Wednesday, February 28, 2007
1. The 5-year plan approved last year focused on narrowing the
rural-urban gap and developing the countryside. Do you expect Premier
Wen Jiabao to continue focusing on both areas or do you expect him to
pursue other goals this year? Which steps do you expect Wen to take to
pursue those goals?
He has made social justice a mark of his administration, and he will continue to do so. The MOF will dedicate an increasing share of the budget on both closing the rural urban gap and in addressing welfare issues in rural and urban areas.
2. Do you expect Wen to introduce new measures (for example, widening
the US dollar-Yuan trading band) to narrow the trade surplus - a goal
set during last year's economic work conference? Do you expect the NPC
to approve the establishment of a new agency to invest China's
foreign-exchange reserves, or an agency to manage the financial sector?
There will likely be the continuation of gradual appreciation, perhaps 50 or so basis points faster than last year. There is heavy speculation that the NPC will establish the new investment body, but there is around a 30% chance that bureaucratic squabbling will delay it.
3. In terms of economic policy, do you expect Wen to introduce more
measures to slow the economy or prevent a stock-market bubble? Would
fiscal policy be expansionary (or would government spending decrease?)
I think they have had enough on the slowing the stock market bubble part after Monday. However, monetary policies will continue to be vigilant. Fiscal spending will likely expand modestly this year to accomodate all the new social spending programs. However, that won't be a problem since revenue income grows substantially every year.
4. Overall - what are you looking out for during the NPC? What's the
question you'd like to see answered during the NPC?
Well, one is always observing how activist the NPC is relative to previous sessions. The trend seems to be increasing activism, and there is no reason to think this NPC will be different. I think the anti-monopoly law may move toward passage at this NPC, although you would have to check. Also, due to age reason, one can expect to see more new faces among the vice chairmans and the standing committee members of the NPC.
Thursday, February 15, 2007
China Names Top Official To Plan Fate of $1 Trillion
By RICK CAREW
February 16, 2007
BEIJING -- Meet China's $1.07 trillion man.
China has appointed a vice minister of finance to head preparations for a new agency that will invest a portion of the country's foreign-exchange reserves, according to a person familiar with the matter, putting Beijing a step closer to diversifying its $1.07 trillion stockpile of hard currency.
The government is yet to announce the appointment publicly but has said internally that Vice Finance Minister Lou Jiwei will become deputy secretary-general of the State Council, China's cabinet, and will lead preparations for the overseas investment agency, the person said.
The appointment signals that Mr. Lou will likely take charge of the institution once it is established, the person said.
Financial markets are closely watching China's plans for the new government entity, which has been in the works since late last year, for signs of how much of the country's reserves will be shifted out of ultrasafe assets such as U.S. Treasurys and into higher-yielding, more-strategic investments.
Mr. Lou's appointment is the most concrete step Beijing has taken toward establishing the agency since Premier Wen Jiabao said last month that China would "actively explore and expand the channels and methods" for using its foreign-exchange reserves.
Mr. Lou, 56 years old, has served as one of six vice ministers of finance since 1998. He holds a master's degree in economics from the Chinese Academy of Social Sciences, a prominent government think tank and educational institution, and has served in numerous financial-policy positions in the government. Immediately prior to becoming vice minister of finance, he was a vice governor of the poor southwestern province of Guizhou.
The size of the reserves to be allocated to the new agency hasn't been decided, according to the person familiar with the situation, who said the government is establishing a "framework" for the agency before finalizing details. Economists expect China will allot around $200 billion of the $1.07 trillion in reserves to the agency but caution it will move slowly to diversify the funds.
In the past, Beijing has tapped its massive reserves to recapitalize the country's biggest domestic financial institutions, including $60 billion of injections into three of China's four big government-controlled banks.
The government then transferred its ownership of those shares to Central Huijin Investment Co., a government agency charged with instituting modern corporate-governance practices at those institutions.
The person familiar with the matter said the new agency Mr. Lou is expected to head could eventually be merged with Central Huijin.
The appointment of a senior official from the Ministry of Finance to head the agency appears to be an effort to even the balance of power in the financial sector between the ministry and the People's Bank of China, the country's central bank. A former head of the central bank's research department, Xie Ping, was selected by China's leaders in November 2004 to take the top post at Central Huijin.
The central bank is widely seen among domestic officials as a stronger advocate of faster liberalization and further opening of the financial sector to foreign investment than is the Ministry of Finance.
