Economy/Resources - 211. page

On October 22, 2011, China Business Journal published a report on an investigation into secret transfers of assets to Canada for entrepreneur emigration.

While the whole nation has been discussing whether to rescue the debt-ridden small and medium enterprises in Wenzhou, Zhejiang Province, business owners from Wenzhou and Yiwu in Zhejiang have been getting ready to emigrate abroad. Some business owners obtained bank loans using their businesses as collateral and transferred the borrowed money abroad for entrepreneur emigration to Canada; other entrepreneurs transferred their assets overseas through different channels long ago, just waiting for the right time to declare bankruptcy. Many Yiwu entrepreneurs have left businesses behind in China, which remain only as empty shells.

Source: China Business Journal, October 22 2011
http://www.cb.com.cn/1634427/20111022/290307.html

On October 19, 2011, the Credit Suisse Research Institute published its second Global Wealth Report. The report said that the total wealth in China grew US$4 trillion from January 2010 to June 2011, exceeding US$20 trillion. China is ranked second in the world next to the U.S. in total wealth, followed by Japan and France. Of the adult population, 37 percent have a total wealth between US$10,000 and $100,000 per person and 5.8 percent have less than $1,000. Meanwhile, China’s million dollar club broke the one million mark. The wealth of 5,000 of those is over US$50 million, which is second to the U.S.

Source: Xi’an News, October 21, 2011
http://news.xiancn.com/content/2011-10/21/content_2499151.htm

The amount of China’s municipal solid waste has reached 70 million tons; the total construction waste is estimated to be between 2.1 to 2.8 billion tons, with 300 million tons of new construction waste generated each year. However, according to Xinhua the disposal of construction waste is mainly temporary pilings and landfill. For example, the annual production of construction waste in Qingdao city’s urban district is as high as 10 million tons, 70% of which is used in reclamation, while 10% is dumped in landfills.

Xinhua said that only five percent of the country’s construction waste is recycled, with only a handful of companies in the business. The problem lies in the inadequate supervision of the disposal of the waste. Construction companies only clean up the waste from the site, while the transportation companies randomly dump or bury the waste nearby to lower their cost. The mechanism involved in waste collection, transportation, recycling, product quality supervision, and product promotion is yet to be put in place.

Source: Xinhua, October 18, 2011
http://news.xinhuanet.com/society/2011-10/18/c_111103536_3.htm

Over 90 owners of private enterprises in Wenzhou, Zhejiang Province have fled in order to escape from debts they could not pay, in an amount of more 200 million yuan (US$31 million). A loan crisis in intermediate and small business enterprises is erupting. Chinese Premier Wen Jiabao brought a group of top financial officials including Finance Minister, Xie Xuren; Governor of the People’s Bank of China, Zhou Xiaochuan; Chairman of the China Banking Regulatory Commission, Liu Mingkang, together with the Party Secretary and Governor of Zhejiang Province, to travel to Wenzhou to deal with the crisis. They held discussions with the local entrepreneurs and asked the local government to try to do everything they could to stabilize the economic and financial situation.

The trigger was that the intermediate and small enterprises could not get funding under the central govenment’s macroregulatory policy and therefore turned to private (underground) sources for loans that often required as much as 200 percent in annual interest.

Source: China Review News, October 5, 2011
http://gb.chinareviewnews.com/doc/1018/5/7/8/101857897.html?coluid=151&kindid=0&docid=101857897&mdate=1005104610

On September 27, 2011, China Review News published a short article to introduce a series it is publishing on “China’s subprime crisis.” Heads of companies are becoming runaway bosses because they are unable to pay hundreds of millions in debt. For example, Hu Fulin, the owner of China’s most popular sun-glass company, recently fled from Wenzhou, the “capital of China’s private manufacturing companies,” to escape his debts. Recently, a “List of Runaway Wenzhou Bosses” has been circulating on the Internet and has caused quite a stir.

