Economy/Resources - 72. page

People’s Daily reported that, at a recent State Council Information Office press conference, China’s central bank, The People’s Bank of China, stated that the Bank supports Shanghai in taking the lead on exploring a way to the free use of the Chinese Currency RMB, under the condition that the use should comply with regulations on anti-money laundering, anti-terrorist financing, and anti-tax evasion. This is to facilitate the flow of funds supporting trade investments. It is also to explore the free currency exchange mechanism for capital moving in and out of the Lingang New Area of the Shanghai Pilot Free Trade Zone. The new policy also helps Shanghai become an important hub and bridge the connection between the international and domestic markets under Shanghai’s new development framework. Not long ago, China’s State Council released a Guidance on supporting “Shanghai Pudong’s high-level reform and opening-up to create a leading area for socialist modernization.” The Guidance allows the expansion of financial openness, aimed at establishing an offshore financial system that matches Shanghai’s international financial center status, and at improving offshore RMB transaction volume with risk management.

Source: People’s Daily, July 20, 2021
http://finance.people.com.cn/n1/2021/0720/c1004-32163882.html

In May of last year, Chinese Premier Li Keqiang stated in the government work report that governments at all levels must maintain a tight budget and the central government must take the lead to cut back 50 percent of non-essential expenses. Even though there is no further indication that the central government is taking any action, ordinary civil servants and teachers have been the first to take the hit.

Recently civil servants and school teachers in Henan, Jiangxi, and Guangdong provinces have received orders to give the performance bonuses they received back to the government. On July 7, the Water Authority of Nanchang City, Jiangxi Province issued a document stating that, according to relevant regulations, bonuses issued after June 7, 2021, must be returned within ten days. On the same day, the Dexing City Government required all teachers to return the merit bonuses they recently received. Teachers in Dexing City received 20,000 yuan (US$3,092) in the first quarter of this year. They expect to receive 80,000 yuan (US$12,367) in total bonuses this year plus a year-end bonus. These bonuses are usually higher than their annual salary.

Postings on Weibo showed that civil servants in Shanghai, Jiangxi, Henan, Shandong, Chongqing, Hubei and Guangdong provinces have also had their future bonuses suspended and they must return previously issued bonuses. On July 3, Chaozhou City, Guangdong Province, issued a notice that their housing subsidies and merit-based bonuses will be suspended. Three days later, Shanwei City followed suit. Meanwhile Shenzhen City is compiling reports on the income its employees received in recent years. For the first quarter this year, Shanghai also stopped giving out bonuses .

At present, most local level civil servants, and elementary and other school teachers make monthly salaries ranging from 2,000 to 4,000 yuan (US$309-618). Most of their childcare and mortgage expenses are paid from these various subsidies and performance bonuses. Many of them will have a hard time making their ends meet. Jiujiang Bank in Jiangxi Province even launched a bank loan to provide people who are not able to pay back the bonus they received.

In the first half of last year, China’s fiscal deficit went up by 30 percent and local municipal debt grew by 34 trillion yuan (US$5 trillion). Official reports showed that 30 out of the 31 provinces and cities in the country have a fiscal deficit. Shanghai is the only city with a fiscal surplus. Provinces such as Henan, Sichuan and Yunnan have deficits of more than 250 billion yuan (US$39 billion).

Source: Radio Free Asia, July 12, 2021
https://www.rfa.org/mandarin/yataibaodao/ql1-07122021052348.html

On July 10, the China Cyber Space Administration published a draft version of a new data security law. It asked the public to provide feedback by July 25. The new law requires that Chinese companies seeking to list in foreign countries must first pass a cyber security review.

The statement stated that companies with a data base of over 1 million users must apply for cybersecurity approval before listing in other countries. The reason is that the data and personal information might be “influenced, controlled and abused by foreign governments.” The review includes an evaluation of the potential national security risks of the company’s overseas initial public offering (IPO).

According to data from Bloomberg News, 37 Chinese companies have been listed in the U.S. They raised a total of $12.9 billion this year.

