October 29, 2008
By: Ding Wenlei
Warren Buffett is financing BYD Co. Ltd.'s auto dream with a strategic investment of $230 million
American investor and businessman Warren E. Buffett has found a "really long hill" in China to snowball his wealth. The "Oracle of Omaha" is known for his investment wisdom as well as his famous likening of finding investments to a snowball. "The important thing is to find wet snow and a really long hill," he has said.
BYD Co. Ltd. is Buffett's long hill in China and his first investment in a company here. MidAmerican Energy Holdings Co., a subsidiary of Berkshire Hathaway Inc., Buffett's conglomerate holding company headquartered in Omaha, Nebraska, announced on September 27 that it paid $230 million for a nearly 10-percent stake in the Shenzhen-based battery producer and automaker.
Established in 1995 and listed on the Hong Kong Stock Exchange in 2002, the BYD has seven production facilities located in different regions around China.
"We are very impressed by BYD's outstanding management team and its research and development capability, especially the capability of translating technologies to products," said David Sokol, Chairman of MidAmerican, at a press conference.
Buffett did not attend the news conference, but said in a statement that he was impressed with the management record of BYD's President Wang Chuanfu.
The investment sage is worshipped for his powerful, long-term investment strategy. He has traditionally shied away from technology-oriented companies and favored simple and mature businesses he understands. Some of his most famous investments include American beverage company Coca-Cola Co. and razor maker The Gillette Co., now owned by Proctor & Gamble Co.
But why would Buffett invest such a large amount in BYD, a company focused on hi-tech batteries and electric cars, as his first strategic investment in a Chinese firm?
Value Investing
Buffett is a high-profile proponent of "value investing," or the strategy of selecting stocks that trade for less than their intrinsic value. The intrinsic value of a security refers to the present value of all expected future income generated by the asset.
Such securities may have high dividend yields, low price-to-earning (PE) ratios or low price-to-book (PB) ratios. A low PB ratio, which compares the market value of a company to the value of its total tangible assets minus liabilities, could indicate the stock is currently undervalued and may have potential for future growth.
Buffett is known for his ability to calculate the intrinsic value of a business and then buy that company at a discount to its intrinsic value. In the case of BYD, Buffett bought the company's stock at a price of HK$8 ($1) per share when the PE ratio was less than 8 and the PB ratio was only 2.5.
It appears to be a real bargain for Buffett. BYD's shares had lost 45 percent of their value when their price dived from HK$77 ($10) per share at its peak to the current HK$8 per share in the past year, partly because of legal disputes between BYD and rival Foxconn International Holdings Ltd. over alleged patent infringement.
But Buffett has been focusing on "finding an outstanding company at a sensible price" rather than generic companies at a bargain price, because future distributions are only based on assumptions. He has stressed the long-term profitability of target companies.
Apart from the requirements related to "intrinsic value," a solid management team and good returns for shareholders, Buffett's other criteria for investment picks include companies that must have at least $5 million in after-tax earnings and have demonstrated consistent earning power. Zhou Jun, a company analyst at Investor Journal affiliated with the Economic Observer, said BYD basically meets all these requirements.
BYD reaped a net profit of 1.6 billion yuan ($235.3 million) last year, up 44.2 percent year on year. In the first half of this year, the company's net profit was 596 million yuan ($87.6 million), which ranked BYD among the top 30 of all 207 Hong Kong-listed industrial companies in terms of after-tax earnings.
In terms of consistent earning power, Buffet requires a company to have a sustainable competitive advantage, what he calls an "economic moat" that protects the company's profitability from competitors. BYD's moat, according to Zhou, lies in the company's leading technological advantages in rechargeable batteries and electric cars. This moat has enabled BYD to maintain a gross profit-to-sales ratio of more than 20 percent in the past five years, he said.
BYD's Moat
Analysts believe BYD's most attractive asset for Buffett is the development of green automotive technologies, including lithium-ion batteries and a related line of hybrid and all-electric vehicles.
Wang Chuanfu, President of BYD, said that electric vehicles would allow people to be less reliant on petrol-energy and reduce greenhouse gas emissions and air pollution.
At the press conference, Sokol called BYD's technologies "a game changer" to seriously reduce emissions of carbon dioxide and address problems related to global warming in the future.
BYD has risen from obscurity in a few short years to be one of the world's largest makers of rechargeable batteries for cellphones and other uses, with Nokia Corp., Motorola Inc. and Samsung Electronics Co. among its customers.
The battery maker acquired 77 percent of Shaanxi Qinchuan Auto Co. in 2003 in a controversial move to make fuel-efficient compact and subcompact cars for the Chinese market. The fast-growing auto-making unit currently accounts for nearly a third of BYD's revenue. Backed by its technological advantages in rechargeable batteries, the auto dark horse is now marrying its battery technology with plug-in hybrids that can also run on petrol as a back-up fuel and all-electric cars.
MidAmerican, an electricity and natural gas provider in the midwest and west United States, sees plug-in electric cars as the best alternative to fuel-powered engines, because the country already has the infrastructure to supply electricity for recharging vehicles almost anywhere.
Sokol said that MidAmerican was impressed with BYD's ability to produce electric cars that have a range of almost 190 miles on a single charge and can be 80 percent recharged in 15 minutes. By comparison, General Motors Corp.'s electric-powered vehicle, the Chevrolet Volt, has a battery range of just 40 miles on a full charge.
BYD plans to start selling F3DM hybrids in China at the end of this year. It says the batteries for the car will last 10 years or 2,000 charging cycles.
Buffett's $230 million investment gives BYD capital and credibility to pursue its ambition of making environmentally friendly hybrid cars and becoming the world's No.1 automaker by 2025. Wang said at the press conference that BYD would sell cars in the United States and might even move up its plans for entering the market in 2010, by using Berkshire Hathaway's money to accelerate research.
In a new move to integrate the upstream supply chain for its electric cars, BYD acquired SinoMOS Semiconductor (Ningbo) Inc. for about 200 million yuan ($29.4 million) on October 6.
Wednesday, October 29, 2008
Friday, October 24, 2008
China's Economy Has Ability to Recover From Slowdown
October 22, 2008
Xinhua News Agency
Experts attending a think tank strategic dialogue at the ongoing China-ASEAN Expo have shown confidence in China's steady economic growth despite the extensive downturn in the world economy.
China's gross domestic product (GDP) grew 9.9 percent during the first three quarters of this year, 2.3 percentage points lower than the same period of last year, the National Bureau of Statistics said Monday. China's GDP has grown with an annual average 10.6 percent since 2003.
Hadi Soesastro, executive director of Center for Strategic and International Studies of Indonesia, said that 9.9 percent is already a good achievement. "We could not simply think China's economy has sagged. China has made great achievements in improving the social interests for the public."
China has spent great amount of money on environmental protection, energy saving, greenhouse gas emission control and social welfare. The social interests and long-term effects are incalculable, he said.
"In consideration of the ongoing global economic crisis, 9.9 percent is still a good figure. China's economy is somewhat resistant to the outside impact and is easy to escape from a standstill," said Nguyen Van Nen, director of planning and promotion department of Vietnam Cooperative Alliance.
China's slowdown under the background of global recession is an opportunity for the country to readjust and transform, said Sheng Lijun, a researcher with the Lee Kuan Yew School of Public Policy, National University of Singapore.
"China should promote its technology innovation and transform itself from a traditional manufacturer to a modern industrialized country, setting a sound basis for its sustainable development," he said.
The weak demand in the West could make Chinese products oversupplied. The mounting protectionism also has a negative impact on Chinese economy, Sheng said. "China can invest in domestic infrastructure as well as that in ASEAN countries. The return is guaranteed."
"I think China's returning to a 10 percent growth rate needs two years at most. I am quite confident about that," said Tan Sri Mohamed Jawhar Hassan with the Institute of Strategic and International Studies of Malaysia.
The global market slipped into a recession in the 1997 Asian financial crisis and China also slowed down its pace. Chinese economy, however, gained a momentum soon after that and moved to a new high, he said.
"Now China's economic quality and the ability to recover is much better than 10 years ago. It will keep an 8 percent increase at worst," said Hassan.
China's steady growth is vital to the development of ASEAN countries. The China-ASEAN Free Trade Zone is expected to become the third largest free trade zone in the world in 2010 and the ties between China and ASEAN are set to become closer, said Nguyen Van Nen.
The close ties and strengthening cooperation between the two sides will definitely improve their resistance to the economic risks, he said.
"In the long run, I am optimistic about China's economy," he said.
Xinhua News Agency
Experts attending a think tank strategic dialogue at the ongoing China-ASEAN Expo have shown confidence in China's steady economic growth despite the extensive downturn in the world economy.
China's gross domestic product (GDP) grew 9.9 percent during the first three quarters of this year, 2.3 percentage points lower than the same period of last year, the National Bureau of Statistics said Monday. China's GDP has grown with an annual average 10.6 percent since 2003.
Hadi Soesastro, executive director of Center for Strategic and International Studies of Indonesia, said that 9.9 percent is already a good achievement. "We could not simply think China's economy has sagged. China has made great achievements in improving the social interests for the public."
China has spent great amount of money on environmental protection, energy saving, greenhouse gas emission control and social welfare. The social interests and long-term effects are incalculable, he said.
"In consideration of the ongoing global economic crisis, 9.9 percent is still a good figure. China's economy is somewhat resistant to the outside impact and is easy to escape from a standstill," said Nguyen Van Nen, director of planning and promotion department of Vietnam Cooperative Alliance.
China's slowdown under the background of global recession is an opportunity for the country to readjust and transform, said Sheng Lijun, a researcher with the Lee Kuan Yew School of Public Policy, National University of Singapore.
"China should promote its technology innovation and transform itself from a traditional manufacturer to a modern industrialized country, setting a sound basis for its sustainable development," he said.
The weak demand in the West could make Chinese products oversupplied. The mounting protectionism also has a negative impact on Chinese economy, Sheng said. "China can invest in domestic infrastructure as well as that in ASEAN countries. The return is guaranteed."
"I think China's returning to a 10 percent growth rate needs two years at most. I am quite confident about that," said Tan Sri Mohamed Jawhar Hassan with the Institute of Strategic and International Studies of Malaysia.
The global market slipped into a recession in the 1997 Asian financial crisis and China also slowed down its pace. Chinese economy, however, gained a momentum soon after that and moved to a new high, he said.
"Now China's economic quality and the ability to recover is much better than 10 years ago. It will keep an 8 percent increase at worst," said Hassan.
China's steady growth is vital to the development of ASEAN countries. The China-ASEAN Free Trade Zone is expected to become the third largest free trade zone in the world in 2010 and the ties between China and ASEAN are set to become closer, said Nguyen Van Nen.
The close ties and strengthening cooperation between the two sides will definitely improve their resistance to the economic risks, he said.
"In the long run, I am optimistic about China's economy," he said.
China's Population May Hit 1.5 Billion in 2033
October 23, 2008
Shanghai Daily
The population on the Chinese mainland is expected to reach 1.5 billion in 2033, an official revealed at a forum in Beijing today.
The population will see an annual increase of about eight million people in the next decade and may reach 1.36 billion in 2010 and 1.4 billion in 2020, said Li Bin, director of the National Population and Family Planning Commission.
The number of people above the age of 65 is expected to reach 320 million by 2040, which will make up nearly 22 percent of the population. The elderly segment was only 8.1 percent of the population in 2007, Li said.
In addition to the pressures of a greyer population, the country will also battle a sex-imbalance that may seriously disrupt social stability, Li warned.
The sex ratio, or proportion of males to females, has been getting increasingly skewed since the 1990s as many Chinese couples show a strong preference for boys.
The ratio has reached 119.92 in 2000 from 108 in 1981, which means 119 boys are born against every 100 girls across the country, according to the National Population and Family Planning Commission.
In five provinces, the figure even surged above 130, the commission said. Analysts say a proportion of 106 boys for every 100 girls can be considered normal.
China will have a male population of up to 30 million in 2020 who may not be able to find wives and partners because of the gender imbalance, Xinhua news agency cited Li Weixiong, a member of the People's Congress and also deputy director of China Economy and Society Reach Committee, in a previous report.
Meanwhile, China is also expected to see its largest population mobilization when 300 million people enter urban centers in the next two to three decades, Li warned.
Shanghai Daily
The population on the Chinese mainland is expected to reach 1.5 billion in 2033, an official revealed at a forum in Beijing today.
The population will see an annual increase of about eight million people in the next decade and may reach 1.36 billion in 2010 and 1.4 billion in 2020, said Li Bin, director of the National Population and Family Planning Commission.
The number of people above the age of 65 is expected to reach 320 million by 2040, which will make up nearly 22 percent of the population. The elderly segment was only 8.1 percent of the population in 2007, Li said.
In addition to the pressures of a greyer population, the country will also battle a sex-imbalance that may seriously disrupt social stability, Li warned.
The sex ratio, or proportion of males to females, has been getting increasingly skewed since the 1990s as many Chinese couples show a strong preference for boys.
The ratio has reached 119.92 in 2000 from 108 in 1981, which means 119 boys are born against every 100 girls across the country, according to the National Population and Family Planning Commission.
In five provinces, the figure even surged above 130, the commission said. Analysts say a proportion of 106 boys for every 100 girls can be considered normal.
China will have a male population of up to 30 million in 2020 who may not be able to find wives and partners because of the gender imbalance, Xinhua news agency cited Li Weixiong, a member of the People's Congress and also deputy director of China Economy and Society Reach Committee, in a previous report.
Meanwhile, China is also expected to see its largest population mobilization when 300 million people enter urban centers in the next two to three decades, Li warned.
Faced With Global Slump, Can China Keep Up Economic Growth?
October 23, 2008
By: Jim Yardley and Keith Bradsher
For three decades, China has fueled its remarkable economic rise by becoming the world's workshop and unleashing a flood of low-priced exports. But faced with a possible global recession and weakening demand for Chinese exports, the question now is whether the ruling Communist Party can prevent the financial crisis from derailing the country's economic miracle.
This is a pressing question not just for China but for the rest of the world. Many economists say continued Chinese growth is vital to the global economy as the United States and Europe face severe downturns. Yet to navigate the crisis, many analysts say China will need to recalibrate its economic model, stoke domestic investment with heavy government spending and promote policies to increase consumer spending in a nation famous for high savings rates.
The global financial crisis is expected to be the main focus of a summit meeting of Asian and European leaders in Beijing this week.
It is also arising at a politically resonant moment for China. This is the 30th anniversary of the policy changes that propelled China's economic rise, a milestone that has raised inevitable questions about the future shape of reform. At the geopolitical level, China would seem well positioned to expand its influence as it sits on $1.9 trillion in foreign exchange reserves and could benefit from widespread calls to reorganize Western-dominated global financial systems.
But for now, most analysts say China's top priority is simply protecting its own economy. Chinese leaders say the domestic financial system is largely insulated from the global crisis but also warn of serious pressures at home and from abroad. Economic growth is at the lowest level in five years, unemployment is a growing concern and scores of factories are closing in the country's export region. Domestic stock exchanges have lost 65 percent of their value and real estate sales have plummeted.
Many economists believe China can avoid a serious downturn, but a significant slowdown would pose a political challenge for the Communist Party, which derives much of its legitimacy from delivering economic growth. Conventional wisdom holds that China's output must grow at a minimum of 8 percent for the economy to produce enough jobs to meet demand, and many economists expect growth to drop below that level next year.
Just last week, thousands of unemployed workers protested outside closed toy factories in Guangdong Province, the country's export hub. Slightly more than half the country's toy exporters shut down in the first seven months of this year, mostly very small companies that struggled to cope with new safety standards as well as weakening Western demand, according to China's customs agency.
If the growth rate "goes below 8 percent in 2009, I think they will be quite concerned," said Kenneth Lieberthal, a China specialist at the Brookings Institution in Washington. "They are always concerned about job creation."
Already, Chinese leaders are preparing a response that could resemble the government spending spree from 1998 to 2000 that is credited with helping China avoid the worst of the Asian financial crisis. Former Prime Minister Zhu Rongji poured billions of dollars into projects like flood control, road building and new airports to pump economic output. Much of that infrastructure is now considered essential to China's competitive advantage as a manufacturing exporter.
