April 7, 2009

2. Stimulus spending monitored nationwide
(China Daily)...Wang Linyan
To prevent fraud in the use of its multi-trillion-yuan stimulus package, the central government sent out 24 inspection teams nationwide last week to oversee how the money is being spent.

3. Yuan's reach widens with currency swaps
(Caijing Magazine )...Li Tao and Zhang Man
Not only do currency swaps benefit trade relations between China and other countries, but they give the yuan more international clout.

4. Chinese loans ballooned in March
(The Economic Observer Online)...Sun Jianfang
China's credit expansion in March kept up rapid growth, the Economic Observer learned.

5. Beijing pre-owned housing surge may be short-lived
(Caijing Magazine )...Cheng Hua
The surging sales of second hand houses may not sustain their surge if second-home buyers and investors do not enter the market.

6. Exec pay up 12% despite poor performance
(The China Perspective)...TONY JIN
The executives of the 816 Shanghai- and Shenzhen-listed companies that have released annual financial statements received an average 12.2% raise in compensation in 2008 despite the tumbling profit earnings.

7. Death toll rises to seven from China coal mine flooding
(Xinhua News Agency )
The death toll from a flooded coal mine in northeast China's Heilongjiang Province stands at seven after rescuers retrieved two more bodies early on Sunday.

8. Beijing car restrictions to continue
(China Daily)...Xin Dingding
Driving restrictions will continue in Beijing for another year starting next Monday, with small changes to make it easier on residents, Wang Zhaorong, spokesman for the municipal committee of communications, told a press conference Sunday.

9. China to set up clinics in every village within 3 years
(Xinhua News Agency )
China will set up at least one clinic in every village within three years to improve the health care at grassroots level, according to an implementation plan for medical reform released by the State Council here on Tuesday.

10. China to promote book reading among children, young people
(Xinhua News Agency )
China plans to launch a series of activities from April to October to promote book reading habit among its citizens, especially children, young people, women and rural residents.

11. Refunds to follow on cancer-linked powder
(Shanghai Daily)...Cai Wenjun
Chinese mainland consumers who bought NUK baby talcum powder will receive full refunds from the stores where they picked up the possibly tainted talc, company officials said yesterday.

Source: Xinhua News Agency | Updated: 04-06-2009

China said here on Sunday that the reaction of the UN Security Council to the Pyongyang rocket launch should be "cautious and proportionate."

The Chinese permanent representative to the United Nations, Ambassador Zhang Yesui, made the statement to the press here at the end of a closed-door meeting of the Security Council. The 15- nation Council on Sunday afternoon held an emergency session on the rocket launch by the Democratic People's Republic of Korea (DPRK) at the request of Japan.

"The reaction of the Security Council should be cautious and proportionate," Zhang said.

"It served the common interests of the international community to continue to promote the Six-Party Talks, achieve denuclearization of the Korean Peninsula and maintain peace and stability on the Peninsula and in Northeast Asia," he said.

"My delegation would be most willing and ready to join other colleagues to participate and discuss whatever reaction from the Council in a most constructive and responsible manner," he added.

Source: China Daily | Updated: 04-06-2009

To prevent fraud in the use of its multi-trillion-yuan stimulus package, the central government sent out 24 inspection teams nationwide last week to oversee how the money is being spent.

During the month-long investigation, the teams will set up operations at local government offices to monitor spending, as well as check on projects throughout the provinces, Wen Wei Po reported.

The Chinese public has been concerned over possible fund misuse and corruption since the announcement in November of the 4-trillion yuan ($586 billion) package. The package includes a central government infusion of 1.18 trillion yuan, plus further financing coming in the form of industrial restructuring, tax reform, scientific innovation, social welfare and creating employment.

Premier Wen Jiabao vowed in March that the government would oversee use of the funds.

Experts said the large-scale investigation will provide a foundation for the next stage in the government's battle against the financial crisis.

Since late March, government agencies including the National Development and Reform Commission (NDRC), the People's Bank of China and the Ministry of Commerce have sent inspection teams nationwide to supervise the implementation of stimulus policies.