Write to Rick Carew at email@example.com
Tuesday, February 13, 2007
97260 party members were disciplined by the party in 2006
Lai Changxing will not be executed
Qiu Xiaohua will soon be put on trial
The investigation on Chen Liangyu is on-going
and much much more....
|2007-02-13 16:41:20 新华报业网|
对中国当前反腐败的形势，我认为应该从两个方面去看：一方面，中国共产党和中国政府历来高度重视反腐败，旗帜鲜明地反腐败，始终把反腐 败作为关系党和国家生死存亡、兴衰成败的重大政治任务来抓。由于思路明确，措施得力，工作扎实，反腐败斗争不断深入，取得了明显的成效，呈现出良好的发展 态势。不仅在国内得到了广泛的认可，而且在国际上也得到了公正、客观的评价。
还有人认为，中国的腐败是由社会制度造成的，实际上大家都知道，许多存在腐败甚至严重腐败的国家，施行的并不是社会主义制度，在经 济社会发展的情况下，如何解决腐败问题，应该是世界各国共同面对的课题。所以，中国的腐败问题决不是由社会制度造成的。恰恰相反，在中国共产党的领导下， 充分发挥社会主义制度的优越性，反腐败取得了卓著的成效。
我们并不否认，中国还处于并将长期处于社会主义初级阶段，由于体制机制制度还不完善，要在短期内根治腐败问题是不可能的。但是我们 坚信，在中国共产党和中国政府的领导下，通过深化改革、体制创新，通过社会主义制度的自我完善，反腐败一定会不断地取得新成效、新进展，把腐败问题降到最 低限度。
2006年，各级纪检监察机关共给予党纪处分97260人，占党员总数的1.4‰。其中，因妨害社会管理秩序、失职渎职、违反廉洁自律 规定和财经纪律等受到处分的78980人，占受党纪处分人员的81.2%。涉嫌犯罪被移送司法机关依法处理的3530人，占受党纪处分人员的3.6%。此 外，还有37775人受到政纪处分。这些情况说明，2006年在积极预防的同时，保持了查办案件工作的力度；另一方面也说明我们的党员干部绝大多数是好 的，腐败分子只是极少数。
2006年，我们坚持纠建并举、综合治理，注重在体制机制制度上下功夫，从源头上解决深层次问题。一是认真解决群众反映的突出问题。二 是从深化改革入手，进一步加强纠风专项治理工作。反腐倡廉成果的取得，充分表明中国共产党和中国政府反对腐败的决心坚定不移，充分表明我们对新形势下反腐 败规律的认识不断深化，反腐倡廉能力不断提高，充分表明我国的反腐倡廉工作有着深厚的群众基础，得到了广大人民群众的拥护和支持。有党中央、国务院坚强有 力的领导，有全党全国人民的积极参与和支持，我们有信心、有能力把我国的反腐倡廉工作不断推向深入，以党风廉政建设和反腐败斗争的实际成效取信于民。重视 制度反腐败
关于2007年的反腐倡廉工作，中央纪委第七次全会和国务院第五次廉政工作会议已经做了部署，当前各级纪检监察机关正在认真学习领会会 议精神，采取有力的措施，来贯彻落实会议的精神。搞好会议精神的贯彻落实，完成好2007年的工作任务，首先要加大组织协调的力度，发挥有关职能部门的作 用。反腐败是一个系统工程，很多任务需要有关职能部门来加以完成。所以我们当前很重要的一项工作，就是加大组织协调的力度，加强监督检查，保证各项任务能 够落到实处。
党内法规对于“两规”问题有严格的规定，什么情况下可以使用“两规”，“两规”的程序是什么，批准权限是什么，包括对“两规”对象不能 侮辱人格、刑讯逼供、侵犯人权，都有很明确的规定。比如我们对于被审查的党员领导干部在作出处分以前，还是把他作为党员、作为同志来对待，在生活上给予照 顾，包括有病了给他创造条件治病，他也有一定的和家人通话的自由。如果违反了党内的规定，对办案人员要追究纪律责任，特别是造成严重后果的。所以，“两 规”在性质上不同于司法机关所采取的措施。
为了加强对党员干部特别是领导干部的监督，中央颁发了关于领导干部有关事项报告的办法。这个办法明确规定了关于领导干部需要报告事项的 范围，以及怎么报告，由哪个部门来受理这个报告，如果违反规定，不报告或者不如实报告的，如何进行处理，等等，这个规定里都有，都是非常明确的。对于这个 规定的执行情况，当然纪检监察机关要进行督促检查，一旦发现了问题，要按照这个意见的规定来进行处理。
赖昌星是被国际刑警组织通缉的刑事犯罪逃犯。前不久，加拿大联邦法院对赖昌星遣返前风险评估进行了司法复核聆讯。据媒体透露，赖昌星的 律师在法庭上主要针对两个问题进行了辩护：一是认为中国司法机关的承诺没有明确表明对赖昌星不会判处死刑、缓期执行，因此最终还是要执行死刑；二是认为赖 昌星被遣返后会受到司法机关虐待。
一是坚持党纪面前人人平等。2006年，我们查处了一批省部级领导干部严重违纪违法问题，有7名省部级干部涉嫌犯罪被移送司法机关依法 处理。尤其是中央严肃查处陈良宇同志严重违纪问题的坚强决心和鲜明态度，充分表明，我们所说的不论什么人、不论其职务多高，只要触犯了党纪国法，都要受到 严肃追究和严厉惩处，决不是一句空话。
二是加强监督检查，严格执行纪律。中央纪委、中央组织部联合派出两批共六个督查组，加强对换届工作全过程的督促和巡查，共查处"跑 官要官"等违反组织人事纪律的424人。严肃公务员工资制度改革和规范津贴补贴工作纪律，共查处违反有关政策规定的单位491个，涉及违规金额2.55亿 元，2666人受到纪律处分和组织处理。严格执行廉洁从政各项规定，共查处违反规定收送现金、有价证券和支付凭证的领导干部1269人，违纪金额 5448.37万元，有23534人主动上交款额1.27亿元；查处参加赌博的党员干部5754人，其中境外赌博的45人。