Today, improvements are needed in railroads and the electrical power grid. But China's most conspicuous needs are the softer side of a modern economy — a health care network, lower tuition and fees for schools and universities and improvement in the rudimentary social safety net, economists say.
Such steps are seen as crucial if China is to give consumers — especially working-class urban residents and the 800 million people still classified as peasants — the confidence to spend rather than increase their savings.
"China's infrastructure is excellent - compare it to India," said Xu Xiaonian, an economics professor at the China Europe International Business School in Shanghai. "It's getting harder for the government to find ways to spend money productively. It's stimulus for the sake of stimulus."
David McCormick, the U.S. under secretary of the Treasury for international affairs, said during a telephone interview that Chinese officials understood that the sheer size of their economy, combined with weakening demand overseas, meant increasing demand for goods and services within China would be in the country's own interest. "They can't count on exports being such a driver of their economy going forward," he said.
To date, the most significant new measure is the land reform announced Sunday after days of mixed signals. Full details of the program are still unclear, but the plan allows farmers for the first time to lease or transfer land, a landmark step in what is still nominally a socialist country. Economists believe the measure will lift the rural economy, though few predict sudden benefits. To raise rural incomes more rapidly, the top Chinese economic planning agency on Monday increased the minimum purchase price of wheat by up to 15 percent beginning next year.
But transforming the countryside and creating a nation of consumers is likely to be a more difficult process than China's transformation into a manufacturing giant. In recent years, President Hu Jintao and Prime Minister Wen Jiabao have eliminated the ancient agricultural tax and increased spending on rural initiatives. Yet the rural-urban income gap has continued to worsen. Today, China still has more than 500 million people living on less than $2 a day; nationwide per capita income is only about $2,000. The social safety net remains so inadequate that most peasants save their spare earnings to protect against a medical crisis or as a thin cushion for old age.
Andy Rothman, a longtime analyst at CLSA Asia-Pacific Markets, an investment bank, said that the government had been promoting domestic consumption for years but that by necessity it was a gradual process and not one that could provide a quick fix to a global slowdown.
"This isn't something you want to move ahead at light speed," Rothman said. "China trying to step into the breach by handing out credit cards to 800 million peasants would be a disaster just a few years down the road."
From a geopolitical standpoint, China would seem to have an opportunity to fill a void created by a weakened West, especially given the country's huge foreign exchange holdings. President Asif Ali Zardari of Pakistan visited Beijing earlier this month in search of financial edge to help his country stave off bankruptcy - an overture that could become more common as China is increasingly perceived as sitting on a money pot.
More pertinent to the United States is whether China will re-examine its strategy of financing U.S. debt. Chinese experts say that the American and Chinese economies are so intertwined that Chinese leaders will not make any abrupt changes in its policy of directing the bulk of its foreign currency reserves to dollar-denominated assets. Indeed, the U.S. Treasury secretary, Henry Paulson Jr., and other senior U.S. officials have been in almost daily contact with their Chinese counterparts.
"China, with the responsibility of a big country, will not make trouble for international financial markets," said Hu Angang, a Chinese economist who is the director of the Center for China Studies at Tsinghua University. "The Chinese government is very rational and flexible, and very clearly recognizes any policy does not just influence domestic markets but also global markets."
McCormick said that U.S. officials had not asked their Chinese counterparts to buy any specific portion of the Treasury bonds that would be issued to finance the Bush administration's $700 billion economic recovery plan. But U.S. officials have tried to impress on Chinese officials that the United States remains an attractive place to invest.
"We've certainly tried to give them confidence we're taking the appropriate policy steps," McCormick said, adding that the United States had also encouraged China to continue to be "a stable and long-term investor in the global financial system."
Some Chinese experts are suggesting that China could use more of its foreign reserves to purchase stocks in Western companies and even leverage positions onto corporate boards. Doing so, these experts say, would allow China to develop expertise and gain more experience in global business.
But others say China was stung by the backlash after a state-owned Chinese petrochemical company sought to purchase Unocal and would be cautious in making any moves deemed politically risky. Domestic pressures also exist; public criticism has erupted after some investments by the country's sovereign wealth fund lost money.
McCormick said that the United States welcomed investments by sovereign wealth funds, whether from China or any other country.
No one is yet certain when the global financial system will stabilize, but the crisis has convinced many economic analysts that the system itself will be re-examined. The financial crisis is "a ground-shaking event, but people are going to stick to the same system," said Wang Tao, chief of the China economic research unit for UBS Securities. "But they are going to think about how to reform the system, and China will probably have a stronger voice than before."
In recent years, some Chinese experts have written analyses about the inevitability of an American decline and how China must prepare to manage it. But in the face of the current crisis, most Chinese analysts say China is nowhere near ready yet to stand as a superpower.
"China doesn't want to be viewed as a replacement for the States," said one Chinese scholar who requested anonymity so that he could discuss the mind-set of government officials. "We are still a developing country. We have more foreign reserves than other countries, but we also have more problems."
By: Jim Yardley and Keith Bradsher
For three decades, China has fueled its remarkable economic rise by becoming the world's workshop and unleashing a flood of low-priced exports. But faced with a possible global recession and weakening demand for Chinese exports, the question now is whether the ruling Communist Party can prevent the financial crisis from derailing the country's economic miracle.
This is a pressing question not just for China but for the rest of the world. Many economists say continued Chinese growth is vital to the global economy as the United States and Europe face severe downturns. Yet to navigate the crisis, many analysts say China will need to recalibrate its economic model, stoke domestic investment with heavy government spending and promote policies to increase consumer spending in a nation famous for high savings rates.
The global financial crisis is expected to be the main focus of a summit meeting of Asian and European leaders in Beijing this week.
It is also arising at a politically resonant moment for China. This is the 30th anniversary of the policy changes that propelled China's economic rise, a milestone that has raised inevitable questions about the future shape of reform. At the geopolitical level, China would seem well positioned to expand its influence as it sits on $1.9 trillion in foreign exchange reserves and could benefit from widespread calls to reorganize Western-dominated global financial systems.
But for now, most analysts say China's top priority is simply protecting its own economy. Chinese leaders say the domestic financial system is largely insulated from the global crisis but also warn of serious pressures at home and from abroad. Economic growth is at the lowest level in five years, unemployment is a growing concern and scores of factories are closing in the country's export region. Domestic stock exchanges have lost 65 percent of their value and real estate sales have plummeted.
Many economists believe China can avoid a serious downturn, but a significant slowdown would pose a political challenge for the Communist Party, which derives much of its legitimacy from delivering economic growth. Conventional wisdom holds that China's output must grow at a minimum of 8 percent for the economy to produce enough jobs to meet demand, and many economists expect growth to drop below that level next year.
Just last week, thousands of unemployed workers protested outside closed toy factories in Guangdong Province, the country's export hub. Slightly more than half the country's toy exporters shut down in the first seven months of this year, mostly very small companies that struggled to cope with new safety standards as well as weakening Western demand, according to China's customs agency.
If the growth rate "goes below 8 percent in 2009, I think they will be quite concerned," said Kenneth Lieberthal, a China specialist at the Brookings Institution in Washington. "They are always concerned about job creation."
Already, Chinese leaders are preparing a response that could resemble the government spending spree from 1998 to 2000 that is credited with helping China avoid the worst of the Asian financial crisis. Former Prime Minister Zhu Rongji poured billions of dollars into projects like flood control, road building and new airports to pump economic output. Much of that infrastructure is now considered essential to China's competitive advantage as a manufacturing exporter.
Today, improvements are needed in railroads and the electrical power grid. But China's most conspicuous needs are the softer side of a modern economy — a health care network, lower tuition and fees for schools and universities and improvement in the rudimentary social safety net, economists say.
Such steps are seen as crucial if China is to give consumers — especially working-class urban residents and the 800 million people still classified as peasants — the confidence to spend rather than increase their savings.
"China's infrastructure is excellent - compare it to India," said Xu Xiaonian, an economics professor at the China Europe International Business School in Shanghai. "It's getting harder for the government to find ways to spend money productively. It's stimulus for the sake of stimulus."
David McCormick, the U.S. under secretary of the Treasury for international affairs, said during a telephone interview that Chinese officials understood that the sheer size of their economy, combined with weakening demand overseas, meant increasing demand for goods and services within China would be in the country's own interest. "They can't count on exports being such a driver of their economy going forward," he said.
To date, the most significant new measure is the land reform announced Sunday after days of mixed signals. Full details of the program are still unclear, but the plan allows farmers for the first time to lease or transfer land, a landmark step in what is still nominally a socialist country. Economists believe the measure will lift the rural economy, though few predict sudden benefits. To raise rural incomes more rapidly, the top Chinese economic planning agency on Monday increased the minimum purchase price of wheat by up to 15 percent beginning next year.
But transforming the countryside and creating a nation of consumers is likely to be a more difficult process than China's transformation into a manufacturing giant. In recent years, President Hu Jintao and Prime Minister Wen Jiabao have eliminated the ancient agricultural tax and increased spending on rural initiatives. Yet the rural-urban income gap has continued to worsen. Today, China still has more than 500 million people living on less than $2 a day; nationwide per capita income is only about $2,000. The social safety net remains so inadequate that most peasants save their spare earnings to protect against a medical crisis or as a thin cushion for old age.
Andy Rothman, a longtime analyst at CLSA Asia-Pacific Markets, an investment bank, said that the government had been promoting domestic consumption for years but that by necessity it was a gradual process and not one that could provide a quick fix to a global slowdown.
"This isn't something you want to move ahead at light speed," Rothman said. "China trying to step into the breach by handing out credit cards to 800 million peasants would be a disaster just a few years down the road."
From a geopolitical standpoint, China would seem to have an opportunity to fill a void created by a weakened West, especially given the country's huge foreign exchange holdings. President Asif Ali Zardari of Pakistan visited Beijing earlier this month in search of financial edge to help his country stave off bankruptcy - an overture that could become more common as China is increasingly perceived as sitting on a money pot.
More pertinent to the United States is whether China will re-examine its strategy of financing U.S. debt. Chinese experts say that the American and Chinese economies are so intertwined that Chinese leaders will not make any abrupt changes in its policy of directing the bulk of its foreign currency reserves to dollar-denominated assets. Indeed, the U.S. Treasury secretary, Henry Paulson Jr., and other senior U.S. officials have been in almost daily contact with their Chinese counterparts.
"China, with the responsibility of a big country, will not make trouble for international financial markets," said Hu Angang, a Chinese economist who is the director of the Center for China Studies at Tsinghua University. "The Chinese government is very rational and flexible, and very clearly recognizes any policy does not just influence domestic markets but also global markets."
McCormick said that U.S. officials had not asked their Chinese counterparts to buy any specific portion of the Treasury bonds that would be issued to finance the Bush administration's $700 billion economic recovery plan. But U.S. officials have tried to impress on Chinese officials that the United States remains an attractive place to invest.
"We've certainly tried to give them confidence we're taking the appropriate policy steps," McCormick said, adding that the United States had also encouraged China to continue to be "a stable and long-term investor in the global financial system."
Some Chinese experts are suggesting that China could use more of its foreign reserves to purchase stocks in Western companies and even leverage positions onto corporate boards. Doing so, these experts say, would allow China to develop expertise and gain more experience in global business.
But others say China was stung by the backlash after a state-owned Chinese petrochemical company sought to purchase Unocal and would be cautious in making any moves deemed politically risky. Domestic pressures also exist; public criticism has erupted after some investments by the country's sovereign wealth fund lost money.
McCormick said that the United States welcomed investments by sovereign wealth funds, whether from China or any other country.
No one is yet certain when the global financial system will stabilize, but the crisis has convinced many economic analysts that the system itself will be re-examined. The financial crisis is "a ground-shaking event, but people are going to stick to the same system," said Wang Tao, chief of the China economic research unit for UBS Securities. "But they are going to think about how to reform the system, and China will probably have a stronger voice than before."
In recent years, some Chinese experts have written analyses about the inevitability of an American decline and how China must prepare to manage it. But in the face of the current crisis, most Chinese analysts say China is nowhere near ready yet to stand as a superpower.
"China doesn't want to be viewed as a replacement for the States," said one Chinese scholar who requested anonymity so that he could discuss the mind-set of government officials. "We are still a developing country. We have more foreign reserves than other countries, but we also have more problems."
China's Next Test: Health Care
October 20, 2008
Reuters
China's economic boom has resulted in stark inequity between its urban and rural populations in terms of health, and experts urged the government to work harder at providing health care for everyone.
Infant mortality in China's countryside stands at 123 for every 1,000 live births compared with 26 in the richest counties, the experts wrote in a paper published in The Lancet medical journal.
Of every 1,000 children, 64 in the countryside will not live beyond their fifth birthday, compared with 10 in the cities.
The report, by researchers in China, the United States and Britain as well as from the World Health Organization, is part of a special series on China's health reforms.
While life expectancy in Shanghai is 78.1 years, that figure is 66.1 in Gansu, one of the poorest provinces.
The team of experts also highlighted China's "missing women."
"In China, the problem has been exacerbated in recent decades by the practice of sex-specific abortions," the experts wrote.
The report continued that "discrimination lasts through infancy and childhood, reflected in higher death rates for girls."
"In 2000, infant mortality was 33.7 per 1,000 live births for girls compared with 23.9 per 1,000 for boys."
The authors attributed the disparities to inadequate government investment in health care, which increased "out-of-pocket" costs, hitting the poorest the hardest.
There was also insufficient government stewardship, which resulted in "doctors using their knowledge to prescribe inappropriate yet profitable procedures and drugs."
Another paper in the series highlighted the preference among medical and health care graduates for joining pharmaceutical and biotechnology companies instead of the medical profession, where they are needed.
This paper, led by Sudhir Anand of the University of Oxford, estimated that one million such graduates between 2000 and 2005 were not absorbed into the country's health care workforce.
"Although the production of doctors and nurses has greatly expanded in recent years, serious problems of distribution remain," the experts wrote, adding that "the goal of its health reform should be to promote equitable and universal access to basic health services."
Another paper highlighted how health care was taking up the bulk of household incomes, or a whopping 50 percent in 2006 (more than 18 times that in 1990) because of inadequate health insurance.
This compares with 45 percent in South Korea, 16 percent in Sweden, 15 percent in Japan and 11 percent in France.
"The average cost of a single hospital admission is now almost equivalent to China's annual income per head and is more than twice the average annual income of the lowest 20 percent of the population," wrote the team, led by Hu Shanlian from Fudan University in Shanghai.
"More than 35 percent of urban households and 43 percent of rural households have difficulty affording health care, go without, or are impoverished by the costs," they wrote.
The papers noted recent moves by the Chinese government to modernize the public health system and introduce health insurance plans, but much more needed to be done, especially to raise the level of reimbursement and help people who live in poverty.
Another Lancet report warned that chronic illnesses like cancer and heart and respiratory diseases were time bombs, and that the Chinese should reduce their intake of fatty foods and salt, stop smoking and start exercising.
Increasingly affluent Chinese consumed between 25 and 100 percent more fat each day in 2002 compared with 1982, sharply raising the risk of heart disease and cancer, the experts wrote in The Lancet.
While the country was plagued by infectious diseases before 1990, chronic illnesses are now the main health problem and accounted for 74.1 percent of all deaths in 2005, up from 47.1 percent in 1973, the researchers wrote.
While these chronic illnesses have to do with people living longer, several high-risk factors are also involved.
Apart from a fatty diet, many Chinese consume a relatively high 12-gram dosage of salt daily, which the paper said accounted for hypertension in about 177 million Chinese adults.
Based on Chinese definitions, 22.8 percent of Chinese were overweight in 2002. About 7.1 percent in the population were obese in 2002.
The paper also drew attention to the smoking habit of many Chinese.
"One in every three smokers in the world is a Chinese man," the experts wrote. They reported that cigarette consumption increased to 2,022 billion in 2006, to a level 17.4 percent higher than in 2002.
The average Chinese male smoker smoked 15 cigarettes a day in 2002, up from 13 in 1984.
The costs of China's disease burden from smoking were likely to be vast, and China will suffer reduced productivity and more premature deaths, the researchers warned.
