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.
Tuesday, October 14, 2008
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.
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