The Sinocism China Newsletter For 09.02.12

Thanks for reading. The best way to see this daily post is to subscribe by email, especially if you are in China, as Sinocism is still blocked here. You can also follow me on Twitter @niubi or Sina Weibo @billbishop. Feel free to donate through the button on the top right, and if there is a story you think I should include please send it to me. 

China’s official PMI manufacturing index contracted for the first time in nine months, catching up to the HSBC gauge which has been below 50.0 for the last several months:

The Purchasing Managers Index fell to 49.2 in August from 50.1 in July, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. That compares with the median forecast in a Bloomberg News survey for a reading of 50, which marks the dividing line between expansion and contraction.

Today’s People’s Daily tries to be positive, writing that China’s economic slowdown is gradually bottoming out–人民日报-8月份中国制造业PMI为49.2%,指数变化显示 经济在下行中逐渐筑底.

This week’s Economist argues in China’s economy: Slow boats that the downturn is a good thing:

In the past, a Chinese government faced with a nasty downturn would already be repealing property curbs and appealing to state-owned firms to expand capacity. Such a clumsy, conventional response would no doubt revive growth, but would also delay the structural reforms, like financial liberalisation, that the country requires. Policymakers outside China may long for more decisive action. But if hesitation enables China to keep to the path of rebalancing its economy, it will be good news for everyone.

China’s stock market dropped 2.7 percent in August in the fourth consecutive month of declines,  “the longest streak since August 2004, according to data compiled by Bloomberg.” It is hard to get excited about stocks when the economy is clearly in distress and corporate profits are declining. But the government may want to prop up the stock market and regulators have decided to allow more money from trust and insurance firms into the equity markets–产品开户重启 有助增量资金入市.

Chinascope has translated an excerpt of an article by Li Zuojun, Deputy Director of the Institute of Resources and Environmental Policy Research at the Development Research Center of the State Council, discussing the Chinese economy’s nine major challenges:

According to Li, the nine problems are: declining economic growth, inflation, economic bubbles, the changing economic growth engines, adjustments in our industries and regional business structures, environmental constraints, the social costs of development, the deteriorating international environment, and resistance to reform.

The original Chinese article is 中国经济面临九大问题与挑战 – [中国证券网].

The Chinese government is not unaware of all the problems, and at least in the case of real estate and related industries has shown a surprising resolve to cripple a sector dominated by powerful special interests. Premier Wen Jiabao reiterated Friday that:

..the country still needs to resolutely curb speculative property investment as controls on the real estate sector are still in a “critical period.”

Hu Shuli’s editorial in the latest issue of Caixin Magazine discusses, once again, the near desperate need for reform to avoid a crisis. I will post a link when it goes online.

Even if the economy goes down the tubes there is always the food, right? If you like Sichuan (aka Szechuan) food check out the pictures and video in Jenny Gao’s latest post my culinary adventure in Chengdu.

On to today’s links:

BUSINESS AND ECONOMY

Goldman’s Jim O’Neill Has Been Pondering China More Than Anything Else Lately – Business Insider - we may already be below his worst case scenario. rah rah// In a note to clients on Thursday, he laid out three scenarios for Chinese growth going forward: high growth over the rest of the decade wherein the economy grows at an average 15 percent annual rate, a “middle path” characterized by an average 10 percent growth rate, and a hard landing scenario in which China only grows 7 percent per year on average through 2020.

房地产税改变的方向、要领与路径选择 – 贾康 – 名家博客 – 博客 – 财经网 - Ministry of Finance official Jia Kang writes on his Caijing blog about property tax policy. Caixin may have Hu Shuli but Caijing may still be better when it comes to insight into economic policy//房产税改革问题正成为各方关注的热点。我认为,房产税的目的并不是唯一地为了打压房价,它实质上是以房产保有环节征税形成规范的经济调节杠杆,来形成多种正面效应,包括对地方政府职能转变的合理激励,以及在配套改革中改变地方政府对土地财政的过度依赖。这一改革也是优化我国税制结构和收入再分配的组成部分。

China Exclusive: Bad loan risk looms over banking sector – Xinhua | English.news.cn - “We should be alert that these local governments’ projects don’t drag the banks into a bad loan crisis,” said Fei Fangyu, a finance professor with Shanghai Jiaotong University. Analysts say banks should learn from the experience that loans to solar panel manufacturing, ship-building and steel, which later suffered from over-capacity, notably went bad three years ago. “The banking sector is extremely sensitive. We can’t overlook the risks even though the overall NPL ratio remains low,” said Zeng Gang, a researcher with the Chinese Academy of Social Sciences. He said banks should ramp up measures — including by slashing dividend payments — to be better prepared for bad loan risks.