Minister of Commerce Chen Deming led a research team looking into household appliance stores, supermarkets and farm produce markets in Guiyang and Zuiyi in Guizhou province.

He said the ministry would help Guizhou develop its service industry and build infrastructure for supermarkets and wholesale markets for farm produce in order to stimulate the local economy.

From last November to January this year, 24 central government inspection teams were sent to look into the use of the funds by the Communist Party of China central commission for discipline inspection, the NDRC, the Ministry of Supervision, the Ministry of Finance and the National Audit Office. They found no evidence of bribery or embezzlement, or that funds were misused for setting up energy intensive or heavily polluting projects or constructing Party or government office buildings.

Source: Caijing Magazine | Updated: 04-07-2009

The cross-border exchange of regional currencies has become an important way to defend against the global economic downturn and promote trade. To circumvent a shortage of dollars and other currencies, as well as reduce exposure to exchange rate volatility, developing countries in eastern and central Asia as well as South America have implicitly recognized the Chinese yuan as a currency for settlements and, in some cases, reserves.
 
Central banks in China and South Korea signed a 180 billion yuan currency swap framework agreement on December 12. That was the first of a number of formal currency agreements, which included a 200 billion yuan swap January 20 between China's central bank--the People's Bank of China--and the Hong Kong Monetary Authority. The central bank also signed an 80 billion yuan agreement with Malaysia's central bank February 8, a 20 billion yuan deal with the National Bank of Belarus on March 11, and a 100 billion yuan swap with the central bank of Indonesia on March 24. Additional central banks have indicated a willingness to enter currency swap agreements with China as well.
 
Currency swaps between central banks are an innovation. A central bank, through the exchange, injects the partner country's currency into its own financial system, allowing domestic businesses to borrow the other country's currency and use it to pay for imports of that country's goods, thereby easing the pressure on trade caused by an insufficiency of dollar.
 
Lu Lei, a Caijing economist and Guangdong Institute of Finance professor, says currency swap agreements are simply two-way loans between central banks. Foreign central banks generally use borrowed yuan to settle trades with China or as a reserve currency. China, on the other hand, uses foreign currency holdings as collateral.
 
Consequently, regional circulation of the yuan expands. The system hinges on confidence in the yuan among all parties.
 
"As liquidity of the U.S. dollar, the international settlement and reserve currency, moved from surplus to shortage, difficulties in borrowing and exchange rate risks emerged," a deputy director at China's central bank told Caijing. "As a result, regional demand for settling trades in local currency appeared. It isn't something China could simply decide to establish by itself.
 
"The development of the scale of currency swaps is not affected by any one party's choice, but is determined by market demand," the bank official said.
 
Genesis of Swap
 
"That foreign central banks would seek us out shows there is increasing demand for the yuan," the bank official said, explaining origins of the latest currency swaps.
 
It began last July at a two-day meeting of East Asia and Pacific area central bank executives in Xi'an. The chairman, China central bank Gov. Zhou Xiaochuan, held talks with representatives from several countries on the subprime crisis. Meanwhile, central banks officials mapped out a cooperative model for currency swaps. The plan quickly received approval from South Korea's central bank.
 
"Korea and China could sign an agreement worth at least US$ 10 billion," a Bank of Korea representative said at the time. In short order, Bank of Korea officials put forward a request for a US$ 30 billion bilateral currency swap.
 
On December 12, Chinese and South Korean leaders signed a bilateral currency swap framework for a two-way swap of 180 billion yuan for 38 trillion won, values based on December 9 exchange rates. Each side can, under the agreement, pledge its own currency in exchange for an equivalent sum of the other country's currency. The agreement is valid for three years, and can be extended by mutual consent.
 
Since then, China has signed additional currency swaps with Hong Kong, Malaysia, Belarus and Indonesia for a total 580 billion yuan.
 
Obviously, China's central bank is considering the needs of its trading partners. The bank official said the main focus is on "nearby economies, particularly those with which China will have close economic and trade exchanges in the future.
 
The deal with South Korea was rooted in the fact that China is that country's largest trading partner, the official said. "While Korea certainly needs U.S. dollars, a local currency swap agreement could be used for trade financing."
 