"Hypertension and tobacco can be targeted health priorities," wrote the team, led by Yang Gonghuan of the Chinese Center for Disease Control and Prevention in Beijing. "Reduction of salt intake should become a national campaign."
Reuters
China's economic boom has resulted in stark inequity between its urban and rural populations in terms of health, and experts urged the government to work harder at providing health care for everyone.
Infant mortality in China's countryside stands at 123 for every 1,000 live births compared with 26 in the richest counties, the experts wrote in a paper published in The Lancet medical journal.
Of every 1,000 children, 64 in the countryside will not live beyond their fifth birthday, compared with 10 in the cities.
The report, by researchers in China, the United States and Britain as well as from the World Health Organization, is part of a special series on China's health reforms.
While life expectancy in Shanghai is 78.1 years, that figure is 66.1 in Gansu, one of the poorest provinces.
The team of experts also highlighted China's "missing women."
"In China, the problem has been exacerbated in recent decades by the practice of sex-specific abortions," the experts wrote.
The report continued that "discrimination lasts through infancy and childhood, reflected in higher death rates for girls."
"In 2000, infant mortality was 33.7 per 1,000 live births for girls compared with 23.9 per 1,000 for boys."
The authors attributed the disparities to inadequate government investment in health care, which increased "out-of-pocket" costs, hitting the poorest the hardest.
There was also insufficient government stewardship, which resulted in "doctors using their knowledge to prescribe inappropriate yet profitable procedures and drugs."
Another paper in the series highlighted the preference among medical and health care graduates for joining pharmaceutical and biotechnology companies instead of the medical profession, where they are needed.
This paper, led by Sudhir Anand of the University of Oxford, estimated that one million such graduates between 2000 and 2005 were not absorbed into the country's health care workforce.
"Although the production of doctors and nurses has greatly expanded in recent years, serious problems of distribution remain," the experts wrote, adding that "the goal of its health reform should be to promote equitable and universal access to basic health services."
Another paper highlighted how health care was taking up the bulk of household incomes, or a whopping 50 percent in 2006 (more than 18 times that in 1990) because of inadequate health insurance.
This compares with 45 percent in South Korea, 16 percent in Sweden, 15 percent in Japan and 11 percent in France.
"The average cost of a single hospital admission is now almost equivalent to China's annual income per head and is more than twice the average annual income of the lowest 20 percent of the population," wrote the team, led by Hu Shanlian from Fudan University in Shanghai.
"More than 35 percent of urban households and 43 percent of rural households have difficulty affording health care, go without, or are impoverished by the costs," they wrote.
The papers noted recent moves by the Chinese government to modernize the public health system and introduce health insurance plans, but much more needed to be done, especially to raise the level of reimbursement and help people who live in poverty.
Another Lancet report warned that chronic illnesses like cancer and heart and respiratory diseases were time bombs, and that the Chinese should reduce their intake of fatty foods and salt, stop smoking and start exercising.
Increasingly affluent Chinese consumed between 25 and 100 percent more fat each day in 2002 compared with 1982, sharply raising the risk of heart disease and cancer, the experts wrote in The Lancet.
While the country was plagued by infectious diseases before 1990, chronic illnesses are now the main health problem and accounted for 74.1 percent of all deaths in 2005, up from 47.1 percent in 1973, the researchers wrote.
While these chronic illnesses have to do with people living longer, several high-risk factors are also involved.
Apart from a fatty diet, many Chinese consume a relatively high 12-gram dosage of salt daily, which the paper said accounted for hypertension in about 177 million Chinese adults.
Based on Chinese definitions, 22.8 percent of Chinese were overweight in 2002. About 7.1 percent in the population were obese in 2002.
The paper also drew attention to the smoking habit of many Chinese.
"One in every three smokers in the world is a Chinese man," the experts wrote. They reported that cigarette consumption increased to 2,022 billion in 2006, to a level 17.4 percent higher than in 2002.
The average Chinese male smoker smoked 15 cigarettes a day in 2002, up from 13 in 1984.
The costs of China's disease burden from smoking were likely to be vast, and China will suffer reduced productivity and more premature deaths, the researchers warned.
"Hypertension and tobacco can be targeted health priorities," wrote the team, led by Yang Gonghuan of the Chinese Center for Disease Control and Prevention in Beijing. "Reduction of salt intake should become a national campaign."
Saturday, October 18, 2008
Blowups Aside, China Is Doing Well As a Money Manager
October 16, 2008
Rick Carew
Quick: Is China the "dumb money" or the "smart money?"
China's sovereign wealth fund and some of its financial firms have taken big hits on their high-profile overseas investments in companies like Morgan Stanley, Blackstone Group and Barclays.
Those losses have attracted some tough criticism, and no doubt made regulators wary of greenlighting other efforts to bargain-hunt among the wreckage of Wall Street and the City.
The reality is that those high-profile troubled investments total only a bit over $10 billion. That's about 0.5% of the country's $1.9 trillion in foreign exchange reserves.
Much of the rest of that -- which economists put at 60% to 70% -- is in U.S. Treasurys, agency debt, and corporate bonds. Those holdings, especially U.S. Treasurys, have done well as a flight to quality makes them more attractive than equities or less well secured debt.
Even the problems at Fannie Mae and Freddie Mac haven't hurt China as the U.S. rescue plan leaves bondholders whole.
So, high-profile blowups aside, the fact is that China has done very well over the past year managing its money.
Where China went right is in staying away from the momentum investing of the past few years. That's kept the country's nest egg safe -- even as the country's forex safeguard, the State Administration of Foreign Exchange, put small amounts of money into more risky investments like private equity funds and blue-chip stocks.
The country's sovereign wealth fund, China Investment Corp., has less than $100 billion allocated for overseas deals and has become increasingly gun-shy about pulling the trigger as its investments in Morgan Stanley and Blackstone soured.
Outsiders may gloat over those ill-timed moves. But in truth, among the world's biggest investors, China may turn out to have been the smartest money of all.
Rick Carew
Quick: Is China the "dumb money" or the "smart money?"
China's sovereign wealth fund and some of its financial firms have taken big hits on their high-profile overseas investments in companies like Morgan Stanley, Blackstone Group and Barclays.
Those losses have attracted some tough criticism, and no doubt made regulators wary of greenlighting other efforts to bargain-hunt among the wreckage of Wall Street and the City.
The reality is that those high-profile troubled investments total only a bit over $10 billion. That's about 0.5% of the country's $1.9 trillion in foreign exchange reserves.
Much of the rest of that -- which economists put at 60% to 70% -- is in U.S. Treasurys, agency debt, and corporate bonds. Those holdings, especially U.S. Treasurys, have done well as a flight to quality makes them more attractive than equities or less well secured debt.
Even the problems at Fannie Mae and Freddie Mac haven't hurt China as the U.S. rescue plan leaves bondholders whole.
So, high-profile blowups aside, the fact is that China has done very well over the past year managing its money.
Where China went right is in staying away from the momentum investing of the past few years. That's kept the country's nest egg safe -- even as the country's forex safeguard, the State Administration of Foreign Exchange, put small amounts of money into more risky investments like private equity funds and blue-chip stocks.
The country's sovereign wealth fund, China Investment Corp., has less than $100 billion allocated for overseas deals and has become increasingly gun-shy about pulling the trigger as its investments in Morgan Stanley and Blackstone soured.
Outsiders may gloat over those ill-timed moves. But in truth, among the world's biggest investors, China may turn out to have been the smartest money of all.
Tuesday, October 14, 2008
Economist Upbeat About Chinese Economy
October 14, 2008
Pang Li
Despite the global financial crisis, Yao Jingyuan, chief economist at China's National Bureau of Statistics (NBS) expressed optimism about the prospects for the Chinese economy in an interview with China Economic Weekly.
Yao admitted the global economic situation is complex and difficult. The credit crunch in the US has led to a financial crisis. The American economy, which generates a quarter of global production, is set to slow down. The Eurozone has also been hit hard. According to statistics published on August 14 by Eurostat, Eurozone GDP declined 0.2 percent in the second quarter of 2008, the first decline since 1995.
Yao said a world slowdown will inevitably cut demand for China's exports. And the strengthening of the Renminbi is affecting China's competitive edge. Growth in exports to the USA, China's second largest trade partner, declined 5.7 percentage points in the first half of 2008.
Soaring commodity prices especially oil, which breached US$140 per barrel at one point have also badly affected China, the second largest oil consumer in the world. Last year's grain reserves amounted to just 15 percent of crop consumption, lower than the safety line of 18 percent. This triggered huge hikes in international grain prices, exerting pressure on China's domestic grain market.
But in spite of the challenges, Yao said the Chinese economy is basically healthy and drew attention to four points:
Firstly, the economy has maintained rapid growth for over three decades. In the first half of 2008 growth was 10.4 percent, demonstrating that the economy is still on track.
Secondly, there have been favorable structural changes to the economy. In 2007, domestic consumption overtook exports as the principal driver of growth. Unit energy consumption is also declining. Both points indicate that China is moving towards a more sustainable growth model.
Thirdly, the country's 39 major industries yielded good returns in 2007. And financial revenues reached a staggering 5100 billion yuan (about US$747 billion), up 31 percent year-on-year. These achievements show how efficiently the macro-economy is operating.
Fourthly, living standards are growing, due to improvements in the social security system and increases in household income.
Finally, Yao identified two priorities for the government in the second half of the year. Controlling commodity prices should remain a top priority. Despite the effects of global inflation China managed to rein in the CPI from 7.7 percent in May to 4.9 percent in August. Second, the authorities should maintain steady growth and avoid sharp fluctuations.
Pang Li
Despite the global financial crisis, Yao Jingyuan, chief economist at China's National Bureau of Statistics (NBS) expressed optimism about the prospects for the Chinese economy in an interview with China Economic Weekly.
Yao admitted the global economic situation is complex and difficult. The credit crunch in the US has led to a financial crisis. The American economy, which generates a quarter of global production, is set to slow down. The Eurozone has also been hit hard. According to statistics published on August 14 by Eurostat, Eurozone GDP declined 0.2 percent in the second quarter of 2008, the first decline since 1995.
Yao said a world slowdown will inevitably cut demand for China's exports. And the strengthening of the Renminbi is affecting China's competitive edge. Growth in exports to the USA, China's second largest trade partner, declined 5.7 percentage points in the first half of 2008.
Soaring commodity prices especially oil, which breached US$140 per barrel at one point have also badly affected China, the second largest oil consumer in the world. Last year's grain reserves amounted to just 15 percent of crop consumption, lower than the safety line of 18 percent. This triggered huge hikes in international grain prices, exerting pressure on China's domestic grain market.
But in spite of the challenges, Yao said the Chinese economy is basically healthy and drew attention to four points:
Firstly, the economy has maintained rapid growth for over three decades. In the first half of 2008 growth was 10.4 percent, demonstrating that the economy is still on track.
Secondly, there have been favorable structural changes to the economy. In 2007, domestic consumption overtook exports as the principal driver of growth. Unit energy consumption is also declining. Both points indicate that China is moving towards a more sustainable growth model.
Thirdly, the country's 39 major industries yielded good returns in 2007. And financial revenues reached a staggering 5100 billion yuan (about US$747 billion), up 31 percent year-on-year. These achievements show how efficiently the macro-economy is operating.
Fourthly, living standards are growing, due to improvements in the social security system and increases in household income.
Finally, Yao identified two priorities for the government in the second half of the year. Controlling commodity prices should remain a top priority. Despite the effects of global inflation China managed to rein in the CPI from 7.7 percent in May to 4.9 percent in August. Second, the authorities should maintain steady growth and avoid sharp fluctuations.
China's Economy to Remain Strong, Consultants
October 15, 2008
Xinhua News Agency
China will keep reasonably robust economic growth despite the ongoing international economic recession, according to Merrill Lynch analysts here on Tuesday.
"As part of the world economy, China certainly would be affected by the current financial crisis," said Liu Erfei, the company's managing director. "We expect the country's economy to slow down from its (current) double-digit growth to an 8 or 9 percent (annual GDP) increase, still relatively rapid."
He added while some countries including the United States stumbled in the credit sector from over-leveraging themselves, China didn't get itself involved in a similar problem.
The New York-based investment bank and brokerage house attributed the country's stable economic performance to the governmental control on its state capital.
"Domestic capital market has not been completely open to the outside yet. This enables the country to avoid major international financial risks," Liu said.
The country was spared much trouble as it didn't invest in sub-prime related financial products, the failure of which had been acknowledged as a prime cause for the present global financial woes.
Meanwhile, the company's research showed domestic consumption would stand out as a major driver for the country's economic growth at a time when exports and the property sector were affected by a shrinking global market.
A developing pro-labour policy, as well as an emerging major consumer force of people born after 1978, would help accelerate the nation's consumption, according to Merrill Lynch market analyst Cui Wei.
"Our view on China's economy in the next five to 10 years is very optimistic," Liu added.
Xinhua News Agency
China will keep reasonably robust economic growth despite the ongoing international economic recession, according to Merrill Lynch analysts here on Tuesday.
"As part of the world economy, China certainly would be affected by the current financial crisis," said Liu Erfei, the company's managing director. "We expect the country's economy to slow down from its (current) double-digit growth to an 8 or 9 percent (annual GDP) increase, still relatively rapid."
He added while some countries including the United States stumbled in the credit sector from over-leveraging themselves, China didn't get itself involved in a similar problem.
The New York-based investment bank and brokerage house attributed the country's stable economic performance to the governmental control on its state capital.
"Domestic capital market has not been completely open to the outside yet. This enables the country to avoid major international financial risks," Liu said.
The country was spared much trouble as it didn't invest in sub-prime related financial products, the failure of which had been acknowledged as a prime cause for the present global financial woes.
Meanwhile, the company's research showed domestic consumption would stand out as a major driver for the country's economic growth at a time when exports and the property sector were affected by a shrinking global market.
A developing pro-labour policy, as well as an emerging major consumer force of people born after 1978, would help accelerate the nation's consumption, according to Merrill Lynch market analyst Cui Wei.
"Our view on China's economy in the next five to 10 years is very optimistic," Liu added.
A Defensive Battle
October 10, 2008
Hu Yue
China jumps into action to counteract the fallout from the crippling U.S. financial crisis
The hard-won passage of the unprecedented $700-billion bank bailout plan in the United States has finally brought hope of an end to the country's financial nightmare. While it remains to be seen whether the government rescue can cure the market ills at their root, the repercussions of the financial woes have been felt far beyond the United States. Wall Street-generated gloom also has spread to already skittish Chinese investors, illustrated by the roller-coaster ride that domestic stock prices have been on in recent weeks.
While China's economy chugged along by a robust 10.4 percent in the first half, concerns that its growth will be subdued have taken hold. Signs of looming recession are proliferating in the export sector, a key drive of the country's growth because of waning demand from the United States.
Meanwhile, a consumer-spending spree seems less likely to take place since an overwhelming bear market has wiped more than 60 percent off domestic stock markets this year.
"Given the global financial chaos and a marked slowdown in the world economy, the domestic economy may head for a downward spiral," Premier Wen Jiabao said in a statement last month. His comment indicated the government's growing concerns about far-reaching damage to the broader economy if the stock market, overshadowed by the roaring U.S. financial fallout, is further left to find equilibrium on its own.
As the latest effort in a string of moves to shore up the shaky confidence in domestic markets, the central bank on October 8 announced cuts in both the reserve-requirement ratio and the benchmark one-year deposit and loan interest rate, by 0.5 percentage points as of October 15, and by 0.27 percentage points as of October 9. On the same day, the State Council suspended the 5-percent tax levied on the interest income of bank deposits starting on October 9.
Prior to that, the China Securities Regulatory Commission (CSRC) announced on October 5 that it would shortly start a trial program for financially sound securities firms to engage in margin trading and short selling. Margin trading allows investors to borrow money from brokerages to buy shares, while short selling lets them sell securities that they do not own, but have borrowed from securities firms. Short sellers then try to buy back the stock at a lower price, attempting to profit from an expected decline in the stock price. Analysts say the program will bring a measure of calm to the shell-shocked market because brokerages currently have much more cash available to lend than shares, and the scale of any margin trading would far outweigh that of short selling in the initial stages.
