Economy/Resources - 217. page

Zhang Anyuan, the Director of the Office of Fiscal Finance at the Economic Research Institute of the National Development and Reform Commission, proposed two approaches to use regarding China’s foreign reserves. “Rather than watching our foreign exchange reserves shrink in value, we should use them to solve domestic problems.” The first approach is to “convert financial assets into reserves of resources,” whereby China encourages the exploration but limits the production of oil, coal, iron ore, and non-ferrous metals. This would increase their imports, reduce the foreign exchange reserves and keep the reserves of resources available in China. The second approach is to “inject funds into local financial entities so as to increase their credit ratings.” According to Zhang, local financial entities have entered into the peak period when payments are due on the government bonds they previously issued. Some of them may face a high probability of liquidity risks. Such an injection of funds will help improve their credit ratings so that these local financial entities can issue more bonds, domestically or in Hong Kong, to solve their liquidity problems for the payments on the bonds they previously issued. 

Source: Modern Bankers reprinted by Sina.com, January 19, 2012
http://finance.sina.com.cn/leadership/mroll/20120119/160911242096.shtml

Outlook Weekly published an article about the West’s pessimistic forecasts for China’s economy. The article pointed out that these negative Western forecasts about China’s economy have never materialized. It stated that there are three reasons: One, Western economists do not want to see a rising China and have the wishful thinking that China will go downhill and collapse. Two, the Western economists measure China against the history of the growth of Korea and Japan. They believe that if other countries such as Korea and Japan did not make it, then China will not be able to make it either. Three, China’s market economy is one that is atypical. When Western economists reviewed the prospects for China’s economy, they relied on the methodology and standards applicable only to typical market economies. That is why their grim forecasts for China have failed to materialize.

Source: Outlook Weekly reprinted by sohu.com, January 21, 2012.
http://news.sohu.com/20120121/n332841922.shtml

Outlook Weekly recently interviewed Fang Jianping, the Chief Economist at China’s State Information Center. In the interview, Fang stated that the real challenge to the economy in 2012 will be the economic structural adjustments, rather than inflation or GDP growth. “Although the price level and growth rate may both show downward movement, it will not be drastic and will not exceed the expected range of the State’s macro-control. The potential growth rate of the economy is between 8 and 9 percent. The real challenge is whether there will be substantial progress in the structural adjustments.”

Source: Outlook Weekly, reprinted on China’s Communist Party website, January 17, 2012
http://theory.people.com.cn/BIG5/49154/49155/16901916.html

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