Monday, February 27, 2006
If they want someone like Zhou or Bo, or even Dai Xianglong, they would have to settle with a relatively weaker vice-Premier with a Politburo rank. That is not advisable for important portfolios like finance and state assets since several provincial party secretaries are themselves Politburo members. A Vice-Premier with only a Politburo rank would have a hard time ordering say Guangdong what to do since Zhang Dejiang is also a Politburo member.
Speaking of Zhang Dejiang, one option that remains is to appoint a current Politburo member as the vice-premier, with the understanding that this person would be promoted into the Standing Committee at the 17th Party Congress. So let's see. Hui Liangyu, Wu Yi, Zeng Peiyan, Cao Gangchuan and Zhou Yongkang are already Vice-Premiers and State Councilor with heavy portfolios. Of the remaining, Liu Yunshan, He Guoqiang, Guo Boxiong, and Wang Gang are all specialists of the military or party affairs and would make unlikely candidates (well, look at Wen....). If they are promoting someone from the Politburo, it is likely to be one of the provincial party secretaries: Wang Lequan, Liu Qi, Zhang Lichang, Zhang Dejiang, Chen Liangyu, and Yu Zhengsheng. Of these, Zhang Lichang is probably too old at 67, especially given that his patron Li Ruihuan now retains little influence. If Jiang's power remains very robust, it is possible that Chen Liangyu would follow Huang Ju's footstep and become Vice-Premier and Standing Committee member. I think Chen is more controversial than Huang was, and Jiang's power is probably not what it was when Huang was appointed. Therefore, I do not place high odds on a Chen appointment. I certainly hope that the Chinese government has enough sense not to appoint Wang Lequan and Zhang Dejiang. While Wang has done a fine job running Xinjiang's natural resource-based economy, some might see him as inexperienced in managing a manufacturing based economy. As for Zhang Dejiang, it would alarm foreign investors if a graduate of the Kim Il-sung University in North Korea were to take over China's financial sector.
Among the Politburo members, I would place the highest odds on Yu Zhengsheng and Liu Qi. Yu Zhengsheng is a well-known princeling with close ties to Deng's family and is on good terms with Jiang. Moreover, he has served both in central ministries (Electronics, Construction) and in provincial governments, making him a well-rounded candidate for the job. Liu Qi was appointed by Jiang, and also has a well-rounded CV with experience both in central ministries (steel) and local government. In terms of technical expertise, Liu Qi probably has much more experience managing SOEs, one of Huang's portfolios. However, Yu's connections in Chinese officialdom cannot be underestimated.
What about Wang Zhaoguo? He is supposedly a close ally of Hu Jintao, and the only Politburo level supporter of Hu. Although Hu would probably like to maneuver him into Huang's position, I think he has too little experience in economic affairs, and Wen might even reject his candidacy. Hu can try to promote one of his provincial followers (Li Yuanchao of Jiangsu or Lu Zhangong of Fujian) to the vice-Premier position. But the problem again is the two-step promotion. For the sake of promoting one of them, Hu might choose to have a Politburo-level Vice-Premier instead of a Standing Committee level one. Let's hope he doesn't do that because it would greatly diminish the reform impetus in the financial sector.
Wednesday, February 22, 2006
I don't think they will split his portfolio up as the article suggests since they are major portfolios that demand a lot of attention (finance and state assets). The NPC Standing Committee might elect a stand-in Vice-Premier, who will be elevated to the Standing Committee or just the Politburo in the 17th PC. I still stick to my original predictions about who these people might be.
Wednesday, February 22, 2006
Cancer diagnosis may force leader off Politburo
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Executive Vice-Premier Huang Ju , the sixth-highest-ranking Chinese leader, is expected soon to quit politics after being diagnosed with cancer, sources said.
Mr Huang, 68, has remained absent from important public functions since late last month, triggering intense speculation about his health.
Sources said he was diagnosed with pancreatic cancer during a routine medical check-up before the Lunar New Year and has been in hospital since.
Although not immediately life-threatening, his medical condition is believed to be serious, making it almost impossible for him to resume his hectic work schedule in the near future.
His illness could add uncertainty to the party congress in autumn next year, at which President Hu Jintao is expected to reshuffle the leadership and promote his supporters to the highest echelons of power when current standing committee members retire. Mr Huang's admission to hospital means that supporters of former president Jiang Zemin could lose a powerful voice in the intense jockeying ahead of the congress.
Mr Huang, who was the party secretary of Shanghai from 1995 to 2002, has long been considered as one of the political leaders closest to Mr Jiang and as his strongest ally on the Standing Committee of the Politburo - the country's highest decision-making body.
The disease, though very common, is very difficult to detect and also extremely difficult to treat - meaning Mr Huang is very likely to be forced out of politics.
It remains unclear whether Mr Huang, who ranks sixth on the nine-member standing committee, will be replaced. According to the party constitution, election of a standing committee member would have to be decided by a full plenary session of the party's Central Committee.
As the executive vice-premier, Mr Huang is in charge of financial and economic policymaking. In the near future, his portfolio is expected to be shared among the other three vice-premiers, Wu Yi , Zeng Peiyan and Hui Liangyu .
Analysts said Mr Huang's admission to hospital was unlikely to have any immediate impact on the direction and thrust of China's economic development because the standing committee's major decisions were reached through consensus.
Monday, February 20, 2006
Okay, it has been well over a month since Huang Ju's last appearance in public. I double-checked. His last public appearance was the CBRC Work meeting on January 16th. There was a State Asset Conference on January 23rd, but he did not attend, just merely "listened to report before-hand and provided important instructions." He remains the only Standing Committee member who did not attend the new year celebrations. He is still MIA. I attach a picture of him dated January 11th, 06. Unless he is on a very successful diet program, he looks a bit sickly. I apologize for this Kremlinology.