The CSRC said in the announcement that the program, in the long run, would inject more vitality into the market and bump up liquidity. More importantly, it could provide a vehicle for investors to hedge against risks, diversify the business of brokerages and help the fledgling market mature beyond the boom-bust cycle, it said.
Analysts say the stock market has appeared to be bottoming out since the central bank on September 16 cut interest rates for the first time in more than six years. The central bank also lowered the reserve requirement ratio for small banks, further salving the wounds of small and medium-sized enterprises starved of liquidity. The surprise move was widely interpreted as a decisive shift by the government toward bucking growth after protracted inflation fears that had crimped the economy.
The interest rate cut came just a few hours after Lehman Brothers Holdings Inc. announced it had filed for bankruptcy. It is expected to prevent external pressure on China's domestic economy from becoming entrenched, although the central bank made no mention of the U.S. economic washout in announcing the rate cut. Domestically, the country's inflation eased to 4.9 percent in August from 8.7 percent in February, removing the major stumbling block to the government's stimulation efforts.
In another move, the country encouraged government entities to lift their stakes or buy back shares of major listed banks and companies that they control to provide a floor for the tumbling market. The share-buying mania of listed companies was led by Central Huijin Investment Co. Ltd. (Huijin), an investment arm of the government, which already held majority stakes in the Industrial and Commercial Bank of China Ltd., Bank of China Ltd. and China Construction Bank Corp. Huijin purchased 2 million new shares of each bank on September 23, infusing some steam into the market's recovery.
Moreover, regulators lifted the stamp tax on share purchases on September 19-the first time in history that the government had levied a unilateral stamp tax on stock trades. This move enlivened stock trading in the following days.
On the fiscal front, the government this year dropped administrative fees for individually-owned businesses and reinstated higher export tax rebates for textiles and some other products. Besides this, the country's embrace of a reformed value-added tax system is expected to further alleviate the burden on enterprises. Analysts also believe that more fiscal stimuli are on the way as the risks of an economic freefall deepen.
Affect on China
Premier Wen Jiabao reassured investors at the beginning of October that the government would continue to support a stable capital market, prop up exporters and spur the consumer market as the country edges toward a market-driven economy.
The foundations of the Chinese economy remain solid with a fluid and resilient financial market, Wen said. "But the impact of the U.S. financial meltdown on the Chinese economy should not be underrated, and efforts to maintain a healthy financial sector should not be relaxed," he said.
China's safeguards against the U.S. financial meltdown had come more swiftly than expected. The central bank said in a statement on October 4 that the country's financial regulators had put in place counteractive programs, including stronger financial oversight and risk controls.
Meanwhile, the central bank has pledged to work closely with international financial institutions to scan every corner of the global financial system where a new set of risks may hide.
"We are confident and well-positioned to maintain a stable financial system and a sound real economy through a variety of flexible control measures," the central bank's statement said.
Hu Yue
China jumps into action to counteract the fallout from the crippling U.S. financial crisis
The hard-won passage of the unprecedented $700-billion bank bailout plan in the United States has finally brought hope of an end to the country's financial nightmare. While it remains to be seen whether the government rescue can cure the market ills at their root, the repercussions of the financial woes have been felt far beyond the United States. Wall Street-generated gloom also has spread to already skittish Chinese investors, illustrated by the roller-coaster ride that domestic stock prices have been on in recent weeks.
While China's economy chugged along by a robust 10.4 percent in the first half, concerns that its growth will be subdued have taken hold. Signs of looming recession are proliferating in the export sector, a key drive of the country's growth because of waning demand from the United States.
Meanwhile, a consumer-spending spree seems less likely to take place since an overwhelming bear market has wiped more than 60 percent off domestic stock markets this year.
"Given the global financial chaos and a marked slowdown in the world economy, the domestic economy may head for a downward spiral," Premier Wen Jiabao said in a statement last month. His comment indicated the government's growing concerns about far-reaching damage to the broader economy if the stock market, overshadowed by the roaring U.S. financial fallout, is further left to find equilibrium on its own.
As the latest effort in a string of moves to shore up the shaky confidence in domestic markets, the central bank on October 8 announced cuts in both the reserve-requirement ratio and the benchmark one-year deposit and loan interest rate, by 0.5 percentage points as of October 15, and by 0.27 percentage points as of October 9. On the same day, the State Council suspended the 5-percent tax levied on the interest income of bank deposits starting on October 9.
Prior to that, the China Securities Regulatory Commission (CSRC) announced on October 5 that it would shortly start a trial program for financially sound securities firms to engage in margin trading and short selling. Margin trading allows investors to borrow money from brokerages to buy shares, while short selling lets them sell securities that they do not own, but have borrowed from securities firms. Short sellers then try to buy back the stock at a lower price, attempting to profit from an expected decline in the stock price. Analysts say the program will bring a measure of calm to the shell-shocked market because brokerages currently have much more cash available to lend than shares, and the scale of any margin trading would far outweigh that of short selling in the initial stages.
The CSRC said in the announcement that the program, in the long run, would inject more vitality into the market and bump up liquidity. More importantly, it could provide a vehicle for investors to hedge against risks, diversify the business of brokerages and help the fledgling market mature beyond the boom-bust cycle, it said.
Analysts say the stock market has appeared to be bottoming out since the central bank on September 16 cut interest rates for the first time in more than six years. The central bank also lowered the reserve requirement ratio for small banks, further salving the wounds of small and medium-sized enterprises starved of liquidity. The surprise move was widely interpreted as a decisive shift by the government toward bucking growth after protracted inflation fears that had crimped the economy.
The interest rate cut came just a few hours after Lehman Brothers Holdings Inc. announced it had filed for bankruptcy. It is expected to prevent external pressure on China's domestic economy from becoming entrenched, although the central bank made no mention of the U.S. economic washout in announcing the rate cut. Domestically, the country's inflation eased to 4.9 percent in August from 8.7 percent in February, removing the major stumbling block to the government's stimulation efforts.
In another move, the country encouraged government entities to lift their stakes or buy back shares of major listed banks and companies that they control to provide a floor for the tumbling market. The share-buying mania of listed companies was led by Central Huijin Investment Co. Ltd. (Huijin), an investment arm of the government, which already held majority stakes in the Industrial and Commercial Bank of China Ltd., Bank of China Ltd. and China Construction Bank Corp. Huijin purchased 2 million new shares of each bank on September 23, infusing some steam into the market's recovery.
Moreover, regulators lifted the stamp tax on share purchases on September 19-the first time in history that the government had levied a unilateral stamp tax on stock trades. This move enlivened stock trading in the following days.
On the fiscal front, the government this year dropped administrative fees for individually-owned businesses and reinstated higher export tax rebates for textiles and some other products. Besides this, the country's embrace of a reformed value-added tax system is expected to further alleviate the burden on enterprises. Analysts also believe that more fiscal stimuli are on the way as the risks of an economic freefall deepen.
Affect on China
Premier Wen Jiabao reassured investors at the beginning of October that the government would continue to support a stable capital market, prop up exporters and spur the consumer market as the country edges toward a market-driven economy.
The foundations of the Chinese economy remain solid with a fluid and resilient financial market, Wen said. "But the impact of the U.S. financial meltdown on the Chinese economy should not be underrated, and efforts to maintain a healthy financial sector should not be relaxed," he said.
China's safeguards against the U.S. financial meltdown had come more swiftly than expected. The central bank said in a statement on October 4 that the country's financial regulators had put in place counteractive programs, including stronger financial oversight and risk controls.
Meanwhile, the central bank has pledged to work closely with international financial institutions to scan every corner of the global financial system where a new set of risks may hide.
"We are confident and well-positioned to maintain a stable financial system and a sound real economy through a variety of flexible control measures," the central bank's statement said.
Fending off the Crisis
October 10, 2008
LAN XINZHEN
The U.S. financial crisis is having an adverse impact on China, but also offers some opportunities and lessons for the country
The U.S. financial crisis was a hot topic at the World Economic Forum's summer meeting in the Chinese port city of Tianjin in late September. More than 1,000 participants discussed what role China would play in global economic leadership in the years ahead and its economic development.
In light of the U.S. financial crisis, Chinese companies, just as other international firms, must overcome the challenges it has introduced to play a significant role in global economic leadership in the future. How companies should cope with the risks of the crisis was the central focus of the participants at the Annual Meeting of the New Champions, also known as the Second Summer Davos Forum.
Making the Best of It
The U.S. financial crisis has directly affected the Chinese banking industry. Many Chinese banks do business with U.S. financial companies, and China considers the U.S. financial market as its model for financial reform.
Liu Mingkang, Chairman of the China Banking Regulatory Commission (CBRC) and one of the speakers at the forum, said on September 27 that despite the current financial turmoil, China would make the best of the situation to improve its information sharing system. He said the CBRC has cooperated with bank regulators from various countries and signed 32 memorandums of understanding for cooperation.
"Since the beginning of this financial turmoil, we have been providing various kinds of very important information, telling our opinions to financial regulators of other countries in a friendly but straightforward way," Liu said. He also said the CBRC would adopt a more effective way to protect the depositors so they could avoid losses from the financial crisis, but he did not provide details.
On September 16, the day that Lehman Brothers Holdings Inc. said it had filed for bankruptcy, the People's Bank of China, the country's central bank, lowered the interest rate on loans as well as the deposit reserve rate to allow more capital to enter the market. It was one of the steps the central bank has taken of late to loosen the tight monetary policy that has been in place for more than a year.
When the U.S. financial crisis started, some Chinese economists suggested that China's financial institutions purchase U.S. financial stocks. But Jiang Jianqing, Board Chairman of Industrial and Commercial Bank of China (ICBC), said at a forum session on September 27 that his bank would hold on tight to its "pockets" instead of "bottom fishing" for U.S. financial stocks.
"We are still stressing our investment base on strategies, but not on finance," Jiang said.
Liu added that China's banking industry also was ready to absorb unemployed talent from the Wall Street.
Boon for Venture Capital
The venture capital sector is one of the fuses that ignited the current U.S. financial crisis. John Zhao, CEO of Beijing Hony Future Investment Advisor Ltd., said he believes that while the crisis may have a negative impact on China's investment banking industry, it would not be the same overwhelming disaster that it has been for American investment banks. Unlike U.S. institutions, Chinese investment banks are still in the initial stages of development, and bankers are making cautious investment decisions.
Zhao said the U.S. financial turmoil has brought an opportunity of transformation for those in the Chinese venture capital sector who have not yet experienced a financial crisis. It would let them draw on the experience and learn its lessons to prevent similar mistakes, he said. Although the five largest U.S. investment banks have now either closed their doors or been taken over by other companies, Zhao said Chinese investment banks would continue to grow, because China's economy is developing quickly and offers many attractive investment opportunities.
Chen Hong, Board Chairman of the Hina Group, also believes that China's venture capital and private equity sectors are still in the initial stages of development and that the country's economy will continue its high-speed growth over the next decade. Currently, Chinese venture capital firms invest billions of dollars each year in only a few hundred companies, while most of China's 27 million small and medium-sized enterprises find no access to such capital. This, on the other hand, projects the broad vista for Chinese venture investors.
At present, most of China's venture capital and private equity firms are located in major cities such as Beijing, Shanghai and Shenzhen, and in some second-tier cities such as Chongqing, Dalian and Tianjin. Chen noted there are many excellent companies in other cities that need, but cannot obtain investment, because venture capital firms are not familiar with the cities or that entrepreneurs do not know how to contact them.
"When people are familiar with this sector, I think there will be more companies of better quality that can get investment from venture capital firms, so I am not worried about the development of China's venture capital and private equity sectors," he said.
Going Global
Skyworth Group Co. Ltd. is a Chinese electronics company in the process of going global. Zhang Xuebin, the company's board chairman and chief executive officer, said at the forum that he believes it is difficult for Chinese companies that want to do business internationally to make an assessment now about how the U.S. financial crisis will affect their prospects. But in general, the crisis would serve as a good opportunity for more Chinese enterprises to become international players.
Whenever an economic or financial crisis occurs, some companies collapse while others grow stronger, Zhang said. For example, South Korea's Samsung Group grew very rapidly after the Asian Financial Crisis a decade ago, he added.
"I think that the market will finally be concentrated around some strong companies," Zhang said. "As often happens, a crisis or difficult period is the best time for such concentration to be accomplished."
The current financial crisis would make it difficult for some small and medium-sized enterprises to survive or maintain their previous operating pace, thereby forfeiting many market resources, Zhang said. As for Skyworth, Zhang said he views the crisis as an opportunity and not a threat, because the company has been growing quickly and is at the forefront of China's color TV industry.
Because the financial crisis will have the greatest impact on companies in developed countries, Wang Jianzhou, Board Chairman and CEO of China Mobile Communications Corp., said at the forum on September 28 that his company's international strategy would mainly focus on prominent emerging markets, where companies from developed countries may not set up operations because they are mired in the current financial turmoil.
Real Estate Woes
Forum participants also discussed the fallout from the U.S. subprime mortgage crisis on the real estate market as one of the root causes of the overall financial turmoil. They raised questions as to whether China's overheated real estate market would experience a similar situation.
Guo Shuqing, Board Chairman of China Construction Bank, believes such concerns are unnecessary.
"On China's housing loan market, there won't be a subprime mortgage crisis as in the United States," Guo said at the forum. He pointed out that China's home loans, which amount to 3 trillion yuan ($439 billion), account for only 13 percent of the country's GDP, much less than the 50 percent of GDP they account for in the United States.
Ronnie Chichung Chan, Board Chairman of the Hong Kong-based Hang Lung Properties Ltd., said on September 27 that China's real estate market would not suffer a collapse, because the government has been aware of the industry's overheated development and has adopted macroeconomic measures to cool down the market.
Although domestic property developers are not experiencing serious problems, it does not mean they have not or will not be affected by the financial crisis, Chan said. At present, most must deal with broken capital chains, a problem that the current financial crisis makes doubly difficult to solve.
"Some real estate companies will be inevitably knocked out," Chan said.
It will take time for the country's real estate industry to be further reorganized, but when it happens, the industry will emerge stronger and more orderly, he added.
LAN XINZHEN
The U.S. financial crisis is having an adverse impact on China, but also offers some opportunities and lessons for the country
The U.S. financial crisis was a hot topic at the World Economic Forum's summer meeting in the Chinese port city of Tianjin in late September. More than 1,000 participants discussed what role China would play in global economic leadership in the years ahead and its economic development.
In light of the U.S. financial crisis, Chinese companies, just as other international firms, must overcome the challenges it has introduced to play a significant role in global economic leadership in the future. How companies should cope with the risks of the crisis was the central focus of the participants at the Annual Meeting of the New Champions, also known as the Second Summer Davos Forum.
Making the Best of It
The U.S. financial crisis has directly affected the Chinese banking industry. Many Chinese banks do business with U.S. financial companies, and China considers the U.S. financial market as its model for financial reform.
Liu Mingkang, Chairman of the China Banking Regulatory Commission (CBRC) and one of the speakers at the forum, said on September 27 that despite the current financial turmoil, China would make the best of the situation to improve its information sharing system. He said the CBRC has cooperated with bank regulators from various countries and signed 32 memorandums of understanding for cooperation.
"Since the beginning of this financial turmoil, we have been providing various kinds of very important information, telling our opinions to financial regulators of other countries in a friendly but straightforward way," Liu said. He also said the CBRC would adopt a more effective way to protect the depositors so they could avoid losses from the financial crisis, but he did not provide details.
On September 16, the day that Lehman Brothers Holdings Inc. said it had filed for bankruptcy, the People's Bank of China, the country's central bank, lowered the interest rate on loans as well as the deposit reserve rate to allow more capital to enter the market. It was one of the steps the central bank has taken of late to loosen the tight monetary policy that has been in place for more than a year.
When the U.S. financial crisis started, some Chinese economists suggested that China's financial institutions purchase U.S. financial stocks. But Jiang Jianqing, Board Chairman of Industrial and Commercial Bank of China (ICBC), said at a forum session on September 27 that his bank would hold on tight to its "pockets" instead of "bottom fishing" for U.S. financial stocks.
"We are still stressing our investment base on strategies, but not on finance," Jiang said.
Liu added that China's banking industry also was ready to absorb unemployed talent from the Wall Street.