三是针对新情况新问题，及时提出廉洁自律要求。去年，我们在深入调研的基础上，针对领导干部利用职权和职务影响，在商品房买卖置 换、借委托他人投资证券或其他委托理财的名义获取不正当利益，为本人谋取预期的不正当利益或以各种方式为配偶、子女和其他亲友谋取不正当利益等行为，明确 了行为规范，并在中央纪委第七次全会上作了部署。
四是正确运用政策，做到宽严相济。在严格执行纪律的同时，我们严格依纪依法查办案件，坚持惩前毖后、治病救人，对能够主动承认和改 正错误，并配合组织查清问题，属于严重错误的，按照规定从宽处理；属于一般性错误的，立足于教育和挽救，帮助其吸取教训。对坚持原则、秉公办事、勇于创新 的党员干部，坚决给予支持和保护。去年，共为29379名受到诬告、错告的同志澄清了问题。
Saturday, February 10, 2007
Tuesday, February 06, 2007
Okay, let's analyze this a bit. CEO Jin Yun rose up in the Shanghai banking system (first ICBC, then SPDB), so he must know the leadership quite well in order to get such a promotion. Remember, SPDB is still mainly owned and operated by investment arms of the Shanghai government. The board of directors of SPDB reads like the who was who in the Shanghai government, with several vice district chiefs, a judge, and several banking officials from the Shanghai banking network. So, obviously, arranging a fictitious loan is no problem among friends.
There are also clearly a few on the board who are just honorary appointments and are mainly interested in collecting the paycheck. Three outsiders, however, could have caught the fishy dealings: Richard Stanley, Fred Hu, and Li Yang. Richard Stanley is Citibank's veteran Asia hand, while Fred is Goldman's point man in China. Li Yang served on the PBOC Monetary Committee and a string of government and academic posts. Granted, the insiders could have easily pulled some serious wool over the eyes of these knowledgeable outsiders. But Citibank actually has a stake in what happens to the bank; were questions asked about the 1 billion RMB loan? Were they given satisfactory answers by the board? Perhaps an "anonymous" source can say something to our friends in the journalism business. It would make for an interesting story.
Targets Shanghai Inc.
Beijing Sends Signal,
Stalling Glitzy Projects
Of City's Ousted Chief
By JAMES T. AREDDY
February 6, 2007; Page A1
SHANGHAI -- With its gleaming towers and explosive growth, this city has helped inspire dreams of a China century. Governed for four years by a British-educated architect named Chen Liangyu, Shanghai exuded a can-do attitude that welcomed foreign investment and showcased China's emergence on the world stage.
But underneath the boom and glitter, Communist Party leaders in Beijing say, lay a secret: massive corruption.
Last fall, the party fired Mr. Chen, alleging mismanagement and theft at a city pension fund, influence peddling and other misdeeds. It detained him at an undisclosed location. There, he has made no public comment.