Wednesday, February 15, 2006
What if he is really ill, such that he is unable to return to his official capacity? I think then it will be a scramble between Zhou Xiaochuan and Bo Xilai for the VP position. Both are clearly vying for the position anyway for after the 17th PC. Dai Xianglong and Wang Qishan are also dark-horse candidates. The problem with Huang's portfolio is that it involves finance and SOEs, so the position would require someone either with extensive experience in the central bureaucracy or experience governing a major metropolitan area, or ideally both types of experience. In theory, Bo Xilai and Dai Xianglong would make perfect candidates since both have both qualifications, but Dai has relatively weak factional backing. Meanwhile, Zhou is a connected princelings with support from both Jiang's camp and from Wen's mentor Zhu Rongji. Wang Qishan is cursed by the fact that he does a fairly good job running the capital, and the leadership probably does not want to rock the boat before the Olympics.
Tuesday, February 14, 2006
Cashed-up state firms told to pay dividends Beijing plans to collect payments as SOEs post 600b yuan in net earnings
14 February 2006
South China Morning Post
(c) 2006 South China Morning Post Publishers Limited, Hong Kong. All rights reserved.
The central government is planning to force large state-owned enterprises to pay dividends to the state after companies overseen by State-owned Assets Supervision and Administration Commission (Sasac) posted more than 600 billion yuan in net profit last year.
"The Ministry of Finance has already completed a plan for state-owned profit allocation and Sasac is in the process of preparing a similar plan for the companies under its control," said Su Guifeng, a spokesman for Sasac.
"I cannot give an exact timetable, but once we have completed the plan, state enterprises must pay dividends to the state."
Central bank governor Zhou Xiaochuan voiced support for the scheme in a speech late last year.
The World Bank, in its just-released quarterly update, also recommended that large profitable state enterprises pay dividends to the Ministry of Finance, which can use the money to pay for reforms in education, health and social welfare.
Since tax reforms were implemented in 1994, no government entity has received any dividends from the 169 large state enterprises under Sasac. The same is mostly true for state firms administered by local governments.
"SOEs always come to the government asking for help when they lose money, so, when they make good profits, they should allow their shareholder [the state] to benefit. It's as simple as that," said Qu Hongbin, an HSBC economist.
Bumper profits at state-held firms last year came mostly from natural resource companies benefiting from strong prices of oil and other basic materials.
Without requiring them to return profits to the state, state enterprises are prone to excessive investment and pro-cyclical investment behaviour that exacerbate China's boom and bust cycles.
Large state enterprises also have very high levels of corporate savings, a major contributor to the mainland's unnaturally high domestic savings rate.
"Dividend payouts to the state will help to lower the high savings rate and rebalance the economy," Mr Qu said. "The government can use the money for health and education and shift economic growth more towards consumption."
The World Bank recommends the payment of dividends back to the state as a way of improving corporate governance at state enterprises through the greater government scrutiny that it will involve.
Despite high-level agreement on the need for reform, an internal debate is raging over which agency will be responsible for collecting and allocating the dividends, according to William Mako, a specialist at the World Bank.
"In terms of theory and international best practice, the dividends should go to the Ministry of Finance but there are all sorts of institutional issues and Sasac has a claim on them as well," Mr Mako said.
He pointed out that many listed state enterprises already paid dividends to a parent holding company, which is not required to pass these on to the state.
"The parent enterprise groups may use the money to pay for pension liabilities but they can also use it to invest in commercial property," Mr Mako said.
Management at large state firms and their parent companies are expected to resist having to transfer profits to whichever government department is eventually named.
"If you are the chief of an SOE and if there is some way the corporate governance structure will allow you to not pay dividends to shareholders, then of course you will be happy," Mr Qu said.
The profits of Sasac-administered state enterprises last year accounted for 3.3 per cent of gross domestic product, equal to 20 per cent of fiscal revenue.
Thursday, February 02, 2006
Wednesday, February 01, 2006
Will this affect the IPO? It depends on when it happened and who else is implicated. If it happened a few years ago, and it was only these guys, it should not be such a big deal. Most likely, the money has been written off by the bank. It's still not great news though.....we'll keep track of it.
New charges in $485M theft from Bank of China
Former bank managers alleged to have funneled money internationally through front companies.
January 31, 2006: 7:28 PM EST
WASHINGTON (CNN) - Two former Chinese bankers and their wives were indicted in Las Vegas in connection with a massive scheme to steal and launder nearly half a billion dollars from the Bank of China, Justice Department officials announced Tuesday.
The former managers of the state-owned Bank of China are alleged to have been engaged in an elaborate plot in which they stole $485 million by running funds through front companies and financial institutions in Hong Kong, Vancouver and Las Vegas, officials said. They allegedly planned to immigrate to the United States with their wives and gain citizenship through schemes involving phony documents and sham marriages.
A federal grand jury in Las Vegas brought the new charges against the defendants, who were first jailed in September 2004 on charges of violating immigration laws for trying to illegally gain U.S. citizenship.
A third Chinese banker involved in the alleged conspiracy has pleaded guilty in Las Vegas and returned to China, where he is being prosecuted for embezzlement and bribery.
In Washington, Assistant Attorney General Alice Fisher issued a statement commending prosecutors for untangling what she called a "complex scheme of racketeering, money laundering and fraud".
"We will continue to work closely with our international partners to make sure that the United States is never seen as a haven for criminals to launder the proceeds of their illegal conduct," Fisher said.
Documents identified those indicted as former bankers Xu Chaofan and Xu Guojun and their wives, Kuang Wan Fang and Yu Ying Yi, who prosecutors claim actively assisted their husbands in the scheme.