Sunday, March 26, 2006
Saturday, March 25, 2006
Man, how did i miss this. Qiu Xiaohua was promoted to the head of the State Statistical Bureau (SSB). He was of course one of Zhu's ablest lieutenants, and it is paying dividend. Note, he is only 48, so the question is what's next for him? I have no doubt that he will serve as head of SSB for the next five years and possibly until the end of the Wen Administration, but then he would still be in his mid-50s. If the Standing Committee considers statistics to be an important tool of the regime, which seems to be the trend, he might find himself a vice premier in charge of statistics, auditing, and the likes.
《市场报》 (2006年03月24日 第五版)
I wonder if this will increase or decrease Chinese import of oil. On the face of it, the answer of course is that Chinese demand for oil will decline due to higher prices, but the refineries are now more eager to process oil than before, so that might neutralize some of the effect of higher prices. But I doubt that would be greater than the effect of increasing prices for consumers, so China's balance of trade will improve even more, unless they revaluate the currency to increase the buying power of domestic oil consumers.
Govt raises retail prices of processed oil
font size ZoomIn ZoomOut
China announced Sunday its decision to lift the prices of processed oil as of March 26 while setting up a mechanism to offer some subsidies to disadvantaged communities and public service sectors.
In a circular made public Sunday, the State Development and Reform Commission, which regulates energy prices, said the producer prices of gasoline will be raised by 300 yuan (37.5 U.S. dollars) per ton while that of diesel oil will be up by 200 yuan per ton.
To offset the impact of the price hikes to communities sensitive to higher prices, the commission said China's State Council has decided to launch a mechanism to subsidize some of the communities and public service sectors.
The recipients of the subsidies include grain growers, fishermen and fishing firms operating and farming offshore or in inland areas, using oil-driven fishing boats, state-owned forestry enterprises and nurseries of forestry centers, urban public transportation firms, said the commission.
It said the government will pay the unspecified amount of subsidies directly to grain growers to mitigate the impact of the price hikes of diesel oil and chemical fertilizers and other agricultural production materials.
For operators of rural passenger shipping business, the commission said the government will reduce the impact mainly through such measures as adjusting the charges of transportation, and offer proper amount of subsidies to those in difficulty.
The commission said local governments will offset the increased financial burden on taxi drivers in the urban areas mainly through readjusting the charges of transportation and imposing surcharge on fuel oil.
It said local governments may offer provisional subsidies to taxi drivers in the urban areas if they are unable to readjust the charges in the immediate future.
The Chinese Government has ordered various localities and government departments to implement the measures on subsides while price regulators at various levels should improve inspection and supervision of prices of processed oil to maintain the stability of the oil prices.
Energy sector is one of the very few areas that Chinese Government has yet liberalize price control since China began to build a market economy.
The commission said China's current prices of processed oil are far below that on the international market, which is not helpful to oil refineries in China, to ensuring adequate supplies and to improving energy efficiencies, thus having negative impact on the stable operation of the economy.
Prior to the price hikes, the retail prices of domestically processed oil is about 43 U.S. dollars, while that of crude oil on the international market stands at around 60 U.S. dollars, an official with the commission said in an interview with the press.
The artificially lower prices have resulted in heavy losses of domestic refineries and made it difficult for the oil sector to ensure domestic supplies.
The central government has been slow in raising processed oil prices in the past two years to reduce the impact of higher oil prices on the disadvantaged communities and public service sectors, said the official.
The official said imported oil accounts for over 40 percent of the country's oil consumption, and changing oil prices on the international market are having growing impact on domestic oil market and prices.
I am having troubles in finding a way to estimate the plausible total losses of the AMCs. Do you have any idea on how I could hovercome the problem?
Actually, it's hard to tell. The problem is that since 2001, AMCs have absorbed new batches of NPLs, which is worth a lot more than the old batch on a per dollar basis. So, when they claim they have "recovered" money, is it from sales of the old NPLs or the new NPLs? I don't have any evidence that AMCs are separating the old NPLs and new NPLs when they declare their recovery ratios. You can find those so called ratios in the CBRC website. If you have some AMC contacts, I would be interested in finding out whether they are separating the new and the old NPLs when they declare recovery ratios.
