Chinascope – Page 985

Scholar: Heightened Risks in International Financial Market

Tan Yaling, President of China Foreign Exchange Investment Research Institute, predicted that 2012 may present potential risks in three areas of the international financial market: First, there are risks to the Euro and a crisis is imminent. Greece or Germany may opt out, which may lead to higher Euro risks and a further crisis. Second, oil price hikes may lead to severe inflation and an economic crisis would be inevitable. Third, fluctuations is the price of gold will be unpredictable and there will be an increase in speculative moves in the gold market. While the price of gold may continue to rise, severe drops may occur. The price of gold is a double-edged sword. It may protect the dollar and the U.S. but the U.S. may also be forced to sell gold in order to save itself.

Source: Xinhua, January 24, 2012
http://news.xinhuanet.com/finance/2012-01/24/c_122611836_4.htm

Briefings | | February 2, 2012 | Economy/Resources

Nanfang Weekend: Integrating China’s Culture with the International Community

Nanfang Weekend published an article on China’s cultural integration. The article suggested that cultural integration needs flagship cultural products, or cultural aircraft carriers, to provide a major cultural influence to the world. The article argued that, though cultures in different countries are very diverse around the world, their underlining human civilizations are based on a common value system that the whole world shares. China should grasp that value system and develop its culture products in line with that value system in order to become a cultural “super power.”

[Ed: As China’s major state media continually deny that there are “universal values,” it is interesting to note that this article subtly hints that Western countries’ “universal values” are closer to the common value system of the world. The article pointed out, “(China’s) emphasis on the ‘Chinese characteristic’ and ‘China’s special situation’ is more focused on ‘individualism’ than on ‘commonality’ (of the world’s common value system).”]

Source: Nanfang Weekend Online, Jan 20, 2012
http://www.infzm.com/content/67963

Briefings | | February 1, 2012 | Government/Politics

Chinese Scholar on Letting the Market Determine Interest Rates

Economic Information recently interviewed Wang Guogang, the Dean of the Institute of Finance and Banking at the Chinese Academy of Social Science (CASS). During the interview Wang explained, “For a long time, (China) has mainly used the administrative mechanism to regulate the market and has become an expert in using the administrative mechanism, but the end result is that (China’s economy) has been drifting further and further away from a market economy.”

In early January, China’s National Conference on Financial Work called for pushing forward on reform of the market-controlled interest rate or a more complicated interest rate establishment mechanism. Wang believes that reducing and weakening administrative factors, such as the government’s control of policy, is a pre-condition, which cannot be circumvented, for these reforms to occur.

Wang stated that the bottom line for the government’s regulatory body is not to let any financial institute go bankrupt. He asked, “In this way, how can we weed out the weak ones? Where’s the competition? Where’s the innovation? Where’s the development?” Wang also pointed out that currently both the government and the public keep their foreign currency as a reserve. Wang advocated that the government should open channels to export capital overseas in the form of financial loans or manufacturing funds, to form an RMB exchange market.

Source: CASS website, January 19, 2012
http://ifb.cass.cn/show_news.asp?id=44509

Briefings | | February 1, 2012 | Government/Politics

Outlook Weekly: Four Challenges for China’s Economy

Outlook Weekly published an article discussing China’s economic growth in the mid to long term. It listed four challenges that China faces:

1. As the global economy is still depressed, the demand for exports may negatively impact China’s economic growth. In 2011, exports dragged down the GDP growth rate by 5.8%.

2. Consumption is likely to stay at the same level. However, the continued economic depression may cause consumption to decrease.

3. The pressure of inflation still exists due to a lack of land in cities, a rapid increase in labor and service costs, an upward adjustment in service industry pricing, the the continuous increase in the price of agricultural products as a result of urbanization, and the ongoing pricing reform

4. High financial leverage results in a risk of bad loans. The M2/GDP ratio, which was 180% in 2011, is higher than in both developed countries and developing countries that are at a comparable income level with China. Local governments and state-owned enterprises are both highly leveraged.

Source: Outlook Weekly, republished on Sohu.com, January 29, 2012
http://news.sohu.com/20120129/n333094430.shtml

Briefings | | February 1, 2012 | Economy/Resources

New Year’s Wishes for Many Chinese People

China News Net published its first commentary after Chinese New Year’s Day, summarizing the three new year’s resolutions that are on many people’s minds. Number one on the wish list is a further drop in the price of housing. The year 2011 was the year we saw the strongest decline in housing prices. However, for most people, the price level is still far from affordable. The second wish on the list is an increase in income. Although statistically there was an increase in income last year, the high pressure of inflation made the increase seem inconsequential. The third biggest item most people wish for is a large improvement in food safety. In the past year, a wide range of food safety incidents occurred in the consumer market, having to do with pork, cooking oil, frozen dumplings, infant formula, beverages, and more.

Source: China News Net, January 29, 2012
http://www.chinanews.com/cj/2012/01-29/3624990.shtml

Briefings | | January 31, 2012 | Economy/Resources

China’s Path to Becoming a Financial Superpower

China Review News (CRN) recently published an article commenting on China’s current financial position in the world, its weaknesses, and suggestions for future growth. The commentary pointed out that, by the end of October of last year, the assets of China’s central bank were the highest in the world, having reached US$4.73 trillion. At the same time, assets of the U.S. Federal Reserve, the EU Central Bank, and the Japanese central bank reached US$2.85 trillion, US$2.73 trillion and US$1.8 trillion, respectively. China also has the highest savings rate as well as the highest foreign exchange reserves. However, China’s financial system is leaning too heavily towards manufacturing and infrastructure investments. Investment in medium and small enterprises is still lacking. Another problem lies in the area of China’s overseas investments, which have a very low yield of 3%-5%. The commentary made two suggestions: that China should establish financial institutes designed to serve medium and small businesses, and that the practice of the large scale purchase of foreign bonds should be completely changed. Investments should switch to stock shares and other types of ownership of overseas economic entities, including U.S. assets.

Source: China Review News, January 20, 2012
http://gb.chinareviewnews.com/doc/1019/7/1/6/101971606.html?coluid=136&kindid=4710&docid=101971606&mdate=0120000611

Briefings | | January 31, 2012 | Economy/Resources

Twelve Challenges China Faces in 2012

Qiushi Journal, a bi-weekly magazine published of the Central Committee of the Chinese Communist Party, recently republished an article from the Tokyo-based magazine The Diplomat on the twelve key challenges China will face in the year 2012: (1) A once-in-a-decade political transition in October; (2) A slowing of China’s economic growth; (3) High local government debt; (4) Falling real estate prices; (5) China’s debt problems may have major repercussions for countries benefitting from China’s commodity demand boom; (6) Tighter domestic media reporting guidelines; (7) Intensified policies to drive growth in Central and Western China; (8) A heightened risk of inflation; (9) The increased outbound investment of money seeking safe havens; (10) Continued friction and possible skirmishes in the South China Sea; (11) Drilling China’s first ultra-deepwater oil/gas well; (12) The ongoing Gulf of Aden/Indian Ocean anti-piracy mission.

Source: Qiushi Journal, January 16, 2012
http://www.qstheory.cn/jj/jjyj/201201/t20120116_135021.htm

Original: The Diplomat, January 8, 2012
http://the-diplomat.com/china-power/2012/01/08/chinas-2012-challenges/

Briefings | | January 31, 2012 | Government/Politics

Xinhua Commentary Series: Spotlight on the U.S. Presidential Election

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.”