Economy/Resources - 74. page

On March 25, China’s Ministry of Commerce announced that foreign direct investment data for the first quarter of 2021 was 206.14 billion yuan (US$31.79 billion), a year over year increase of 4.6 percent. The data showed that foreign non-financial direct investment was 160.81 billion yuan (US$24.76 billion), a year-over-year decrease of 4.9 percent. The amount for the completion of contracted projects was 195.31 billion yuan (US$30.07 billion), roughly the same as the same period last year. The newly signed contract value was 347.24 billion yuan (US$534.62 billion), a year-over-year decrease of 10.2 percent. In addition, 74,000 individuals from different labor forces were dispatched overseas. At the end of March 590,000 personnel were working abroad.

Below are four major highlights:

1) “Belt and Road” countries showed a steady growth in investments. In the first quarter, China’s non-financial direct investment in these countries was US$4.42 billion, an increase of 5.2 percent year over year. The value of newly signed contracted projects was US$31.34 billion, and the completed contract value was US$17.75 billion, an increase of 19.4 percent and 12.4 percent year-over-year respectively.

2) The investments in manufacturing, information transmission and other fields showed a rapid growth. In the first quarter, investment in manufacturing was US$3.84 billion, a year over year increase of 17.8 percent; the investment in the information transmission industry was US$1.62 billion, a year over year increase of 20.9 percent.

3) Foreign investments from local enterprises have increased. In the first quarter, foreign non-financial direct investment by local enterprises was US$20.03 billion, a year over year increase of 9.9 percent, accounting for 80.8 percent of the total foreign direct investment in the same period. The year over year growth of foreign investment from the eastern, central and western regions reached 7.2 percent, 45.6 percent and 6.3 percent respectively.

4) Foreign contracted projects are mostly in infrastructure. In the first quarter, the value of newly signed contracts for overseas infrastructure projects was US$41.2 billion, and for the completed contracts, it was US$24.6 billion, accounting for 77 percent and 81.6 percent of the total respectively.

Source: Sina, April 25, 2021
https://sina.com.hk/news/article/20210425/2/81/2/%E5%95%86%E5%8B%99%E9%83%A8-%E4%B8%80%E5%AD%A3%E5%BA%A6%E4%B8%AD%E5%9C%8B%E5%B0%8D%E5%A4%96%E7%9B%B4%E6%8E%A5%E6%8A%95%E8%B3%872061-4%E5%84%84%E5%85%83-12988123.html

According to the 21st Century Business Herald, a Chinese business-news daily newspaper published in China, at least 26 prefecture-level cities have disclosed their population data. Eight of them see that their natural population growth rate has turned negative. A prefectural-level city is an administrative division that ranks below a province and above a county in the country’s administrative structure.

The eight cities include the northeastern cities of Shenyang and Fushun, five cities in Jiangsu province – Taizhou, Yangzhou, Zhenjiang, Changzhou and Wuxi – as well as Weihai in Shandong province. In 2020, Wuxi, a city with a household population of more than 5 million, registered a birth rate of 7.75 percent, a death rate of 7.91 percent and a natural population growth rate of -0.16 percent. Some cities are also on the verge of negative growth, such as Wuhu from Anhui province, Jiaxing and Ningbo from Zhejiang province, with natural population growth rates of 0.12 percent, 0.43 percent and 0.75 percent respectively.

Jiangsu ranks among the richest provinces in China. In 2020, it reported a gross regional product of 10.27 trillion yuan (US$1.58 trillion), becoming the second province to break 10 trillion yuan after Guangdong. Jiangsu’s GDP per capita reached 125,000 yuan (US$19,230), ranking first in the country. The city of Wuxi has an economy of 1.2 trillion yuan (US$180 billion); Changzhou, Yangzhou and Taizhou’s economic volume also range between 530 billion and 770 billion yuan.

Cai Fang, a member of the Monetary Policy Committee of China’s Central Bank, stated at a recent meeting that China’s total population will peak in 2015 and then decline afterwards. The People’s Bank of China released a research paper on April 14, calling for the complete removal of restrictions on childbirth and easing the difficulties that women encounter in pregnancy, childbirth, childcare and schooling, so that “women dare to have children, can have children and want to have children.”

Yi Fuxian of the University of Wisconsin in Madison is skeptical. “This involves a series of reforms … and is more difficult than (the reform) in 1979. The government can’t do anything if they don’t want to or they can’t give birth. The only thing it can do is to (solve) the problem of not being able to afford to have children. This requires real money, but local governments are cheapskates and no one is willing to pay money to encourage childbirth. Education, health care and childbirth subsidies all need money. Raising consumption taxes would lead to a decline in economic vitality.”

Source: Radio Free Asia, April 21, 2021
https://www.rfa.org/mandarin/yataibaodao/shehui/xx-04212021161813.html

Several excessive traffic violation fines given to truck drivers in China have caught the public’s attention.

