Chinascope – Page 705

The Need to Accelerate China’s “Innovation-Driven” Transformation

On February 13, Finance (jingrongjie) magazine published an article on the need to accelerate China’s “innovation driven” strategic transformation. The article stated that China’s economic growth can no longer be sustained by going along with the use of cheap labor and the damage to the environment and resources. Only innovation can accelerate the transformation and the upgrading of China’s economy.

The article stated that China faces several challenges.

China’s innovation and competitiveness remain low. According to the 2013 National Innovation Index Report that the Chinese Academy of Science and Technology for Development issued, China holds the position of No.19 in the ranking of innovative countries, while the U.S., Japan, and South Korea are Nos. 1, 2 and 4, respectively. The intensity of China’s innovation is also low. The intensity of U.S. innovation is 3.35 percent, while, in 2013 China’s innovation intensity was 0.88 percent. The “window” for China’s technological development to "catch-up" is closing. When compared to the United States and other developed countries, even China’s strategic emerging industries are showing gaps as wide as in traditional industries. Further, China has experienced a severe brain drain; it ranks No. 1 in brain drain in the world. After completing their studies overseas, about 87 percent of those who major in science and engineering fields do not return to China X.

Source: Finance (Jingrongjie), February 13, 2015

http://opinion.jrj.com.cn/2015/02/13040118859863.shtml

Briefings | | February 19, 2015 | Economy/Resources

The China Press: Financial Corruption May Shatter the Nation’s Foundation

On February 11, 2015, the US China Press (http://www.uschinapress.com/) first published an article titled, “Financial Corruption May Shatter the Nation’s Foundation.” Then on February 13, 2015, China Review News re-published the article on its website. The anti-corruption campaign in the financial sector just started in January of 2015. As of now, three bank presidents and a number of high level bank executives have been put under investigation. Mao Xiaofeng, the president of Minsheng Bank, is under investigation. The CCP Central Commission for Discipline Inspection has set up a new division focusing on investigating financial corruption.

According to the article, the financial sector has become a place for big and small tigers (corrupt officials) and their children and relatives to come together. After the downfall of Zhou Yongkang, Ling Jihua, and some other high-ranking officials, at least 70 listed companies became embroiled in the anti-corruption movement. Companies involved in nonferrous metals, coal, oil, and other resources accounted for about a quarter of these listed companies. The businesses in which these companies are involved are closely connected with high ranking officials. For example, China Minsheng Bank reportedly has a "Wives Club." A number of the wives of high ranking officials regularly get paychecks although they do not work at all. Ampang Insurance, the largest shareholder of Minsheng Bank, has been growing rapidly over the past 10 years. It has assets of more than one trillion yuan (US160 billion) with licenses in insurance, banking, funds, and security firms. Overseas, Ampang has acquired the New York City landmark, the Waldorf Astoria Hotel; Belgium’s Insurance Company, FIDEA; and Delta Lloyd Bank of Belgium. “Ampang’s explosive growth is beyond the scope of conventional economics. Even Warren Buffett who started from investments in insurance has been lagging far behind. Ampang owes the people an explanation. What panacea does it have that can enable it move so easily through the trials in China with such a Midas touch?”

The article concluded, “Financial corruption, which is more covert than industrial corruption, is also more dangerous. It does not bring any material wealth to society, but it can result in huge losses of state assets. It can produce a financial elite class, fragment society’s distribution patterns, cause social instability, and even lead to a financial crisis. This is not alarmist. Such things have happened in Indonesia and other countries.”

Sources: US China Press, February 11, 2015 and China Review News, February 13, 2015 http://opinion.uschinapress.com/2015/0211/1012895.shtml
http://hk.crntt.com/doc/1036/2/1/5/103621531.html?coluid=59&kindid=0&docid=103621531&mdate=0213074500

Briefings | | February 18, 2015 | Government/Politics

China’s Food Security Problem

The Sun, a Hong Kong newspaper, published a commentary stating that food security has become a real threat to China. If the Sino-U.S. relationship went south, the U.S. could use the food weapon and "win over China without a war."

"For the first time, the first government directive in 2015, titled, ‘The Opinion on Deepening Countryside reforms and Accelerating Agricultural Modernization,’ listed the potato as the fourth staple food for China. In the past, the list included only three staple foods: rice, wheat, and corn."

"At the recent meeting of the Central Financial and Economic Affairs Leading Group, Xi Jinping put food security in a prominent position. It was prior to energy security, which indicated that China’s food problem is more severe than what the outside world thought."

"The North China Plain is the main production area for wheat, but the production of wheat has been decreasing year by year due to the contamination of underground water. Hunan Province is a main production area for rice, but its rice has become carcinogenic due to heavy metal pollution."

An earlier China Review News article on China’s food problem mentioned four challenges for China’s agriculture industry:
1. High Prices: The prices of major agricultural products in China exceed their international prices.
2. Increasing Costs: The costs of agricultural products keep increasing.
3. "The Yellow Line" for Subsidies: China’s commitment to the WTO means the country can no longer increase its subsidies to the agriculture industry.
4. "Red Light" on the ecological environment: In its agricultural decisions, China has to pay more attention to the ecological environment.

Sources:
1. The Sun Online, February 17, 2015
http://the-sun.on.cc/cnt/china_world/20150217/00674_001.html
2. China Review News, January 27, 2015
http://hk.crntt.com/doc/1035/9/3/0/103593027.html?coluid=151&kindid=11511&docid=103593027&mdate=0127102620

Briefings | | February 18, 2015 | Economy/Resources

People’s Daily: Expert’s Explanation of “Land-based Aircraft Carrier”

People’s Daily published an article in which military experts explained China’s "land-based aircraft carrier."

