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Counterfeit Digital Currency Surfaced in Pilot Cities

On October 25, at the 2nd Bund Finance Summit in Shanghai, Mu Changchun, director of the Digital Currency Research Institute of the Bank of China, disclosed that counterfeit digital currency has appeared in pilot cities such as Shen Zhen, Suzhou, Xiong’an New Area, and Chengdu. The central bank is facing issues with the prevention of people counterfeiting digital currency. The general public was shocked about the news. People commented that they believe that paper money is much safer than digital currency because digital currency is easier to counterfeit than paper money and the cost of counterfeiting is lower. The Central Bank rushed to introduce digital currency even though the technology is still pre-mature.

The Bank of China has been studying digital currency since 2014. They kept a low profile from the outside world for a number of years. However, as more information has been made public recently, it has triggered high expectations on the launch of digital currency. Even though the officials have repeatedly emphasized the advantages of digital currency over traditional paper money, they have obviously ignored the problems that would come with the digital currency.

Source: Radio Free Asia, October 28, 2020

As Street Vendors Reappear, Retail Stores Are Closing Down

Several videos posted on Twitter show that the retail stores on the street or in shopping malls in large cities like Shanghai, Guangdong, and Shenzhen are closed. At the same time, the once officially banned street vendors have begun to re-appear in the larger cities like Beijing, an indication that the Chinese economy is heading towards depression.

The videos were posted on different twitter accounts. They show that many retail stores on Nanjing Road in Shanghai and Luohu Commercial City in Shenzhen are closed due to an increase in e-commerce shopping and the COVID 19 pandemic. The once prosperous commercial districts that used to be packed with retail stores are like empty cities right now. In Yiwu City, Zhejiang Province, there were not only few visitors and customers at an annual International Commodity Fair, but also, few exhibitors participated in the fair. The organizers had to use cardboard to block sight of the empty booths. In Heilongjiang in the northern part of China, a video showed a street with few people. The person who was taking the video said, “What happened? It is only five or six o’clock in the afternoon right now. All the stores are closed. There are not that many people on the street.” In Beijing, the city started to allow street vendors to sell on the street again even though the city was previously against the street vendor idea. One economist commented that allowing street vendors means that the economy is not doing well. Even though these street vendors will not help to improve the overall economy, if the street vendors were still not allowed, there would be more people unemployed. They could become a possible source of social instability.

Source: New Tang Dynasty Television, October 26, 2020

Wang Qishan Warned against Risk of Financial Bubbles

According to Hong Kong Economic Times, China’s Vice president Wang Qishan gave a video speech at the Bund Summit 2020 held in Shanghai on October 24. Wang said, “The Financial sector, when separated from the real economy, is ‘water without a source and a tree without roots.’ The financial sector cannot take the crooked path of speculation and gambling, the wrong path of the self-circulation of financial bubbles, and the evil path of Ponzi schemes.”

Wang also emphasized that, among the three principles of safety, liquidity, and efficiency that the financial industry must follow, “safety always comes first.” He also maintained that the bottom line is that no systemic risks should be taken.

He added that, as new financial technologies have been widely used and new business models have emerged, financial risks are on the upsurge. It is necessary to strike a balance between encouraging financial innovation, expanding financial openness, and strengthening supervision over the industry.

Source: Hong Kong Economic Times, October 25, 2020

Package Delivery Companies in China on Strike

Recently, people in many parts of China have complained about the delay in package delivery. The media reported that a number of package delivery companies are on strike due to wage cuts. The strike highlights the unhealthy price competition among the booming package delivery companies in China.

Metropolitan newspapers reported that due to rising logistics costs, some delivery companies chose to cut the delivery fee paid to couriers to save money. One company cut the delivery fee from the original 1.2 yuan (18 cents) per item to 0.5 yuan (7.5 cents).

The couriers who went on strike came from companies including ZTO Express, Yunda Express, Best Express, and the YTO Express Group. The affected areas included Changsha in Hunan province, Sanming in Fujian province, Hebei province, Suzhou in Jiangsu province, and Changchun in Jilin province.

The booming e-commerce in China has sent the package delivery industry on a high growth path. Although companies such as SF Express, Yunda Express, and STO Express have gone public, the industry has been stuck in a price war for a long time.

For example, in 2015, in Yiwu city of Zhejiang province, the delivery fee was 7.44 yuan (US$ 1.11) per item, and in the first half of 2019, it dropped to only 3.45 yuan (52 cents). Parcels under one kilogram had a fee as low as 1 yuan (15 cents).

