Economy/Resources - 222. page

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

China Review News (CRN) recently published a report referring to a Bloomberg article that quoted Davide Cucino, Chairman of the EU Chamber of Commerce in China, as saying China plans to realize the free exchange of the RMB by the year 2015. Cucino suggested that he heard the news at a summit with Chinese officials. Reuters commented that, if the report reflected the truth, this was the first time China set an official date for the matter. Chinese central bank governor Zhou Xiaochuan commented on the news when he was attending the Fourth China-U.K. Economic and Financial Dialogue. He said that China does not have such a timetable and that a long and orderly process is involved. He also suggested that China is not eager to include the RMB in the basket of currencies that make up the IMF SDR (Special Drawing Rights) exchange rate. However, there are signs that the Chinese government is placing the RMB free exchange issue on the agenda.

Source: China Review News, September 9, 2011
http://www.chinareviewnews.com/doc/1018/3/0/1/101830181.html?coluid=0&kindid=0&docid=101830181&mdate=0909185345

China Youth Daily published a report about the enourmous land and water resources that Beijing’s 75 golf courses use. In terms of land, they use 132, 257.75 mu (about 881,713 acres), which is 0.5% of the total area under the Beijing administrative jurisdiction. The daily consumption of water is at least 168,700 cubic feet, amounting to 60 million cubic feet of water resources every year. Due to Beijing’s shortage of water, twice in 2010 Beijing diverted water from other provinces. In October 2010 alone, about 40 million cubic feet was diverted to Beijing.

Source: China Youth Daily, September 7, 2010
http://news.xinhuanet.com/politics/2011-09/07/c_121990086.htm

On September 6, 2011, People’s Daily Online published an article suggesting that China should increase its gold reserves when the time is right.

“The strategic significance of increasing gold reserves is to relieve the risk to our foreign exchange reserves. China’s foreign exchange reserves exceed US$3 trillion, of which 70% is in U.S. dollar denominated assets. Due to the current structure of our foreign exchange reserves, the security of our national wealth is highly dependent on the United States. If the U.S. dollar continues to depreciate, our foreign exchange reserves will shrink dramatically. At an appropriate time, (we should) convert part of our foreign exchange reserves into gold reserves. When the U.S. dollar depreciates, the price of gold will rise, which will make up for our loss due to the depreciation of U.S. dollar assets, ease the risk to our foreign exchange reserves, and safeguard our national wealth.”

"According to World Gold Council (WGC) data on every country’s gold reserves, in August, the United States’ gold reserves were 8,133.5 tons, which amounts to 74 percent of all of its foreign currency reserves; China’s gold reserves were a little more than 1,000 tons, which amounts to only 1.6 percent of China’s total foreign reserves, ranking it sixth in the world."

Source: People’s Daily Online, September 6, 2011
http://finance.people.com.cn/GB/15595252.html

On August 9, 2011, the National Bureau of Statistics of China released data showing that the CPI rose 6.5 percent in July, the biggest increase in 37 months. On August 16, 2011, Xinhua News Agency’s Outlook Weekly published an article pointing out that when state-owned enterprises raise prices, the government has difficulty regulating inflation. The article referenced several interviews that emphasized the responsibility of state-owned enterprises to stabilize prices. 

One interviewee said, “Many commodities have higher prices because of higher labor and raw material costs. It is the monopolies in the electric, oil, and petrochemical industries that charge more for raw materials. These industries earn high profits, but still raise prices several times a year. It is clearly neither reasonable nor fair to request private enterprises and consumers to bear the consequences of higher prices.” Another interviewee said, “Since state-owned enterprises use China’s national resources and enjoy state subsidies, they should assume the important task of stabilizing prices. They cannot stress their state-owned background when they want subsidies, but emphasize the market mechanism when they want to increase prices.”

The article concluded, “Many experts believe that it is the people who own state-owned enterprises. In the more and more severe circumstance of managing inflation, state-owned enterprises should take more social responsibility.”

Source: Xinhua News Agency’s Outlook Weekly, August 16, 2011,
http://www.lwgcw.com/NewsShow.aspx?newsId=22795

Qiushi, a flagship publication of the Chinese Communist Party’s Central Committee, republished an article from People’s Daily on the topic of pushing the cultural industry forward. The article suggested improvements needed in four areas: (1) the investment structure needs to be optimized to allow more investors; (2) the technological structure needs to be optimized in order to utilize more cutting-edge technologies; (3) the cultural industry product structure needs to be optimized for better branding and design; (4) the industry’s organizational structure needs to be optimized to introduce more enhancements to state owned cultural enterprises. The article expressed the belief that, to meet the requirements of the Party, the industry must successfully unify both ideology attributes and economic attributes .

Source: Qiushi, August 3, 2011
http://www.qstheory.cn/wh/whcy/201108/t20110803_99214.htm