Economy/Resources - 209. page

China News recently reported that the spokesman for the Chinese People’s Political Consultative Committee (CPPCC), Zhao Qizheng, commented in a media briefing on two major security concerns of Chinese companies doing business overseas. Zhao suggested that, though China’s “Go Out” strategy has been very successful, many Chinese companies still face challenges due to a lack of knowledge of the international market. One of the major security concerns is the personal safety of the Chinese company’s staff working overseas. Another major concern is the safety of the investment. On the second point, Zhao added that many failures were directly caused by not using effective public diplomacy, which, if used, would help eliminate the negative voices in the foreign government and the general public. Zhao revealed that, last year, public diplomacy associations were established in Shanghai, Tianjin, and Guangzhou. These three cities do the most international business.

Source: China News, March 2, 2012
http://finance.chinanews.com/cj/2012/03-02/3715152.shtml

At a press conference on February 29, 2012, Chi Fulin, the President of the China Institute for Reform and Development, stated that, in the near future, the government should introduce an income allocation plan that adjusts the allocation of capital  in order to improve public welfare. “At the present time, State-owned capital is invested in competitive markets. It pushes the private sector out and over-heats the investment market. More importantly, it cannot reflect the public ownership of the State’s capital and is not conducive to social fairness.”

Zhang Zhuoyuan, a research fellow at the Institute of Economics at China’s Academy of Social Science, expressed that China is probably the worst country when it comes to income distribution and is also the most confusing and chaotic. Recently, when he was looking at the breakdown on his pay statement, he discovered that his base salary accounts for less than 20% of his total income.

Source: Yangtse Evening Post reprinted at China Economic Net, February 29, 2012 http://www.ce.cn/xwzx/gnsz/gdxw/201202/29/t20120229_23114559.shtml

A Xinhua report revealed some statistics on the 2011 performance of China’s state-owned enterprises that are under the central government, or central government enterprises. (State-owned enterprises include those under the central government, provincial government, and city government, among which those under central government are the largest in size.)

In 2011, these enterprises achieved an operating revenue of 20.2 trillion yuan (US$3.2 trillion), up 20.8% over 2010; a net profit of 971.3 billion yuan (US$154 billion), an increase of 6.4%; and tax payments of 1.7 trillion yuan (US$0.27 trillion), up 19.7%; accounting for about one sixth of the national tax revenue. As of the end of 2011, the asset size of the 117 central government enterprises reached 28 trillion yuan (US$4.4 trillion), up 14.9 percent; with net assets of 10.7 trillion yuan (US$1.7 trillion), an increase of 11.4%. Among the 2011 Fortune 500 companies, 38 are China’s central government enterprises, an increase of eight over 2010.

For the first 11 months of 2011, those enterprises’ overseas operating revenues reached 3.4 trillion yuan (US$0.54 trillion) with a profit of 128 billion yuan (US$20.3 billion), an increase of 30.7% and 28% respectively. The growth rate significantly exceeds that of their domestic operations.

Source: Xinhua, February 28, 2012
http://news.xinhuanet.com/2012-02/28/c_111577568.htm

In a special report about China’s real estate market, Shanghai Security News Online reported that some small and mid-sized developers in the second and third-tier cities in China have abandoned their businesses as they are no longer able to make payments on their loans. Taking Changsha, the capital city of Hunan Province, as an example, the developers of eight real estate projects have fled. There are similar cases in Nanjing City, Jiangsu Province, Jiaxing City, Zhejiang Province, Anyang City, and Henan Province.

The common thread among these run-away developers is that they have borrowed heavily, as much as several hundred million Yuan, from private money lenders. Such loans carry a high interest rate (in Changsha, they run from 3 to 5%, and sometimes even as high as 10% per month). Normally the loans are due in less than a year. While local banks charge only 0.7% per month, with China’s tightened bank loan policies, these developers could no longer get a bank loan.

According to the World Union’s report, for real estate developers in China, 1 trillion yuan (U.S. $163 Billion) in debt payments will be due soon.

Source: Shanghai Security News Online, February 28, 2012
http://www.cnstock.com/index/cj/201202/1871405.htm?page=7

China Review News (CRN) recently republished an article by Professor Zhao Xiao from the Beijing University of Science and Technology. The article stated that the total amount of international settlements done with the Chinese currency in 2011 was RMB 2.08 trillion (around US$306 billion). At the same time, the U.S. unemployment rate was above 8.5% and 15% of the U.S. population received government help. Professor Zhao believes that China’s currency is preparing to challenge the dominance of the U.S. dollar and the United States is playing defense. Zhao pointed out three major challenges China has to overcome: (1) maintaining the stable growth of both the domestic economy and China’s exports; (2) gaining enough national acceptance by promoting fairness, justice, and democracy; (3) establishing an international alliance against the current currency leader – the United States – by enhancing China’s soft power, or even its “hard” power.

Source: China Review News, February 13, 2012
http://gb.chinareviewnews.com/doc/1020/0/8/3/102008309.html?coluid=53&kindid=0&docid=102008309&mdate=0213081204

On February 16, Li Keqiang, China’s Vice Premier, who is discussed as the likely successor to Wen Jiabao as Premier, published a feature article in the Chinese Communist Party’s flagship publication Qiushi Journal. The article elaborates on China’s 2012 national economic strategy with a focus on boosting domestic demand by urbanization.

Li points to three “structural problems” in the Chinese economy: First, a slowdown in the drive for economic growth. “While the external demand declines, factors restricting the growth of domestic demand are also increasing. It is difficult for people’s income to maintain a rapid growth and Chinese enterprises’ ability and willingness to invest has waned. There are many obstacles to expanding private investment.” Second, there are many factors that drive up prices. “They include the upward pressure on production costs caused by labor, land, energy resources, and other production factors; the impact of inflation on the importation of bulk commodities in the international market, as well as the effect of the deepened price reform of raw materials.” Third, the problem of unbalanced, uncoordinated and unsustainable development is still prominent.

Source: Qiushi, February 16, 2012
http://www.qstheory.cn/zywz/201202/t20120216_138924.htm

According to recent data released by China’s Central Bank, by the end of the fourth quarter of 2011, China’s foreign exchange reserves had fallen to $ 3.181 trillion, a decrease of $20.55 billion or a decline of 0.6%, compared to the end of the third quarter of 2011. The decline in the foreign exchange reserves occurred because of China’s policy adjustments, the slower speed of China’s economic growth, and capital outflows.

Source: China Review News, February 14, 2012
http://gb.chinareviewnews.com/doc/1020/0/9/5/102009536.html?coluid=10&kindid=253&docid=102009536&mdate=0214084959

A-Finance recently published an article analyzing the fact that the profit that the Chinese banking system makes is greater than that of the tobacco industry or the oil industry. According to CBRC (the China Banking Regulatory Commission), in the first three quarters of the year 2011, the increase in the banking system’s annual profit was 35.4%. Those who work in the banking industry have an average income that is dramatically higher than any other industry in China. An analysis showed that the primary sources of profit are the high interest differential, frequently collected fees, and a massive amount of “wealth management” products. The net interest differential contributes from 75.7% to over 90% of the banking system’s annual income. The differential is the highest in the world and is determined by the government. Meanwhile, 79% of the services that banks provide are fee-based. Today, these fees are ten times higher than they were ten years ago. Chinese banks are considered monopolies both as institutions that take deposits and as lenders.

Source: A-Finance, February 6, 2012
http://www.afinance.cn/bank/yhxw/201202/420475.html