China - Economic Data & News 01 (May 08 - Oct 08)

[winston]

Fiscal revenue will grow slowly in second half

Annual growth in China's fiscal revenue slowed sharply in July from June, pointing at further weakness in coming months and limiting the space for government spending, the finance ministry said.

Fiscal revenue for July alone grew 16.5 percent from a year earlier, almost half of June's rate, the ministry said.

"We expect fiscal income will follow this trend of expanding only moderately for the rest of the year,'' it said.

China's fiscal revenue over the first seven months of 2008 grew 30.5 percent from a year earlier to 4.09 trillion yuan (HK$4.68 trillion), the ministry said. Fiscal revenue in 2007 rose 32.4 percent.

REUTERS

[millionairemind]

Chinese bankers and their wives convicted in Las Vegas
The Associated PressPublished: August 31, 2008

LAS VEGAS: Two former Bank of China managers and their wives have been convicted of conspiracy charges in an elaborate 13-year scheme to embezzle $485 million from a state-owned bank and launder the money in other countries.

The former bankers, Xu Chaofan and Xu Guojun, and their wives, Kuang Wan Fang and Yu Ying Yi, were found guilty Friday in U.S. District Court in Las Vegas of racketeering conspiracy, money laundering conspiracy and conspiracy to transport stolen money. The bankers were also convicted of visa fraud, and their wives were convicted of passport fraud.

The indictment also charged Kwong Wa Po, the brother of Kuang Wan Fang. He remains a fugitive.

Federal prosecutors accused the five of participating in a racketeering conspiracy that began in 1991 and continued until October 2004, when the two former bank managers and their wives were arrested.

Yu Zhendong, another former manager who participated in the scheme, pleaded guilty earlier to racketeering charges and cooperated with the investigation. In 2004, U.S. officials handed him over to the Chinese authorities under a promise that he would not be executed.

Prosecutors said the three former bankers had used their posts at a Bank of China branch to approve phony loans and money transfers.

They said the bankers tried to launder more than $3 million by making deposits at several Las Vegas casinos. The casinos were not accused of wrongdoing.

They said the bankers' wives helped launder the stolen money, entered the country illegally and received U.S. citizenship and passports through deceit.

During the trial, the defense lawyers Mitchell Posin, representing Xu Chaofan, and Bret Whipple, representing Xu Guojun, characterized their clients as pawns in a new era of U.S.-Chinese legal cooperation. They attempted to challenge efforts to hold the two men to U.S. banking standards and laws.

The defendants are scheduled to be sentenced on Nov. 24.

[kennynah]

apparently, never watched ocean 11, 12 & 13

[millionairemind]

Reminds me of Petronas Towers in KL

Shanghai's World Financial Center may prove to be a white elephant
By Malcolm Moore in Shanghai
Last Updated: 11:26pm BST 31/08/2008

China's tallest skyscraper, the half-kilometre-high World Financial Center (WFC) in Shanghai, has opened its doors, just as the country's property bubble shows every sign of being on the verge of collapse.

Looking out from Shanghai's Bund, the new building, topped with a finial reminiscent of a bottle-opener, places the rest of the city's iconic skyline in the shade. It towers above the Oriental Pearl Television Tower and the city's previous record holder, the Jin Mao Tower.

The WFC offers the world's highest observation deck, complete with a transparent glass floor, the world's loftiest hotel, and some of Shanghai's priciest office space.

However, the formal unveiling, 14 years after the £640m project started, was being talked of as the turning point for China's over-inflated property market.

While the Communist Party is likely to keep injecting public money to keep headline growth rates rising respectably, the slowdown of demand for office and residential space shows that the Chinese miracle may not be sustainable indefinitely.

Minoru Mori, chairman of Mori Building Company, Japan's largest private property developer, was forced to admit that only 45pc of the office space in the WFC had been let and even Morgan Stanley, which is backing the project financially, could cut its leased space from eight floors to four.

"I believe the building was completed at the best time, when China has opened its doors to the world for 30 years and the city is going to hold the World Expo soon in 2010," he said.

Others are not so sure.China Vanke, the Middle Kingdom's largest property developer, posted a 24pc jump in net profits for the first half of 2008 this week but sent out a deeply bearish message about the rest of the year.

The company has slowed or in some cases completely halted construction on the sites it bought in 2007 and has suspended its landbank purchases for the rest of the year until the market picks up again. In a leaked internal email, it noted that there had been a "plunge in trading volume".

That plunge left more than half of Shanghai's estate agents out of business in the past two years. Housing sales in the city fell nearly 28pc in the first half.

The total wealth of China's 10 richest tycoons has declined by more than £15bn in 12 months.