Boon for Venture Capital
The venture capital sector is one of the fuses that ignited the current U.S. financial crisis. John Zhao, CEO of Beijing Hony Future Investment Advisor Ltd., said he believes that while the crisis may have a negative impact on China's investment banking industry, it would not be the same overwhelming disaster that it has been for American investment banks. Unlike U.S. institutions, Chinese investment banks are still in the initial stages of development, and bankers are making cautious investment decisions.
Zhao said the U.S. financial turmoil has brought an opportunity of transformation for those in the Chinese venture capital sector who have not yet experienced a financial crisis. It would let them draw on the experience and learn its lessons to prevent similar mistakes, he said. Although the five largest U.S. investment banks have now either closed their doors or been taken over by other companies, Zhao said Chinese investment banks would continue to grow, because China's economy is developing quickly and offers many attractive investment opportunities.
Chen Hong, Board Chairman of the Hina Group, also believes that China's venture capital and private equity sectors are still in the initial stages of development and that the country's economy will continue its high-speed growth over the next decade. Currently, Chinese venture capital firms invest billions of dollars each year in only a few hundred companies, while most of China's 27 million small and medium-sized enterprises find no access to such capital. This, on the other hand, projects the broad vista for Chinese venture investors.
At present, most of China's venture capital and private equity firms are located in major cities such as Beijing, Shanghai and Shenzhen, and in some second-tier cities such as Chongqing, Dalian and Tianjin. Chen noted there are many excellent companies in other cities that need, but cannot obtain investment, because venture capital firms are not familiar with the cities or that entrepreneurs do not know how to contact them.
"When people are familiar with this sector, I think there will be more companies of better quality that can get investment from venture capital firms, so I am not worried about the development of China's venture capital and private equity sectors," he said.
Going Global
Skyworth Group Co. Ltd. is a Chinese electronics company in the process of going global. Zhang Xuebin, the company's board chairman and chief executive officer, said at the forum that he believes it is difficult for Chinese companies that want to do business internationally to make an assessment now about how the U.S. financial crisis will affect their prospects. But in general, the crisis would serve as a good opportunity for more Chinese enterprises to become international players.
Whenever an economic or financial crisis occurs, some companies collapse while others grow stronger, Zhang said. For example, South Korea's Samsung Group grew very rapidly after the Asian Financial Crisis a decade ago, he added.
"I think that the market will finally be concentrated around some strong companies," Zhang said. "As often happens, a crisis or difficult period is the best time for such concentration to be accomplished."
The current financial crisis would make it difficult for some small and medium-sized enterprises to survive or maintain their previous operating pace, thereby forfeiting many market resources, Zhang said. As for Skyworth, Zhang said he views the crisis as an opportunity and not a threat, because the company has been growing quickly and is at the forefront of China's color TV industry.
Because the financial crisis will have the greatest impact on companies in developed countries, Wang Jianzhou, Board Chairman and CEO of China Mobile Communications Corp., said at the forum on September 28 that his company's international strategy would mainly focus on prominent emerging markets, where companies from developed countries may not set up operations because they are mired in the current financial turmoil.
Real Estate Woes
Forum participants also discussed the fallout from the U.S. subprime mortgage crisis on the real estate market as one of the root causes of the overall financial turmoil. They raised questions as to whether China's overheated real estate market would experience a similar situation.
Guo Shuqing, Board Chairman of China Construction Bank, believes such concerns are unnecessary.
"On China's housing loan market, there won't be a subprime mortgage crisis as in the United States," Guo said at the forum. He pointed out that China's home loans, which amount to 3 trillion yuan ($439 billion), account for only 13 percent of the country's GDP, much less than the 50 percent of GDP they account for in the United States.
Ronnie Chichung Chan, Board Chairman of the Hong Kong-based Hang Lung Properties Ltd., said on September 27 that China's real estate market would not suffer a collapse, because the government has been aware of the industry's overheated development and has adopted macroeconomic measures to cool down the market.
Although domestic property developers are not experiencing serious problems, it does not mean they have not or will not be affected by the financial crisis, Chan said. At present, most must deal with broken capital chains, a problem that the current financial crisis makes doubly difficult to solve.
"Some real estate companies will be inevitably knocked out," Chan said.
It will take time for the country's real estate industry to be further reorganized, but when it happens, the industry will emerge stronger and more orderly, he added.
Chinese Farmers' Income to Be Doubled
October 14, 2008
China Daily
The government will substantially boost consumption of rural residents and eliminate absolute poverty in rural areas by 2020
The nation has set a goal of doubling per capita disposable income of rural residents by 2020 from the 2008 level, top decision-makers announced in Beijing Sunday.
The target was set at the close of the 3rd Plenary Session of the 17th Communist Party of China (CPC) Central Committee, which focused on rural reform and development.
Standing members of the CPC Central Committee raise their hands to adopt a decision on major issues concerning rural reform and development at the four-day plenum which ended in Beijing on October 12, 2008. [Xinhua]
The government will substantially boost consumption of rural residents and eliminate absolute poverty in rural areas by 2020, said a communique issued at the plenum's conclusion.
Per capita rural disposable income in 2007 was 4,140 yuan ($605), a year-on-year gain of 9.5 percent in real terms. A rise of at least 6 percent is expected this year, according to the government annual report issued in March.
The rural population mired in absolute poverty was reduced to 15 million last year, down from 250 million in 1978.
The country faces challenges in rural development and reform, but will firmly push forward with the task, the communique said.
"Rural infrastructure is still weak and needs improving. Rural development is lagging behind and needs support. Farmers' incomes are increasing slowly, and need to be pushed up," said the document.
"We will firmly push forward rural reform ... and we shall work out new concepts and ideas to solve the problems in rural development."
The government will improve the rural economic system, the communique said. The system is based on the household contract responsibility system, which entrusts the production and management of public-owned farmland to individual households through long-term contracts.
It will set up a "strict and normative" land management system in the countryside, expand policy support for agriculture, establish a modern rural financial network and a system to balance development between rural and urban areas, and improve rural democracy.
In the communiqu, the CPC promised to allot more government funds to public services in rural areas, including education, healthcare, employment, housing and pension.
Agriculture will be modernized in tandem with rural progress, and agricultural productivity will be raised, with national grain security and product supplies ensured, the communique said.
It asked Party organs and governments at all levels to put rural development at the top of their agenda and ensure it is reflected in policies, planning, budgets and assignment of officials.
The meeting also discussed the economic situation, saying the country will maintain flexible and prudent macro-economic policies and seek to expand domestic demand in the face of a grim international economic environment.
It warned that the global economy was slowing, threatening to dent Chinese growth, and said the country would be turning to home markets to counter the fallout.
"The most important thing is to handle our country's own affairs well," the communiqu said.
Hu Jintao, general secretary of the CPC Central Committee, delivered a work report at the four-day plenum, attended by 202 full members and 166 alternate members of the committee.
Some delegates to the 17th CPC National Congress who are working on agriculture and rural development at the grassroots, as well as experts and scholars on agriculture, rural areas and farmers also attended the plenum.
China Daily
The government will substantially boost consumption of rural residents and eliminate absolute poverty in rural areas by 2020
The nation has set a goal of doubling per capita disposable income of rural residents by 2020 from the 2008 level, top decision-makers announced in Beijing Sunday.
The target was set at the close of the 3rd Plenary Session of the 17th Communist Party of China (CPC) Central Committee, which focused on rural reform and development.
Standing members of the CPC Central Committee raise their hands to adopt a decision on major issues concerning rural reform and development at the four-day plenum which ended in Beijing on October 12, 2008. [Xinhua]
The government will substantially boost consumption of rural residents and eliminate absolute poverty in rural areas by 2020, said a communique issued at the plenum's conclusion.
Per capita rural disposable income in 2007 was 4,140 yuan ($605), a year-on-year gain of 9.5 percent in real terms. A rise of at least 6 percent is expected this year, according to the government annual report issued in March.
The rural population mired in absolute poverty was reduced to 15 million last year, down from 250 million in 1978.
The country faces challenges in rural development and reform, but will firmly push forward with the task, the communique said.
"Rural infrastructure is still weak and needs improving. Rural development is lagging behind and needs support. Farmers' incomes are increasing slowly, and need to be pushed up," said the document.
"We will firmly push forward rural reform ... and we shall work out new concepts and ideas to solve the problems in rural development."
The government will improve the rural economic system, the communique said. The system is based on the household contract responsibility system, which entrusts the production and management of public-owned farmland to individual households through long-term contracts.
It will set up a "strict and normative" land management system in the countryside, expand policy support for agriculture, establish a modern rural financial network and a system to balance development between rural and urban areas, and improve rural democracy.
In the communiqu, the CPC promised to allot more government funds to public services in rural areas, including education, healthcare, employment, housing and pension.
Agriculture will be modernized in tandem with rural progress, and agricultural productivity will be raised, with national grain security and product supplies ensured, the communique said.
It asked Party organs and governments at all levels to put rural development at the top of their agenda and ensure it is reflected in policies, planning, budgets and assignment of officials.
The meeting also discussed the economic situation, saying the country will maintain flexible and prudent macro-economic policies and seek to expand domestic demand in the face of a grim international economic environment.
It warned that the global economy was slowing, threatening to dent Chinese growth, and said the country would be turning to home markets to counter the fallout.
"The most important thing is to handle our country's own affairs well," the communiqu said.
Hu Jintao, general secretary of the CPC Central Committee, delivered a work report at the four-day plenum, attended by 202 full members and 166 alternate members of the committee.
Some delegates to the 17th CPC National Congress who are working on agriculture and rural development at the grassroots, as well as experts and scholars on agriculture, rural areas and farmers also attended the plenum.
China Airs Resolve to Keep Economy in Good Shape
October 14, 2008
Xinhua News Agency
Vice Premier Wang Qishan said the financial crisis, triggered by the U.S. credit crunch, had exerted a grave impact on the global financial market
China on Tuesday reaffirmed its resolve to keep its economy on track amid the global financial turmoil.
In a meeting with visiting U.S. Senator Chuck Hagel, Vice Premier Wang Qishan said the financial crisis, triggered by the U.S. credit crunch, had exerted a grave impact on the global financial market.
"As a responsible country, China has always valued the communication and cooperation with other nations to ensure world financial and economic stability."
Wang said China would make great efforts to keep its economy on the right track, which would be the country's greatest contribution to the world.
China had implemented and would continue measures to ensure the stability of finance, economy and the capital market, he said, referring to a package of new policies to spur economic growth.
The central bank cut interest rates on Sept. 15 for the first time in six years.
The People's Bank of China, the central bank, announced the deposit and lending rates would be lowered by 0.27 percentage points and the reserve-requirement ratio would be reduced 0.5 percentage points starting Oct. 15.
"With tools at our disposal, we are confident and capable of prevailing over the overall difficulties and challenges," Wang told Hagel.
He added the overall bilateral relations of the two countries had moved forward and become increasingly interdependent since forging diplomatic ties in 1979.
To promote China-U.S. ties was in the fundamental interests of the two nations, he said.
Wang proposed the two deepen a strategic trust and take a candid and pragmatic approach in addressing differences. They should work more closely on economy, trade, investment, energy, environment and high-tech.
He also urged the United States to observe the three joint communiques, refrain from anything harmful to bilateral ties and the stability of the Taiwan Straits, so as to ensure the sound and steady progress of bilateral constructive cooperation.
As all nations were becoming more connected, Hagel, a Republican senator from Nebraska, said the stronger cooperation between the United States and China would help ensure world financial and economic stability.
Xinhua News Agency
Vice Premier Wang Qishan said the financial crisis, triggered by the U.S. credit crunch, had exerted a grave impact on the global financial market
China on Tuesday reaffirmed its resolve to keep its economy on track amid the global financial turmoil.
In a meeting with visiting U.S. Senator Chuck Hagel, Vice Premier Wang Qishan said the financial crisis, triggered by the U.S. credit crunch, had exerted a grave impact on the global financial market.
"As a responsible country, China has always valued the communication and cooperation with other nations to ensure world financial and economic stability."
Wang said China would make great efforts to keep its economy on the right track, which would be the country's greatest contribution to the world.
China had implemented and would continue measures to ensure the stability of finance, economy and the capital market, he said, referring to a package of new policies to spur economic growth.
The central bank cut interest rates on Sept. 15 for the first time in six years.
The People's Bank of China, the central bank, announced the deposit and lending rates would be lowered by 0.27 percentage points and the reserve-requirement ratio would be reduced 0.5 percentage points starting Oct. 15.
"With tools at our disposal, we are confident and capable of prevailing over the overall difficulties and challenges," Wang told Hagel.
He added the overall bilateral relations of the two countries had moved forward and become increasingly interdependent since forging diplomatic ties in 1979.
To promote China-U.S. ties was in the fundamental interests of the two nations, he said.
Wang proposed the two deepen a strategic trust and take a candid and pragmatic approach in addressing differences. They should work more closely on economy, trade, investment, energy, environment and high-tech.
He also urged the United States to observe the three joint communiques, refrain from anything harmful to bilateral ties and the stability of the Taiwan Straits, so as to ensure the sound and steady progress of bilateral constructive cooperation.
As all nations were becoming more connected, Hagel, a Republican senator from Nebraska, said the stronger cooperation between the United States and China would help ensure world financial and economic stability.
Beijing Restrains Buying Urge
October 10, 2008
Antoaneta Bezlova
BEIJING - The Wall Street fire-sale has prompted economic pundits in China and elsewhere to call on Beijing to snap up stakes in United States financial institutions and further China's influence on global financial power.
From Mexico to South Africa, investors and strategists are calling on China's leaders to use the opportunity of the spreading financial crisis to help determine the new set of financial rules that will emerge from it.
"China cannot easily afford to pass up such an opportunity," says Chen Jie, professor of economics at Shanghai Fudan University. "We have been anxiously trying to find investment opportunities for our financial capital but before the crisis there existed a myriad of visible and invisible barriers for Chinese investment overseas, particularly in the United States."
China should lead rescue efforts for the US financial crisis, Mexican tycoon Carlos Sim, one of the world's richest men, told the press last week.
"China is now the most important country to help responsibly in this crisis," he said. "In the past, developed countries had reserves and financed developing countries, while today developed countries, especially the United States, are being financed with resources from developing countries".
But China's response to expectations at home and abroad has been unassuming. Although fortified with great liquidity and large reserves, Chinese banks and government investors have preferred to sit on their hands rather than go on a shopping spree of tumbling Wall Street firms.
Chinese politicians have expressed support for the US bailout plan to save banks and arrest the financial turmoil but stopped short of pledging to do more than keep their own financial house in order.
Premier Wen Jiabao summed up China's cautious position: maintaining "steady and fast growth" is the "biggest contribution" China can make to help the world overcome the current financial crisis stemming from the United States, he said during an inspection tour of Chinese provinces this week.
Chinese bank officials have dismissed as groundless reports that China plans to buy up to US$200 billion worth of US Treasuries to help Washington combat the deepening financial crisis. In a statement published on the central bank's website this week, governor Zhou Xiaochuan said the bank views a "stable currency and job creation" as priorities in the current situation.
Some of Beijing's conservatism stems from the fact that the global credit crisis has walloped the value of the Chinese government's initial batch of investments in US financial institutions such as Morgan Stanley and Blackstone Group. In Internet forums and the press at home the government has been criticized for taking equity stakes in US financial companies that have nose-dived.
"No one can see the light at the end of the tunnel for the US crisis and in view of our past blunders it will be prudent of China to observe more and act less," the Investors Daily said last week.
Several media outlets have engaged in predictions about the decline of US dominance in world affairs, presenting the demise of Wall Street as a retribution for US "arrogance and greed".
"The crisis that befell ordinary American people is caused by the greed of Wall Street bankers," Wang Songqi, financial analyst with the Chinese Academy of Social Sciences, told the China Business Journal.
An editorial in the Economic Observer said: "The United States is no longer the omnipotent savior and global protector of American values ... The demise of Wall Street means that the cornerstone of this global financial empire has been broken and no one knows whether it can ever be repaired."
Officially, few Chinese officials have shared in the European politicians' criticism of the Anglo-Saxon model of capitalism, which they blame for spawning the global financial crisis.