As early as three months ago, Chinese authorities requested Didi Chuxing, the Uber of China, to postpone its IPO in the US. Despite inconsistent orders from various agencies, Didi Chuxing moved forward with its listing plan on June 30. On July 2, Beijing ordered a cyberspace security inspection on DidiChuxing and banned the new users from signing up. On July 9, 29 Didi Chuxing Apps were taken down online. All these measures are considered to be Beijing’s deliberate retaliation against companies that don’t follow its order. According to Didi Chuxing financial disclosure, in the first quarter of 2021, it had 156 million active users and an average daily transaction volume of 25 million in China while it had 493 million active annual users and 15 million active drivers annually worldwide.

On July 8, a number of companies withdrew their IPOs from the New York Stock Exchange including LinkDoc Technology, a medical data solutions and oncology big data service provider; Keep, a modile fitness company, and Meicai, a food delivery firm.

The new law could push more Chinese Internet companies to list in Hong Kong, rather than listing in other countries, in order to bypass such scrutiny.

Source:

1. Epoch Times, July 10, 2021
https://www.epochtimes.com/gb/21/7/10/n13080990.htm
2. Central Cyberspace Affairs, July 10, 2021
http://www.cac.gov.cn/2021-07/10/c_1627503724456684.htm

Three major commercial office transactions have taken place in China in the past month. On June 28, Capital Land sold six Raffles City locations to Ping An Life Insurance for 9.6 billion yuan (US$1.5 billion). The week before, SOHO China sold 91 percent of its stock shares to the Blackstone Group for US$3 billion. On June 7, Hexie Health Insurance acquired SK Tower in Beijing for 9.06 billion yuan (US$1.4 billion). Three large commercial real estate transactions within 22 days totaled approximately 38 billion yuan (US$5.9 billion), a rare phenomenon in the industry. Insurance companies, asset managers and other institutions are acquiring commercial real estate in China at a moderate price.

According to statistics from the Beike Research Institute, a real estate industry think tank, the average annual growth rate of commercial office space over the past decade has exceeded 10 percent. By 2020, the total area of commercial business premises was 2.9 billion square meters (31 billion square feet). The estimate for sales of commercial real estate in 2021 approximates 2.6 trillion yuan (US$0.4 trillion).

Office buildings in China feature low rental yields, sloppy operations and high vacancy rates. In the second half of 2020, commercial office vacancy rates in first-tier cities were all above 20 percent, representing ten-year highs. The measure in Shanghai and Shenzhen even exceeded 25 percent. The national average vacancy rate for commercial office space is close to 30 percent.

Source: Central News Agency, July 2, 2021
https://www.cna.com.tw/news/acn/202107020087.aspx

The 14th Five-Year Plan that China’s Ministry of Human Resources and Social Security recently released states that over the next five years, China will see an additional 40 million retirees and 35 million fewer people of working age. This poses a huge challenge for the pension system. This means an average of 8 million additional retirees per year, far more than the 4.5 million added last year.

The government made it clear earlier this year that it would gradually postpone the mandatory retirement age, sparking widespread concerns. The official Xinhua News Agency quoted experts who stated that people born during the “baby boom” in 1963 will soon become 60, leading to a rapid decrease in pension contributions and a dramatic increase in the number of recipients. China’s legal retirement age has stayed unchanged for nearly 70 years. It is 60 for men, 55 for female officials, and 50 for female workers.

China’s seventh population census shows that, last year, the proportion of people over 65 years old reached 13.5 percent of the total population.

Source: Radio Free Asia, July 2, 2021
https://www.rfa.org/mandarin/Xinwen/3-07022021104522.html

The cross-border use of digital Chinese currency will be fully rolled out for testing in Hong Kong. Hong Kong’s Financial Secretary Paul Chan Mo-po said that, in the coming year, preparations will be stepped up for the issuance of a central bank digital currency (CBDC) in Hong Kong at the wholesale and retail levels, including a study on the application of the electronic Hong Kong dollar (e-HKD) at the local retail level.

On Sunday, Chan said in his blogger that he is determined to promote the transformation of Hong Kong in the direction of a digital economy, to encourage more enterprises to use technology and to enhance operational efficiency and expand their businesses.

According to Sing Tao Daily, Hong Kong will continue to work with the People’s Bank of China in the coming year to conduct technical tests on the local use of CDBC, so as to provide convenient cross-border payment services for mainland and Hong Kong residents.

Source: Sing Tao Daily, June 28, 2021
https://std.stheadline.com/daily/article/2370853