In Guangdong, Tea Oil Greases Official Palms – Caixin Online - In the financial documents for a Guangdong Province grower and processor of tea seed oil is a list of key shareholders who also happen to be the relatives of local government officials. Off the record, Guangdong Xindadi Biotechnology Co. Ltd. and its chief – a businessman who went out of his way to cultivate good relations with local officials – received but according to investigators never properly accounted for tens of million of yuan in government subsidies. Tipping authorities to the alleged fraud was an anonymous source who gave police information about a provincial government official who owns 10 valuable pieces of real estate. His portfolio includes homes that would never be affordable based on his salary of no more than 10,000 yuan a month. On June 18, the local Communist Party anti-corruption agency announced the detention of the official, Wei Jinfeng, a 50-year-old deputy director of the Guangdong Finance Department. His wife and mother-in-law were also placed under investigation.

Chinese home builder Agile’s chairman arrested over indecent assault | Reuters - lots of comments on weibo, many say could never have been arrested for this in China, or if had been could have avoided media coverage and worked it out privately.// Aug 31 (Reuters) – Hong Kong police have arrested the chairman of one of China’s largest property developers, Agile Property Holdings, in connection with a case of alleged indecent assault, the firm said on Friday. Chen Zhuo Lin, known as Chan in Cantonese, was arrested on Thursday, Agile said in a filing to the Hong Kong stock exchange. The arrest comes at a time when Chinese property companies are under pressure from government efforts to make housing more affordable in the world’s second-largest economy.

 

POLITICS

Ling Jihua appointed head of United Front Work Department – Xinhua | English.news.cn - BEIJING, Sept. 1 (Xinhua) — The Communist Party of China (CPC) Central Committee has appointed Ling Jihua as head of the United Front Work Department of the CPC Central Committee, replacing Du Qinglin. Ling will no longer hold the post as director of the General Office of the CPC Central Committee. Li Zhanshu has been appointed as the Office’s director.

栗战书任中央办公厅主任–组织人事-人民网 - yesterday was news that former guizhou provincial secretary li zhanshu was now the executive vice director of the very powerful General Office of CPC Central Committee. today there is an official statement that he is now the director of the general office, and his predecessor ling jihua is now the head of the united front work department// 中国共产党新闻网北京9月1日电 据悉,令计划同志已兼任中央统战部部长,不再兼任中央办公厅主任职务,栗战书同志任中央办公厅主任。

Hu Jintao names protégé Li Zhanshu as key aide to Xi Jinping | South China Morning Post - Like his predecessor Ling Jihua , Li rose through the Communist Youth League, a key base of support for President Hu Jintao . Observers compared Hu’s decision to put Li in the post, which manages the daily activities of top officials, to former president Jiang Zemin’s appointment of his own protégé, Wang Gang , during Hu’s rise a decade ago….The source said that Li was someone who was also seen as acceptable and trustworthy to Xi, because he had been the magistrate of Wuji county in Hebei province in the early 1980s, when Xi was in charge of nearby Zhengding county. It is believed that Li and Xi have stayed in touch over the years…A source in Beijing said Ling’s political problems were made worse by his ties to the corruption case of disgraced former railways minister Liu Zhijun

Party Intrigue Seen in Chinese Official’s Apparent Demotion – NYTimes.com -  Cheng Li, an expert on China’s party politics at the Brookings Institution in Washington, said that in recent years Mr. Ling had been likened to Zeng Qinghong, the former Standing Committee member and power broker aligned with former President Jiang Zemin. That was considered an indication that Mr. Ling might join the Standing Committee. “This is very significant,” Mr. Li said in a telephone interview Saturday, referring to Mr. Ling’s new post. “We don’t know what’s going on behind the scenes, but this looks like Ling has been marginalized to a less important position. With this position, his chance of making it to the Standing Committee is almost completely gone.”