In addition, most couriers, except SF Express employees, are paid using a piece rate only and have no minimal pay.

Source: Central News Agency, October 18, 2020

Global Times: The Pentagon Invoked Defense Production Act for Rare Earths

Global Times recently reported that, in order to make its rare earths supply “self-sufficient,” the U.S. Department of Defense (DoD) invoked “without hesitation” the Defense Production Act of 1950. This new decision was to improve and speed up the U.S. domestic rare earths development effort. The U.S. military depends heavily on rare earths for manufacturing weaponry. For example, to build an F-35 fighter jet, the manufacturer needs 417 kilograms (around 919 pounds) of rare earths. To make a Virginia Grade nuclear submarine, the rare earth consumption level is four tons. Presently, direct imports from China fulfill eighty percent of the U.S. rare earths demand. In the meantime, the remaining twenty percent of the U.S. consumption depends on indirect imports from China via other countries. The Defense Production Act allows the U.S. President to require businesses to accept government contracts, to expand production scale, and to prioritize production material pricing and allocation for national defense purposes.

Source: Global Times, October 7, 2020

Sichuan Province Proposed New Law to Safeguard Food Supply

Well-known Chinese news site Sohu (NASDAQ: SOHU) recently reported that the Sichuan provincial people’s congress proposed a new law to regulate all aspects of the food supply, including agricultural production, storage, distribution, quality assurance, emergency safeguards, and legal responsibilities for key players. A major addition to the traditional cycle is to encourage restaurants and catering businesses as well as individual families to maintain a certain level of food inventory based on their regular consumption level. Sichuan Province is one of China’s primary food (mainly rice) producing provinces that supply the whole nation. The local congress also issued a report which indicates there has been a sustained “gap” between supply and demand in the province, especially after the COVID pandemic outbreak. The proposed new law also establishes new regulations on protecting agricultural land, in terms of both quantity and quality. (Editor’s note: Traditionally the Chinese socialist system depends on the government instead of private entities for its food inventory.)

Source: Sohu, September 27, 2020

RFA Chinese: Around 1,700 Japanese Applied for Government Aid to Leave China

Radio Free Asia (RFA) Chinese Edition recently reported that the Japanese government’s aid program to assist Japanese companies to leave China is gaining in popularity. The first batch of approved applicants consisted of nearly 90 companies. However, by the end of July, the program received almost 1,700 applications in the second batch. It appears Japan is moving its industrial supply chain out of China. The Japanese government added a supplemental budget of US$2.07 billion to its 2020 budget in order to sponsor Japanese manufacturers moving their supply chain out of China and back to Japan or somewhere else. The second batch of applications totaled US$16.57 billion. Experts expressed the belief that, right now, the CCP virus is serving as a wake-up call for many governments around the globe that restructuring their industrial supply chain is an urgent task. On the other hand, the steady increase in the cost of investing in China is also emerging as an important factor motivating companies to consider leaving China. According to a study that the Japan External Trade Organization conducted, China’s cost index was 80 in 2019, Vietnam was 74, and baseline Japan was 100.

Source: RFA Chinese, September 14, 2020

87 Chinese Cities Showed “Urban Expansion and Population Shrinkage” Between 2014 and 2018

According to the statistics from the Urban and Rural Statistics Yearbook that the Ministry of Housing and Urban-Rural Development issued, between 2014 and 2018, 451 cities had “urban expansion and population growth,” 87 cities had “urban expansion and population shrinkage,” 18 cities had “urban contraction and population growth,” and 13 cities had “urban contraction and population shrinkage.”

In 2018, the total newly constructed urban area was 58,456 square kilometers, an increase of 53.4 percent over 2009, while the permanent urban population was 510 million, only 35.8 percent higher than ten years ago. This indicated a phenomenon in which “land urbanization was faster than population urbanization.”

In comparing the data between 2018 and 2014, one can find that the number of cities with urban population reduction is twice the number of cities with urban area reduction. 122 cities experienced a decrease in urban permanent population during those five years; five cities showed little change; and 507 cities maintained a positive population growth. Among them, Longjing City in Jilin province, Jieyang City in Guangdong province and Honghu City in Hubei province are the only three cities whose population has decreased by more than 50 percent.

Most of those with a declining population are the third and fourth tier cities. Two main types of cities exhibited more urban population losses: cities in northeast China where young people are leaving en masse; and the smaller cities in the Pearl River Delta, whose population is beimg absorbed by the two top-tier cities of Guangzhou and Shenzhen.

Source: 21st Century Business Herald, September 12, 2020