While embarrassed by the nosedive of its initial Wall Street investments, Beijing has more pressing tasks than assigning blame for the crisis. Chinese policymakers have been racing to prevent the country's economy from slowing too sharply because of global economic forces.
The legitimacy of the ruling communist party rests on maintaining a robust economic growth and providing prosperity to its people. Over the past 30 years of reforms, Chinese people have grown richer but not much freer and the country's rulers have staked their future on efforts to preserve the status quo by fueling continuous economic growth.
A survey by the Pew Global Attitudes Project this spring found that 86% of Chinese said they were content with their country's direction, double the percentage who said the same thing in 2002. By contrast, only 23% of Americans polled in the survey said they were satisfied with their country's direction.
Yet China's growth, fueled by foreign investment and exports, is interlinked to the global economy. Any radical downturn in economic prosperity could undermine the communist party's chance of holding on to its political scepter. There are already signs of a slowdown. Growth in GDP dropped to 10.1% in the second quarter from 11.9% in all of 2007.
To counter the fallout, in recent weeks Beijing has made a u-turn on its tight monetary policy set last year to fight overheating and inflation. The government relaxed caps on bank lending and approved new tax breaks for textile exporters, which have been hard hit by weakening demand and rising costs.
Experts anticipate that the forthcoming plenum of the central committee of the communist party would approve even more decisive measures of easing fiscal and monetary policies to prevent the global financial crisis from dramatically slowing down the Chinese economy.
(Inter Press Service)
Antoaneta Bezlova
BEIJING - The Wall Street fire-sale has prompted economic pundits in China and elsewhere to call on Beijing to snap up stakes in United States financial institutions and further China's influence on global financial power.
From Mexico to South Africa, investors and strategists are calling on China's leaders to use the opportunity of the spreading financial crisis to help determine the new set of financial rules that will emerge from it.
"China cannot easily afford to pass up such an opportunity," says Chen Jie, professor of economics at Shanghai Fudan University. "We have been anxiously trying to find investment opportunities for our financial capital but before the crisis there existed a myriad of visible and invisible barriers for Chinese investment overseas, particularly in the United States."
China should lead rescue efforts for the US financial crisis, Mexican tycoon Carlos Sim, one of the world's richest men, told the press last week.
"China is now the most important country to help responsibly in this crisis," he said. "In the past, developed countries had reserves and financed developing countries, while today developed countries, especially the United States, are being financed with resources from developing countries".
But China's response to expectations at home and abroad has been unassuming. Although fortified with great liquidity and large reserves, Chinese banks and government investors have preferred to sit on their hands rather than go on a shopping spree of tumbling Wall Street firms.
Chinese politicians have expressed support for the US bailout plan to save banks and arrest the financial turmoil but stopped short of pledging to do more than keep their own financial house in order.
Premier Wen Jiabao summed up China's cautious position: maintaining "steady and fast growth" is the "biggest contribution" China can make to help the world overcome the current financial crisis stemming from the United States, he said during an inspection tour of Chinese provinces this week.
Chinese bank officials have dismissed as groundless reports that China plans to buy up to US$200 billion worth of US Treasuries to help Washington combat the deepening financial crisis. In a statement published on the central bank's website this week, governor Zhou Xiaochuan said the bank views a "stable currency and job creation" as priorities in the current situation.
Some of Beijing's conservatism stems from the fact that the global credit crisis has walloped the value of the Chinese government's initial batch of investments in US financial institutions such as Morgan Stanley and Blackstone Group. In Internet forums and the press at home the government has been criticized for taking equity stakes in US financial companies that have nose-dived.
"No one can see the light at the end of the tunnel for the US crisis and in view of our past blunders it will be prudent of China to observe more and act less," the Investors Daily said last week.
Several media outlets have engaged in predictions about the decline of US dominance in world affairs, presenting the demise of Wall Street as a retribution for US "arrogance and greed".
"The crisis that befell ordinary American people is caused by the greed of Wall Street bankers," Wang Songqi, financial analyst with the Chinese Academy of Social Sciences, told the China Business Journal.
An editorial in the Economic Observer said: "The United States is no longer the omnipotent savior and global protector of American values ... The demise of Wall Street means that the cornerstone of this global financial empire has been broken and no one knows whether it can ever be repaired."
Officially, few Chinese officials have shared in the European politicians' criticism of the Anglo-Saxon model of capitalism, which they blame for spawning the global financial crisis.
While embarrassed by the nosedive of its initial Wall Street investments, Beijing has more pressing tasks than assigning blame for the crisis. Chinese policymakers have been racing to prevent the country's economy from slowing too sharply because of global economic forces.
The legitimacy of the ruling communist party rests on maintaining a robust economic growth and providing prosperity to its people. Over the past 30 years of reforms, Chinese people have grown richer but not much freer and the country's rulers have staked their future on efforts to preserve the status quo by fueling continuous economic growth.
A survey by the Pew Global Attitudes Project this spring found that 86% of Chinese said they were content with their country's direction, double the percentage who said the same thing in 2002. By contrast, only 23% of Americans polled in the survey said they were satisfied with their country's direction.
Yet China's growth, fueled by foreign investment and exports, is interlinked to the global economy. Any radical downturn in economic prosperity could undermine the communist party's chance of holding on to its political scepter. There are already signs of a slowdown. Growth in GDP dropped to 10.1% in the second quarter from 11.9% in all of 2007.
To counter the fallout, in recent weeks Beijing has made a u-turn on its tight monetary policy set last year to fight overheating and inflation. The government relaxed caps on bank lending and approved new tax breaks for textile exporters, which have been hard hit by weakening demand and rising costs.
Experts anticipate that the forthcoming plenum of the central committee of the communist party would approve even more decisive measures of easing fiscal and monetary policies to prevent the global financial crisis from dramatically slowing down the Chinese economy.
(Inter Press Service)
New Chinese Policy Draws Farmers Into Market Economy
October 13, 2008
Edward Wong
Chinese leaders approved on Sunday a policy that will in theory allow peasants to buy and sell their land rights, a move that sets in motion the nation's biggest economic reform in many years, according to a report by Xinhua, the state news agency.
The report did not immediately give details on the changes, but scholars and government advisers have said that the new policy would allow China's more than 800 million peasants to engage in the unrestricted trade or sale of 30-year land-use contracts that are given to them by the government.
The goal of the new policy is to stimulate market-driven business growth in the countryside and to narrow the huge income gap between people living in rural areas and those in the cities.
While China's cities have profited enormously from economic reforms first announced in 1978, the countryside has lagged further and further behind. Protests are common now throughout rural China, and the most common grievance centers around seizure of land by corrupt government officials.
According to some land-reform experts, the policy change would grant peasants more land security and inspire them to make better use of the small patches of fields that they now manage under the 30-year contracts. The ability to sell the contracts could also lead to the establishment of large-scale farms, which some economists say would help China's agriculture industry better compete in a global marketplace.
The Xinhua report came on Sunday evening, after four days of deliberation during the Communist Party's annual planning session. On Thursday, the first day of the session, party members began reviewing a draft of a plan detailing the land reform. The draft had been drawn up by the Central Committee.
"With rapid industrialization and urbanization, the violation of farmers' land rights happens all the time, as local governments make decisions for farmers instead of allowing farmers to decide for themselves," Song Hongyuan, the head of the Research Center for the Rural Economy in the Ministry of Agriculture, said in an interview. "Thus the government needs to improve the policy to fully protect farmers' interests."
Through state-run news organizations, the government has been signaling since the start of the month that the leadership was ready to announce a major policy shift on the issue of land use. On Sept. 30, President Hu Jintao, who is also the general secretary of the Communist Party, made a much-publicized visit to Xiaogang village in Anhui Province, during which he said farmers would be allowed to transfer their land contracts and management rights. Xiaogang is synonymous with land reform: A group of villagers banded together there in 1978 to quietly start a system of private farming that rejected the collectivization of Maoist-era China.
Their experiment was later lauded by Deng Xiaoping, the paramount leader who started China on the path of economic reform.
Rural land reform was actually at the forefront of that economic overhaul, as communal farms were divided up among peasants. But the peasants remained extremely restricted in their ability to trade or sell those new land-use rights. Meanwhile, land reform in the cities began to surpass the countryside, as the government granted urban residents the right to trade or sell their contracts.
A law passed in 2002 allowed farmers to engage in limited trades of their land-use contracts, but still kept many restrictions in place.
Advocates for land reform say that in order for the new system of land use to work properly, the Chinese government still has to ensure that rule of law is established and followed, especially by local government officials. This would curb the land seizures that have recently caused so many mass protests in the countryside.
"Implementation of the law is the key," said Keliang Zhu, a lawyer with the China research division of the Rural Development Institute, a group in Seattle that pushes for land reform for poor people around the world. "You have a much greater test in the future. We need to make sure to establish supporting institutions that will help to carry out laws and policies."
Zhu said that the government needed to educate farmers and local officials about what the law says about land rights. In addition, farmers should be given full documentation ensuring their rights to a piece of land, he said. Officially, the government claims that 80 to 90 percent of peasants have proper documentation, but in reality only half do, he said, citing recent statistics compiled by the Rural Development Institute.
Under the new system, the companies buying land-use rights from peasants probably will not easily be able to convert the land to some use other than for farming. Senior Communist Party officials often express reservations at allowing businesses unfettered access to China's land.
Peasants have long had an uneasy relationship with Chinese rulers over use of the land. Each dynasty has tried various ways of controlling and taxing rural land, which at various times has resulted in large-scale peasant rebellions. Sun Yat-sen, one of the founders of the modern nation-state of China, put land reform at the top of his agenda after the overthrow of the Qing Dynasty.
In the 1950s, Mao Zedong began herding China's farmers onto collectives, a move that resulted in widespread famine and is now considered one of the worst economic policies of the 20th century.
Huang Yuanxi contributed research.
Edward Wong
Chinese leaders approved on Sunday a policy that will in theory allow peasants to buy and sell their land rights, a move that sets in motion the nation's biggest economic reform in many years, according to a report by Xinhua, the state news agency.
The report did not immediately give details on the changes, but scholars and government advisers have said that the new policy would allow China's more than 800 million peasants to engage in the unrestricted trade or sale of 30-year land-use contracts that are given to them by the government.
The goal of the new policy is to stimulate market-driven business growth in the countryside and to narrow the huge income gap between people living in rural areas and those in the cities.
While China's cities have profited enormously from economic reforms first announced in 1978, the countryside has lagged further and further behind. Protests are common now throughout rural China, and the most common grievance centers around seizure of land by corrupt government officials.
According to some land-reform experts, the policy change would grant peasants more land security and inspire them to make better use of the small patches of fields that they now manage under the 30-year contracts. The ability to sell the contracts could also lead to the establishment of large-scale farms, which some economists say would help China's agriculture industry better compete in a global marketplace.
The Xinhua report came on Sunday evening, after four days of deliberation during the Communist Party's annual planning session. On Thursday, the first day of the session, party members began reviewing a draft of a plan detailing the land reform. The draft had been drawn up by the Central Committee.
"With rapid industrialization and urbanization, the violation of farmers' land rights happens all the time, as local governments make decisions for farmers instead of allowing farmers to decide for themselves," Song Hongyuan, the head of the Research Center for the Rural Economy in the Ministry of Agriculture, said in an interview. "Thus the government needs to improve the policy to fully protect farmers' interests."
Through state-run news organizations, the government has been signaling since the start of the month that the leadership was ready to announce a major policy shift on the issue of land use. On Sept. 30, President Hu Jintao, who is also the general secretary of the Communist Party, made a much-publicized visit to Xiaogang village in Anhui Province, during which he said farmers would be allowed to transfer their land contracts and management rights. Xiaogang is synonymous with land reform: A group of villagers banded together there in 1978 to quietly start a system of private farming that rejected the collectivization of Maoist-era China.
Their experiment was later lauded by Deng Xiaoping, the paramount leader who started China on the path of economic reform.
Rural land reform was actually at the forefront of that economic overhaul, as communal farms were divided up among peasants. But the peasants remained extremely restricted in their ability to trade or sell those new land-use rights. Meanwhile, land reform in the cities began to surpass the countryside, as the government granted urban residents the right to trade or sell their contracts.
A law passed in 2002 allowed farmers to engage in limited trades of their land-use contracts, but still kept many restrictions in place.
Advocates for land reform say that in order for the new system of land use to work properly, the Chinese government still has to ensure that rule of law is established and followed, especially by local government officials. This would curb the land seizures that have recently caused so many mass protests in the countryside.
"Implementation of the law is the key," said Keliang Zhu, a lawyer with the China research division of the Rural Development Institute, a group in Seattle that pushes for land reform for poor people around the world. "You have a much greater test in the future. We need to make sure to establish supporting institutions that will help to carry out laws and policies."
Zhu said that the government needed to educate farmers and local officials about what the law says about land rights. In addition, farmers should be given full documentation ensuring their rights to a piece of land, he said. Officially, the government claims that 80 to 90 percent of peasants have proper documentation, but in reality only half do, he said, citing recent statistics compiled by the Rural Development Institute.
Under the new system, the companies buying land-use rights from peasants probably will not easily be able to convert the land to some use other than for farming. Senior Communist Party officials often express reservations at allowing businesses unfettered access to China's land.
Peasants have long had an uneasy relationship with Chinese rulers over use of the land. Each dynasty has tried various ways of controlling and taxing rural land, which at various times has resulted in large-scale peasant rebellions. Sun Yat-sen, one of the founders of the modern nation-state of China, put land reform at the top of his agenda after the overthrow of the Qing Dynasty.
In the 1950s, Mao Zedong began herding China's farmers onto collectives, a move that resulted in widespread famine and is now considered one of the worst economic policies of the 20th century.
Huang Yuanxi contributed research.
Thursday, October 9, 2008
Premier Says China's Financial System 'Sound and Safe'
October 5, 2008
Xinhua News Agency
Chinese Premier Wen Jiabao said in Nanning Sunday that China's financial institutions have generally increased their strength, profitability and risk-resisting ability, and the financial system as a whole is sound and safe in face of the international financial crisis.
Wen made the remarks during an inspection tour to Guangxi Zhuang Autonomous Region in southwest China.
He said that the world economic situation has had dramatic changes this year, the United States' subprime crisis has been deteriorating and is having an increasingly serious negative impact on the world's financial market and the world economy as a whole.
Under multiple negative factors, both international and domestic, China has reacted actively and properly, made efforts to improve the predictability, pertinence and flexibility of macro-economic control policies, and timely solved outstanding problems in economic development. As a result, the country's economy has maintained its momentum of smooth and rapid development, Wen said.
Generally speaking, China's economic foundations have not changed and the economy is developing towards the preset macro control targets, said the Premier.
"We have full confidence in China's economic development and financial stability," Wen said, stressing that the most important thing is to do our own business well, maintain the stability of the economy and the financial and capital markets.
"It is the biggest contribution to the world when a big country with a population of 1.3 billion is able to maintain a lasting, smooth and fast economic development," he said.
On Saturday and Sunday, Wen inspected villages and factories in the cities of Beihai, Qinzhou and Fangchenggang, and talked with local people of different nationalities and from all walks of life.
He said that the development of Beibu Gulf should focus on technological innovation and environmental protection to build into an important zone for international and regional economic cooperation.
In Gaosha Village of Qinzhou, Wen inspected rice paddy and visited farmers' homes. He said that the government will further reinforce its support for agriculture, continue to increase subsidies to farmers and raise the minimum grain purchasing prices to mobilize farmers to produce more grain.
Xinhua News Agency
Chinese Premier Wen Jiabao said in Nanning Sunday that China's financial institutions have generally increased their strength, profitability and risk-resisting ability, and the financial system as a whole is sound and safe in face of the international financial crisis.
Wen made the remarks during an inspection tour to Guangxi Zhuang Autonomous Region in southwest China.
He said that the world economic situation has had dramatic changes this year, the United States' subprime crisis has been deteriorating and is having an increasingly serious negative impact on the world's financial market and the world economy as a whole.
Under multiple negative factors, both international and domestic, China has reacted actively and properly, made efforts to improve the predictability, pertinence and flexibility of macro-economic control policies, and timely solved outstanding problems in economic development. As a result, the country's economy has maintained its momentum of smooth and rapid development, Wen said.