On April 5, Jin Deqiang, a 51-year-old truck driver from Hebei province took his life because he received a 2,000 yuan (US$307) fine at a checkpoint because of a failed Beidou navigation connection inside his truck. The truck drivers in China usually make 200 to 400 yuan (US$31-$61) a day. In his suicidal note, he asked how a truck driver would know that the Beidou navigation was not working. He said in the past ten years of working as a truck driver, he didn’t make much money even though his health condition was deteriorating. He hopes his death will alert the officials to pay attention to the matter. He left behind his wife, three children and his mother.

Other truck drivers are experiencing similar issues with the Beidou navigation system. A Youtube video showed a driver sharing his experience. He said he was fined numbers of times for the bad connection. Even though he pays an annual maintenance fee for the system, he still wouldn’t know if the connection had been dropped as all the signals on the front panel appeared to be working. He said the authorities are using the navigation system as a tool to penalize the drivers while imposing the fine on the truck driver is not fair.

Another case happened in the northern mountainous region of China. A county was reported to have received 30 million yuan (US$4.6 million) or 1/3 of its annual revenue from traffic tickets. With no highway access, the county is the only path for local coal transportation. The area is very much underdeveloped so it looks to the law enforcement agencies for fiscal revenue. The county set up 10 traffic cameras on the main road within 40 mile stretch. The drivers are often tricked because of a sudden change in the speed limit and they have to pay 1,000 yuan (US$153) for each violation.

According to China’s National Business Daily, there are about 30 million truck drivers in China, and more than 90 percent are self-employed. These drivers not only have to deal with personal injury and accidents. They also have experienced excessive fines due to overloading, speeding and other violations.

Source:
1. Epoch Times, April 8, 2021
https://www.epochtimes.com/gb/21/4/8/n12867732.htm
2. Sina, April 17, 2021
https://news.sina.com.tw/article/20210417/38256134.html

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that, according to Swiss Julius Baer Group’s Global Wealth and Lifestyle Report 2021, Asia remains the most expensive region in the world and Shanghai, replacing Hong Kong, has become the world’s top city with the highest living cost. The report showed that Shanghai’s consumer prices increased by six percent last year, while the global average was only one percent. Shanghai’s business class airfare and hotel lodging price both increased rapidly. Hong Kong dropped its ranking from number one to number three. Tokyo now ranks number two. The Julius Baer Report covers 25 major cities in the world, mainly tracking the prices of 20 high-end products and services to compose high-end lifestyle indicators. This year’s focal point was on the impact of the pandemic and the findings showed a serious drop for travel related industries.

Source: Sina, April 9, 2021
https://finance.sina.com.cn/china/dfjj/2021-04-09/doc-ikmyaawa8744146.shtml

On March 24, 2021, the U.S. Securities and Exchange Commission adopted interim final amendments to implement the congressionally mandated submission and disclosure requirements of the Holding Foreign Companies Accountable Act (HFCA Act).

On December 18, 2020, the Holding Foreign Companies Accountable Act became public law. Most significantly, the Act requires the U.S. Securities and Exchange Commission (SEC) to prohibit the securities of foreign companies from being listed or traded on U.S. securities markets if the company retains a foreign accounting firm where the books cannot be inspected by the Public Company Accounting Oversight Board (PCAOB) for three consecutive years, beginning in 2021, because the accounting firm is located in a foreign jurisdiction that does not permit PCAOB inspection.

As required by the Sarbanes-Oxley Act of 2002, the auditor of financial statements of companies whose securities are listed on a U.S. securities exchange— whether a U.S. auditor or a non-U.S. auditor — must be registered with, and therefore subject to the jurisdiction of, the PCAOB.

China’s state security laws, including governing the protection of state secrets and national security, have been invoked in recent years to limit the ability of the PCAOB to oversee PCAOB-registered audit firms in mainland China and Hong Kong. As a result, for certain China-based companies listed on U.S. stock exchanges, the SEC and PCAOB have not had access to the books and records and audit work papers of PCAOB-registered firms in China and, to the extent their audit clients have operations in China, Hong Kong. Due to these obstacles, investors or potential investors in U.S. capital markets who rely on the audit reports of PCAOB-registered firms in China and Hong Kong are deprived of the potential benefits of PCAOB inspections of these auditors.

The Act directs the SEC to prohibit securities of any registrant from being listed on any of the U.S. securities exchanges if the auditor of the registrant’s financial statements was not subject to PCAOB inspection for three consecutive years, beginning in 2021. As an example, a registrant whose financial statements are not subject to PCAOB inspection would be prohibited from being listed on any U.S. securities exchange starting with the registrant’s filing of its 2023 annual report filed in early 2024. The Act further directs the SEC to prohibit the trading in such securities in the U.S. over-the-counter market.

The Act requires additional disclosures. Specifically, each foreign registrant that files an audit report not subject to PCAOB inspection should disclose:

The percentage of shares of the registrant owned by governmental entities in the foreign jurisdiction where the registrant is incorporated or organized;
Whether governmental entities in the applicable foreign jurisdiction have a controlling financial interest with respect to the registrant;
The name of each official of the Chinese Communist Party who is a member of the board of directors of (i) the registrant or (ii) the operating entity with respect to the registrant; and
Whether the articles of incorporation of the registrant (or equivalent organizing document) contains any charter of the Chinese Communist Party, including the text of any such charter.

