Economy/Resources - 93. page

Well-known Chinese news site NetEase recently reported that China’s National Bureau of Statistics just released its August Manufacturing PMI (Purchasing Managers Index) number. The PMI index for the Chinese manufacturing sector was 49.5 percent. This is the fourth consecutive month in which PMI has remained below 50 percent. The key sub-indicators that dragged down the overall PMI number were New Orders (49.7 percent), Raw Materials Inventory (47.5 percent) and Employment Level (46.9 percent). Data also showed medium and small companies suffered the most. Large corporations are in a better shape. PMI is an indicator of financial activity reflecting purchasing managers’ acquisition of goods and services. A PMI number below 50 typically reflects a decline.

Source: NetEase, August 31, 2019
https://money.163.com/19/0831/09/ENT7EMEB00258105.html

On September 6, Hu Chunhua, China’s Vice Premier of the State Council, said during his trip to northeast Heilongjiang province that ensuring the supply of pork is one of the most urgent tasks of the current agricultural work. Hu mandated that all production areas accomplish the task of ensuring a stable production and supply “one hundred percent,” and that they clean up improper practices in raising pigs.

In the past six months, after the outbreak of African swine fever in China, the retail price of pork soared. This led to a rise in the price of food and other livelihood products. At present, it is a “significant major political task” to restore pig production and stabilize pork prices.

Heilongjiang province is one of China’s main pig production areas. Hu Chunhua was inspecting pig slaughtering and processing companies and breeding bases in Mudanjiang city on September 6. Hu was there to learn about the main problems facing pig production, the demands from farmers and firms, and the impact of the African swine fever epidemic.

Source: Central News Agency, September 7, 2019
https://www.cna.com.tw/news/acn/201909070053.aspx

The People’s Bank of China (PBOC) announced on Friday, September 6, that it would lower the reserve requirement ratio for financial institutions by 0.5 percent, effective September 16. China’s central bank said the move was to support the real economy and reduce social financing costs. The reserve requirement ratio is the minimum amount of reserves that must be held by a commercial bank.

In addition, the PBOC will lower the reserve ratio of 1 percent for the urban commercial banks. These measures are to be implemented on October 15 and November 15, respectively, with a 0.5 percent reduction each time. In other words, the PBOC will have successively lowered the reserve ratio for urban commercial banks three times, with a total reduction of 1.5 percent.

It is estimated that this round of ratio reductions will release funds of 900 billion yuan ($126 billion).

Earlier this year, the PBOC already implemented two rounds of reductions: a comprehensive ratio reduction of 0.5 percent in January and another 0.5 percent reduction for small and medium-sized banks between May and July.

Source: Radio Free Asia, September 6, 2019
https://www.rfa.org/cantonese/news/bank-09062019112953.html

On August 10, 2019, at a 40 person forum on China’s financial system, Zhou Xiaochuan, the former Chairman of China’s People’s Bank, stated that trade protectionism, the development of modern technology, and currency-based economic sanctions have caused significant twists in the global market system.

Zhou pointed out that the first global market twist came from trade conflicts between countries. A trade war can last a long time and cause obvious twists in the distribution of global resources.

The second one is due to the development of technology. Some IT companies pursue a “winner takes all” or “winner takes the biggest share” result. They therefore burn a tremendous amount of money to claim that market share and increase traffic. Zhou suggested fair competition as the solution.

The third one is that the U.S., due to its control of the U.S. dollar, uses currency as its means to impose economic sanctions. Zhou argued that the globalization of the Renminbi will solve this problem.

Source: Sina, August 11, 2019
https://finance.sina.com.cn/money/bank/yhpl/2019-08-11/doc-ihytcern0062585.shtml

China News recently reported that China just announced the establishment of six more free trade zones in Shandong, Jiangsu, Guangxi, Hebei, Yunnan, and Heilongjiang Provinces. By now China has a total of 18 free trade zones and all coastal provinces are covered. The focuses of the free trade zones are different. However, this round of new zones mainly emphasizes transportation, high-tech, logistics, high-end manufacturing, health, biology, tourism, culture, and financial areas. Developing relationships with geographically nearby countries, such as South Korea and ASEAN (Association of Southeast Asian Nations) countries, was also set as a priority. The new announcement also mentioned the importance of the experimental nature of the free trade zones as well as the necessity of risk control. Meanwhile, according to LTN (Taiwan), China’s first free trade zone, the Shanghai Zone, suffered the record of not being able to deliver on key promises such as the free flow of currencies.

Source: China News, August 27, 2019
http://finance.chinanews.com/cj/2019/08-27/8938498.shtml
Source: Liberty Times Network (LTN), September 2, 2019
https://ec.ltn.com.tw/article/breakingnews/2903528

A German think tank scholar is concerned that the ongoing demonstrations have caused irreparable harm to the status of Hong Kong as a financial center and that the situation, if allowed to further deteriorate, may also hurt China.