Another problem is that AMCs have learned to buy NPLs from each other at a high price. So, even if the MOF has some regulation requiring AMCs to keep track of recovery ratio for the original 1.4 trillion, they can just sell NPLs to each other at a high price, thereby jacking up the recovery ratio. In this way, the cash recovery ratio for the original 1.4 trillion is artificially high, while AMCs have "invested" in some useless NPLs from another AMC, which they will make a loss on. But that's okay, since NPLs they acquire from another AMC does not count as the original NPLs, but "new investment." Anyway, if readers out there know the accounting, please let us all know.
Tuesday, March 14, 2006
Wen gave a pretty important press conference yesterday at the NPC in which he said "...we must resolutely push forward reform and opening, walk the path of socialism with Chinese characteristics. Although moving forward will be difficult, we must not stop; the way back is a dead-end." So, things are about to get really interesting since this was clearly a very strong message intentionally telling the world that Wen is supportive of further reform. This stands in sharp contrast to, if not in opposition, to Hu's call for reviving Marxism. I don't know what prompted Wen to make this statement, but perhaps out of personal preference or pleads by his advisors (as well as Jiang's people) that Hu's leftism now needs some adjustments. Undoubtedly, this strong signal will give heart to those neo-liberal economists and reformers in the government, who had been feeling a bit defensive lately.
Wen also said that the bank listings will go forward, as expected. BUT, in answering the WSJ reporter's questions that "whether you will support Citibank's bid to acquire majority stakes in the Guangdong Development Bank?" His answer was "in the process of handling commercial banking reform, we must insist on two principles 1. THE STATE MUST HOLD MAJORITY CONTROL, which guarantees the control over a vital economic flow and prevents financial risks 2. strengthen management of the entire process of reform, perfect internal control and monitor and prevent the loss of state assets"
Man, the folks at Citibank must be feeling pretty painful tonight. With Huang Ju's absence, Wen's words are the law, so that's it for that deal. I think this will give the Societe General/Shougang combo a renewed chance of taking a minority stakes. Mm, what should they do? Well, if Citibank had been active in other bank deals (like with city commercials), I would just cut my losses with this deal. GDB is pretty crappy anyway. I would much rather hold high minority stakes in several good city commercials. But I haven't heard any Citibank deals on the horizon with other smaller banks, so this is all they got.......
The AWSJ piece on this topic says "The premier didn't answer a question about his views on Citigroup Inc.'s effort to buy a controlling stake in Guangdong Development Bank. The potential deal would require Beijing to ease its current 25% cap on foreign ownership of domestic banks." No, he answered it, he said "in the process of handling commercial banking reform...." not in the process of handling "state-owned commercial banking reform" which would indicate that the majority control rule only applies to the Big Four banks. His language suggests that the state controlling majority rule still applies to all commercial banks.
央视国际 (2006年03月14日 12:18)
Saturday, March 11, 2006
That's fine, but the tragedy in China is that these ideological debates often have policy implications. Zhou Xiaochuan, for example, are now under the attacks of the leftists for selling state bank shares too cheaply. He is especially vulnerable now with the absence of Huang Ju, who would have taken the brunt of the criticism.
New York Times
By JOSEPH KAHN
Published: March 12, 2006
BEIJING, March 11 — For the first time in perhaps a decade, the National People's
Congress, the Communist Party-run legislature now convened in its annual two-week
session, is consumed with an ideological debate over socialism and capitalism that many assumed had been buried by China's long streak of fast economic growth.
The controversy has forced the government to shelve a draft law to protect property
rights that had been expected to win pro forma passage and highlighted the resurgent
influence of a small but vocal group of socialist-leaning scholars and policy advisers.