Generally speaking, China's economic foundations have not changed and the economy is developing towards the preset macro control targets, said the Premier.
"We have full confidence in China's economic development and financial stability," Wen said, stressing that the most important thing is to do our own business well, maintain the stability of the economy and the financial and capital markets.
"It is the biggest contribution to the world when a big country with a population of 1.3 billion is able to maintain a lasting, smooth and fast economic development," he said.
On Saturday and Sunday, Wen inspected villages and factories in the cities of Beihai, Qinzhou and Fangchenggang, and talked with local people of different nationalities and from all walks of life.
He said that the development of Beibu Gulf should focus on technological innovation and environmental protection to build into an important zone for international and regional economic cooperation.
In Gaosha Village of Qinzhou, Wen inspected rice paddy and visited farmers' homes. He said that the government will further reinforce its support for agriculture, continue to increase subsidies to farmers and raise the minimum grain purchasing prices to mobilize farmers to produce more grain.
Morgan Stanley Plans Broader Push Into China
Despite Market Woes, Firm's Local Chief Expects Huge Growth
September 11, 2008
Rose Yu
SHANGHAI -- Morgan Stanley will continue to broaden its business in China despite a slowdown in the market, the chief executive of the U.S. investment bank's China operation said Wednesday.
"The market is obviously slowing down compared with 2007. But that doesn't mean the business is slowing down," Wei Sun Christianson said. "In the long run, we do believe China is going to be unstoppable; not only that, it will be unimaginable in terms of the pace of growth."
More than a decade after entering mainland China, Morgan Stanley has obtained a variety of business licenses, covering commercial lending, mergers and acquisitions advisory, and fixed-income investment.
To expand its mainland China business over the long run, Morgan Stanley will consider hiring local talent or moving people from Hong Kong, Ms. Christianson said.
Morgan Stanley established an office in China in the early 1990s, before helping to set up investment bank China International Capital Corp. with China Construction Bank Corp. in 1995.
In 2006, Morgan Stanley was granted a license to offer corporate-banking services through its wholly owned unit that is now known as Morgan Stanley Bank International (China) Ltd.
The Wall Street bank also plans to set up an investment-banking joint venture with Shanghai-based China Fortune Securities Co., people close to the deal said earlier. But failure to sell its 34% stake in China International Capital appears to have complicated Morgan Stanley's plan to pursue a new partnership with Fortune Securities, they said.
Ms. Christianson declined to comment on the new joint venture Wednesday.
"In the future, we hope to gain more licenses to offer Chinese clients a full suite of services that Morgan Stanley has offered around the globe," she said on the sidelines of a charity event for the city of Dujiangyan, one of the areas worst hit by a major earthquake in May.
In December, China Investment Corp., the state-run investment vehicle that manages China's $200 billion sovereign-wealth fund, paid $5 billion for a 9.9% stake in Morgan Stanley.
September 11, 2008
Rose Yu
SHANGHAI -- Morgan Stanley will continue to broaden its business in China despite a slowdown in the market, the chief executive of the U.S. investment bank's China operation said Wednesday.
"The market is obviously slowing down compared with 2007. But that doesn't mean the business is slowing down," Wei Sun Christianson said. "In the long run, we do believe China is going to be unstoppable; not only that, it will be unimaginable in terms of the pace of growth."
More than a decade after entering mainland China, Morgan Stanley has obtained a variety of business licenses, covering commercial lending, mergers and acquisitions advisory, and fixed-income investment.
To expand its mainland China business over the long run, Morgan Stanley will consider hiring local talent or moving people from Hong Kong, Ms. Christianson said.
Morgan Stanley established an office in China in the early 1990s, before helping to set up investment bank China International Capital Corp. with China Construction Bank Corp. in 1995.
In 2006, Morgan Stanley was granted a license to offer corporate-banking services through its wholly owned unit that is now known as Morgan Stanley Bank International (China) Ltd.
The Wall Street bank also plans to set up an investment-banking joint venture with Shanghai-based China Fortune Securities Co., people close to the deal said earlier. But failure to sell its 34% stake in China International Capital appears to have complicated Morgan Stanley's plan to pursue a new partnership with Fortune Securities, they said.
Ms. Christianson declined to comment on the new joint venture Wednesday.
"In the future, we hope to gain more licenses to offer Chinese clients a full suite of services that Morgan Stanley has offered around the globe," she said on the sidelines of a charity event for the city of Dujiangyan, one of the areas worst hit by a major earthquake in May.
In December, China Investment Corp., the state-run investment vehicle that manages China's $200 billion sovereign-wealth fund, paid $5 billion for a 9.9% stake in Morgan Stanley.
Green Victory
Award-winning solar energy project benefits millions of people in underdeveloped areas
By JING XIAOLEI
The world's leading green energy prize, Ashden Award for Sustainable Energy, announced on June 19 that China's Renewable Energy Development Project (REDP) was among its latest recipients. The REDP was jointly launched by the National Development and Reform Commission of China and the World Bank in 2001, with an international grant provided by the Global Environment Facility.
The project aims to promote the installation of photovoltaic (PV) solar home systems in remote off-grid homes in nine west China provinces and to improve the quality of production of PV modules and other system components. It also provides free information about PV and facilitates cooperation between the PV sector in China and the rest of the world.
Since its inception, the REDP has enabled sales of more than 402,000 PV solar-home systems to rural people, who live off the land by tending yaks or other animals in remote areas of the western and northwestern parts of China, through a subsidized program.
With the systems, around 1.6 million people, who live in tents for at least several months in a year and previously had little access to electricity, now have an improved living conditions featuring better lighting, communications and entertainment equipment, which are ideally suited to the lifestyle of these semi-nomadic users.
"We bought the system just in time for the Spring Festival (Chinese lunar New Year) in 2007," said a yak herder from Inner Mongolia. "We had the money saved up from selling fungus. It's so much better than before-we used to just have candles. It's good for charging the phone, and for music. It's good that we can carry it with us."
A typical solar home system supplies two lights, a radio and a mobile phone charger, and comes in a metal carry-case so that it is portable. Larger systems can power radio-cassettes, televisions and DVD players. For users, the main benefit of the REDP is brighter, cleaner lighting, for study, work and recreation.
The REDP also supports some village-based PV systems to provide electricity for public facilities, such as schools and health centers.
The REDP has boosted the PV industry in China, improving the quality of production while keeping costs low. It has also greatly expanded the market for solar home systems, and prompted the formation of a network consisting of suppliers, wholesalers and retailers.
"The project has been of enormous economical and social significance to the people living in remote and poor areas in China," said Sarah Butler-Sloss, founder of the Ashden Awards.
The REDP was one of the six pioneering renewable energy projects from Africa, Asia and Latin America that each received a prize of 20,000 pounds ($40,000) at the Ashden Awards ceremony in London.
At the ceremony, India's Technology Informatics Design Endeavour was announced the winner of this year's title and given a prize of 40,000 pounds ($80,000). Bangladeshi Grameen Shakti won the 2008 Outstanding Achievement Award and a prize of 15,000 pounds.
The Ashden Trust, a Britain-based charity, founded the Ashden Awards for Sustainable Energy in 2001. The competition is held annually to identify and reward outstanding and innovative projects in Britain and developing countries, which provide renewable energy and improve energy efficiency at a local level.
By JING XIAOLEI
The world's leading green energy prize, Ashden Award for Sustainable Energy, announced on June 19 that China's Renewable Energy Development Project (REDP) was among its latest recipients. The REDP was jointly launched by the National Development and Reform Commission of China and the World Bank in 2001, with an international grant provided by the Global Environment Facility.
The project aims to promote the installation of photovoltaic (PV) solar home systems in remote off-grid homes in nine west China provinces and to improve the quality of production of PV modules and other system components. It also provides free information about PV and facilitates cooperation between the PV sector in China and the rest of the world.
Since its inception, the REDP has enabled sales of more than 402,000 PV solar-home systems to rural people, who live off the land by tending yaks or other animals in remote areas of the western and northwestern parts of China, through a subsidized program.
With the systems, around 1.6 million people, who live in tents for at least several months in a year and previously had little access to electricity, now have an improved living conditions featuring better lighting, communications and entertainment equipment, which are ideally suited to the lifestyle of these semi-nomadic users.
"We bought the system just in time for the Spring Festival (Chinese lunar New Year) in 2007," said a yak herder from Inner Mongolia. "We had the money saved up from selling fungus. It's so much better than before-we used to just have candles. It's good for charging the phone, and for music. It's good that we can carry it with us."
A typical solar home system supplies two lights, a radio and a mobile phone charger, and comes in a metal carry-case so that it is portable. Larger systems can power radio-cassettes, televisions and DVD players. For users, the main benefit of the REDP is brighter, cleaner lighting, for study, work and recreation.
The REDP also supports some village-based PV systems to provide electricity for public facilities, such as schools and health centers.
The REDP has boosted the PV industry in China, improving the quality of production while keeping costs low. It has also greatly expanded the market for solar home systems, and prompted the formation of a network consisting of suppliers, wholesalers and retailers.
"The project has been of enormous economical and social significance to the people living in remote and poor areas in China," said Sarah Butler-Sloss, founder of the Ashden Awards.
The REDP was one of the six pioneering renewable energy projects from Africa, Asia and Latin America that each received a prize of 20,000 pounds ($40,000) at the Ashden Awards ceremony in London.
At the ceremony, India's Technology Informatics Design Endeavour was announced the winner of this year's title and given a prize of 40,000 pounds ($80,000). Bangladeshi Grameen Shakti won the 2008 Outstanding Achievement Award and a prize of 15,000 pounds.
The Ashden Trust, a Britain-based charity, founded the Ashden Awards for Sustainable Energy in 2001. The competition is held annually to identify and reward outstanding and innovative projects in Britain and developing countries, which provide renewable energy and improve energy efficiency at a local level.
China Confident of Continued Growth
Source: Xinhua News Agency
September 27, 2008
Though faced with "the most difficult year" for its economy, China on Saturday showed a strong confidence in its sustained, rapid growth, with Premier Wen Jiabao telling a top-grade world economic forum that his country enjoys a favorable development environment as a whole.
"We have full confidence and capability to overcome various difficulties to ensure sound and fast growth of the national economy for an even longer period of time," said the premier while addressing the opening ceremony of the 2008 Summer Davos forum in Tianjin on Saturday afternoon.
And such a growth will be China's "greatest contribution" to the world economy under the current circumstances, said Wen during a brief question and answer session that followed his speech.
The two-day forum, also known as the Annual Meeting of the New Champions 2008, has drawn some 1,400 participants from nearly 90 countries and regions, most of whom are successful entrepreneurs and high-ranking government officials.
The meeting, second of its kind sponsored by the prestigious World Economic Forum, took place at a difficult time for the world economy, as a financial storm starting from the Wall Street rocked the globe and triggered widespread worries about economic slowdown or even depression.
"It has been an extraordinary few weeks on the financial markets, weeks with consequences across the global economy," said European Union Trade Commissioner Peter Mandelson, who is also in this north China metropolis to attend the forum, on Friday in a speech to the local European business people.
The costs of this crisis will be felt by all countries, including China through changing stock market sentiment, falling inward investment and a fall in export demand tied to falling consumer spending in Europe and the U.S., said Mandelson.
The Chinese premier also observed that the world economic environment is getting "tougher and more complex," with "exacerbated financial volatility" and "notable economic slowdown."
And this is just one of many "considerable difficulties" faced by the country, which also needs to address other prominent problems such as domestic price rises, a weak agriculture, energy and resources constraint, poor business management, and hidden problems in the financial sector.
"As I said earlier in the year, 2008 could be the most difficult year for China's economy," said Wen, who also cited natural calamities that struck the country in a row, including heavy snow and sleet storms in January and February and a devastating earthquake in May.
Nevertheless, he stressed that "the economic fundamentals in China remain unchanged" and the economy "is moving in the direction envisaged in the macro-economic control policy."
He listed out "many favorable conditions" for China to maintainits growth, including the rapid industrialization and urbanization process, abundant supply of labor and capital, huge potential of increased domestic consumption and investment demands, a vast domestic market, and improved ability of macroeconomic regulation.
But most of all, the premier's confidence derives from China's adoption of a correct development course, as reflected in the title of his speech: "Reform and Opening-up -- the Eternal Driving Force for China's Development."
"China's changes over the past three decades would not have been possible without reform and opening-up... Reform and opening-up must be carried on through the entire process of China's modernization drive," said Wen.
The fundamental solution to all problems China now faces, including unbalanced growth, pollution and corruption, lies in deepened reform, he stressed.
Applause burst out from time to time in the full-packed Plenary Hall of the Binhai International Convention & Exhibition Center, the meeting's venue, as the participants expressed their approval of Wen's words.
Many of them have come with the hope of finding a platform to pool the wisdom of business leaders and economic masterminds worldwide, to evaluate the impact of the current crisis and propose possible ways out.
They are also interested in what China will do in the face of the crisis, and whether the country could repeat its success in handling the 1997 Asian financial crisis.
"A crisis is often totally unexpected, and it always strikes atthe most unlikely links," said veteran Chinese investor Wu Ying. "That's why we are here -- to react to the crisis with innovative methods and approaches of imaginative power."
Asked about his prescription for the current crisis, the Chinese premier emphasized international cooperation and -- more importantly -- confidence, on the parts of economists, entrepreneurs, the public and the state leaders. "At this moment, confidence is even more precious than gold or any currencies," he said.
And some key participants of the forum share China's confidence.Klaus Schwab, founder and executive chairman of the World Economic Forum, predicted on Friday that the world economy will see a slowdown in growth in the next one to three years, but China will remain the fastest-growing economy with a growth rate of seven to eight percent.
Founded four years ago for growing enterprises, even though some of them were just of medium or small size, the forum of the new champions has picked "The Next Wave of Growth" as the theme for the Tianjin meeting.
In the context of the financial woes, this theme appears even more significant, as many people have started to view the new businesses, whose growth is often driven by inspiration and innovation, as a major leading force of the global economic revival.
And more attention was paid to the emerging economies like Brazil, Russia, India and China.
The infrastructure improvement in the developing nations has given them more opportunities to embrace new technologies and the new economy, such as bio-techs, which will bring new growth, said Peer M. Schatz, chief executive officer of Germany's Qiagen company.
"These young companies have the potential to list among the Fortune 500 in next five to ten years," said Schwab of the more than 200 new champion companies that have come to the Tianjin forum.
According to Premier Wen, China is ready to share its development opportunities with these new businesses, and Tianjin, designed to be "the economic center in north China" in the country's development blueprint, could be a perfect starting ground.
"Many of you are from growing enterprises that are most dynamic,competitive and full of development potential. You are welcome to invest in China, to start businesses in Tianjin and to seize the opportunity and pursue greater development," Wen told the forum participants at the opening ceremony.
September 27, 2008
Though faced with "the most difficult year" for its economy, China on Saturday showed a strong confidence in its sustained, rapid growth, with Premier Wen Jiabao telling a top-grade world economic forum that his country enjoys a favorable development environment as a whole.
"We have full confidence and capability to overcome various difficulties to ensure sound and fast growth of the national economy for an even longer period of time," said the premier while addressing the opening ceremony of the 2008 Summer Davos forum in Tianjin on Saturday afternoon.
And such a growth will be China's "greatest contribution" to the world economy under the current circumstances, said Wen during a brief question and answer session that followed his speech.
The two-day forum, also known as the Annual Meeting of the New Champions 2008, has drawn some 1,400 participants from nearly 90 countries and regions, most of whom are successful entrepreneurs and high-ranking government officials.
The meeting, second of its kind sponsored by the prestigious World Economic Forum, took place at a difficult time for the world economy, as a financial storm starting from the Wall Street rocked the globe and triggered widespread worries about economic slowdown or even depression.
"It has been an extraordinary few weeks on the financial markets, weeks with consequences across the global economy," said European Union Trade Commissioner Peter Mandelson, who is also in this north China metropolis to attend the forum, on Friday in a speech to the local European business people.
The costs of this crisis will be felt by all countries, including China through changing stock market sentiment, falling inward investment and a fall in export demand tied to falling consumer spending in Europe and the U.S., said Mandelson.
