Economy/Resources - 226. page

Radio France International (RFI) reported that multiple Chinese officials have recently been asked to leave their posts in the National Bureau of Statistics and the central bank. The rankings of those sacked are mostly at the bureau-level, but the nature of their work allows access to sensitive economic data. The central government recently noticed frequent leaks of macroeconomic data just before its public announcement. 

As China is the world’s second largest economy, publicly released economic data has an enormous influence on the global financial market. It thus becomes the pursuit of the media and financial agencies. In recent years, the mainland’s macroeconomic data, such as the consumer price index published by the National Bureau of Statistics, is often accurately “predicted” and foreign media and security brokerage firms release it in advance. The domestic stock markets have also reacted before the official releases. 

The responsibilities of involved stock brokerage firms are still being determined. Criminal investigations are under way.

Source: Radio France International, June 4, 2011
http://tinyurl.com/4xnxxzy

On June 1, 2011, Lenovo Group Limited announced its plan to acquire the German consumer-electronics group Medion AG, a well-known electronics manufacturer and supplier. The report indicated that the acquisition will be completed in the third quarter with a cash payment. The move is viewed as a major step for the Chinese Lenovo to penetrate the European market, particularly the German PC market, which will also promote Lenovo’s mobile Internet business. After the acquisition, Lenovo will become the third largest PC manufacturer in Germany.

[Editor: According to Deutsch Welle, "Under the deal, Lenovo plans to buy a 36.6 percent stake from Medion founder and chief executive Gerd Brachmann, who currently owns more than 55 percent of the company. It then wants to extend the 13-euro-a-share offer to other shareholders to build a controlling stake for a total price of 466 million euros."]

Sources: Xinhua, June 1, 2011
http://news.xinhuanet.com/fortune/2011-06/01/c_121484398.htm
Deutsch Welle, June 2, 2011
http://www.dw-world.de/dw/article/0,,15124805,00.html

A China Urban Development Report released by a mayors’ association predicts that the size of the nation’s mobile population will be 200-300 million in the coming two or three decades. “The complex dynamics of its (migrants) geographic distribution, composition, and quality is posing a severe challenge for national strategic planning, the government’s social management, and public services.” 

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