Tuesday, September 23, 2008
http://www.jrj.com 2008年09月23日 23:38 21世纪经济报道
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But you ask: Li and Meng are both senior officials. If factional logic holds, Hu should be trying to save them, not fire them. I think they are small pawns because Meng's career is basically ruined after he got fired from the mayor post of Beijing during SARS. It would have been hard for Hu to elevate him beyond governor level in any event. Li Changjiang's career is basically over also at the age of 64. He would have had to retire in any event next year, so having him resign one year earlier is no big deal for Hu. You can bet that if a mining accident happens in a province governed by one of Hu's younger proteges, like Hu Chunhua or Liu Qibao, there would not be any resignations.
Blitz against Chinese officials follows milk, other scandals
www.chinaview.cn 2008-09-22 20:31:45 Print
By Cheng Zhiliang, Ji Ming, Cheng Yunjie
BEIJING, Sept. 22 (Xinhua) -- China's top quality control official, Li Changjiang, resigned on Monday over the tainted milk scandal, becoming one of the highest-ranking officials punished after the acclaimed Olympics.
Just eight days ago, Shanxi Province Governor Meng Xuenong resigned over the fatal landslide at an illegal mine. Also sacked were a vice governor of Shanxi, the Party chief and mayor of Hebei's capital city Shijiazhuang, and Party and government officials in Xiangfen and Linfen of Shanxi.
These departures represent the biggest step China has taken to remove responsible officials from their posts after 2003, when many officials were punished over the outbreak of the SARS epidemic. Observers said this blitz showed that the central government was on the alert for unexpected developments and was acting on problems straightaway through reform.
The Chinese leadership admitted the existing system of administrative management had some aspects that were not compliant early this year, saying pursuing further administrative reform is "imperative".
They listed those unsuitable aspects, such as insufficient change in government functions, excessive administrative interference in micro-economic operations, and relatively weaker social management and public services.
The resignation of Li, former head of the General Administration of Quality Supervision, Inspection and Quarantine, came three days after President Hu Jintao, also general secretary of the Central Committee of the Communist Party (CPC), reprimanded” some officials" over work and food safety accidents this year.
These accidents indicated that some cadres lacked a sense of responsibility and had loose governance, and some paid no attention to people's problems and complaints and were even insensitive to life-threatening problems, Hu said.
"The punishments blew the whistle for officials, telling them that governments at all levels must operate according to the scientific outlook of development. It will also act as a breakthrough point in the ongoing administrative reform, as all those unfit for their positions will be fired," said Wu Zhongmin, professor with the Party School of the CPC Central Committee.
The scientific outlook of development, which was first raised in 2003 and inscribed into the Party Constitution last year, puts people first in the process of development and aims at comprehensive, balanced and sustainable development.
However, the interests and security of the people did not receive due attention from officials in the above-mentioned accidents.
A father complained about tainted milk powder after his 13-year-old daughter developed kidney stones after drinking the powdered milk in May. The Department of Health of Gansu Province received a hospital's report of 16 infants suffering from kidney stones after drinking the same formula in July.
However, the scandal was covered up until September. A total of12,892 infants across China have been hospitalized with the effects of tainted milk powder as of Sunday morning, and at least three babies have died, according to the Ministry of Health.
Long before the Sept. 8 landslide in Shanxi Province, in which 265 people have been confirmed dead, local villagers had reported an unsteady dam at the mining dump to the Xiangfen county government on Feb. 27. However, the county government officials ignored these reports and took no measures against the dump.
"In some areas and departments, there is a culture among government officials that everybody struggles for more power and shuns responsibility. This neglect of the interests of the people is totally unacceptable in the current reform of the administrative system, which aims to build a service-oriented government," said Wang Shiquan, a doctor of the China Executive Leadership Academy Pudong.
www.XINHUANET.com 来源： 新华网
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Sunday, September 21, 2008
Basically, I don't think that many deals will actually happen. Many Chinese banks may run into their own sub-prime problem soon due to falling housing prices (you can read my previous blogs on that issue). Thus, they need to hoard capital for impending write-offs which should take place some time next year. The State Council knows this and will be very careful with approving major acquisitions by commercial banks. In the mean time, the CIC is being very careful due to the Blackstone debacle and the equally embarrassing Morgan Stanley deal. CIC may instruct third parties to take small stakes in a bunch of financial institutions, but it would take a very attractive bargain for them to take a substantial stake in any particular one.
Saturday, September 20, 2008
It strikes me that the timing coincides somewhat with the imposition of price control on dairy products earlier in the year (February I think and more indirect measures even earlier). As I have argued in this blog earlier, the imposition of price control means either shortage or the deterioration of quality. In a purely planned economy, the result was shortage. However, in a quasi market economy, where SOEs are expected, indeed pressured, to generate profit, the result was the deterioration of quality. Below is the China Daily press release from February:
"During the price intervention period, operators' price increases must not be higher than the cost increase and the government can limit the manufacturers' profit rate and goods distribution difference rate. Operators must apply for a price increase to the local pricing department 10 days in advance of their expected increase."