[kennynah]

I wonder in china, how developers are charged for their land parcels they bought? Singapore is clear cut; open tender bidding system. So, supposing in China, the state "gives" away land to stste run developers, then generating profits from their development will simply be negating the cost of development. Easier to obtain profits?

[winston]

Central bank to make credit easier

China's central bank said on Monday that it would increase the flexibility of its credit control policy to ensure steady economic growth.

The central bank will expand loan access for the agriculture sector and small companies countrywide, as well as reconstruction projects in areas devastated by the May 12 earthquake, it said.

State media reported last month that the central bank had raised this year's quota of new yuan loans by five percent, although this has not been confirmed.
The previous cap was widely understood to be no more than the 3.63 trillion yuan (HK$4.14 trillion dollars) lent in 2007.

AGENCE FRANCE-PRESSE

[winston]

China May Raise Retail Power Prices, Official Says
By Helen Yuan and Wang Ying

Sept. 3 (Bloomberg) -- China, the world's second-biggest energy consumer, may raise retail electricity prices to cover higher costs for generators and distributors, an official said.

Prices may increase by 0.025 yuan per kilowatt-hour, Zhang Zengchan, secretary general of China Ferroalloys Industry Association, said today in Xiamen, citing discussions with government officials. He didn't say when prices will be raised.

China, fighting a sixth year of power shortages, lifted wholesale electricity tariffs twice and retail prices once this year. State Grid Corp. of China, the distributor in 26 provinces, said Aug. 20 the government needs a system that allows retail and on-grid prices to rise at the same time because it is struggling to raise funds for its network.

``The tariff hike will lead to higher costs for ferroalloy producers,'' Zhang said. ``Though the impact of the increase won't be as big as prices of imported mineral ores.''

China raised prices of electricity sold from utilities to distributors by 4.7 percent in July and 6 percent in August to 0.02 yuan per kilowatt-hour. The increases were aimed at helping power generators cope with rising coal costs, which reached a record 1,080 yuan a ton on July 23.

Huaneng, Huadian

Huaneng Power International Inc., a unit of China's biggest power producer by capacity, and smaller rival Huadian Power International Corp. reported first-half losses last month because of higher fuel costs. Datang International Power Generation Co., the biggest Chinese power producer listed in Hong Kong by market value, said first-half profit fell 77 percent.

State-owned State Grid said in August it shoulders the ``social responsibility'' to expand its network even as profit slumped 80 percent between January and May because of damages from snowstorms and earthquakes.

The grid operator will need 73.6 billion yuan ($10.7 billion) to restore power lines after the natural disasters in the first half, it said at the time.

The Beijing-based company needs to invest more than 1.2 trillion yuan in the five years ending 2010, it said. Annual spending for the next two years will reach 330 billion yuan, State Grid said.

[winston]

Cheng Siwei: Chinese economy not in downturn, but adjustments needed(Xinhua)

BEIJING - China is experiencing a temporary economic slowdown rather than a downturn, said Cheng Siwei, former vice chairman of the Standing Committee of the National People's Congress, raising the prospect that adjustments might be necessary.

"The domestic inflation, severe winter weather, devastating earthquakes and the weakening global economy in the first half year have pushed the country's economy to the edge of decline, but it is getting better", Cheng said in a China Central Television talk show aired on Tuesday night.

He said according to the business cycle theory, any economy develops in cycles, and 10 years constituted a cycle for China's economy.

The decade from 1990 to 2000 saw about a 14 percent growth of gross domestic product (GDP) in the first two or three years and then a slowdown to about 8 percent in the remaining period. Economic growth continued rising from about 7.3 percent per annum in 2001 to 11.4 percent in 2007.

The estimated GDP growth rate in 2008 may slow to around 10 percent. Worry over a downturn for the Chinese economy reemerged.

However, he didn't agree with the view that the Chinese economy faced a watershed, noting that this year's growth rate, compared with 2007, meant only a temporary slowdown lasting two or three years.

The country's decision makers now face the problem of combating inflation while at the same time boosting economic growth in the rest of the year to ensure a steady and fast economic development. He said the two courses could be both contradictory and mutually stimulating. It is the strategy which could maintain a strong momentum for investment, consumption and exports while controlling inflation at six to seven percent that matters, he said.

The government said last week it would stick to an economic policy that focuses on curbing inflation for the rest of the year.

Banks have been urged by the industry regulator to use the expanded loan quota to support small enterprises hit by rising costs and a credit crunch. Early in August, China's central bank raised the credit quota by 5 percent for nationwide lenders and 10 percent for local ones.

These are among measures the country has taken to bring the economy back to a normal track, he said.

