Economy/Resources - 216. page

A Chinese Ministry of Commerce official told Xinhua that the country’s overseas investments have been growing at a high speed. “If the world economy continues to improve, in three or four years, Chinese enterprises’ annual foreign direct investment is expected to exceed US$100 billion, an amount commensurate with the current annual absorption of foreign capital. This brings the hope that China will soon become a net capital exporter.” 

In 2010, China invested US$59 billion in 122 countries and regions. According to a UN report, last year saw China become the third largest investor in Latin America. Despite the high growth of outbound investment, risks are increasing. Some governments have prevented China from investing in some industries, with the belief that Beijing’s support of certain large companies results in unfair competition.

Source: Xinhua, May 17, 2011
http://news.xinhuanet.com/2011-05/17/c_13878558.htm

A recent Guangming Daily commentary advises that state-owned enterprises should learn to avoid commercial and political risks when making overseas investments. Among the US$18.8 billion worth of contractual projects of Chinese enterprises in Libya, commercial insurance only covered less than 400 million Chinese yuan (US$61.50 million) of the loss. The rest of the investment in Libya has been “left to God’s mercy.” 

China Review News (CRN) republished a State Information Center (SIC) article on constraints to the process of internationalizing China’s currency, the RMB. The article suggested that this process will be a long one and is constrained by four main limitations: 1) the limitation of the economic development model and structure; 2) the limitation on the degree of the Chinese central bank’s independent decision making power; 3) the limitation of the international financial market’s conditions; 4) the limitation of the cross-border money exchange mechanism. The article expressed the belief that RMB internationalization is an important symbol of China’s movement toward becoming a strong financial power. However, the journey ahead requires heavy work on building a monetary system.

Source: China Review News, May 20, 2011
http://gb.chinareviewnews.com/doc/1016/9/9/5/101699564.html?coluid=53&kindid=0&docid=101699564&mdate=0520063632

A recent Xinhua article discussed the security of China’s foreign assets. With the Chinese government’s “Going Out” strategy, many Chinese companies’ sped up their international investment process, resulting in large overseas assets. By the end of 2009, the total amount exceeded 4 trillion yuan. The recent Libyan situation highlighted the issue of the security of these assets. Although the workers returned home, the investment and assets there remain unprotected. Experts suggest that international investments involve two types of risks. One is market risks, such as price changes; the other is non-market related, such as government regulations and terrorist attacks. Many Chinese companies “rushed out” without proper preparation, such as insurance. The article called for improved risk management.

Source: Xinhua, May 21, 2011
http://news.xinhuanet.com/2011-05/21/c_121442871.htm

Central China Grid Company Limited, one of the five regional power plants of the State Grid Corporation of China, released an analysis stating that power shortages, which used to be seasonal, are becoming a year round problem. "[The Central China Grid] is at a critical turning point – seasonal and local power shortages now occur throughout the year and cover the entire region.” Rapid increases in consumption and an insufficient supply of coal are believed to be the root causes of the shortage. The Central China Grid covers the five provinces of Hubei, Hunan, Henan, Jianxi, and Sichuan and the city of Chongqing. In the past, the Central China region did not experience any problems with the supply of power during April and May. In 2010, restrictions on consumption [that were imposed during the winter] were lifted in February. In contrast, in 2011, the restrictions have remained in place through April. The analysis predicts a shortage of 8.22 million kilowatts for the summer of 2011.

Source: Xinhua, May 6, 2011
http://news.xinhuanet.com/2011-05/06/c_121387402.htm

An article appearing in Xinhua’s Economic Information Daily quoted Li Daokui, a member of China’s Central Bank’s Committee on Monetary Policy, as stating, “The world, including China, has entered into an era of high inflation. Over the next five to ten years, China’s inflation will remain at a high level. Predictions are that, in the next decade, prices of energy and resources will be an important factor pushing up inflation.” 

On May 12, 2011, China’s central bank, the People’s Bank of China, decided to increase the deposit reserve ratio another half percent. It was the fifth increase this year. It is believed to be a signal that decision makers are determined to fight inflation and excess liquidity. The announcement came after the State Statistics Bureau and the central bank published April’s economic and financial data. While economists believe this is a gesture to combat high inflation, they fear that inflation will remain high in the foreseeable future. This recent hike in the ratio is able to freeze 370 billion yuan and is considered a way to tighten liquidity. Experts believe there is a downside risk on both the real estate market and the real economy in terms of the cost of loans. Since 2008, the central bank has increased the ratio 17 times.

Source: Xinhua, May 12, 2011
http://news.xinhuanet.com/2011-05/12/c_13872209.htm

Starting on April 29, 2011, the northern part of China has been hit with large-scale sandstorms. The sandstorms were the strongest this spring, covering 10 provinces, including Gansu, Xinjiang, Inner Mongolia, Ningxia, Shaanxi, Shanxi, Hebei, and Beijing, and 286 counties or cities (about 2.3 million square kilometers). The total population impacted by the sandstorms was 90 million. It’s the second time this year that Beijing and the Tianjin area were attacked by sandstorms. Downtown Beijing’s ground visibility was reduced to five kilometers. This round of sandstorms originated in Southern Mongolia and the South Xinjiang Basin. Coupled with low precipitation in the region, cold air was the main force that pushed the sand and dust south.

Source: China News Service, April 30, 2011
http://www.chinanews.com/gn/2011/04-30/3009731.shtml