Economy/Resources - 207. page

Over the past year, waves of Chinese companies (28 in total) have been delisted from U.S. stock exchanges. Since 2011, the total market value of the delisted and about to be delisted Chinese companies has amounted to US$7.8 billion. That compares to US$2.2 billion for IPOs that Chinese companies have issued in the U.S. market. The large number of delisted companies has also had an effect on other Chinese companies that are planning to go public in the U.S. The reasons for the delistings include a stock price that is too low, back door listings (such as reverse takeovers or reverse mergers), and fraudulent accounting practices. The fraudulent accounting practices are the most common reason for delisting.

Source: China Review News, January 24, 2012
http://www.chinareviewnews.com/doc/1019/8/3/8/101983871.html?coluid=7&kindid=0&docid=101983871&mdate=0124000417

Jinghua Times reported on January 21, 2012, that HSBC just released its latest Chinese manufacturing industry’s PMI (Purchasing Managers Index) number. The January number is 48.8, which indicates that the manufacturing sector remained weak in the first month of the year: output and new orders are still declining. Qu Hongbin, HSBC’s Chief Economist in the China Region, commented that the HSBC PMI has been below 50 for three consecutive months, which shows that the growth of the Chinese economy is still slowing down. The continuous decline of investment and exports may result in serious challenges for economic growth. The manufacturing sector may very likely face the heavy pressure of dealing with a high inventory level. PMI is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline.

Source: Jinghua Times, January 21, 2012
http://news.jinghua.cn/348/c/201201/21/n3611197.shtml

On January 12, 2012, the National Bureau of Statistics released information on China’s Consumer Price Index (CPI). According to the latest release, the CPI fell during the five consecutive months prior to the close of 2011. In December, the CPI showed an increase of 4.1% compared to the same month last year. This was a record low for the prior 15 months. The annual CPI increase for 2011 was 5.4%. Ma Jiantang, the Director of the National Bureau of Statistics, expressed that the government’s regulation and control of prices had achieved remarkable results. However, a survey conducted by China’s central bank, the People’s Bank of China, during the fourth quarter of 2011, showed that 68.7% of the residents surveyed believed that prices were “high and hard to accept.” Many residents indicated that their “income could not catch up with price increases”

Source: Xinhua, January 22, 2012
http://news.xinhuanet.com/fortune/2012-01/22/c_111457063_2.htm

In the latest indication of the growing political and economic links between Beijing and countries in the oil-rich Gulf region, China and the United Arab Emirates (UAE) signed a multi-billion dollar currency swap deal. The swap, valued at RMB35bn ($5.5bn), is the latest in a string of currency deals China has agreed to with foreign nations. It is effective for three years and will allow the central banks to draw on the local currency facility to ease bilateral trade. The announcement, which came as Chinese Premier Wen Jiabao visited the UAE for the first time as part of a three country tour of Gulf oil states, acts as both a political statement to bolster China’s ties to the UAE, and a pragmatic measure to increase business with the Gulf’s regional trade hub.

Source: People’s Daily, January 18, 2012
http://politics.people.com.cn/GB/70731/16914473.html

China Youth Daily recently reported that the government’s income for the year 2011 was “amazingly good.” However, tax-paying companies were having a hard time managing. The report gave an example of a small-to-medium sized company in Beijing. The gross profit margin of the company was near 10%, but the VAT (Value-Added Tax) was 17%. Therefore the company was heading down the same road as “everybody else” – tax evasion. One of the typical methods was for companies with business relations to stop invoicing each. Professor Zhou Tianyong from the Central Party School concluded that 90% of the companies would have to go out of business if they didn’t do something like this. The report suggested that tax cuts seem to be on political leaders’ minds, but whether there will be any tax relief remains to be seen.

Source: Xinhua, January 11, 2012
http://news.xinhuanet.com/2012-01/11/c_111409775.htm

According to Zhong Shan, China’s Vice Minister of Commerce, China’s international trade is facing a “complicated and grim” situation due to a lack of demand and intensified competition in the international market.

Zhong said that, on the one hand, China’s exports face competition from traditional exporting countries. On the other hand, with regard to labor intensive products, there is growing competition from developing countries due to rising labor costs in China. Statistics show that, since the third quarter of last year, the market share of Chinese exports to the United States, the European Union, and Japan decreased by 1.3%, 1% and 0.6%, respectively. Seven categories of labor-intensive exports, including textiles, clothing, footwear, luggage, furniture, toys, and plastic products saw a rapid decline.

Source: Xinhua, January 9, 2012
http://news.xinhuanet.com/2012-01/09/c_111401927.htm

China Review News (CRN) commented on Wen Jiabao’s recent speech on financial reform given at the National Conference on Financial Worik held in Beijng. Wen “suggested breaking the (state-owned banks’) monopoly and encouraging private money to enter the financial service field.” The speech also highlighted that the government’s work would be to “improve confidence in the stock market” in 2012.

A few points that Wen’s made in his speech:

1. “China has steadily advanced the international status of the Renminbi (RMB). China has signed a total of 1.3 trillion yuan (U.S. $200 billion) in bilateral currency swap agreements. The amount of cross-border trade in RMB has reached 2.6 trillion yuan (U.S. $400 billion).”

2. “We must acknowledge that the global financial crisis is not over yet. We must improve our sense of crisis and sense of responsibility, and prepare for adversity during times of prosperity."

3. Wen stressed that financial services should move to the real economy and stop “using money for speculation.” For the real economy, Wen wants to “effectively solve the hard-to-obtain-financing problem and the too-expensive-to-obtain-financing problem…”

4. Wen listed “guard against and mitigate the local government’s debt risk” as one of eight measures for China’s financial reform.

Sources
1. Xinhua, January 7, 2012
http://news.xinhuanet.com/video/2012-01/07/c_122551507.htm
2. China Review News, January 8, 2012 http://gb.chinareviewnews.com/doc/1019/7/0/2/101970247.html?coluid=10&kindid=253&docid=101970247&mdate=0108105700

Wen Jiabao attended the National Conference on Financial Work China held in Beijing on January 6 and 7, 2012, and gave a speech, which listed eight measures for China’s financial reform:

1. Provide more good-quality financial services for society’s economic development.
2. Deepen the reform of financial organizations.
3. Strengthen and improve financial oversight and prevent systematic financial risks.
4. Guard against and mitigate the local government’s debt risks.
5. Improve the development of the capital market and the insurance market.
6. Improve the financial macro-control system.
7. Expand the opening of the financial industry (to the world) and improve the capabilities to allocate financial resources and safeguard the level of protection for financial security.
8. Strengthen the development of the financial infrastructure and improve the environment for financial development.

Source: Xinhua, January 7, 2012
http://news.xinhuanet.com/video/2012-01/07/c_122551507.htm