Cheng also suggested adjustments for the rest of the year and after.

He said more investment should go to agriculture, especially hi-tech enterprises and other enterprises closely related to people's lives, and environmental protection, energy conservation, education, public service and social security, among others.

People's income should be increased along with economic growth. More subsidies should be given to low-income groups. Lenders should expand loans for individuals, which only account for 12 percent of the total loans, far from the 60 percent to 70 percent levels in other countries, he said.

The fiscal revenue in the first half totaled 3.48 trillion yuan (US$507.7 billion), up 33.3 percent from last year. The country should raise the personal income tax threshold to drive up consumption.

He said the export structure should be reformed as energy-intensive products were high in cost and thus not profitable. With the Renminbi's appreciation against the US dollar, the country should expand its exports to other regions.

In terms of inflation, he said six percent to seven percent with a backdrop of 10 percent GDP growth was moderate.

The producer price index rose 10 percent compared with a year-earlier.He said that might be the peak for the rest of the year as oil price rises would not take place, and the reasonable price should be less than US$100 per barrel.

The consumer price index was up 6.3 percent in July over the same month last year, lower than the 7.1 percent increase in June and 7.7 percent in May.

Lack of talent in management and finance had always been a problem, he said.

[millionairemind]

Rich in reserves, Chinese central bank is short of capital
By Keith Bradsher Published: September 5, 2008

It has been on a buying binge in the United States over the last seven years, snapping up roughly $1 trillion worth of Treasury bonds and mortgage-backed debt issued by Fannie Mae and Freddie Mac.

Those investments have been declining sharply in value when converted from dollars into the strong yuan, casting a spotlight on the central bank's tiny capital base. The bank's capital, just $3.2 billion, has not grown during the buying spree, despite private warnings from the International Monetary Fund.

Now the central bank needs an infusion of capital. Central banks can, of course, print more money, but that would stoke inflation. Instead, the People's Bank of China has begun discussions with the finance ministry on ways to shore up its capital, said three people familiar with the discussions who insisted on anonymity because the subject is delicate in China.

The central bank's predicament has several repercussions. For one, it makes it less likely that China will allow the yuan to continue rising against the dollar, say central banking experts. This could heighten trade tensions with the United States. The Bush administration and many Democrats in Congress have sought a stronger yuan to reduce the competitiveness of Chinese exports and trim the American trade deficit.

The central bank has been the main advocate within China for a stronger yuan. But it now finds itself increasingly beholden to the finance ministry, which has tended to oppose a stronger yuan. As the yuan slips in value, China's exports gain an edge over the goods of other countries.

The two bureaucracies have been ferocious rivals. Accepting an injection of capital from the finance ministry could reduce the independence of the central bank, said Eswar Prasad, the IMF's former division chief for China.

"Central banks hate doing that because it puts them more under the thumb of the finance ministry," he said.

Prasad said that during his trips to Beijing on behalf of the fund, he had repeatedly cautioned China over the enormous scale of its holdings of American bonds, emphasizing that it left China vulnerable to losses from either a strengthening of the yuan or from a rise in American interest rates. When interest rates rise, the prices of bonds fall.

Officials at the central bank declined to comment, while finance ministry officials did not respond to calls or questions via fax seeking comment. Data in a study by the Bank of International Settlements based in Basel, Switzerland, sometimes called the central bank for central banks, shows that many central banks had small capital bases relative to foreign reserves at the end of 2002, though few were as low as the People's Bank of China.

Given the poor performance of foreign bonds, the Chinese government could decide to shift some of its foreign exchange reserves into global stock markets.

The central bank started making modest purchases of foreign stocks last winter, but has kept almost all of its reserves in bonds, like other central banks.

The Finance Ministry, however, has pushed for investments in overseas stocks. Last year, it wrested control of the $200 billion China Investment Corp., which had been bankrolled by the central bank. That corporation's most publicized move, a $3 billion investment in the Blackstone Group in May of last year, has lost more than 43 percent of its value.

The central bank's difficulties do not, by themselves, pose a threat to the economy, economists agree. The government has ample resources and is running a budget surplus. Most likely, the Finance Ministry would simply transfer bonds of other Chinese government agencies to the bank to increase its capital. But even in a country that strongly discourages criticism of its economic policies, hints of dissatisfaction are appearing over China's foreign investments.

For instance, a Chinese blogger complained last month, "It is as if China has made a gift to the United States Navy of 200 brand new aircraft carriers."

Bankers estimate that $1 trillion of China's total foreign exchange reserves of $1.8 trillion are in American securities. With aircraft carriers costing up to $5 billion apiece, $1 trillion would, in theory, buy 200 of them.

