Economy/Resources - 98. page

For years, debt-ridden Chinese local governments have been facing lots of fiscal challenges. During the recent “Two Sessions,” Wu Sufang, the Beijing city government’s Finance Bureau Chief asked for the central government to step up its support. On March 7, Wu publicly stated that Beijing is facing a “slowdown in the growth of its fiscal revenue,” and 2019 is the “tightest year for a balanced budget.”

Wu added that the centrally-administered state-owned enterprises and their branches, the financial industry, and high-tech enterprises are relocating (outside of Beijing). This is having a major impact on Beijing’s industrial growth and fiscal revenue.

An article in the official media pointed out that the primary reason for the difficulty with Beijing’s finances is the “cleaning up of Beijing’s migrant population.” Starting in late 2017, Beijing launched campaigns to evict the migrant population. The decline in Beijing’s population has led to the relocation of industries such as manufacturing, retail, wholesale, transportation, and warehousing. The consequence was that the GDP and the tax revenue decreased.

The second reason is the housing market. The central government’s crackdown on real estate speculation affected Beijing’s official land sales revenue and real estate investments have declined. The third reason is China’s effort to cut taxes to keep the economy from further going south.

Source: Central News Agency, March 19, 2019
https://www.cna.com.tw/news/acn/201903190069.aspx

The population of nearly one-third of China’s cities is shrinking. This is based on a study that the research team at Tsinghua University in Beijing conducted between 2013 and 2016. The South China Morning Post said in a report that, through satellite, researchers had monitored the light density of more than 3,300 Chinese cities and counties.

Long Ying, a city planning scholar at Tsinghua University, led this study. Long said that the population of 938 cities in China has shrunk. This was more than any other country in the world. One interpretation of the results could be that the economic engine of nearly one-third of China’s cities is slowing down. Official statistics show that China is facing huge economic and demographic challenges.

Source: Central News Agency, March 19, 2019
https://www.cna.com.tw/news/acn/201903190162.aspx

According to Yin Zhongqing, deputy director of the Financial and Economic Affairs Committee of the National People’s Congress (NPC), the total amount of all local GDP added together is greater than the national GDP due to data fraud.

“There is a discrepancy between regional and national GDP figures and it has negatively affected the credibility of the government,” said Yin at a press conference on March 10 during the second session of the 13th NPC. “Some local governments tend to cook their books, inflate some statistics, or conceal some data to stand out from the competition.”

According to Yin, a number or factors contribute to data fraud. First, people do not comply with the law and data fraud persists despite repeated crackdowns. Second, local governments, businesses, and residents are overburdened with data calls from different government agencies. Third, many government agencies apply different standards, resulting in inconsistencies in the data collected. Fourth, punishment over data fraud is “too light.” Fifth, a lot of statistical indicators are still defined according to the planned economy and do not reflect actual development.

Source: Beijing News, March 10, 2019
http://www.bjnews.com.cn/news/2019/03/10/554694.html

BBC Chinese recently reported that China’s February total exports suffered a year-over-year decline of 20.7 percent. This is the lowest point in three years. China’s imports declined by 5.2 percent. These numbers brought down the Asian stock markets significantly. Some suggested that the numbers might be the result of the Chinese New Year. However, most economists expressed their belief that the general expectation was a decline of 4.8 percent. The reality was five times worse than the expectation. Even with the seasonal impact factored in, the official numbers were quite negative. Some researchers indicated that the U.S. Tariff is having an impact on exports to the U.S. globally. Although the U.S.-China trade talks are still on-going, yet the uncertainty kept bringing doubts to the market. Currently the global market demand is still weak. Even if President Trump and President Xi quickly reach an agreement, China’s export outlook remains very bleak.

In the meantime, according to the China Automobile Dealers Association (CADA), China’s February domestic passenger vehicle sales recorded a year-over-year decline of 18.5 percent and a month-over-month decline of 45.4 percent.

Sources:
1. BBC Chinese, March 8, 2019
https://www.bbc.com/zhongwen/simp/business-47495127
2. East Money, March 9, 2019
http://finance.eastmoney.com/a/201903091064544862.html

Wang Zhaoxing, Vice Chairman of the China Banking Insurance Regulatory Commission (CBIRC) spoke recently about financial risks. Wang said that, to prevent and resolve financial risks, it is necessary to be ready for a good fight as well as to be prepared for a protracted war. He indicated that China should always focus on the following five major risk areas.

First, China should continue to increase its efforts to dispose of the non-performing assets of banking institutions and, at the same time, to control the growth of new non-performing loans.

Second, China should beware of the liquidity risks of small and medium-sized bank insurance institutions during economic downturns and financial market fluctuations.

Third, China should continue to watch out for shadow banking activities such as regulatory arbitrage, “passageway business,” and increased leveraging that includes inter-bank investments, interbank financial management, entrusted loans, and “passageway trust loans.”

Fourth, China should continue to focus on real estate financial risks and implement prudent lending standards for real estate development loans and personal mortgage loans. In particular, it should impose strict control over speculative real estate development and personal loans, and prevent major problems related to real estate financial risks.

Fifth, China should continue to coordinate among other government departments in the disposal of local government debts, especially the disposal of hidden debts of local governments.

Source: The State Council Information Office, February 25, 2019
http://www.scio.gov.cn/xwfbh/xwbfbh/wqfbh/39595/39902/zy39906/Document/1647716/1647716.htm

Well-known Chinese news site Sohu recently reported that China’s National Bureau of Statistics just released its official February numbers for the manufacturing industry sector. The manufacturing PMI dropped to 49.2, which is the lowest since March 2016. Some experts suggested that the February Chinese New Year was the cause. However, the PMI decline this year is worse than it was for the Chinese New Year months in the past three years. This is also the first time since February 2009 that the official manufacturing PMI has gone below 50. The latest numbers showed very low new orders on the import side. New export orders also reached the lowest since March 2009. Almost all analysts pointed out that the new PMI numbers do reflect a continued pressure on the Chinese economy. 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: Sohu, February 28, 2019
http://www.sohu.com/a/298199657_114986