The fall of Mr. Chen, who not only ran the city but sat in China's ruling Politburo, was China's biggest political shakeup in a generation. But more than the ouster of one official, it amounted to an indictment of the business model known as Shanghai Inc.
Key to that model, according to company and government statements: Giant construction projects got funded from public coffers; choice assets moved out of state hands in elaborate transactions; and plum contracts went to the well-connected.
See some of the buildings involved1 in the pension fund mismanagement in Shanghai over the past several years.
The party, which says its biggest threat is corruption within its ranks, has sent investigators sniffing for official graft in other Chinese cities as well. The Chinese have a saying: Kill a chicken to scare the monkeys. Mr. Chen's ouster is a reminder to local leaders, as well as to foreign investors, that roaring Shanghai-style growth is no longer Beijing's priority. If officials elsewhere take Mr. Chen's fate as a warning, one result could be to tap the brakes on China's booming economy. That would bolster a goal of moderation that Beijing has so far pursued to limited success by jawboning and curbing bank lending.
Mr. Chen's post as party secretary for Shanghai gave him vast power: control over 45% of the city's industry, from manufacturers to banks and property developers. The portfolio reflects the Communist Party's core position in Chinese business. A party-appointed secretary sits at the helm of many business groups in the country, including some joint ventures with foreigners.
In Shanghai, party officials all answered to Mr. Chen. After his September ouster, dozens fell along with him, from a pension-system chief to a mutual-fund executive to Mr. Chen's son and brother-in-law. The detentions have placed power in the hands of officials who are extra-careful in granting licenses and making other approvals needed to do business in Shanghai, say investors.
A subway expansion under way has been called into doubt, as has privatization of a water utility. Museum projects, including a Shanghai branch of France's Centre Georges Pompidou, are held up, as is approval for a Saks Inc. store on the classy waterfront district known as the Bund. The city has put on ice a campaign to lure a Walt Disney Co. theme park and a plan for the world's tallest Ferris wheel, officials say. Saks says it has pushed back the planned opening of its store to 2009 from 2008, while Disney says its China strategy is broader than a Shanghai theme park.
The 60-year-old Mr. Chen was fond of tennis, and a few years ago, Shanghai spent $300 million to build an arena to host the Tennis Masters Cup. Future tournaments are uncertain without their No. 1 fan: Mr. Chen.
Shanghai still has plenty of sizzle. For 2006, it reported its 15th straight year of double-digit economic growth, 12%. But expansion in fixed-asset investment such as property development, while still robust at 11%, was far below the rate of two years ago.
And there are some signs the city is losing its legendary magnetism. The government recently gave permission to the northern city of Tianjin to adopt looser foreign-exchange regulations, not to the traditional banking center of Shanghai. Some foreign developers say it makes sense now to seek opportunities in other Chinese cities rather than Shanghai.
The scandal is a reminder of the role corruption long played in Shanghai's history. Though the city was famed early last century as the East's richest banking center, and opulent Art Deco buildings sprang up on the Bund, government-tolerated opium and prostitution rings also earned the city the label Whore of the Orient. Its very name came to stand for trickery, as in getting "shanghaied" into working on a ship. The Communist Party was founded in Shanghai and rose partly on a wave of resentment against the corruption of the ruling Nationalists.
Decades later, the city was identified with Mao's Cultural Revolution and then the policies of "capitalist roader" Deng Xiaoping. Mr. Chen arrived in Shanghai as its transformation to a futuristic city was beginning. After studying architecture at an army institute, he joined the Communist Party in 1980. It put him in charge of Shanghai Electric Group Co., a massive machinery maker sometimes called China's General Electric. Later, his party jobs included overseeing sports programs, old cadres' retirement and transforming the historic Bund district.
Pension-fund money was used to complete Shanghai's futuristic Tomorrow Square in 2003.
Mr. Chen was allied with Shanghai party secretary Jiang Zemin, one of the pioneers in opening Shanghai to foreign investment. When Mr. Jiang vaulted to Chinese president, a string of Shanghai leaders followed him to national office, enabling Mr. Chen to move up the ranks in Shanghai.
In 1992, Mr. Chen cut short a course in public policy at England's University of Birmingham to accept a promotion back in Shanghai. After a tour as mayor, he ascended in 2002 to the top party post in eastern China: Shanghai party secretary.
Tall, brainy and confident, Mr. Chen fit the part of a big-city boss. He conveyed a populist persona by riding the subway to work and having his spokeswoman hold regular news conferences, a first for a Chinese city.