By buying U.S. bonds, the Chinese government has been investing a large chunk of the country's savings in assets earning just 3 percent annually in dollars. And those low returns turn into real declines of about 10 percent a year after factoring in inflation and the yuan's appreciation against the dollar.

The yuan has risen 21 percent against the dollar since China stopped pegging its currency to the dollar in July 2005.

The actual declines in value of the central bank's various investments are a carefully guarded state secret.

Still China finds itself hemmed in. If it were to curtail its purchases of dollar-denominated securities drastically, the dollar would likely fall and American interest rates could soar.

China spent more than one-eighth of its entire economic output last year on foreign bonds, and then picked up the pace during the first half of this year. Chinese officials have suggested in recent comments that they are increasingly interested in stopping the yuan's rise, and thus are willing to continue buying foreign securities to support the dollar. In fact, the yuan weakened slightly against the dollar last month after 26 consecutive months of gains.

Along with Treasuries, China has invested heavily in mortgage-backed bonds from Fannie Mae and Freddie Mac, the struggling mortgage finance giants that are sponsored by the United States government. Standard & Poor's estimates China's holdings at $340 billion.

Some bond traders suspect that the central bank has scaled back its purchases of these securities, as have China's commercial banks. But the central bank trades this debt through many third parties in many countries, making its activity opaque to outside analysts.

The central bank has gone to great lengths to maintain its foreign purchases. The money to buy foreign bonds has come from the reserves required that commercial banks must deposit with the central bank. In effect, China's commercial banks have been lending the central bank more than $1 trillion at an interest rate of less than 2 percent.

To keep the banks strong when they were getting such little interest on their reserves, the central bank has kept deposit rates low. The gap between what banks are paying on deposits and the rates they are charging ordinary customers to borrow is several percentage points. This amounts to a transfer of wealth from ordinary Chinese savers to the central bank and on to Americans who are selling their debt to the Chinese.

Nicholas Lardy, a Chinese finance specialist at the Peterson Institute for International Economics, estimated in a paper in early August that China's decision to hold bank deposit rates far below inflation costs families in China more than three times as much as the country's personal income tax.

The central bank is now under considerable pressure to reduce the commercial banks' reserve requirements to encourage growth as the Chinese economy shows signs of slowing.

Victor Shih, a specialist in Chinese central banking at Northwestern University, said that when he visited the People's Bank of China for a series of meetings this summer, he was surprised by how many officials resented the institution's losses.

He said the officials blamed the United States and believed the controversial assertions set forth in the book "Currency War," a Chinese best seller published a year ago. The book suggests that the United States deliberately lured China into buying its securities knowing that they would later plunge in value.

"A lot of policy makers in China, at least midlevel policy makers, believe this," Shih said.

[millionairemind]

About the same news as above.. but from different agency

China central bank may need government bailout
By MarketWatch
Last update: 6:33 a.m. EDT Sept. 5, 2008Comments: 8

HONG KONG (MarketWatch) -- The People's Bank of China, China's central bank, has begun discussions with the finance ministry on ways to shore up its capital, The New York Times reported, citing three people familiar with the discussions.

The move could make it less likely that China will allow the yuan to continue rising against the dollar and accepting an injection of capital from the finance ministry could also reduce the independence of the central bank, the report said.

Halting the appreciation of the yuan could heighten trade tensions with the U.S., which has sought a stronger Chinese currency to reduce the competitiveness of Chinese goods and lower the U.S trade deficit, the report said.

The central bank is in need of capital because of its roughly $1 trillion purchase of U.S. Treasury bonds and Fannie Mae- and Freddie Mac-issued mortgage-backed debt.

Those dollar-denominated investments have fallen in value against the strengthening yuan, pressuring the Bank of China's $3.2 billion capital base, the report said.

The central bank could print yuan to boost its capital, but such a policy would be highly inflationary.

More likely, the central bank will turn to the finance ministry for help, which will make it beholden to the ministry and its preference for a weaker yuan.

The two institutions have been are ideologically split on whether the currency should strengthen.

The finance ministry has long favored a weaker yuan because it helps Chinese exports gain an edge over other countries. The PBOC has been the main advocate for a stronger Chinese currency.

Analysts say the PBOC's small capital base does not pose a threat to the economy. If need be, the government can tap its ample resources to shore up the central bank. What's most likely to happen is that finance ministry will transfer bonds of other Chinese government agencies onto the PBOC's balance sheet, the report said.

Estimates are China has invested $1 trillion of its $1.8 trillion foreign exchange stockpile in U.S. securities. The yuan has appreciated about 21% since China dropped its fixed peg to the U.S. dollar in July 2005.