Economy/Resources - 210. page

Xinhua published an article which observed three changes have occurred in 2012 in Chinese companies’ overseas investments. First, there was a change in the investment philosophy from the time of start-up to merger and acquisition. If a Chinese company builds a new business in competition with existing traditional industries, clashes with those local businesses will likely occur; the Chinese business often becomes the “enemy” in the local community. Second, the sectors where investments are made appear to be more diversified, moving from the resources sector to the technology, brand name, and distribution sectors. There have been political complexities associated with the acquisition of resources overseas. These acquisitions have tended to occur in Africa and South America, and have brought geo-political risks that cannot be ignored. The acquisition of technology, brand name, and distribution businesses make up for the weakness in manufacturing in China and also can be easily accepted overseas. Thirdly, recent acquisitions have involved private equity (PE), which is viewed as good progress. With PE’s expertise in investment, their participation has enhanced the success rate of China’s acquisitions.

Source: Xinhua, February 12, 2012
http://news.xinhuanet.com/fortune/2012-02/12/c_111515389.htm

Xinhua‘s Huanqiu interviewed Lin Boqiang, the Director of the China Center for Energy Economics Research at Xiamen University. In the interview, Lin commented on China’s strategic oil stockpile. He observed, “Unfortunately, our response to the demand to stockpile oil came late. Had we taken action sooner, we would have been in a better position to take advantage of the international oil price dive that occurred in 2008 and to enhance our stockpile capability.”

The China National Petroleum Reserve Center was established on December 18, 2007. The plan was to complete the build-up of China’s reserves within 15 years in three phases. The first phase has been completed and the second phase is scheduled to conclude in 2012. The third phase is in the design stage and is scheduled for completion in 2020. At the present time, China’s strategic oil stockpile will last 50 days. Lin said that after the second phase, China will have 60 days of oil stockpiled, and when the project is completed the oil reserve is to reach 90 days. He estimated that the U.S. may have about 90 to 100 days of strategic oil stockpiled, and can support well over six months. Currently about 55% of the oil that China consumes is imported.

Source: Huanqiu, February 10, 2012
http://mil.huanqiu.com/Observation/2012-02/2426983.html

On February 7, 2012, China Review News published an article about China’s development strategy after the death of al-Qaeda leader, Osama bin Laden. According to the article, since the success of the U.S. counter-terrorism strategy, China and the U.S. are no longer close. The theory of the "China threat" in some Western countries has changed into increased containment of China. How to break through the Unites States and the Western countries’ containment is a big challenge for China’s development. However, China’s huge foreign exchange reserves provide a solid backing for Chinese enterprises to go abroad. Internally, China should deepen its institutional reforms and provide a better life for the ordinary people.

Source: China Review News, February 7, 2012
http://gb.chinareviewnews.com/doc/1020/0/2/3/102002391.html?coluid=53&kindid=0&docid=102002391&mdate=0207083644

The Chinese Communist Party issued its first official policy document in 2012, called the No. 1 Document, on the promotion of agricultural innovation. This is the ninth consecutive year that the No. 1 Document has had rural issues as the theme, but it is the first time it has focused on agricultural science and technological development. It emphasizes that more attention must be placed on technological innovation. Three sections of the six section document discuss this focus. Specifically, it would “substantially increase investments and subsidies for the agricultural technology sector, promote great leaps forwards in the sector, and provide a strong momentum for improvements in land yield, farmers’ income, and rural prosperity.”

Source: Xinhua, February 1, 2012
http://news.xinhuanet.com/politics/2012-02/01/c_111478030.htm

Tan Yaling, President of China Foreign Exchange Investment Research Institute, predicted that 2012 may present potential risks in three areas of the international financial market: First, there are risks to the Euro and a crisis is imminent. Greece or Germany may opt out, which may lead to higher Euro risks and a further crisis. Second, oil price hikes may lead to severe inflation and an economic crisis would be inevitable. Third, fluctuations is the price of gold will be unpredictable and there will be an increase in speculative moves in the gold market. While the price of gold may continue to rise, severe drops may occur. The price of gold is a double-edged sword. It may protect the dollar and the U.S. but the U.S. may also be forced to sell gold in order to save itself.

Source: Xinhua, January 24, 2012
http://news.xinhuanet.com/finance/2012-01/24/c_122611836_4.htm

Outlook Weekly published an article discussing China’s economic growth in the mid to long term. It listed four challenges that China faces:

1. As the global economy is still depressed, the demand for exports may negatively impact China’s economic growth. In 2011, exports dragged down the GDP growth rate by 5.8%.

2. Consumption is likely to stay at the same level. However, the continued economic depression may cause consumption to decrease.

3. The pressure of inflation still exists due to a lack of land in cities, a rapid increase in labor and service costs, an upward adjustment in service industry pricing, the the continuous increase in the price of agricultural products as a result of urbanization, and the ongoing pricing reform

4. High financial leverage results in a risk of bad loans. The M2/GDP ratio, which was 180% in 2011, is higher than in both developed countries and developing countries that are at a comparable income level with China. Local governments and state-owned enterprises are both highly leveraged.

Source: Outlook Weekly, republished on Sohu.com, January 29, 2012
http://news.sohu.com/20120129/n333094430.shtml

China News Net published its first commentary after Chinese New Year’s Day, summarizing the three new year’s resolutions that are on many people’s minds. Number one on the wish list is a further drop in the price of housing. The year 2011 was the year we saw the strongest decline in housing prices. However, for most people, the price level is still far from affordable. The second wish on the list is an increase in income. Although statistically there was an increase in income last year, the high pressure of inflation made the increase seem inconsequential. The third biggest item most people wish for is a large improvement in food safety. In the past year, a wide range of food safety incidents occurred in the consumer market, having to do with pork, cooking oil, frozen dumplings, infant formula, beverages, and more.

Source: China News Net, January 29, 2012
http://www.chinanews.com/cj/2012/01-29/3624990.shtml

China Review News (CRN) recently published an article commenting on China’s current financial position in the world, its weaknesses, and suggestions for future growth. The commentary pointed out that, by the end of October of last year, the assets of China’s central bank were the highest in the world, having reached US$4.73 trillion. At the same time, assets of the U.S. Federal Reserve, the EU Central Bank, and the Japanese central bank reached US$2.85 trillion, US$2.73 trillion and US$1.8 trillion, respectively. China also has the highest savings rate as well as the highest foreign exchange reserves. However, China’s financial system is leaning too heavily towards manufacturing and infrastructure investments. Investment in medium and small enterprises is still lacking. Another problem lies in the area of China’s overseas investments, which have a very low yield of 3%-5%. The commentary made two suggestions: that China should establish financial institutes designed to serve medium and small businesses, and that the practice of the large scale purchase of foreign bonds should be completely changed. Investments should switch to stock shares and other types of ownership of overseas economic entities, including U.S. assets.

Source: China Review News, January 20, 2012
http://gb.chinareviewnews.com/doc/1019/7/1/6/101971606.html?coluid=136&kindid=4710&docid=101971606&mdate=0120000611