As foreign money poured in, the city's economic engine seemed to be firing on all cylinders. Companies blazed their logos in neon along the riverfront. Magazine covers touted the skyline as a symbol of the new China.
Behind the scenes, the boom appeared less spontaneous. Mr. Chen's government was seeding big projects from its own coffers and steering city pension funds into deals, according to official reports and people close to the matter.
Records show that to complete a 60-story Marriott hotel, featuring a triangular top and a Ferrari dealer at its base, the city used pension money despite China's prohibition on doing so. And in order to clear swaths of riverfront for still more apartment towers, the city government spent $1.7 billion to relocate its container handling docks to a distant island.
Public works got increasingly grandiose. In 2003, shortly after Mr. Chen revealed a passion for classical music, the city hoisted a 1930s opera house off its foundation and moved it 215 feet to a better location.
When Shanghai bid to be a host city for Formula One auto racing, Mr. Chen's brother-in-law took charge of building a billion-dollar track. The circuit was "unquestionably the finest in the world," marveled 27-time Grand Prix winner Jackie Stewart, who added that "no democracy could afford this."
The city government also sold assets in murky deals, according to brief stock-market disclosures and other official sources. In late 2004, Shanghai's State Asset Bureau sold 8% of Shanghai Electric, the $4.25 billion machinery maker Mr. Chen once headed. The local government also sold 20% of Hua An Fund Management Co., a mutual-fund group that manages $4.3 billion of assets.
The city gave no values for the deals or reasons for doing them. But according to the companies, the buyer in each case was a man named Zhang Rongkun, who earlier in 2004 had also built a toll highway to the Formula One track. Forbes estimated the obscure 33-year-old's worth at $605 million.
But tension with the central government was growing. The first signs of it had already arisen in 2002, soon after a new generation of officials with few Shanghai links rose to power in Beijing, led by President Hu Jintao and Premier Wen Jiabao.
As Shanghai continued to pour money into megaprojects that underpinned property and commodity costs nationwide, the disconnect with Beijing's leadership widened. When the central government imposed a national tax in 2005 to squeeze property speculators, Shanghai diluted it with local exemptions.
In the middle of last year, the government stepped up a crackdown on excesses. For instance, a vice mayor of Beijing was ousted in June for "corruption and dissoluteness" in his job, which included overseeing construction for the 2008 Olympic Games.
Mr. Chen appeared bulletproof. His mentor, former President Jiang, still pulled strings from his retirement, in a Shanghai compound so exclusive that the streets around it aren't on maps. But in August, just as the former president was enjoying a last hurrah with publication of his memoirs, investigators from the Communist-run central government and military began detaining Shanghai officials.
First came the chief of the city pension fund and then Mr. Zhang, the wealthy young purchaser of parts of two state companies, Shanghai Electric and Hua An Fund Management. He couldn't be reached for comment. Detained shortly afterward were Mr. Chen's longtime secretary and people who ran Hua An, plus heads of the Shanghai asset bureaus that sold the stakes in the companies.
Mr. Chen's brother-in-law, boss of the Formula One speedway, was detained. The Communist Party dealt with them in a time-honored method of party discipline, with detention as the first step in what is usually a secretive trial process.
On Sept. 25, the party stunned Shanghai by announcing that Mr. Chen himself was out. Besides pension corruption, said the state-run Xinhua news agency, Mr. Chen had committed "other discipline violations," such as "helping further the economic interests of illegal entrepreneurs," protecting colleagues who "severely violated laws" and aiding family members "by taking advantage of his official posts."
Mention of Mr. Chen quickly vanished from government Web sites. Within hours, Shanghai party members were summoned to a ballroom at a state-owned newspaper company, Wenhui-Xinmin United News Group. There, says a person who was present, party members heard more specific accusations: that Mr. Chen had channeled cash to his family, including $125 million in city pension money to his son, Chen Weili.
The son was a figure in sports, as deputy manager of the city's professional soccer club and publisher of China's Tennis World magazine. He was an official of a company that bought control of a city-owned developer with prominent projects on the Bund, including one with New York-based Rockefeller Group International Inc. The son, detained, couldn't be reached for comment. Rockefeller, a unit of Japan's Mitsubishi Estate Co., says its project has been unaffected by the case.
Several books quickly appeared, anonymously purporting to tell more of the story of the Shanghai leader's downfall, such as tales of alleged carousing and mistresses.
