Zhang Anyuan, the Director of the Office of Fiscal Finance at the Economic Research Institute of the National Development and Reform Commission, proposed two approaches to use regarding China’s foreign reserves. “Rather than watching our foreign exchange reserves shrink in value, we should use them to solve domestic problems.” The first approach is to “convert financial assets into reserves of resources,” whereby China encourages the exploration but limits the production of oil, coal, iron ore, and non-ferrous metals. This would increase their imports, reduce the foreign exchange reserves and keep the reserves of resources available in China. The second approach is to “inject funds into local financial entities so as to increase their credit ratings.” According to Zhang, local financial entities have entered into the peak period when payments are due on the government bonds they previously issued. Some of them may face a high probability of liquidity risks. Such an injection of funds will help improve their credit ratings so that these local financial entities can issue more bonds, domestically or in Hong Kong, to solve their liquidity problems for the payments on the bonds they previously issued. 

Source: Modern Bankers reprinted by Sina.com, January 19, 2012
http://finance.sina.com.cn/leadership/mroll/20120119/160911242096.shtml

Outlook Weekly published an article about the West’s pessimistic forecasts for China’s economy. The article pointed out that these negative Western forecasts about China’s economy have never materialized. It stated that there are three reasons: One, Western economists do not want to see a rising China and have the wishful thinking that China will go downhill and collapse. Two, the Western economists measure China against the history of the growth of Korea and Japan. They believe that if other countries such as Korea and Japan did not make it, then China will not be able to make it either. Three, China’s market economy is one that is atypical. When Western economists reviewed the prospects for China’s economy, they relied on the methodology and standards applicable only to typical market economies. That is why their grim forecasts for China have failed to materialize.

Source: Outlook Weekly reprinted by sohu.com, January 21, 2012.
http://news.sohu.com/20120121/n332841922.shtml

Over the past year, waves of Chinese companies (28 in total) have been delisted from U.S. stock exchanges. Since 2011, the total market value of the delisted and about to be delisted Chinese companies has amounted to US$7.8 billion. That compares to US$2.2 billion for IPOs that Chinese companies have issued in the U.S. market. The large number of delisted companies has also had an effect on other Chinese companies that are planning to go public in the U.S. The reasons for the delistings include a stock price that is too low, back door listings (such as reverse takeovers or reverse mergers), and fraudulent accounting practices. The fraudulent accounting practices are the most common reason for delisting.

Source: China Review News, January 24, 2012
http://www.chinareviewnews.com/doc/1019/8/3/8/101983871.html?coluid=7&kindid=0&docid=101983871&mdate=0124000417

Outlook Weekly recently interviewed Fang Jianping, the Chief Economist at China’s State Information Center. In the interview, Fang stated that the real challenge to the economy in 2012 will be the economic structural adjustments, rather than inflation or GDP growth. “Although the price level and growth rate may both show downward movement, it will not be drastic and will not exceed the expected range of the State’s macro-control. The potential growth rate of the economy is between 8 and 9 percent. The real challenge is whether there will be substantial progress in the structural adjustments.”

Source: Outlook Weekly, reprinted on China’s Communist Party website, January 17, 2012
http://theory.people.com.cn/BIG5/49154/49155/16901916.html