栗战书任中办主任 令计划被指入政治局式微_多维新闻网 - Duowei says Ling Jihua’s shift to head of United Front Work Department means he will probably not make it onto politburo..we’ll see//【多维新闻】北京时间9月1日,中共官方发布消息称,令计划不再兼任中央办公厅主任职务,由栗战书任中央办公厅主任。由于政协副主席、统战部部长杜青林已年满65周岁,按照任职年龄规定不再兼任中央统战部部长职务。该职位由令计划兼任。对此有分析人士指出,这是北戴河会议上已经达成的共识。中共正在十八大冲刺的关键时刻着手新一轮的高层大员人事调动,为习近平接棒开始做交接。而此前入政治局呼声较高的令计划,如今从“大内总管”位置上下来,加之可能受此前负面传闻影响,入局前景式微。

United Front Work Department – Wikipedia, the free encyclopedia- The United Front Work Department (UFWD) (Chinese: 中共中央统战部) of the People’s Republic of China is an agency under the command of the Central Committee of the Communist Party of China. Its main function is to manage relations with the non-Communist Party elite, including individuals and organizations holding social, commercial, or academic influence, or who represent important interest groups. In so doing, the UFWD seeks to ensure that these groups are supportive of and useful to Communist Party rule.[1] The UFWD consists of eight minor political parties and the All-China Federation of Industry and Commerce. It maintains a close relationship with the State Administration for Religious Affairs, which overseas the five officially sanctioned religions, and plays an active role in managing ethnic and religious minorities

China’s coming leadership change met with a shrug – The Washington Post - wonder how many Americans think this about the presidential or congressional elections?// With China facing a worsening economy, its biggest political crisis in two decades, and growing public anger and domestic unrest, what do people here say about the seismic change about to take place in the country’s top leadership? “Wu suo wei.” It doesn’t matter.

Official discipline: Policing the party | The Economist - Because of widespread disgust over official corruption, the use of shuanggui arouses little concern outside legal circles. Occasional doubts, however, do appear in the media. In 2010 Time Weekly, a magazine in Guangdong province, reported on a case of apparent wrongful use of shuanggui against a police official. “Once they are brought down to the level of ordinary people, they find they have not the slightest guarantee of their basic rights,” it said of such cadres. Few in China shed tears.

 

FOREIGN AFFAIRS

Imposing West’s will on China goes against global norms – Xinhua | English.news.cn - China’s continuous gains in strength have fanned the flames of envy, misgiving and even horror among certain Westerners, leading some to slander Beijing’s development, squeeze its strategic space and challenge its main interests. China’s fast economic development over the past 30-odd years has not prevented the spread of empty talk about subjects such as “China’s collapse”, “China’s responsibility” and “China’s expansion”. The country’s rapid gain in international influence has been accompanied by a so-called alliance of values, the “return to the Asia-Pacific” strategy and similar Western initiatives

China lays out policy of stability, development in Pacific – Xinhua | English.news.cn - Chinese Vice Foreign Minister Cui Tiankai told the Pacific Islands Forum (PIF) Post-Forum Partners Dialogue Meeting, attended by U.S. Secretary of State Hillary Clinton and representative of the European Union, Japan and other major nations, that the region ‘s development partners should respect the will of Pacific island countries. This involved taking concrete actions on issues of concern to them, such as trade, health, energy and climate change.

Sri Lanka, China seek to strengthen military ties – Xinhua | English.news.cn - Chinese Defense Minister Liang Guanglie (R) shakes hands with Secretary of Sri Lankan Ministry of Defense Gotabaya Rajapaksa in the Sri Lankan capital of Colombo, Aug. 31, 2012

DAWN.COM Singapore allowed to quit port contract « - Sardar Fateh Muhammad Hassani chaired the meeting. Now the Chinese will take over the Gwadar Port, he said. He indicated that China would invest $10 billion to develop the port and manage its operations, but did not go into details about the proposed agreement.

In China, Merkel Focuses on Economy, Not Rights – NYTimes.com - One of the sharpest critics of the chancellor, however, was in Beijing. The artist provocateur Ai Weiwei, who has a strong following in Germany, began poking fun at Ms. Merkel and posting comments on the Internet to show his disappointment at not being invited to meet her for lunch. He even posted pictures of himself striding outside, wearing Chinese slippers and carrying a cardboard cutout of Ms. Merkel through his garden. He called it Taking Merkel to Lunch. Human rights issues may have been largely ignored on this visit, but economic ties have flourished since the two countries began a program of annual governmental exchanges in 2010. On this trip, German executives signed contracts worth more than 4.8 billion euros, or $6 billion, including an order for Airbus, a French-German venture, for 50 jets worth more than $4.4 billion.