The investigation has especially chilled the property industry. Across the Huangpu River from the Bund, Japan's Mori Building Co. is barred from leasing space in a 100-story skyscraper it's building until the city government signs off on the tower's name, say people familiar with the project. The city's plans for a similar-size skyscraper next door are on hold.
Vincent Lo, a Hong Kong magnate who used to boast about his political connections, has warned investors that his company faces legal risks for accepting pension money to try to build a Shanghai version of Silicon Valley. In contrast to the U.S., China bars the investment of pension money in real estate, to keep retirees' money from being squandered in chancy projects.
Shanghai's mayor and acting party secretary, Han Zheng, says real-estate investors are still welcome. But now, extravagance is out, and "prominent use will be made of caps and ceilings" to control economic growth, he said in a recent address.
When the scandal broke, Mr. Lo of Hong Kong was in the midst of building the "Knowledge & Innovation Community," an ultramodern apartment and office complex adapted to high-tech tenants. Oracle Corp. and Cisco Systems Inc. called it Shanghai's version of Silicon Valley and agreed to help build it.
Among his financing: $190 million from the Shanghai pension fund. It had been funneled through Shanghai Pudong Development Bank Co., a local-government-run bank part-owned by Citigroup Inc., and masked as commercial lending, according to regulatory notices. Pudong Development and Citigroup had no comment.
Mr. Lo said he was returning the pension money and might be unable to finish the project but knew of no investigation targeting him. He replaced the pension money in part with a $113 million loan, but that came on tougher terms and needs to be repaid by March. Through a spokeswoman, Mr. Lo said he is arranging repayment and his projects remain on track. Oracle wouldn't say whether it remains involved. Cisco declined to comment on Mr. Lo's funding.
Write to James T. Areddy at firstname.lastname@example.org
Sunday, February 04, 2007
Note, this could provide the Chinese government incentive to SLOW DOWN appreciation of the RMB to prevent a liquidity shock arising from the appearance of a large quantity of bonds. Of course, it depends on how fast they want to raise 200 billion. This spending will also artificially prop up the value of the dollar and price of dollar assets in the near future, assuming that much of the spending will be on dollar dominated assets.
Also, the word is that Lou Jiwei will head it, which means he won't get the job as the head of MOF! Poor Lou.
China prepares to spend $200 billion to buy stuff around the world
By Zhou Jiangong
Asia Times, Hong Kong
Saturday, February 3, 2007
SHANGHAI -- The Chinese government is taking action to implement a new policy of diversifying the disposal of the country's over US$1 trillion foreign exchange reserves that was initiated by the Central Conference on Financial Affairs three weeks ago.
The Ministry of Finance (MOF) is planning to issue yuan-denominated bonds to raise funds that will be used to "buy out" as much as $200 billion from the country's foreign reserve pool.
To take funds out of the foreign exchange reserves the government must pay the equivalent amount in yuan to balance the books.
At the current exchange rate, the total amount of yuan bonds to be issued by the MOF will be more than 1.5 trillion yuan. The ministry plans to sell the bonds to commercial banks, according to China Business News, a leading business newspaper based in Shanghai.
The $200 billion "bought out" from the foreign exchange reserves will then be injected into a new company to be set up this year to handle overseas investment with foreign reserves.
The new company, tentatively named National Foreign Exchange Investment Co., will be controlled by the State Council, China's cabinet. It will spend funds from the foreign reserves on mergers and acquisitions of overseas businesses, including foreign financial institutions. It will also target overseas energy assets and will likely acquire equities in the domestic markets, or even lend money to help finance domestic research and development projects.
Informed sources say that Lou Jiwei, currently vice minister of finance, will be appointed as board chairman of the National Foreign Exchange Investment Co.
The new company will be a ministry-level body and as such its creation needs to be rubber-stamped by the National People's Congress (NPC), China's parliament. According to Chinese law, bond issuance by the MOF also needs the NPC's approval. Therefore, both the establishment of the investment arm and the issuance of bonds are expected to be on the agenda of the NPC's annual session, which begins next month.
If the MOF decides to issue yuan-denominated bonds, which could happen this year, 1.6 trillion yuan would be taken back from the market.
The new company represents a victory for the Ministry of Finance in the battle for foreign exchange assets management. Some researchers close to decision-makers estimated that the new company could manage about $200 billion.
The new policy to diversify the disposal of the country's huge yet growing foreign exchange reserves is also bound to change China's current foreign exchange management regime, which is dominated by the State Administration of Foreign Exchange (SAFE).
