Economy/Resources - 77. page

The new coronavirus has devastated the economies of countries around the world, leaving a large number of people unemployed, although the Chinese government has never publicly admitted the fact that the epidemic has eliminated the jobs of many Chinese people.

In a recent interview with Tencent Finance, a well-known Chinese economist Yao Yang, head of Peking University’s National School of Development, said that the epidemic has had a profound impact on the domestic economy. In the first quarter of this year, many small and medium-sized business, especially those in the service sector, were forced to close down. It is quite difficult for these low-profit businesses to reopen and some may disappear for good.

According to data that China’s National Bureau of Statistics of China released in July, in the first half of this year, more than 5 million new jobs were created in urban regions, exceeding the annual target. As of June, the nationwide urban survey showed an unemployment rate of 5.7 percent, but Yao mentioned another set of alarming numbers in the interview.

According to Yao, at the end of June, the National School of Development of Peking University conducted an online survey of more than 6,000 people. The survey showed that the unemployment rate was as high as 15 percent, and 5 percent were semi-unemployed. Considering over 700 million people in labor force, an unemployment rate of 20 percent translates into over a hundred million people unemployed at the time. Such a large unemployed population obviously differs significantly from what the government said at the time. It said, “The overall employment situation in the country is stable.”

He Qinglian, a Chinese economist currently living in the United States, believes that Yao’s remark gives a higher number than the official figure and that he wishes to emphasize the seriousness of China’s unemployment problem. “The problem of unemployment among the rural population is more pronounced. In the urban unemployed population, the people themselves generally absorb the unemployed. For example, it has almost become a common phenomenon that many unemployed young people have become their parents’ dependents.”

China unemployment rate is only based on the urban population. Critics believe that the authorities have long concealed the scale of hidden unemployment in rural areas on the grounds that farmers “have land to grow” and are not considered unemployed. In fact, due to the very limited arable land per capita in the country, there are a great number of surplus laborers in rural areas. These highly mobile populations are usually not included in government statistics.

He Qinglian said that the size of China’s rural unemployed population has always been a mystery and that this relates to their social attributes. “In the countryside, no matter how many unemployed people there are, they have no organizational and action capabilities. Mao Zedong once sent all the young intellectuals to the countryside to relieve the pressure in the cities.”

Yao also mentioned in an online forum in June that the unemployment problem of migrant workers, who travel to cities from rural areas to look for low paying jobs, is very serious. In the second quarter, migrant workers began to travel to the cities on a large scale, but due to limited job availability in the cities, there was another wave of them returning to the countryside in May. He also mentioned the 8.7 million new college graduates this year. The government plans to add 9 million urban jobs, which can at best match the demand of college graduates, but not the demand of those who have already lost their jobs.

Source: Radio Free Asia, December 18, 2020
https://www.rfa.org/mandarin/yataibaodao/jingmao/hc-12182020131524.html

Primary Taiwanese news agency Central News Agency (CNA) recently reported that, according to a report that the IAC (The Insurance Association of China), issued, China’s pension fund’s financial gap has widened. In the next five to ten years, the IAC expects that the financial gap for the Chinese pension fund will reach RMB eight to ten trillion yuan (around US$1.2 trillion to $1.5 trillion), and it won’t stop there. In the past few years, the Chinese pension gap has been a major concern among China’s elderly and even among middle-aged people. After 40 years of the birth control policy, the Chinese society is now aging very quickly. Those who pay into Social security are decreasing while the number of those receiving pensions is on the rise. The current Chinese pension system depends on social security, employers and personal funds. However, the system is not mature and lacks a managed investment market that is deep enough.

Source: CNA, November 20, 2020
https://www.cna.com.tw/news/acn/202011200241.aspx

Hong Kong Economic Times (HKET), the leading financial daily in Hong Kong, recently reported that, according to a report that the Institute of International Finance (IIF) released, Chinese debt saw a rapid increase in the third quarter to 335 percent of its GDP. The same ratio was 302 percent at the end of last year. The total debt of the Emerging Countries grew to 250 percent of GDP. The IIF report points out that non-financial sector debts in Lebanon, China, Malaysia and Turkey had the biggest increase. Unlike previous years, non-financial corporate debts have been the main cause of China’s debts this year. By the third quarter, Chinese non-financial corporate debts reached 165 percent of China’s GDP, up from 150 percent for same quarter last year. With the coronavirus, China did not take the route of large-scale government-sponsored stimulus plans. Instead, the Chinese government allowed the companies to enlarge their borrowing scale. It appears China is asking the companies to channel through corporate bonds instead of bank loans. However, recently, many major Chinese companies have defaulted on their bonds.

Source: HKET, November 19, 2020
https://bit.ly/3lTC7Ji

China has become an aging society. It is estimated that the number of elderly people over 60 will reach 400 million in 15 years, accounting for nearly 30 percent of the population. Some organizations predict that the labor force will shrink substantially in the future. Statistics show that there were 14.65 million newborn babies nationwide last year. The birth rate dropped to about 10 per thousand. It is projected that, in ten years, it will further drop to less than 11 million births every year. After the “two-child policy” was adopted, there was no peak in the number of births.

Zheng Gongcheng, a Chinese scholar, said at a recent forum that the process has been accelerating. It is expected that by 2035, China will be considered a “super-aged society.” The average annual increase in the elderly population is about 10 million, and the total will reach about 400 million by then. The number of the elderly population, that is, those over 80 years old, will increase by more than 1 million annually.