The Chinese premier also observed that the world economic environment is getting "tougher and more complex," with "exacerbated financial volatility" and "notable economic slowdown."
And this is just one of many "considerable difficulties" faced by the country, which also needs to address other prominent problems such as domestic price rises, a weak agriculture, energy and resources constraint, poor business management, and hidden problems in the financial sector.
"As I said earlier in the year, 2008 could be the most difficult year for China's economy," said Wen, who also cited natural calamities that struck the country in a row, including heavy snow and sleet storms in January and February and a devastating earthquake in May.
Nevertheless, he stressed that "the economic fundamentals in China remain unchanged" and the economy "is moving in the direction envisaged in the macro-economic control policy."
He listed out "many favorable conditions" for China to maintainits growth, including the rapid industrialization and urbanization process, abundant supply of labor and capital, huge potential of increased domestic consumption and investment demands, a vast domestic market, and improved ability of macroeconomic regulation.
But most of all, the premier's confidence derives from China's adoption of a correct development course, as reflected in the title of his speech: "Reform and Opening-up -- the Eternal Driving Force for China's Development."
"China's changes over the past three decades would not have been possible without reform and opening-up... Reform and opening-up must be carried on through the entire process of China's modernization drive," said Wen.
The fundamental solution to all problems China now faces, including unbalanced growth, pollution and corruption, lies in deepened reform, he stressed.
Applause burst out from time to time in the full-packed Plenary Hall of the Binhai International Convention & Exhibition Center, the meeting's venue, as the participants expressed their approval of Wen's words.
Many of them have come with the hope of finding a platform to pool the wisdom of business leaders and economic masterminds worldwide, to evaluate the impact of the current crisis and propose possible ways out.
They are also interested in what China will do in the face of the crisis, and whether the country could repeat its success in handling the 1997 Asian financial crisis.
"A crisis is often totally unexpected, and it always strikes atthe most unlikely links," said veteran Chinese investor Wu Ying. "That's why we are here -- to react to the crisis with innovative methods and approaches of imaginative power."
Asked about his prescription for the current crisis, the Chinese premier emphasized international cooperation and -- more importantly -- confidence, on the parts of economists, entrepreneurs, the public and the state leaders. "At this moment, confidence is even more precious than gold or any currencies," he said.
And some key participants of the forum share China's confidence.Klaus Schwab, founder and executive chairman of the World Economic Forum, predicted on Friday that the world economy will see a slowdown in growth in the next one to three years, but China will remain the fastest-growing economy with a growth rate of seven to eight percent.
Founded four years ago for growing enterprises, even though some of them were just of medium or small size, the forum of the new champions has picked "The Next Wave of Growth" as the theme for the Tianjin meeting.
In the context of the financial woes, this theme appears even more significant, as many people have started to view the new businesses, whose growth is often driven by inspiration and innovation, as a major leading force of the global economic revival.
And more attention was paid to the emerging economies like Brazil, Russia, India and China.
The infrastructure improvement in the developing nations has given them more opportunities to embrace new technologies and the new economy, such as bio-techs, which will bring new growth, said Peer M. Schatz, chief executive officer of Germany's Qiagen company.
"These young companies have the potential to list among the Fortune 500 in next five to ten years," said Schwab of the more than 200 new champion companies that have come to the Tianjin forum.
According to Premier Wen, China is ready to share its development opportunities with these new businesses, and Tianjin, designed to be "the economic center in north China" in the country's development blueprint, could be a perfect starting ground.
"Many of you are from growing enterprises that are most dynamic,competitive and full of development potential. You are welcome to invest in China, to start businesses in Tianjin and to seize the opportunity and pursue greater development," Wen told the forum participants at the opening ceremony.
Hurdling Language Barriers
Source: China Daily
09-05-2008
For many people, studying Chinese is nothing more than a mild flirtation, but for others it is the Holy Grail, their very reason for being in China.
I'd like to say a foreigner's interest in learning Chinese stems from a deep-seated desire to understand China's ancient and mysterious culture but, frankly, the motivation is often more pragmatic. The temptation to cash in on this booming economy is irresistible. Learn the lingo and the world is your oyster.
Call it what you will, more foreigners are learning Chinese than ever before, many of us burying our heads in textbooks and homework for the first time in decades.
As growth industries go, it is a phenomenon. Only 20 years ago, less than 8,000 foreigners studied Chinese in this country. By the turn of the century it was up to 50,000. By 2004 it was 86,000, and the government estimated then that the number would be 120,000 by the time of the Olympics. Talk about an opening-up. This is a deluge.
If that isn't impressive enough, include the rest of the world in the picture. Even 10 years ago, it was estimated nearly 100 million people around the world were studying Chinese and about 100 countries were offering Chinese courses in various educational institutions. One result of this growing demand was a dire shortage of Chinese teachers and urgent requests to this country to send out more.
The burgeoning growth statistics are borne out by Zhao Changzheng, who has taught Mandarin at Peking University for seven years.
"When I came here we only had 300 foreign students learning Chinese," he says. "Now it's around 500-600 and we could have many more if we wanted.
"The university is keen to expand the department to 1,000 new foreign students each semester but we don't have enough room in the classes and dorms. Soon we will have a new building for foreign students and then the number learning Chinese will be as high as 2,000 each semester."
The geographical breakdown has also changed. "Ten years ago, it was just called the Chinese International College for Language Study and we mostly had Japanese and South Koreans," says Zhao. "In the last 4-5 years we've experienced such an surge of interest from the US that Americans are our biggest group, about 40 percent of all foreigners."
The benefit to the university has been more than merely financial. "Years ago, when we didn't have many applications to our department, we had no choice who we took," he continues.
"Many of the students from South Korea weren't that interested and weren't very good students. Now we have a big pool of students to choose from. We are able to select only the best ones and we have noticed their attitude to be getting better and better."
Courses last one semester, though students can apply to stay on longer. At the start of each semester, students are tested on their oral Chinese and put into the 34 classes, each with around 15 students, according to their results. There are also 34 parallel classes in vocabulary, grammar and script.
It may come as a surprise, but studying Chinese characters is a compulsory component of the program. For Zhao, this is essential. "If you don't study the characters you can't really know our language and our culture," he says. "The best students are also taught about Chinese society, culture, economics and law, and we find they are very interested in these extra subjects."
The rewards are mutual. "I am their teacher but also their student too, sometimes. Just as it is a culture shock for students coming here from Europe and America, so it is for us at the university. The students tell me things I never knew and I learn from them all the time, so life is much more interesting."
While Zhao is reluctant to guesstimate how well students can expect to speak after just one semester, he says the sky is the limit.
"We once had a student who spent one year in China - 6 months with us and 6 months in Shanghai - and at the end of the year he spoke Chinese very, very well," he says.
Usually, though, he reckons you'd need to study full-time for 2-3 years before you are likely to speak with any fluency.
If students need to work hard to achieve their dreams, the same is true for 110-year-old Peking University, which is constantly reviewing its course structures to cater to the ever-changing student roll.
"Having so many Americans and Europeans here spreads the word about Peking University around the world," says Zhao.
"This is already the best university in China but we want more. We want to be the best, most famous university in the world. That has been our dream for a long time."
"Bah, humbug!" I thought. Then I surfed the Net and discovered the Times Higher Education Supplement, published in London, rated Peking University the best in Asia in 2006 and the 14th best in the world. Maybe it isn't an impossible dream.
09-05-2008
For many people, studying Chinese is nothing more than a mild flirtation, but for others it is the Holy Grail, their very reason for being in China.
I'd like to say a foreigner's interest in learning Chinese stems from a deep-seated desire to understand China's ancient and mysterious culture but, frankly, the motivation is often more pragmatic. The temptation to cash in on this booming economy is irresistible. Learn the lingo and the world is your oyster.
Call it what you will, more foreigners are learning Chinese than ever before, many of us burying our heads in textbooks and homework for the first time in decades.
As growth industries go, it is a phenomenon. Only 20 years ago, less than 8,000 foreigners studied Chinese in this country. By the turn of the century it was up to 50,000. By 2004 it was 86,000, and the government estimated then that the number would be 120,000 by the time of the Olympics. Talk about an opening-up. This is a deluge.
If that isn't impressive enough, include the rest of the world in the picture. Even 10 years ago, it was estimated nearly 100 million people around the world were studying Chinese and about 100 countries were offering Chinese courses in various educational institutions. One result of this growing demand was a dire shortage of Chinese teachers and urgent requests to this country to send out more.
The burgeoning growth statistics are borne out by Zhao Changzheng, who has taught Mandarin at Peking University for seven years.
"When I came here we only had 300 foreign students learning Chinese," he says. "Now it's around 500-600 and we could have many more if we wanted.
"The university is keen to expand the department to 1,000 new foreign students each semester but we don't have enough room in the classes and dorms. Soon we will have a new building for foreign students and then the number learning Chinese will be as high as 2,000 each semester."
The geographical breakdown has also changed. "Ten years ago, it was just called the Chinese International College for Language Study and we mostly had Japanese and South Koreans," says Zhao. "In the last 4-5 years we've experienced such an surge of interest from the US that Americans are our biggest group, about 40 percent of all foreigners."
The benefit to the university has been more than merely financial. "Years ago, when we didn't have many applications to our department, we had no choice who we took," he continues.
"Many of the students from South Korea weren't that interested and weren't very good students. Now we have a big pool of students to choose from. We are able to select only the best ones and we have noticed their attitude to be getting better and better."
Courses last one semester, though students can apply to stay on longer. At the start of each semester, students are tested on their oral Chinese and put into the 34 classes, each with around 15 students, according to their results. There are also 34 parallel classes in vocabulary, grammar and script.
It may come as a surprise, but studying Chinese characters is a compulsory component of the program. For Zhao, this is essential. "If you don't study the characters you can't really know our language and our culture," he says. "The best students are also taught about Chinese society, culture, economics and law, and we find they are very interested in these extra subjects."
The rewards are mutual. "I am their teacher but also their student too, sometimes. Just as it is a culture shock for students coming here from Europe and America, so it is for us at the university. The students tell me things I never knew and I learn from them all the time, so life is much more interesting."
While Zhao is reluctant to guesstimate how well students can expect to speak after just one semester, he says the sky is the limit.
"We once had a student who spent one year in China - 6 months with us and 6 months in Shanghai - and at the end of the year he spoke Chinese very, very well," he says.
Usually, though, he reckons you'd need to study full-time for 2-3 years before you are likely to speak with any fluency.
If students need to work hard to achieve their dreams, the same is true for 110-year-old Peking University, which is constantly reviewing its course structures to cater to the ever-changing student roll.
"Having so many Americans and Europeans here spreads the word about Peking University around the world," says Zhao.
"This is already the best university in China but we want more. We want to be the best, most famous university in the world. That has been our dream for a long time."
"Bah, humbug!" I thought. Then I surfed the Net and discovered the Times Higher Education Supplement, published in London, rated Peking University the best in Asia in 2006 and the 14th best in the world. Maybe it isn't an impossible dream.
Wednesday, October 8, 2008
China May Hold Key to Calming the Storm
By Eadie Chen and Simon Rabinovitch Reuters
Wednesday, October 8, 2008
China, the world's biggest holder of currency reserves, may yet play an important part in calming a global financial storm from which it is largely sheltered.
Prime Minister Wen Jiabao, who has promised to "join hands" with other nations to tackle the deepest financial crisis since the Great Depression, says the biggest contribution China can make is to keep the world's fourth-largest economy humming.
To that end, China has cut interest rates twice in three weeks, including a move on Wednesday. Yet speculation is swirling that Beijing could also chip in with a vote of confidence by pledging to hold onto its vast dollar assets and even buy more to help fund the massive bailout of the U.S. financial system now under way.
"For the sake of long-term U.S.-China relations, for the sake of China presenting a better image, I think China should stand up and say that it supports the U.S. dollar and is buying Treasuries," said Tao Xie, an expert on U.S.-China relations at the Beijing Foreign Studies University.
On one level, doing so would be very much in China's self-interest. Perhaps two-thirds of its $1.81 trillion in foreign exchange reserves is in U.S. Treasury and other bonds, and there was much hand-wringing during the dollar's slide earlier this year at the hefty losses Beijing was incurring.
"The dollar assets are held hostage. Dumping them is in nobody's interest," said Ding Zhijie, a finance professor who advises the government.
On the other hand, there is a strong current of opinion in official circles that America has only itself to blame. A leading state newspaper said on Tuesday that China should not foot the bills for U.S. woes, while a commentary on Wednesday lashed Washington for a lax, short-sighted monetary policy.
And China's state-owned banks and its sovereign wealth fund, stung by losses on earlier investments, have conspicuously kept their hands in their pockets while Japanese financial firms have bought into Wall Street's fallen or ailing giants.
As a quid pro quo, researchers suggested, Beijing should press Washington to open U.S. markets wider to Chinese companies, take concrete steps to stabilize the dollar and help China wield more power in bodies like the International Monetary Fund.
The global crisis has so far had little impact on China. Far from depending on capital inflows, it is a huge exporter of savings; the financial system is awash with cash; capital controls shield it from volatile outflows; and its banks are underdeveloped and inward-looking.
Yet collateral damage through economic linkages are a growing concern. Exports are softening and recent surveys of purchasing managers have been weak.
Auto sales growth has slowed to single digits. Housing sales in major cities have almost ground to a halt as people expect prices to fall further. And four big steelmakers have agreed to cut output by 20 percent to prop up prices.
"I personally feel that the economic fundamentals are undergoing dramatic changes," said an official close to a team from the National Development and Reform Commission that visited five central provinces last month.
http://www.iht.com/articles/2008/10/08/business/col09.php
Wednesday, October 8, 2008
China, the world's biggest holder of currency reserves, may yet play an important part in calming a global financial storm from which it is largely sheltered.
Prime Minister Wen Jiabao, who has promised to "join hands" with other nations to tackle the deepest financial crisis since the Great Depression, says the biggest contribution China can make is to keep the world's fourth-largest economy humming.
To that end, China has cut interest rates twice in three weeks, including a move on Wednesday. Yet speculation is swirling that Beijing could also chip in with a vote of confidence by pledging to hold onto its vast dollar assets and even buy more to help fund the massive bailout of the U.S. financial system now under way.
"For the sake of long-term U.S.-China relations, for the sake of China presenting a better image, I think China should stand up and say that it supports the U.S. dollar and is buying Treasuries," said Tao Xie, an expert on U.S.-China relations at the Beijing Foreign Studies University.
On one level, doing so would be very much in China's self-interest. Perhaps two-thirds of its $1.81 trillion in foreign exchange reserves is in U.S. Treasury and other bonds, and there was much hand-wringing during the dollar's slide earlier this year at the hefty losses Beijing was incurring.
"The dollar assets are held hostage. Dumping them is in nobody's interest," said Ding Zhijie, a finance professor who advises the government.
On the other hand, there is a strong current of opinion in official circles that America has only itself to blame. A leading state newspaper said on Tuesday that China should not foot the bills for U.S. woes, while a commentary on Wednesday lashed Washington for a lax, short-sighted monetary policy.
And China's state-owned banks and its sovereign wealth fund, stung by losses on earlier investments, have conspicuously kept their hands in their pockets while Japanese financial firms have bought into Wall Street's fallen or ailing giants.
As a quid pro quo, researchers suggested, Beijing should press Washington to open U.S. markets wider to Chinese companies, take concrete steps to stabilize the dollar and help China wield more power in bodies like the International Monetary Fund.
The global crisis has so far had little impact on China. Far from depending on capital inflows, it is a huge exporter of savings; the financial system is awash with cash; capital controls shield it from volatile outflows; and its banks are underdeveloped and inward-looking.
Yet collateral damage through economic linkages are a growing concern. Exports are softening and recent surveys of purchasing managers have been weak.
Auto sales growth has slowed to single digits. Housing sales in major cities have almost ground to a halt as people expect prices to fall further. And four big steelmakers have agreed to cut output by 20 percent to prop up prices.
"I personally feel that the economic fundamentals are undergoing dramatic changes," said an official close to a team from the National Development and Reform Commission that visited five central provinces last month.
http://www.iht.com/articles/2008/10/08/business/col09.php
Subscribe to:
Posts (Atom)
Posts