These old-style leftist thinkers have used China's rising income gap and increasing
social unrest to raise doubts about what they see as the country's headlong pursuit of private wealth and market-driven economic development.
The roots of the current debate can be traced to a biting critique of the property
rights law that circulated on the Internet last summer. The critique's author, Gong
Xiantian, a professor at Beijing University Law School, accused the legal experts who
wrote the draft of "copying capitalist civil law like slaves," and offering equal
protection to "a rich man's car and a beggar man's stick." Most of all, he protested
that the proposed law did not state that "socialist property is inviolable," a once
sacred legal concept in China.
Those who dismissed his attack as a throwback to an earlier era underestimated the
continued appeal of socialist ideas in a country where glaring disparities between rich and poor, rampant corruption, labor abuses and land seizures offer daily reminders of how far China has strayed from its official ideology.
"Our government only moves forward when it feels there is a strong consensus," said Mao Shoulong, a public policy specialist at Tsinghua University in Beijing. "Right now, the consensus is eroding and there is a debate over ideology, which we haven't seen for some time."
The divide does not appear likely to derail China's market-led growth. President Hu
Jintao, in what Chinese political experts and party members said was a clear reference to the debate, told legislative delegates last week that China must "unshakably persist with economic reform."
China has generally stuck by its market-opening commitments to the World Trade
Organization. Wen Jiabao, the prime minister, has allowed billions of dollars in foreign investment to flow into the once tightly protected financial sector.
Legislative officials insist that the proposed law, which has taken eight years to
prepare and is intended to codify a more expansive notion of property rights added to
the Constitution in 2003, will sooner or later be enacted, though possibly with some
significant modifications. But Mr. Hu and Mr. Wen wittingly or unwittingly invited the debate when they made tackling growing inequality a center of their propaganda efforts, political analysts say. The state-run news media are abuzz with calls to make "social equity" the focus of economic policy, replacing the earlier leadership's emphasis on rapid growth and wealth creation.
Since his rise to power in 2002, Mr. Hu has also tried to establish his leftist
credentials, extolling Marxism, praising Mao and bankrolling research to make the
country's official but often ignored socialist ideology more relevant to the current
He told party leaders in 2004 to study how Cuba and North Korea maintained political
order, party officials say. And he has tried to distance himself from his predecessor, Jiang Zemin, who invited private businessmen to join the Communist Party and was viewed as permitting well-connected officials to enrich themselves with public property at the expense of the poor.
"Hu is himself a centrist who is not really pursuing one agenda or the other," observed a party official who said he could be punished for talking about leadership politics if he were quoted by name. "But he did pull us to the left to restore balance, and that gave the old guard an opportunity it has not had in years."
As a result, analysts say, the leadership may find it harder to pursue market-oriented solutions to some pressing problems, like providing health care to rural residents, grappling with rampant corruption in the state sector, expanding access to education and overhauling banks, insurance and securities companies.
Beijing's new plan to address its rural woes, labeled "building a new socialist
countryside," promises an infusion of government cash for peasants and rural areas. But it steers clear of tackling some restrictions on economic activity, like a ban on
private land sales in the countryside, that many pro-market economists say have left
peasants economically disenfranchised.
"My impression is that allowing an expanded role for the market in education and health care is off the table," said Mr. Mao, the Tsinghua policy expert. "Rural land ownership is also too sensitive to consider now."
The tensions reflect rising concern that breakneck growth averaging nearly 10 percent
annually over 20 years has left China richer but also dirtier and, by the standards of the one-party state, politically volatile. Corruption, pollution, land seizures and arbitrary fees and taxes are among the leading causes of a surge in social unrest. Riots have become a fixture of rural life in China — more than 200 "mass incidents of unrest" occurred each day in 2004, police statistics show — undermining the party's insistence on social stability.
Many Western and some Chinese experts have argued that these problems stem from China's authoritarian political system, and that they will not easily go away until people have a greater say in how they are governed. But the Communist Party and many left-leaning scholars reject that view. They say the ills are caused by capitalist excesses and rising inequality, which they say requires that the government reassert itself in economic affairs.