The official said the amount of currency to swap is determined "mainly in relation to the two sides' trade and investment requirements. But so far, no swap agreement has exceeded 200 billion yuan."
 
Everyone Wins
 
In general terms, countries are signing currency swaps with China to fight atrophying trade and protect regional financial stability. However, each country has its own particular focus.
 
The most obvious goal is to promote international trade and direct investment. The yuan is already frequently used for payments and settlements in East Asia--uses that have become more common as dollar supplies dried up. Central banks using currency swaps for trade can obviously reduce the pressure of demand for the dollar.
 
Moreover, when two sides use local currencies for trade, export companies can borrow money in local currencies, reducing the exchange rate risk tied to the dollar and cutting exchange fees. This is particularly important in the current environment, which is marked by stalling trade and increasing exchange rate volatility.
 
Sources familiar with the China-Indonesia currency swap told Caijing that a preliminary investigation by Indonesia's central bank found a number of big companies already using yuan to settle transactions. Indonesia concluded that signing a currency swap deal would promote bilateral trade.
 
For Belarus, promoting investment was an important motive for the currency swap. China has substantial investments in Belarus, which hoped to receive credit in yuan for paying various costs to China linked to projects such as new power plants.
 
For South Korea, the currency swap agreement was signed not only to "advance the development of trade settlement business" but because also it would protect the stability of the nation's financial sector. When the financial crisis hit, many Chinese banks were unwilling to make short-term loans to South Korean banks operating in China. But after the currency swap, the Bank of Korea could use yuan to support the nation's financial institutions.
 
International demand for yuan settlement is gradually expanding, and even some South American countries are requesting currency swaps. Countries such as the Philippines, Mongolia and Belarus have started using the yuan as a reserve currency, although not on a large scale.
 
According to industry experts, the yuan's advance as a settlement currency and currency swaps catalyzed by the financial crisis are deeply intertwined. Concurrent with the signing of bilateral currency swaps, China has been exploring the use of yuan for bilateral trade. Gradually, the yuan may be increasingly used for trade settlements in the future.
 
Caijing learned that related government departments have completed plans for a pilot yuan settlement program. After getting approval from the State Council, the pilot is expected to encourage currency exchanges between the Yangtze River Delta region, Guangdong Province, and Hong Kong, Macau. Also included would be settlements between entities in Guangxi Autonomous Region and ASEAN-member nations.
 
A central bank official told Caijing the test should substantially raise China's experience in trade settlements with nearby countries in their local currencies.
 
Yuan's Internationalization?
 
The gradual acceptance of the yuan as a currency for international trade and financial markets raises a number of technical concerns and macroeconomic issues.
 
It is generally believed that central banks will mainly lend yuan to other banks, which will lead to the use of yuan-based bank account services, and provide yuan that businesses can use to pay for Chinese imports, thus supporting bilateral trade.
 
"Although China currently doesn't let Chinese banks operating abroad conduct yuan deposit and loan business, it doesn't oppose such activity by foreign banks," the central bank official told Caijing.
 
In addition, the official said, the yuan settlement pilot project signifies a gradual relaxation of rules for Chinese banks conducting yuan deposit and lending activities abroad.
 
As the number of overseas enterprises holding yuan gradually grows, an offshore market for yuan is expected to develop. When conditions are ripe, channels would open for foreign yuan holders to invest that money.
 
Will an overseas market for yuan lead to a loss of exchange rate control for Chinese authorities? No, according to one industry expert who spoke with Caijing. Currency swap agreements so far have totaled only 580 billion yuan, but more than 20 trillion yuan are circulating in China. As a result, the domestic market will continue to determine yuan exchange rates for the foreseeable future.
 
The central bank official told Caijing that, in the future, yuan investment channels could be diversified through the issuance of yuan-based loans. "Yuan debt has been issued in Hong Kong. I doubt it will be a special case," the bank official said.
 
According to Caijing contributing economist Ye Xiang--a former member of China's State Administration of Foreign Exchange and the Hong Kong Monetary Authority--currency swaps are beneficial.
 