According to the People's Bank of China, (PBoC), the central bank, the SAFE is responsible for the stewardship of the largest foreign exchange reserves in the world. It is estimated that over 60% of the reserves are invested in US Treasury bonds, with an annual return rate of about 3.5%.
It is risky to put all eggs in one basket. Also, the expected appreciation of the yuan is worrying the Chinese government. If the US dollars depreciate against the yuan by 5% this year, which is almost certain, the reserves will "shrink" by $50 billion against the yuan, equivalent to the amount of capital the Central Huijin Investment Co has injected into Industrial and Commercial Bank of China (ICBC), Bank of China (BOC) and China Construction Bank (CCB).
Such concerns finally prompted Beijing to decide to reform the management of its foreign exchange reserves.
It is now widely speculated in Beijing financial circles that the SAFE's dominance in the foreign exchange regime will be cracked. The MOF, along with the PBoC, will lead an emerging multi-tier foreign exchange reserve management system.
Meanwhile, the SAFE will also set up an overseas company to prudently invest in low-risk, long-term Treasury bonds and housing mortgage bonds denominated by the US dollar and the euro. The SAFE will still control at least 60% of the $1 trillion reserves after the diversification.
Central Huijin, nominally the PBoC's investment arm, will continue to manage tens of billions of reserve dollars it has injected into three of the "Big Four" state lenders: ICBC, BOC, and CCB.
This year, it is estimated that Central Huijin will inject about $25 billion to $30 billion into the last of the "Big Four," the Agricultural Bank of China (ABC), to help restructure it into a joint-stock corporate in preparation for going public. ABC's restructuring is to be decided at the Central Conference on Financial Affairs.
Reserve dollars have helped Central Huijin emerge as an empire of state financial asset control. It also controls the country's biggest securities brokerages and indirectly controls the biggest mutual funds. Central Huijin has just announced that it will inject $4 billion into the China Reinsurance Group to take a 92% controlling stake, while the MOF is taking the remaining 8%.
The National Social Security Fund (NSSF) headed by former minister of finance Xiang Huaicheng is also eyeing a slice of the foreign exchange reserve. But a suggestion that a chunk of the reserve be allocated to the NSSF was firmly rejected by Wu Xiaoling, the deputy governor of PBoC. In general, the idea of allocating part of the reserve to any existing financial institution or government department for the purpose of investment has been discarded.
The scale of the MOF's planned bond issuance is so huge that it has to be done phase by phase. In so doing, pressure on market liquidity can be alleviated. Although the market is awash in liquidity, the issue needs to be in line with monetary policy.
Some analysts suggest that the government adopt a Japanese practice: the Ministry of Finance issues home-currency denominated bonds to buy foreign exchange flowing into the country. The purpose of the policy is to separate the burgeoning money supply from the increasing foreign exchange reserves.
The Japanese Ministry of Finance is responsible both for fiscal policy and monetary policy. But the mandates of the MOF in China are limited to fiscal policy and the supervision of financial assets management. The PBoC oversees monetary policy. Yet the issuance of government bonds concerns both the country's fiscal and monetary policy. Therefore, it requires improved coordination between the MOF and the PBoC, whose relationship has long been tense.
The market is also worried that the MOF could incur losses from the operation since it risks holding hundreds of billions of US dollars that will likely depreciate in coming years. But analysts in Beijing policy circles believe that the government is considering hedging the risk.
They say that with the MOF's bond issuance, more than 1.5 trillion yuan will be drawn from the country's banking system to reduce commercial banks' liquidity.
However, some analysts point out the potential shock effect the operation could have on the stock markets. If 1.5 trillion yuan is absorbed by the bond issuance, the market could face a "liquidity shock."
Many concerns have surfaced: Can the markets bear the shock? Will the purchase of $200 billion be completed in one year or in three years? What will the terms of the bonds be?
Ha Jiming, chief economist at International Capital Corporation Limited, dismissed this concern. "Nowadays, liquidity inside the banking system is more than sufficient. If the government bonds are issued phase by phase, the due bank notes issued by the PBoC and the new base money from the purchase of the foreign exchange will allow the market to absorb the pressure."
If the 1.5 trillion yuan is drawn from the banking system in three years, the market could bear the impact on liquidity, many analysts say.
The point is that on the eve of the 17th Party Congress, it remains unclear that Hu is unambiguously in charge. The launch of such a campaign signals to lower officials that Jiang's faction, now controlled by Zeng, continues to enjoy considerable cloute. When it comes time to support controversial promotions, such as the "helicoptering" of Li Keqiang to the Standing Committee, they may be more reluctant to support it due to uncertainty about the relative power balance between Hu Jintao and Zeng Qinghong.