One measurement of inequality, the gap between the average incomes of urban and rural
residents, has risen to about 3.3 to 1, according to the United Nations Development
Program, higher than similar measures in the United States and one of the world's
highest. A study by the party's Central Research Office estimates that the ratio could rise to 4 to 1 by 2020 if current trends continue, a level some Chinese economists say could incite wider social turmoil.
Such political fears seemed to give an opening to critics who felt economic policies had strayed too far toward capitalism. The strength of leftist opposition had faded
throughout the 1990's after Deng Xiaoping, who called economic development "hard truth," and later Mr. Jiang tolerated little ideological discussion of the direction of changes.
Liu Guoguang, a Marxist economist and a former vice director of the Chinese Academy of Social Sciences, stimulated an outpouring of opinions about inequality last summer when he gave a private talk that was transcribed and posted on the Internet. His talk
supported the emphasis on growth and development but called for a much larger role for the government in managing economic affairs.
In a subsequent interview with Business Watch, a state-run magazine, Mr. Liu said, "If you establish a market economy in a place like China, where the rule of law is
imperfect, if you do not emphasize the socialist spirit of fairness and social
responsibility, then the market economy you establish is going to be an elitist market economy."
He has been joined by other scholars, including Mr. Gong, whose incendiary polemic on
the property law prompted a succession of sympathetic essays and study sessions.
Also contributing to the response is the Hong Kong-based economist Lang Xianping, who
has used a television show to pillory what he describes as raids on state assets by
managers and foreign investors.
One top official who has come under scrutiny is Zhou Xiaochuan, the central bank
governor and a promoter of market initiatives. Mr. Zhou attracted foreign investment to the financial sector, partly delinked China's currency from the United States dollar and steered the three biggest state-owned banks toward stock market listings overseas.
Mr. Zhou was attacked directly in a widely circulated Hong Kong newspaper article and
indirectly by commentators in Beijing, who accuse financial officials of selling China's most valuable assets too cheaply.
Ji Baocheng, president of People's University in Beijing, criticized Mr. Zhou's banking changes in a public session of the legislature last week. He cited the big Hong Kong stock market listing of China Construction Bank, which was completed after the government injected billions of dollars to clean up its balance sheet.
Mr. Ji said the government priced shares in the bank too low, given the fresh infusion of capital, and he accused officials of "blindly sacrificing the interests of China and its people."
The government defends the overseas listings as a necessary step to raise capital,
attract foreign experts to the boards and executive offices of the troubled banks and
put the financial system on sounder footing.
Some pro-market economists, who seemed ascendant in the 1990's and early in this decade and now often sound defensive, have denounced the leftist revival as dangerous. Many also criticize the Hu-Wen administration for micromanaging investment and bank loans, tinkering with property and stock markets and declining to extend market-oriented policies to the countryside.
Zhou Ruijing, a retired newspaper editor associated with the pro-market camp, captured the sentiment in a January magazine essay.
"A widening gap between rich and poor is not the fault of market reforms," he wrote.
"It's the natural result of them, which is neither good nor bad, but quite predictable."
(2)If according to the Kahn article, Hu is playing the centrist, then who are the leftists in power?
(3) I am waiting eagerly for Steinfeld's China's Market Visions.
As unfortunately in the ed. posted here...
Wednesday, March 08, 2006
1. What, in your opinion, is the reason for this announcement?
Hu Jintao is trying to gain legitimacy through this move. Also, I suspect that it is also an attempt to remove or at least undermine the legitimacy of several Jiang crony who are currently provincial party secretaries, such as Guangdong's Zhang Dejiang. He is probably not very popular these days.