“Some analysts believe the incident indicates that a crisis exists in Wenzhou that may affect hundreds of billions in private loans. With the continuous deterioration in the chain of repayment of private loans [Ed: As banks favor SOE’s, banks make loans that are not on the books or borrowers turn to underground sources at higher interest rates, creating a chain of loans] quite a large number of enterprises may collapse. For the banks that originally made these private loans, the funding chain is getting longer. Once the enterprises, the loan borrowers, have business problems and cannot repay the loans, the original banks will be in trouble and more economic entities will be affected. Therefore, a subprime crisis may erupt in China.”

Source: China Review News, September 27, 2011
http://gb.chinareviewnews.com/doc/1018/4/9/6/101849670.html?coluid=73&kindid=7150&docid=101849670

On September 19, 2011, Study Times, the publication of the Party School of the Central Committee of the CCP, published an article about the performance of China’s state-owned enterprises. It was based on a report by the Unirule Institute of Economics, a research institution in Beijing.

From 2001 to 2008, the state-owned and state holding enterprises generated a 7.68% ROE (Return on Equity), while the industrial enterprises above a designated size yielded a 9.22% ROE. Therefore, the performance of the state-owned and state holding enterprises was not good enough. After deducting the costs, government subsidies, and the excess profits due to their being administrative monopolies, it is estimated that, between 2001 and 2008, the true average ROE generated by the state-owned and state holding enterprises was -6.2%.

From 2007 to 2009, the average corporate tax paid by 992 state-owned enterprises was 10%, while the average corporate tax paid by the private enterprises was as high as 24%. In 2008, the employees of the state-owned enterprises received 13.3% more in payments than other companies, which was 12% higher than the average payment level in society. In 2009, the average annual salary of the executive management team of the central government enterprises that were listed on the stock market was 313,000 yuan (US$48,984.5), 37.3% higher than the executive management teams of regional state-owned enterprises and 61% higher than the executive management teams of private enterprises.

Source: Study Times, September 19, 2011
http://www.studytimes.com.cn:9999/epaper/xxsb/html/2011/09/19/12/12_45.htm

Study Times, a newspaper of the CCP Central Party School, recently republished an article from Value China on how to rescue the current imbalanced Chinese economy. The article first compared the Chinese financial system with the U.S. financial structure. Then it asserted that (1) the Chinese financial system is a weak link in China’s global positioning as it relies too heavily on manufacturing and (2) the large amount and the rapid growth of China’s foreign exchange reserves are proof of the lack of domestic consumption and international investments. The author believes that the Chinese financial system has a low service level, a lack of mid-to-small range banks, and a lack of local financial markets. Large national banks have monopoly power and they tend not to provide loans to small businesses even though they create a majority of the jobs in China. The lack of official local financial markets has also encouraged the growth of an underground financial market. In conclusion, the article called for “major structural adjustments.”

Source: Study Times, September 9, 2011
http://www.qstheory.cn/jj/jjyj/201109/t20110909_109222.htm

An editorial in the Securities Times states that the economic crisis in the United States and Europe has brought a rare opportunity for internationalization of the Chinese RMB. In early September, Nigeria announced that it had a Memorandum of Understanding with the People’s Bank of China to convert about 5 to 10% of its foreign exchange reserves to Chinese RMB. China has already entered into agreements with Russia, South Korea, Mongolia, Myanmar, Malaysia and others regarding use of the RMB in settlement. The editorial states, “To internationalize the RMB is the only path for the rise of China. … From regional to global, this is the real path of internationalization.” "It not only expands the RMB’s influence but also reduces the exposure of Chinese foreign trade to the weak U.S. dollar." However, the editorial recognized that the RMB has a long way to go to become a true international currency, stating that the current situation is inadequate because China is the second largest economy and has the largest trade surplus and foreign reserves. “The current international environment has provided China with a historic opportunity to accelerate RMB internationalization.”

Source: Securities Times, September 9, 2011
http://epaper.stcn.com/paper/zqsb/html/2011-09/09/content_304984.htm