A Google satellite picture showed a large land-based construction in the shape of an aircraft carrier and other construction in the shape of a warship in a location in central China. The "land-based aircraft carrier" is about 300 meters long and 80 meters wide. A plane that looks like a J-15 fighter aircraft was also visible on the carrier’s deck. The warship next to it is thought to be the upper decks of China’s 055 Destroyer.

In an interview with the CCTV, military expert Li Li stated that this "land-based aircraft carrier" should be China’s land-based aircraft carrier training center. With the model of large warships next to it, it indicated that China’s training also includes system integration with multiple ships.

Li Li also said that China’s aircraft carrier may use both the catapult style and sky-jump style for planes to take off.

Source: People’s Daily Online, January 23, 2015
http://military.people.com.cn/n/2015/0123/c1011-26439359.html

Briefings | | February 18, 2015 | Defense/Military

Xinhua: China’s Luxury Market Is Cooling Down

Xinhua recently reported that, in the year 2014, China’s market in luxury goods saw a one percent decline from 2013. The report was based on Bain & Company’s latest research results. The research showed that the market suffered mainly from the anti-corruption campaign, overseas spending, and the proliferation of counterfeit goods. However, in the meantime, Chinese consumers were responsible for around 30 percent of all luxury spending globally. Chinese buyers combined domestic and overseas spending increased by nine percent. This is the first time in eight years of Bain’s research history that the Chinese domestic market has declined. The decline was seen mainly in the sector of men’s products. The year 2014 also saw the highest number of luxury store closures. For example, Hugo Boss closed seven stores, Ferragamo closed six, Zegna closed six, and Burberry closed four stores.

Source: Xinhua, February 15, 2015

http://news.xinhuanet.com/fashion/2015-02/15/c_1114367560.htm

Briefings | | February 17, 2015 | Economy/Resources

BBC Chinese: China-Supplied Fighter Jets May Be a Threat to the Falkland Islands

BBC Chinese recently reported that, not long ago, China signed an agreement with Argentine President Cristina [Fernandez de Kirchner] to supply her nation with fighter jets that are considered capable of attacking the Falkland Islands (also known as the Malvinas Islands). According to the British Ministry of Defense, the China-made FC-1 fighters are a concern. The British army is planning to enhance the radar system deployed at the Falkland Islands. The islands are currently under British control, but Argentina also claims sovereignty. British analysts pointed out that Argentina has been suffering a major economic downturn and President Cristina has been trying to distract domestic public opinion by introducing new conflicts with Great Britain. China sold Argentina a frigate last year and promised to invest 162 billion pounds in Argentina over the next five years.

Source: BBC Chinese, February 15, 2015

http://www.bbc.co.uk/zhongwen/simp/press_review/2015/02/150215_press_china_argentina_fighters

Briefings | | February 17, 2015 | Geo-Strategic Trend

People’s Daily: U.S. Filed WTO Complaint against China’s Export Subsidies

People’s Daily recently reported that the United States just filed a WTO (World Trade Organization) case against China for subsidizing eight categories of export companies. These included textiles, clothing and shoes, metal materials, light industry and specialized chemical products, medicine, construction materials, and agricultural products. The Chinese government provided funding via the public service platform to companies located in 179 industrial parks. The U.S. filing claimed that the Chinese government provided $US one billion worth of subsidies in the period from 2010 to 2012. The public data released on the Chinese Ministry of Commerce official website supported some of the numbers. Before this new filing, there had been 24 WTO filings between the United States and China. The U.S. had initiated 15 of them. Some analysts pointed out that this latest conflict occurred at the very moment when President Obama was asking the U.S. Congress for the power to fast track international trade negotiations. However, the WTO investigation may discover that this type of “hidden subsidy” has been used widely by governments all over the world, including the U.S. government.

Source: People’s Daily, February 13, 2015

http://finance.people.com.cn/n/2015/0213/c1004-26560398.html

Briefings | | February 17, 2015 | US-China Relations

Beijing Experts Discussed How China Should Deal with U.S. Financial Dominance

On February 1 in Beijing, the Chongyang Financial Research Institute of Renmin University held a new book release conference and forum exploring the theme, "Financial Sanctions: the U.S.’s New Global Asymmetric Power."

The participants in the forum generally agreed that the U.S. financial hegemony is an exclusive weapon built on its comprehensive national strength. Using this weapon to provide sanctions against other countries is “a massively profitable business without any cost.” It is like "killing people without firing a shot." The difficult situation in Russia is a new example of the United States applying its financial hegemony. In modern society, financial sanctions have become the core of economic sanctions.

[The experts at the forum believed that] “Facing this situation, China, on the one hand, should not simply oppose the monetary system in which the United States is the center, as it is impossible to change the reality that the Federal Reserve is essentially the equivalent of the World Bank. Instead, China can actively get into the system and make it change the rules so the direction in which it moves is favorable to China. On the other hand, China should establish "infrastructure" in the financial sector and develop a cross-border payment transactions system capable of replacing the SWIFT code.

Source: China Review News, February 2, 2015

http://hk.crntt.com/doc/1036/0/2/8/103602851.html?coluid=151&kindid=11515&docid=103602851&mdate=0202110708

Briefings | | February 13, 2015 | US-China Relations

Wu Guoguang: Xi Jinping’s Reversal of the Course, Will China’s Transition be Peaceful or Marked with Bloodshed?

Cheng Xiaonong: U.S.-China Strategic Relations Have Crystallized

Xinhua Commentaries: “Exposing the Three Major Political Deficits of the U.S.”

The CCP’s Performing Arts Troupes in the U.S.