 

TECH AND MEDIA

Focus Media Envisions Private Equity Future – Caixin Online - Privatizing the firm and listing on a Chinese exchange could help set Focus Media’s value right and prepare for future expansion…An analyst familiar with the firm said privatization may open doors to innovations that otherwise might have been overlooked because they generate returns too slowly for stock investors…Private investors could also be expected to push the company to optimize its financing schemes and iron out any corporate governance wrinkles…”The greatest risk of investing (in Focus Media) is that an economic slowdown will affect advertising,” said a private equity executive.

Sohu CTO Calls His Boss “Really F*cking Stupid,” Says Sohu Should Stay Out of Search War

 

SOCIETY AND CULTURE

“有钱就能超生”折射社会公平问题-中国青年报 - China Youth Daily on the loopholes in the one child policy and the unfairness that allows the rich and powerful to have more than one child.//  王贵松认为,将“超生罚款”改为“计划外生育费”,再改为“社会抚养费”,一定程度上表明有关方面的态度。“至少相对于违反政策超生就要被强制引产的制度,“社会抚养费”是一个相对合理的制度。”但是,“公民不应因有无单位和贫富差别而受到不同对待,开除、高额罚款等做法都是不妥当的。”

Living with China’s wealth gap on campus — Shanghai Daily - ARRIVING at Beijing’s Communication University of China, freshman Wang Xiaoyan lugged a small suitcase to queue for a welcome package of daily necessities and subsidies from her university. One of her fellow freshmen, Zhu Ling, meanwhile got out of a nearby Mercedes-Benz, took out 12 suitcases and proceeded to hire three porters to carry all the stuff to her dormitory

“Migrant students” to be fairly treated when taking college entrance exam – Xinhua | English.news.cn - Provincial governments should publish measures which allow children of migrant workers to take the exam at places where they currently reside, instead of having to go back their birthplaces to take the exam, as what is stipulated at present, according to the document.

北京小升初共建生内幕:权力部门子弟一比一录取_资讯频道_凤凰网 - so much for the idea of meritocracy, at least in the capital. getting into the top primary and middle schools in beijing may be even harder than getting into the best ones in new york. but there are ways here too, esp if you work for a large SOE or the government, as this story details// 王浩之所以有这么好的运气,全仰仗他的爸爸单位的一项名叫共建的政策。所谓共建,就是政府机关和企事业单位为了满足员工子女入学,通过单位赞助钱或物的方式,与知名中学建立“共建”的关系,共建单位的子女不用通过考试,可直接入读这些学校。 在北京,近二十年来,共建有愈演愈烈之势。每年,通过这个隐秘的渠道,都有人数众多的孩子走进众人仰慕的“牛校”。

Labour camps: Demanding justice | The Economist - One of the lawyers, Li Fangping, says he does not expect changes soon. Officials are worried, he says, about using courts to handle offences now dealt with by laojiao because more sensitive cases would come to light. (The court system is slightly less secretive.) It seems activists like Mr Li are making some officials even less inclined to change the system.

 

ENERGY AND ENVIRONMENT

China denies Greenpeace GM rice test claims |Society |chinadaily.com.cn - CHANGSHA – Government officials in central China’s Hunan Province on Saturday denied claims that children in the area were being used as guinea pigs in US-backed research on the effects of consuming genetically-modified (GM) rice. The response was prompted by a Greenpeace article saying that the environmental protection group had discovered a study backed by the U.S. Department of Agriculture involving feeding genetically modified Golden Rice to a group of 24 children, aged between six and eight, in Hunan.

 

BOOKS

BREAKINGVIEWS-Review: the two-sidedness of a richer China - his writing is engaging. ‘The End of Cheap China’ is full of vivid anecdotes from different levels of the Chinese society, from Chinese billionaires to senior party officials to waitresses and even prostitutes. He gleaned some unique insights about how the Chinese society works from his wife, who comes from a well-connected Chinese family. For any foreigners thinking about doing business in the Middle Kingdom, ‘The End of Cheap China’ is a good place to start.

The End of Cheap China: Economic and Cultural Trends that Will Disrupt the World–Amazon

Thanks for reading. The best way to see this daily post is to subscribe by email, especially if you are in China, as Sinocism is still blocked here. You can also follow me on Twitter @niubi or Sina Weibo @billbishop. Feel free to donate through the button on the top right, and if there is a story you think I should include please send it to me.