Max Zenglein, head of research in economics at the Mercator Institute for China Studies (Merics), said, after a visit to Hong Kong, that people in Hong Kong believe that the city is gradually losing its freedom. They are therefore pessimistic about the future. Hong Kong’s economy is facing an unprecedented crisis; the number of visitors from abroad has gone back to the level during severe acute respiratory syndrome (SARS) epidemic in 2003.

Zenglein observed that many foreign businessmen are worried that Hong Kong’s high degree of autonomy will be gone forever and are preparing for the worst. As the situation worsens, when Hong Kong loses its advantages of judicial independence and freedom of speech, and is no different from a Chinese city, foreign companies will move their Asian headquarters to Singapore or Tokyo.

Zenglein’s analysis is that the continuous demonstrations over two months have caused irreparable harm to Hong Kong. “Hong Kong’s best time as a global financial center has already passed.” Moreover, the demonstrators did not cause the harm. The Chinese government’s tough reaction caused it. The massive assembly of armed police on the border will only bring greater fear.

Zenglein believes that China’s state-owned enterprises and rich people are highly reliant on Hong Kong’s capital market. China’s “Belt and Road” project also needs Hong Kong. China’s richest people have begun to transfer their assets to Singapore or London, and no longer view Hong Kong as a safe haven.

Source: Central News Agency, August 27, 2019
https://www.cna.com.tw/news/acn/201908270017.aspx

Since April, Chinese pork prices have risen almost every day. In the past few months they reached a new peak. According to the Chinese Ministry of Agriculture last Friday (August 23), the wholesale price of pork had increased by 26 percent from the previous month, to 30.79 yuan (US$4.3) per kilogram.

Chinese officials say the rise in the price of pork is due mainly to African swine fever. However, this round of price increases is inseparable from the ever intensifying US-China trade war. From February to May of this year, Chinese buyers cancelled a total of 4,513 tons of U.S. pork orders. It was not until the beginning of this month that the purchase of 10,200 tons of U.S. pork resumed. At present, China imposes a 62 percent tariff on U.S. pork.

The government is taking measures to curb the rise in the price of pork. 29 provinces have introduced various forms of pork subsidies. Some people question whether China has returned to the era of economic shortage that existed under Mao.

Some people expressed their willingness to share the same pain that the country is suffering. “The restrictions on the purchase of pork are good. There is little the people can do when the country is in a disaster. It is not impossible to live while eating less pork,” said a Sina Weibo user. “I believe there are 1.4 billion people who are willing to suffer with the country.”

Not every Chinese agrees. One netizen said, “For the people to live and work well is the greatest counter-measure (in the trade war). Whether the economy has problems or not, there is only one standard: whether the people are poorer or richer, not whether the government is poorer or richer.” Some people even said, “Counter measures? The people are just cannon fodder.”

China is the world’s largest consumer of pork. The Chinese eat an average of 700 million pigs a year.

Source: Voice of America, August 27, 2019
https://www.voachinese.com/a/china-s-hard-line-rhetoric-on-trade-war-in-the-midst-of-rising-pork-price-20190827/5057760.html

At the time when Hong Kong’s anti-extradition bill protests continued, the Chinese government announced its plan to support Shenzhen as a pilot zone for a new practice of “one country, two systems.” Some scholars believe that the move shows the central government’s wish to tell Hong Kong that China’s development will not be affected by the situation in Hong Kong and that Shenzhen, with strong support from the central government, may replace Hong Kong in terms of its financial and economic standing.

On August 18, the State Council issued an opinion about developing a “Pilot Zone for Socialism with Chinese Characteristics” in Shenzhen. The document indicated that the plan is conducive to promoting reform and opening up, implementing the strategy of the Greater Bay Area of Guangdong, Hong Kong and Macao, and enriching the development of “one country, two systems.” It includes a total of 19 specific goals, aims to make Shen Zhen a world top city by 2025, and a national model by 2035.

He Ping, a professor at Tsinghua University told Radio Free Asia that Hong Kong’s frequent protests in recent days has led to political instability. At this juncture, the central government’s plan to develop Shenzhen vigorously is actually to show Hong Kong that Shenzhen can be as prosperous as Hong Kong. He believes that if Hong Kong’s demonstrations continue and the economy stagnates, Hong Kong’s status as an international financial center may not be sustainable, and Shenzhen may replace Hong Kong.

However, Liu Kaiming, a scholar at a Shen Zhen think tank, pointed out that even if the central government strongly supports Shenzhen, Hong Kong’s full-fledged rule of law and financial institutions, which are in line with international standards, makes it impossible for a mainland city to take over. If the mainland wants to attract foreign investors, it has to change and use the rule of law and the financial system, but that cannot be done in the short run.

Source: Radio Free Asia, August 19, 2019
https://www.rfa.org/cantonese/news/shenzhen-08192019083422.html