2. Do you think this is feasible, and why/why not?
First, the Central Organization Department (COD) has been talking about this for quite some time. In fact, experiments using polls to evaluate cadres have been carried out for several years. The CCP will probably implement it nation-wide. I actually think the impact won't be that great. First, if the surveys are carried out by the local Organization Department, they will be meaningless since the local party secretary can control the outcome. I wonder if the COD will carry out its own survey on an annual basis across all the counties in China. It is actually much easier to do this than it sounds. Many Chinese governemnt and academic organizations (as well as western ones) have been doing mass surveys in China for years. I don't think the polling will be centralized for political reason. There would be too much opposition to it.
Even if they do the surveys, it will only be around 20% of the overall "grade" of the official. Evaluation by co-workers and superiors, as well as age, education, and administrative accomplishments, will still be important.
3. If it is not too speculative, how can this be implemented?
Like I said, it wouldn't be that hard. The COD can set up survey teams in every provincial capital, and they can carry out an annual survey of randomly chosen households in that province every autumn or spring (harvest and spring festivals are the two stress points during the year).
4. In your opinion, will "social stability" lose its importance to the new criteria in cadre performance reviews?
No, social stability will always be the number one priority in evaluating a cadre. There is no sign that this criterion is slipping.
China to use public opinion in party reshuffles
Wednesday, March 8, 2006; 1:08 AM
BEIJING (Reuters) - China is planning a massive reshuffle of local politicians, linking promotion to how well they adhere to the central leadership's bid to address social imbalances, an official newspaper said on Wednesday.
The moves may affect over 100,000 officials in township, county, city and provincial posts ahead of a party congress in 2007 that is likely to seal changes in the country's ruling circle under President Hu Jintao.
"The criteria for promotion will not only look to GDP growth and other political achievements, it will also look to the level of popular satisfaction with their administration," the overseas edition of the People's Daily, the Communist Party's mouthpiece, said, citing comments by the party's organization chief, He Guoqiang.
It said the decisions about promotions and demotions would apply the "scientific outlook on development" -- the party's catchphrase for balanced economic and social growth that places fresh emphasis on social equality, especially for China's poor farmers.
"The goal is to properly select appropriate officials to provide an organizational guarantee for China's future development, and it has major significance for the Chinese Communist Party's 17th Congress in 2007," the paper said.
Hu and Premier Wen Jiabao have overseen a new five-year national development program currently before China's parliament.
That program promises improved incomes, health, education and housing for the country's 750 million farmers, but it has ignited internal debate about how to combine economic growth and equity, say observers.
He, the organization chief, said 14 provincial-level governments would be reshuffled later this year, and 17 in the first half of next year. Party congresses are held every five years, usually late in the year.
He did not specify what provinces would be changed first, but the leaders of several have been widely discussed as potential successors to Hu and Wen.
The paper said the selection process would include public opinion polls, on-the-ground investigations, and interviews with officials.
Wednesday, March 01, 2006
Of course, this bill is ridiculous from an economic and legal perspective (like, it violates the WTO), but does that mean it doesn't have a chance of becoming law? I wish I can say so with confidence, but in politics, you never know. I presume there is some heavy lobbying in the background against any actual protectionist measures. However, there is likely a free-riding problem. That is, all the small firms investing in China are leaning on the big companies to lobby Congress, but the big players are afraid to damaging their name brand, so they pray that the other big companies will do the lobbying. As a result, you have an under-supply of pro-China lobbying. Meanwhile, politicians who just want the next re-election are individually incentivized to hurl as much protectionist rhetoric to the public as possible.
But what's really crucial is whether there is leadership to actually see this bill through. One thing to look at is whether members in the relevant committees (finance committee, I believe) are running for re-election this time and whether their margin of victory is narrow. Only those with a need of re-election would try to benefit from this mess through shepherding the bill through the legislative process, thereby claiming credit. At minimum, this bill will require both Schumer and Graham's continual commitment; they are incentivized to continue sponsoring the bill since they will get the most credit, as the bill is named after them. But will other members follow suit?
One hopes not. Rhetoric is fine, but actual action will be detrimental because it will create general expectation of uncertainty. And of course, consumers will suffer.
The main determining factor in how a congressman votes on these things is what district they come from. Schumer and Graham are both from textiles states.