOE’s. This practice introduces unfair competition into international trade and hurts China’s trading partners. However, the author attempted to justify the dominance of SOE’s in the key industries by referring to existence of SOE’s in the history of Western capitalism. The author expressed that the West just does not feel happy about the fact that some Chinese state-owned companies are too large and too successful for them to be able to compete. The article concluded that China should keep backing these companies.

Source: Qiu Shi, May 10, 2012
http://www.qstheory.cn/gj/gjsspl/201205/t20120510_156891.htm

On May 10, 2011, China’s Ministry of Land and Resources issued the “2011 China’s Land and Resources Report.” The report revealed that China relies on imports for over 56 percent of all of the oil and iron ore it uses. The report stated, “In 2011, the total foreign trade in mineral products amounted to US$957.1 billion, which was a 34.3 percent increase over the previous year; imports increased 34.5, while exports increased 33.9 percent.”

Source: People’s Daily, May 10, 2012
http://politics.people.com.cn/GB/1027/17859378.html

SecuTimes recently reported on the issue of local governments facing pressure due to debts that will mature at a peak time in 2012. According to the National Audit Office, it is estimated that local government debts amounting to RMB 3 trillion (US$477 billion) are expected to mature this year. With the adjusted interest rate, 2012 is the year in which local governments face the highest risk of defaulting on their debts. By the end of 2010, total local debts reached RMB 9.67 trillion (US$1.54 trillion). In fact, local governments never planned to pay off their debts with budgeted fiscal funds. Instead, nearly all expected payments were based on anticipated land sale income that was not included in the official budget. However, the cooling housing market has caused a significant decline in land sales. It is estimated that the funding gap for these debts is about RMB 500 to 1000 billion. In the meantime, local governments are required to fund housing construction plans for low income families. This will further increase the likelihood of a debt crisis.

Source: SecuTimes, April 28, 2012
http://news.stcn.com/content/2012-04/28/content_5510372.htm

China Economy recently reported that the Ministry of Commerce released a first quarter foreign trade review showing the market’s movement in six key areas: (1) The import and export growth rates significantly slowed down, which was a continuation of the direction established in the last quarter of 2011. (2) Chinese exports to Europe suffered a decline, while trade with emerging markets showed rapid growth. (3) Labor-intensive products (such as shoes) recorded very slow growth, while mechanical and electrical products exhibited healthy growth. (4) Coastal provinces reported much slower growth than the Middle West provinces. (5) Private companies were responsible for more than half of the growth in foreign trade. (6) Import growth significantly slowed. Some commodities were produced in much larger quantities, with lower prices.

Source: China Economy, April 27, 2012
http://www.ce.cn/xwzx/gnsz/gdxw/201204/27/t20120427_23280625.shtml