"As a trading engine that alleviates the effects of a lack of (dollar) liquidity on trade among nations, currency swaps are a useful financial innovation," Ye said.
 
Ye's analysis shows international financial transactions in the future will largely take the form of commercial activities. Whether a commercial organization is willing to adopt the yuan as its currency for trade, investment and account settlements rests entirely on the convenience and stability of the currency.
 
Ye compared this cross-border trade to a highway between two towns. If there is no trade between the towns, there's no need for a highway. But when there is demand for trade, people will walk a route until a highway is built. Similarly, Ye said, even if banks aren't providing settlement services, some corporations will use yuan to settle transactions, leading to the internationalization of the yuan. But this is not expected to happen overnight.

Source: The Economic Observer Online | Updated: 04-03-2009

China's credit expansion in March kept up rapid growth, the Economic Observer learned.

According to a source close to the matter, the new loans in March reached 1.3 trillion yuan, some 21 % or 230 billion yuan higher than the February's. Among the loans, bill financing made up a high proportion.

The above source said the China Banking Regulatory Commission (CBRC), the country's banking watchdog, and the central bank held different views on the rapid loan growth. The CBRC tended to rein in credit expansion, while the central bank thought that banks issuing loans was a business activity, and that the supervising agency should not intervene.

Together with additional loans in January and February, new loans in the first three months of 2009 amounted to 3.99 trillion yuan. The figure stood at nearly 74% of the total Chinese Premier Wen Jiabao promised to issue in 2009 at the country's top legislative meeting in early March.

Source: Caijing Magazine | Updated: 04-07-2009

Sales of existing homes in Beijing, which rose 113 percent month-on-month in March, may not sustain their surge if second-home buyers and investors do not enter the market, property brokers said.
 
The upturn reflects the government's policy preference for first-time buyers in its stimulus package, allowing them to pay lower rates and make smaller down payments. The central bank also cut benchmark interest rates five times late last year to support the economy. Some local governments are offering their own special terms in addition to those mandated by the central government.
 
But that leaves little for the more speculative buyers which the real estate sector depends upon for boom conditions. Centaline Beijing, a second-hand property brokerage, said in a recent report that investors only accounted for 5 to 10 percent of deals concluded in March.
 
"The strong momentum is unlikely to persist if demand for second homes and for investment is not activated," according to Hu Jinghui, deputy general manager of www.5i5j.com, a website specializing in the pre-owned market.
 
Hu noted that such homes have "advantages in price, location and instant availability" and can be priced at 70 to 80 percent of equivalent newly-developed housing.
 
According to Beijing Real Estate Transaction Management's website, 19,993 pre-owned homes were sold in March, up 255 percent from a year earlier.
 
China's residential property sales rose 13.1 percent year-on-year in the first two months, recovering from a 20.1 percent drop in 2008. Housing prices fell over 30 percent in some Chinese cities last year, as the economy slowed in line with the global economic downturn.
 
Full Article in Chinese: http://www.caijing.com.cn/2009-04-03/110133240.html

Source: The China Perspective | Updated: 04-03-2009

The executives of the 816 Shanghai- and Shenzhen-listed companies that have released annual financial statements received an average 12.2% raise in compensation in 2008 despite the tumbling profit earnings. A total of RMB 2.9 billion were paid to some 13,863 senior managers. Shenzhen Development Bank topped the charts with RMB 43.7 million given to its management. Zhuhai Huafa Industrial's RMB 41.1 million and Bank of China's RMB 37.4 million trailed behind. The 14 financial institutions eliminated RMB 9.2 million from their payrolls put together last year, down 4.2% on 2007.

$1 = RMB6.8

Source: http://www.21cbh.com/HTML/2009-4-3/HTML_09FFH1I7C669.html

Source: Xinhua News Agency | Updated: 04-06-2009

The death toll from a flooded coal mine in northeast China's Heilongjiang Province stands at seven after rescuers retrieved two more bodies early on Sunday.

Five people were still trapped underground at the Jinli Coal Mine in the Xingnong Township, Jidong County, Jixi City, said Fang Dongchu, vice secretary-general of the Jixi municipal government, on Monday.