A country is defined by the United Nations as “aging” if the percentage of those over 65 exceeds 7 percent; it is considered “aged” if it exceeds 14 percent, and “super-aged” when it is over 20 percent. In 2011, the weighted average of the percentage of the global aging population was 8.1 percent, indicating that the world has entered the era of aging.

Source: Radio Free Asia, November 14, 2020
https://www.rfa.org/cantonese/news/elderly-11142020091031.html

China’s big five state banks announced their financials on Friday October 30 and stated that their profits and debts have continued to deteriorate.

The Industrial and Commercial Bank of China (ICBC), which has the largest number of assets, posted a 4.7 percent decline in third-quarter profits.

The Bank of Communications (BoCom) reported a drop in net profits of 12.36 percent year-on-year in the first three quarters. The bank’s non-performing loan ratio was 1.67 percent, an increase of 0.2 percentage points from the end of the previous year.

The Bank of China’s net profit dropped 8.7 percent year-on-year, and the group’s asset impairment losses were nearly 100 billion yuan, an increase of 60 percent year-on-year. The total debt was 22.6 trillion yuan, an increase of 8.68 percent over the end of the previous year. The non-performing loan ratio was 1.48 percent, an increase of 0.11 percentage points over the end of the previous year.

According to Chinese media, in the first half of this year, at least 1,300 bank outlets and branches were closed. A total of 26,000 state bank employees were laid off.

China’s Securities Daily newspaper quoted Pan Helin, a professor from Zhongnan University of Economics and Law. He stated that, although only a small portion of the publicly listed banks disclosed their third-quarter financial reports, they are the best performers in the industry and their profitability is stronger than the unlisted banks. Among the large number of unlisted banks, based on the financial reports of nearly a hundred companies that have already disclosed their financial performances, profits have fallen sharply. According to Securities Daily, the proportion of loss-making companies is as high as 75 percent. 31 companies saw a double digit drop in net profits.

Reuters reported that Guo Yi, an analyst with Wanlian Securities, said the degree of economic recovery will impact expectations for the asset quality of banks, with banks likely to see corporate loan repayment pressure peaking around mid-2021.

Earlier in the year, the Chinese government asked banks to lower mortgage standards in order to reduce corporate losses and curb the impact of the epidemic. The government also asked banks to delay corporate loan repayments to increase economic liquidity. It is hard to tell how many bad loans will be brought to the banks through the use of this measure. Experts believe that the consequences will be unraveled in the next few months.

Source: Voice of America, October 30, 2020
https://www.voachinese.com/a/China-banks-seen-facing-persistent-bad-loan-pressures-after-third-quarter-earnings-drop-20201030/5641898.html

Two price increase notices that the grain companies in Hunan and Jiangxi provinces issued in October have been circulating on the Internet. A notice from Jiangxi province stated that COVID 19 and natural disasters this year affected several major grain producing areas across the country Some areas had rain for two consecutive months prior to the harvest season, so overall rice production dropped by about 30 percent compared to previous years. The notice predicted that the minimum increase per ton of rice would be between 200 and 500 yuan (US$30-75). A notice from a grain company in Hunan province stated that the reduced grain production output has resulted in the price being highly competitive. Therefore, the purchase price of the rice will be based on the market rate on the day of the purchase.

Due to flooding in dozens of provinces across the country, along with pest infestation, droughts, and hail this year, China has seen much lower grain production compared to prior years. The grain that the state-owned grain warehouse received was only two-thirds of last year’s level. The official CCTV reported that in previous years farmers would go to the market to sell their grain, but this year the grain merchants have been visiting the farmers homes to buy grain. The price for corn even reached 2600 yuan (US$389) per ton, the highest in the last four years.

According to China’s agricultural commodity futures website, China recently granted a rice import license to 43 rice companies in Myanmar. The reason it switched from its major rice importing countries such as India, Vietnam and Thailand this year was because these countries have either refused to sell, have restricted grain exports, or have increased the price.

Source: Aboluowang, October 31, 2020
https://www.aboluowang.com/2020/1031/1518272.html

A Large number of foreign companies are exiting China lately and many Chinese companies are also relocating their factories to Vietnam to lower the costs. These companies have also attracted Chinese workers to work for them in Vietnam. A video posted on twitter showed that on October 20, nearly a thousand Chinese high-tech workers were gathering at the Sino-Vietnamese border in Guangxi and were ready to cross the border. All of them were supervisory level technicians. Vietnamese companies that the mainland or Taiwanese businessmen set up were the ones that hired them. A Taiwanese businessman living in Vietnam said that the Vietnam government restricts workers from China and it is not easy for people to find jobs in Vietnam. A Chinese businessman told Radio Free Asia that Vietnam is almost a democratic country now. It’s just like Shenzhen in the old days, but its policies, business environment, and the openness are much better than it is in the mainland and it draws many workers to work in Vietnam.

As a result, China is building a two-meter-high wall along the Sino-Vietnamese border to prevent Chinese residents from leaving China. The Sino-Vietnamese border runs about 1300 kilometers (808 miles). People commented that the “US is building a wall to prevent people from entering (illegally), while the CCP is building a wall to prevent people from escaping!”

Source: Radio Free Asia, October 22, 2020
https://www.rfa.org/mandarin/yataibaodao/jingmao/ql1-10222020063212.html