The International Herald Leader published an article on the collapse of Rio Tinto’s controversial deal with China’s state-owned aluminum company, Chinalco. The Chinalco’s deal, valued at $24.3 billion, would have been China’s largest investment in a foreign company. Rio recently announced to would combine its large iron ore operations with BHP Billiton instead.
Nanfang Daily reported that China has made policy changes to smooth the process for domestic enterprises to buy properties overseas. There are three check points for such purchases: National Development and Reform Commission (NDRC) – checks on whether the investment is in line with national interests; Ministry of Commerce – checks on trade balance, anti-trust, WTO suit, etc; and State Administration of Foreign Exchange – approves use of foreign currencies. The Ministry of Commerce has relaxed their control.
In 2009, the State Administration of Foreign Exchange published “Foreign Currency Management Regulations on Domestic Enterprises’ Overseas Investments (Draft of Soliciting Opinions),” which changed the funds source verification process from approving before the investment to recording after the investment.
The Ministry of Commerce published “Measures for Overseas Investment Management” in March. The regulations have the following changes: 1. Ministry of Commerce will only review and approve a limited number of large overseas investments. 2. The process is simplified so that most companies only need to submit a form and receive an investment certificate in three working days. 3. The financial viability and feasibility of the investment is left to the company to decide.
Source: Nanfang Daily, June 2, 2009
China News, a state owned and internationally oriented Chinese news agency, recently reported on the idea of having Chinese oil futures. The Chairman of the China Securities Regulatory Commission and the Deputy Mayor of Shanghai delivered speeches that indicated the State Council intended to introduce crude oil, gasoline, diesel and asphalt futures at the Shanghai Futures Exchange. The Exchange has been pushing the oil futures for quite some time and the system is ready. However, the Chinese oil industry is highly centralized and the related oil companies are not willing to give up the pricing monopoly. Another major barrier is foreign exchange control, which prevents international players from participating in the commodity trade.
Source: China News, June 2, 2009.
Qiu Shi, a magazine by CCP Central Committee, published an article on global economies by Professor Zhang Boli, a member of the Administrative Council of the CCP Central Party School. The article suggested that the solution to the global financial crisis is international cooperation. Aspects of the suggested cooperation include: establishing a healthy global economic and financial system; restraining protectionism; enhancing financial supervision and control; reforming the international currency system; and strengthening regional economic cooperation.
Source: Qiu Shi, June 1, 2009.
Xinhua republished an article from China Youth, which states that as of June 4, only 2.75 million college graduates, 45% of the total number of graduates this year, have received job offers. To ease the unemployment pressure, the government is creating basic level positions in the countryside, remote towns, and less-developed areas and encouraging the graduates to go there.
Source: Xinhua, June 5, 2009
Beijing News recently published an article by well known scholar Ma Guangyuan on the cost of Chinese labor. The article quoted the results of a study by the Chinese central bank. In Dongguan, a major manufacturing city in Guangdong Province, the minimum wage standard went up from RMB 350/month in 1994 to 770/month in 2008 – an annual increase rate below 5%.
The article pointed out that the "miracle" of the "Chinese Model" is obviously built on a "low wages in exchange for profit" basis. As a result, consumer spending remains low. For the past 30 years, the average annual increase in China’s GDP rate has been far higher than the increase in the rate of consumer income. Cheap labor is more of an Achilles’ heel than the "core competitive advantage" of "Made in China".
Source: Beijing News, May 30, 2009.