"The chances of their survival are slim, but the government will go all out to save them so long as there is a glimmer of hope," said Fang.

More than 150 rescuers and six pumps have been deployed to the rescue operation, Fang said.

About 4,000 cubic meters of water had poured into the shaft and it was expected to be pumped out by about 9 p.m. Monday, he added.

The accident occurred at about 5:30 a.m. Saturday when 22 miners were working underground. Six managed to escape.

Four miners were rescued and are being treated at the Center Hospital of Jixi, where doctors described their conditions as stable.

The mine, owned by the Tianyuan Company, is said to have an annual output capacity of 40,000 tonnes.

Work safety officials said the mine was licensed, it was operating illegally as it had not been authorized by safety inspectors.

Police have detained the mine owner, whose identity is still unavailable.

Source: China Daily | Updated: 04-06-2009

Driving restrictions will continue in Beijing for another year starting next Monday, with small changes to make it easier on residents, Wang Zhaorong, spokesman for the municipal committee of communications, told a press conference Sunday.

Starting Monday, April 13, cars with number plates ending in 0 or 5 will be taken off roads on Monday, while those ending in 1 or 6 will be banned on Tuesday, 2 or 7 on Wednesday, 3 or 8 on Thursday and 4 or 9 on Friday. The ban does not apply on weekends or holidays.

According to the new rules, private cars will be banned within, but not on, the Fifth Ring Road from 7 am to 8 pm. Previously, they were also banned from driving on the Fifth Ring Road from 6 am to 9 pm.

The committee estimated the new rules will take 930,000 of the city's 3.6 million vehicles off the road each weekday and increase driving speed by 10 percent, Wang said. In the previous trial, speed increased by 14.7 percent on average.

"Beijing's air quality is getting better," said Li Kunsheng, head of the vehicle management section of the Beijing municipal environmental protection bureau, adding that the daily vehicle emissions fell by 375 tons, or 10 percent.

However, while people without cars tend to support the ban, many motorists oppose it.

"I believe the ban will only drive many rich people to evade the restrictions by buying another car. It is just unfair for people like me, who bought a car because I live too far from the office and want to waste less time on buses, but can't afford a second one," said bank worker Chen Tao. Others said the ban won't cure traffic woes.

"Drivers and pedestrians should all be instructed to strictly follow the traffic rules. This is the best solution to traffic problems," said college teacher Ye Ruozhou.

The banned driving dates will rotate every 13 weeks. The ban expires on April 10, 2010.

Wang said government and corporate vehicles will continue to be banned around the clock based on plate numbers, but it does not apply to emergency vehicles, mass transit vehicles or public service vehicles.

Li expects air quality to improve further thanks to a ban on heavy polluting vehicles that fail to meet the European No 1 standard for exhaust emission within the Fifth Ring road starting April 11.

Previously, such high-emission vehicles were only banned within the Second Ring Road.

The measures are expected to jointly make the daily vehicle emissions to fall by 750 tons, or 20 percent, said Li.

Source: Xinhua News Agency | Updated: 04-07-2009

China will set up at least one clinic in every village within three years to improve the health care at grassroots level, according to an implementation plan for medical reform released by the State Council here on Tuesday.

The government will also support the construction of 2,000 hospitals at the county level to guarantee that each county has a hospital that meets the national standard, the three-year plan (2009-2011) said, adding that more township hospitals and clinics will be built or expanded in 2009.

The country will build or renovate 3,700 community clinics and 11,000 health service centers in urban areas within three years. The central government will also build 2,400 such centers in underdeveloped urban areas during the same period.

In spite of the country's economic progress, the development of health care services in rural areas has lagged behind because most medical facilities and doctors are in cities, the plan said.

Poorly-equipped rural clinics and a shortage of medical staff have restricted the quality and availability of health care for rural residents. Some are even impoverished because of the huge cost of medical treatment and the transportation fees they have to pay traveling from their homes to cities, according to the plan.

Source: Xinhua News Agency | Updated: 04-06-2009

China plans to launch a series of activities from April to October to promote book reading habit among its citizens, especially children, young people, women and rural residents.