Of course Sanlu was particularly egregious and might have started doing this a few years ago. However, the fact that 22 companies also engaged in using Melamine suggests that there was some industry wide pressure to generate profit in the face of price control. The inflation rate looks relatively good now because the price bureaus have apparently done their job by giving few price increases. However, the cost to consumers is deterioration in quality in essential food items. I would look for harmful chemicals being used in processed meats and poultry also......
Also, sadly, this is one of those instances in which some corruption might have caused a better outcome. Had Sanlu been able to bribe quality inspectors about diluted milk powder, many Chinese infants would have been a bit more malnourished, but still alive...
Then strangely, the NDRC website calls for even stricter enforcement of price control on baby formula. Why? No one is buying milk powder, so why is there the need to impose price control on it?!
I read from some forums that some sell-claimed insider argues that the situation is worse than is reported. He argues that in fact a chemical compound called UREA rather than Melamine was originally employed during the milk power production. UREA is cheaper and more dangerous than Melamine while Melamine is only a byproduct of UREA.
Melamine makes it appear as if protein levels are higher than they really are, but keeps cost down, boosting profit.
Wednesday, September 03, 2008
Bundling in China
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Victor Shih | Sep 3, 2008
Due to strong political pressure at the highest level and seemingly declining inflation, the State Council caved and increased the credit quota by some 200 billion RMB. Well, that only goes so far, and much of it still goes to larger firms. So, how are they dealing with the continual liquidity problem? Bundling!! Local governments, including Sichuan, Chongqing, Henan, Beijing, Liaoning, Zhejiang, and Shenzhen, are all planning to issue tranches of corporate bonds whose cash flow comes from a group of small and medium enterprises (SMEs). Each province will issuing 1 to 2 billion RMB of notes for the approved SMEs. The local governments will guarantee these notes, which have 3-5 years maturity!! This is a familiar scheme of borrowing to fulfill current policy needs and leaving bad debt for future leaders of a province or city. This is why the central government banned local governments from issuing debt, but it is coming back in a latent form. Granted, it is on a small scale now, but it can really take off. I think the NDRC is backing this effort, though I am not sure if the financial regulators in Beijing like this. This will also create good business for domestic investment banks, especially those with local government ties. It might also give a boost to state owned asset management companies which are trying to transform themselves into investment banks.
Great, everybody wins, right? We must revisit the question of whether bundling a few highly leveraged companies together makes it better than one highly leveraged company issuing debt? We eventually found out in the US that such bundling, even if done in a very clever way, does not reduce fundamental risks. But I think in China, they know of the risks-- they just don't care because in three years' time, it will be someone else' problem. Perhaps those more familiar with this kind of product can comment further on its risks.
Generally, the recent decision to increase credit quota has made the signal from the central government much more ambiguous and subject to local interpretation. Instead of fighting inflation and reining in investment, growth and survival of SMEs are also paramount policy goals now. I have always argued that ambiguous signals are very dangerous in the Chinese context. The local regulators are already on the side of the local governments and businesses. If the center gives even a hint of loosening, local governments will encourage local regulators to forget all about the rules. In Shenzhen, the local CBRC office is thinking up all kinds of "methods" of financing SMEs, including healthy measures like allowing city commercial banks elsewhere to do business in Shenzhen. Less healthy suggestions include using government money to set up a fund to invest in SMEs and allowing lower level branch banks to operate side investment and small loans companies. Matt Miller, a former Bloomberg reporter who has researched the Kaiping case extensively, can tell you all about side investment and loan companies operated by branch banks. We basically saw an explosion of NPLs and corruption scandals as local bankers siphoned billions from the banking system.
The CBRC in Beijing is also exploring "flexible" policies, such as allowing commercial banks to serve as quasi investment banks to provide funds and guarantees for companies that merge. Basically, instead of allowing bankruptcies, which would increase NPLs, the CBRC would rather that banks force good companies to take over the bad ones. Sounds familiar? That is what they did in the 90s with SOEs--now the same formular is applied to teetering real estate companies and SMEs. Why are they doing this? Isn't everything fine? The first half reports of banks all show spectacular profit and falling NPL ratios. Well, if we look a bit more carefully at overdue loans (definition varies, but typically lapsed interest payment over 90s days), we see that they are on the rise. Overdue loans for Industrial Bank, for example, has gone up over 20% in the first half. Accounting tricks are holding the NPL figures low for now, but by first quarter next year......
Monday, September 01, 2008
凤凰财经 > 历史 > 政经江湖 > 正文
2008年08月29日 08:27新华网【大 中 小】 【打印】