Economy/Resources - 223. page

Sun Lijian, a Professor of Finance and Vice Dean of the School of Economics at Fudan University, wrote an article in Shanghai Securities News recommending that China should expand Shanghai’s offshore settlement business to control the dollar value of its holdings of U.S. debt. “When they (the United States) threatened to default, we realized how critical it is for China to … internationalize the renminbi.” Sun recommended that China leverage Shanghai as an international financial center and proactively expand the Asian dollar offshore settlement business. This would enable China to get around the bottleneck from the absence of a market mechanism for adjusting the exchange rate and the interest rate, the lack of international finance professionals, and the deficiencies in risk management. That, wrote Sun, would allow China to protect, to the maximum extent, the dollar value of its holdings of U.S. debt, and buy time for China to internationalize the renminbi.

Source: Shanghai Securities News reprinted by Qiushi, August 1, 2011
http://www.qstheory.cn/jj/jjyj/201108/t20110801_98836.htm

On People’s Daily Online, Niu Wenxin, Managing Editor and Chief Commentator of the CCTV Finance Channel, commented on the “sky-high" U.S. debt. Niu argued that, technically speaking, the U.S. government is already bankrupt. The total U.S. debt in 2007 was $US73 trillion, including hidden debts such as social security liability and bonds issued by companies with government guarantees or by local governments, but the total of U.S. current assets is only $US50 trillion. “The best choice for the U.S. is to repudiate its debt” and “force other countries to accept U.S. debt restructuring.”

“It is a ‘zero-sum’ game. If the U.S. wins, other countries (including China) will lose.” Niu then listed four reasons why China should not tighten its monetary supply: 1. Such a tightening will suppress economic growth. 2. It may lead to a financial crisis and recession in China. 3. It will cause higher unemployment. which in turn will result in social unrest and challenges to the CCP’s ruling position. 4. Europe is trying to hang on to the U.S. and hopes China will be sacrificed.

Source: People’s Daily Online, August 1, 2011
http://finance.people.com.cn/GB/15294964.html

China Review News published a commentary stating that, though China’s loose monetary policy quickly stimulated the economy, its residual effect has been to dampen China’s economy. First, a huge amount of loans has built up inflation pressure. The CPI has kept increasing since the fourth quarter of 2010; it reached a peak of 6.4% in June 2011. Since 2010, the People’s Bank of China has been forced to raise the deposit reserve ratio 12 times and the interest rate 4 times. This credit tightening causes economic growth to slow down. The unemployment rate may shoot up as small-and-mid-level businesses face challenging times to get loans.

Second, in 2008, by issuing bonds, local governments financed 70% of the government’s 4 trillion yuan ($US600 billion) stimulus package. By the end of 2010, local government’s debts had jumped to 10.7 trillion yuan ($US1.6 trillion). Local government’s inability to pay back the loans will hurt banks. The large local government debts also hinder the central bank’s ability to fight inflation, as higher interest rates makes it harder for local governments to pay back their loans.

Third, China’s efforts to cool down the overheated real estate market will hurt construction and other real estate related industries.

Source:
China Review News, August 3, 2011
http://gb.chinareviewnews.com/doc/1017/8/3/8/101783832.html?coluid=1&kindid=0&docid=101783832&mdate=0802001129

According to China Review News (CRN), a Politburo meeting chaired by Hu Jintao on July 22 reported that China’s general economic health is positive, but the issues of imbalance, inconsistency and unsustainability are still very pronounced. New issues are also coming up due to the changes in the international and domestic environments. The primary goal of macroeconomic management is to stabilize the overall consumer price level, which includes maintaining strong control over the real estate market. The meeting also emphasized the firm position of lowering the rate of increase in housing prices and speeding up the development of low-income housing projects. The meeting called for unifying all thoughts and actions on all administrative levels towards the direction that the Party Central Committee pointed out.

Source: China Review News, July 22, 2011
http://gb.chinareviewnews.com/doc/1017/7/5/4/101775457.html?coluid=151&kindid=0&docid=101775457&mdate=0722214159

Xinhua reprinted an article from Yangcheng Evening News, which reported that the GDP numbers that each province in China reported did not match the GDP number from the central government. For the past several years, the sum of GDPs reported at the provincial level has always been greater than the national number. In 2010, the provincial sum was 3.5 trillion yuan (US$540 billion), or 8.8%, greater than the national number. The report listed the reasons for this inconsistency as double counting, calculation errors, and false claims at the provincial level. “For example, an economic review of the previous two years found significant gaps in some provinces’ GDPs numbers. As a result, those GDP numbers underwent a major correction.”

Source: Xinhua, July 19, 2011
http://news.xinhuanet.com/fortune/2011-07/19/c_121690132.htm

Jinghua Times, a Beijing based daily newspaper under Chinese state media People’s Daily, recently reported on the newly released 2011 Fortune 500 China list. China Petroleum and Chemical (Sinopec) remains number one on the list with a revenue of RMB 1.91 trillion, followed by PetroChina as second and China Mobile as third. The total revenue of all 500 companies on the list reached RMB 18.9 trillion, which is 47% of the nation’s GDP. This total represents a growth of 38% over last year. State owned capital still holds the vast majority of the Fortune 500 China list. This year, 45 new companies joined the list. Only 9 out of the 500 reported financial losses. Industrial and Commercial Bank of China (ICBC), Sinopec and China Construction Bank are the top 3 most profitable companies on the list.

Source: Jinghua Times, July 14, 2011
http://epaper.jinghua.cn/html/2011-07/14/content_679703.htm

A Study Times article calls for immediate strategic adjustments to face the global economic realities in the post financial crisis era. The article suggests: 1) In order to take advantage of the relative changes in the economic strengths in the world, [China should] establish its own world financial center, set up its own international trade platform, and assume the right to set prices in certain areas. 2) Promote the RMB’s internationalization and break free from dependence on the U.S. dollar. 3) Speed up Chinese enterprises’ direct investments. 4) Allocate a considerable amount of foreign currency reserves to national strategic capitals markets, such as essential products, technology, and resources. 5) Promote industrial transformation and promote the development of low carbon, green, and environmental friendly industries.

Source: Study Times, July 11, 2011
http://www.studytimes.com.cn:9999/epaper/xxsb/html/2011/07/11/02/02_37.htm

In the first half of 2011, natural disasters in mainland China, such as drought, flooding, snow, earthquakes, and tropical storms, left 449 people dead and 100 missing and caused the evacuation of 2.964 million people from their homes, damage to 1.15 million houses, and the collapse of 274,000 buildings. The disasters affected a total of 25.52 million hectares of crops, among which 1.93 million hectares of crops were completely ruined. The direct economic loss is estimated to be 142 billion yuan ($US21.8 billion). The disasters included frequent earthquakes, multiple disasters in the same region, and recurrent adverse weather conditions.

Source: China News Service, July 9, 2011
http://www.chinanews.com/gn/2011/07-09/3169744.shtml