The activities include book discounts, prize contests for book reports, opening of new libraries in rural areas and urban communities, and book donation to disaster and poverty-stricken areas, according to a circular issued jointly by the Publicity Department of the Communist Party of China Central Committee and the General Administration of Press and Publication on Sunday.

The circular urged government departments of education, culture and civil affairs, and organizations of trade unions, the Communist Youth League and women's federations at all levels to find creative ways to promote reading habits among the public.

All kinds of media, including radio, TV, magazines, newspapers, Internet and mobile phones, should be involved to set up new trends for book reading, and enhance the social influence of activities designed to promote reading, according to the circular.

"Promoting book reading is a long-term task for us, and we should combine it with the activities to promote spiritual civilization," the circular said.

Statistics showed that the country's book purchase and reading rate was declining in recent years. In 2008, the book purchase rate was 1.75 book per family and the book reading rate was 34.7 percent, 14 percent lower than the figure of 2005, according to a national survey by China Institute of Publication Science.

The survey revealed that about half of the people said they did not read because they did not have time, while 43 percent said they did not have the habit of reading.

The circular said one of the key activities for promoting reading habit was to launch the activity of "reading with your children" among parents across the country on April 23.

Starting from the same day, Xinhua book stores will offer discounts for book purchase and prolong their opening hours, and public-interest ads about the activity will be broadcasted on TV and in other media, and will be sent as text messages to mobile phone users, to help promote the activity.

From April to October, the central government will launch a prize contest for book reports to mark the 60th anniversary of the founding of new China among employees of its departments and organizations. The government will also set up new libraries in rural areas, enterprises and urban communities, and in the military to encourage people to read more books.

In early April, a book list containing more than 100 outstanding books will be promoted among young people and children, with national activities featuring the theme "growing in reading", which will last for a year.

Women will also be encouraged to enjoy book reading and contribute in building a study-oriented society, and help their children to develop reading habit, the circular said.

The organizations of the Communist You League will help promote reading among children and young people in poverty-stricken areas in west China, and collect donated books from all circles of life for earthquake and poverty-stricken areas, according to the circular.

Source: Shanghai Daily | Updated: 04-07-2009

Chinese mainland consumers who bought NUK baby talcum powder will receive full refunds from the stores where they picked up the possibly tainted talc, company officials said yesterday.

Suzhou Debao Baby Supplies Co Ltd, the German brand's general agent for the mainland, said it informed all its dealers to remove the suspect product from their shelves and launched a nationwide recall.

"Customers can return the powder for refunds, even without a sales certificate and no matter which production batch it is," said a Debao official identified only as Xiao. "We informed all our dealers of this policy over the weekend. There may be a delay in taking action due to the Qingming Festival from April 4 to 6."

She said Debao was informed by the German company MAPA, which makes NUK, to recall all its baby talcum after South Korean authorities detected asbestos in NUK and 11 other products during a test of 30 baby powders last week.

NUK has not said how asbestos may have gotten into the company's products. But according to the American Cancer Society, talcum powder is produced from the mineral talc, which may contain asbestos in its natural form.

The inhalation of asbestos can lead to diseases such as cancer of the respiratory system, according to health experts.

At least one local baby product Website said it has started to offer unconditional refunds.

"We removed all the NUK baby talcum powder yesterday," a Redbaby Website official said yesterday. "We received some phone calls from customers and told them they can return the product to us and get a refund."

A representative of Aiyingshi, another online seller, said NUK baby powder sold well and that it was surprising to learn the product must be removed because of safety risks.

Baodaxiang Department Store in Shanghai, which specializes in children's products, and two other major retailers contacted by Shanghai Daily said they removed the talc even though they were still awaiting an official refund notice.

"The authorities had better carry out a wide investigation to ensure the quality of all baby powders on the market to protect children's health, said Wang Yajun, a Shanghai mother who has an eight-month-old son.

The Shanghai Industrial and Commercial Administration Bureau said yesterday that it was closely following the situation.

China's General Administration for Quality Supervision, Inspection and Quarantine said on Sunday it had begun an urgent investigation into NUK powder.