The HFCA Act requires the SEC to issue rules within 90 days of the date of enactment to establish the manner and form in which registrants must comply with the documentation submission requirement. SEC is issuing the interim final amendments to comply with this 90-day deadline.

Source: Securities and Exchange Commission, March 24, 2021
https://www.sec.gov/news/press-release/2021-53

In an interview with Voice of America, Yi Fuxian, a senior scientist at the University of Wisconsin-Madison, author of “Worse than Japan: how China’s looming demographic crisis will doom its economic dream,” an article that the South China Morning Post published, said that China will never surpasses the U.S. and that China’s national and local entities have been overstating the population data for their own benefit.

China’s economic growth will fall behind the U.S. by 2035 because of its aging population

China censored Yi in 2016 because Yi told the New York Times when participating in the 2016 Boao Forum that China’s economy could never exceed the U.S. At that time, the statement he voiced was a big blow to China.

Yi said that population drives the economy – production, consumption and innovation. Yi predicted that because of its aging population, China’s growth will fall behind the U.S. by 2035 and will also make it impossible to surpass the U.S. as the world’s largest economy in 2028. In the 1980’s, China was going through the reform and opening up. China’s median age was 22 years old vs. 30 in the U.S. At that time, China’s economy achieved great results because it conformed to the economic law. However, China’s labor force began to decline around 2014, and the median age had surpassed the U.S. even before 2018. Currently China’s median age is 42 years old while in the U.S. it is 38 years old. If China keeps a stable birth rate of 1.2 (each woman of childbearing age has an average of 1.2 children in her lifetime), then by 2035, the median age in China will be 49 years old, while in the U.S. it will be 42. By 2050, China will reach over 56 years old, and the U.S. will be 44 years old. Between 2030 and 35, China’s population index will fall behind the U.S., which means that the economic growth will be lower than the U.S. by around 2035.

Meanwhile China’s labor force began to decrease in 2013 and 2014, while the labor force in the U.S. will not decrease until 2050. In 1991, China’s birth rate was already lower than the U.S. and in 2000 it was lower than Japan, Germany, Greece, Portugal, and Italy.

Government entities have been overstating population data

According to Yi, very few elite scholars in the U.S. conduct analyses on China’s population data and they don’t have the real data. In the more than 20 years of his research career, he found that the China’s National Family Planning Commission, the National Bureau of Statistics, the local education departments, the local household registration departments, and hospitals have been overstating the population numbers. As a result, projected economic indicators such as the future labor force, consumption power, productivity, and innovation are exaggerated, leading to the overstating of China’s future economic growth and national power.

In 2000, the census data showed that China’s birth rate was only 1.2 and there were 14.08 million births, which means that it had reached the point where China needed to boost its birth rate. However, a law and regulation director of the Family Planning Commission said that the birth rate can’t be that low, so he forged a false report. The Family Planning Commission even announced that, if China had eased up on the one child policy, its birth rate would have risen to 2.1 which would have resulted in an unlimited population expansion. The Family Planning Commission continued to report higher birth rates in 2010 and 2015 census.

In 2016, China stopped the one child policy. The Family Planning Commission projected that China would have 47 million births every year but the actual number of births was 22 million in 2015 and 12 million births in 2016. In 2017, there were discussions on whether China still needed a Family Planning Commission. In order to maintain its power, the Family Planning Commission projected that China would have 18.46 million births in 2018, but the actual births in 2018 was only 13.62 million.

Yi said that at that time, from the National Bureau of Statistics which receives data from the Family Planning Commission to the China Population Association which is managed by the Family Planning Commission, all levels of the government entities set their population numbers to meet their needs.

Even the education bureaus have inflated the student numbers because the education funds they get are jointly funded by the central and local governments based on the projected school age children. The same is for the hospitals. After 2008 when the farmers had insurance to cover child births, hospitals started to overstate the number of births to receive more funding because they knew that the National Health Commission would never be able to find out what the actual number was.

After the household registration reform took place in 2010, there were no restrictions for people to register for residential status. People started to buy or sell birth certificates. Some even have dual or even multiple household registrations. The public security bureau’s household registration data was also fraudulent because the number of household registrations was tied in with the government housing incentive and social security funding.

The National Bureau of Statistics believes that from 2000 to 2019, China had a population increase of 130 million people, while public security household registration showed an increase of 170 million. Yi estimated that, in 2018, the number of births in China was about 10 million, which would have been the beginning of a negative population growth trend. The National Bureau of Statistics, however, showed the number of births was 15.23 million, an increase of 5.3 million, and household registrations showed an increase of 9.24 million.

Source: Voice of America, March 4, 2021
https://www.voachinese.com/a/china-will-not-win-the-race-with-us-20210304/5802138.html