So why did Hu allow such a campaign to take place? Either because he genuinely could not stop Zeng from launching such a campaign, which would imply that Zeng has some powerful cards to play--this would not be surprising given Zeng's close ties with Zhou Yongkang, who probably knows much of what happens in China. The other possibility is that Hu intentionally allowed Zeng to launch such a campaign in order to muddy the water for the 17th Party Congress. Why? I leave that to readers to ponder.......
曾庆红在主持开班式时指出，为了把全党学习《江泽民文选》、贯彻落实“三个代表”重要思想不断引向深入，中央决定举办省部级主 要领导干部学习《江泽民文选》专题研讨班，充分表明了以胡锦涛同志为总书记的党中央对用“三个代表”重要思想武装全党、教育干部的高度重视，充分表明了党 中央对于抓好高级干部理论学习的高度重视。我们一定要深刻领会党中央举办这次研讨班的重要意义，并以高度自觉和严肃认真的态度参加学习和研讨，深刻领会 《江泽民文选》的科学体系和丰富内涵，并结合贯彻落实以胡锦涛同志为总书记的党中央提出的科学发展观、构建社会主义和谐社会等重大战略思想，结合全面建设 小康社会、开创中国特色社会主义事业新局面，结合为迎接党的十七大召开创造良好环境，进一步增强学习贯彻“三个代表”重要思想的自觉性、坚定性，并在实践 中不断取得新的成效。
李长春在讲话中指出，深入学习《江泽民文选》，是坚持和发展马克思主义，不断推进马克思主义中国化，用发展着的 马克思主义指导新的实践的必然要求；是贯彻落实十六大以来中央一系列重大战略思想，推动全面建设小康社会、构建社会主义和谐社会的必然要求；是科学把握国 际国内形势和发展趋势、正确应对各种风险和挑战，牢牢掌握加快我国发展主动权的必然要求；是推进党的建设新的伟大工程，使党始终站在时代前列，成为中国特 色社会主义事业坚强领导核心的必然要求。我们要进一步深入学习中央关于学习《江泽民文选》的决定和胡锦涛总书记在学习《江泽民文选》报告会上的讲话精神， 进一步深刻领会“三个代表”重要思想的时代背景、实践基础、科学内涵、精神实质、历史地位和重大意义，推动学习《江泽民文选》和学习贯彻“三个代表”重要 思想继续向深度和广度发展，加深对邓小平理论的理解，加深对党的十六大以来党中央提出的科学发展观、构建社会主义和谐社会等重大战略思想的理解，为全面建 设小康社会、实现中华民族的伟大复兴提供科学的理论指导和有力的思想保证。
李长春指出，要深入学习《江泽民文选》，全面把握“三个代 表”重要思想的科学体系和丰富内容，必须牢牢把握建设中国特色社会主义这一主题，不断深化对什么是社会主义、怎样建设社会主义的认识；必须牢牢把握加强党 的建设这一关键，不断深化对建设什么样的党、怎样建设党的认识；必须牢牢把握解放思想、实事求是、与时俱进这一活的灵魂，不断深化对推进马克思主义中国化 的认识；必须牢牢把握始终坚持和代表中国最广大人民根本利益的马克思主义立场，不断深化对立党为公、执政为民的认识；必须牢牢把握坚持马克思主义指导地位 这个根本，不断深化对建设社会主义核心价值体系的认识。
李长春强调，加强思想理论建设，用马克思主义武装全党，是我们党永葆先进性的 根本保证。要按照胡锦涛总书记在学习《江泽民文选》报告会上的讲话精神，坚持理论联系实际的马克思主义学风，着力在武装头脑、指导实践、推动工作上下功 夫，努力把“三个代表”重要思想转化为为党和人民的事业不懈奋斗的坚定信念，转化为观察和解决问题的科学方法，转化为指导改造客观世界和主观世界的行为准 则，努力做到认识上有新提高、运用上有新收获。他希望参加研讨班的学员们集中精力学习，花大气力研读原著，独立思考，深入研讨，把思想进一步统一到中央对 当前国内外形势的重大判断上来，统一到中央确定的大政方针上来，增强贯彻落实中央重大决策部署和党的各项方针政策的自觉性和坚定性，进一步提高马克思主义 理论水平和思想政治素养。
《人民日报》 (2007-02-03 第01版)