Elite Chinese Politics and Political Economy

Oh Jeez, let's see what the PBOC is saying....

According to PBOC internal report, the 4.58 trillion went mainly to construction and, surprise!, to SOEs in the electricity equipment, coal, concrete, non-ferrious and machinery sectors. Folks, these are the sectors that will see prolonged over-capacity!


4万亿信贷加剧产能过剩担忧 可能无法达到初衷
来源：南方日报 　2009-04-27 08:43:26 　作者：

　　

　　央行信贷分析报告引发争议,有学者建议不宜推出新的经济刺激计划

　　中国信贷洪闸一季度大开,达到4.58万亿!这些钱到底流向何处?有媒体报道,央行上周出台一份报告,称第一季度信贷资金在第一、二、三大产业上分布比较合理,并得出中国经济形势比较乐观的结论,但央行的观点并未得到其他部门的认同。部分学者和机构担心加剧过剩产能,建议不宜急于推出新的经济刺激计划。

　　4.58万亿投向哪儿去了?

　　据悉,中国人民银行内部已经做出一份详细的一季度信贷分析报告,报告对第一季度信贷资金流入的区域、产业、行业、企业规模做出分析,之后央行认为第一季度信贷资金在第一、二、三大产业上分布比较合理,所谓合理是一种比较均匀的资金分配模式。

　　但央行所认为的信贷结构合理的报告引来了不同的声音。国家信息中心经济预测部副主任祝宝良猜测,根据之前他已经从央行那边获取的一些信息,一些产能过剩的产业获得的贷款也不在少数。

　　事实上,第一季度经济数据就已经让祝宝良感到十分奇怪。4月16日,国家统计局公布的数据显示:一季度,全社会固定资产投资28129亿元,同比增长 28.8%。从产业看,第一、二、三产业(下面分别简称为一产、二产、三产)投资分别为332亿元、10180亿元和13050亿元,同比分别增长 85.0%、26.8%和29.1%。

　　“本来4万亿投资计划应该集中民生工程、‘三农’、基础设施在内产业,这些投资方向多属于第一产业和第三产业。 ”祝宝良说,“三产、一产投得快,大家可以理解,因为一产农业基数低,三产包括医疗保险等在内,所以85.0%、29.1%增长率并不是说很快,但我不明白一季度第二产业投资速度增长为什么那么快。”

　　国金证券最近对上市公司做了调查,结果发现,贷款多的行业主要集中在中上游和投资周期较长的行业,如房地产、电力设备、煤炭、水泥、有色金属和机械等,而这些企业主要是国有企业。“贷款流向投资周期偏长的中上游企业,这些行业有大量的资金需求,资金流入对这些企业有一定支撑。”国金证券王晓辉给出结论。

　　4万亿可能无法达到初衷

　　祝宝良认为, 如果二产投资主要集中在家电、电子元器件、服装、造纸等下游产业,由于这些产业民营企业居多,这可能意味着民间企业真的开始增加,这是真实的经济恢复状况。但是,如果二产投资集中在钢铁、有色金属、造船等这些政府主导的垄断性行业,那么政府4万亿计划可能无法达到计划初衷,因为这些行业产能已经过剩,那么这就预示着产能过剩的调整没有结束。

　　“今年前三个月过高的信贷投放已经加剧经济失衡的风险。”经济学家王小广认为,首先,信贷刺激会导致资金无法有效被利用。“第一季度的信贷不大可能全部都流到实体经济之中,即使流到实体经济也是流到国有企业,可能很多企业把这个钱都用在圈地或搞房地产,而真正需要资金、用于技术升级的企业和中小企业无法得到现金。”

　　其次,当前的资金流向可能会进一步增加过剩产能。由于政府刺激经济,有一些企业可能因此误判,从而增加投资,采取积极进取的经营措施。但经济并没有复苏,一旦经济再次进入调整,这批企业可能就要死掉了。这些情况在国有企业身上可能更加明显。

　　因此,目前一些政府部门建议,未来一个季度不要着急推出新一轮的经济刺激计划,而是等待4万亿投资计划落实情况,观测出现的新变化。祝宝良他认为目前的关键在于对4万亿投资计划的落实。“去年实际投下去是1040亿,今年剩下3个季度每个季度还有2000多个亿,未来三个季度投资肯定比前期要稍微快一点。”

　　本报记者黄应来

What did 5 Trillion RMB Buy?

Dear All, my latest blog post on RGE Monitor


Victor Shih | Apr 23, 2009

I have been getting a wave of bullish sell side reports about how the stimulus program launched late last year is having an unexpectedly good impact on leading indicators in China. Before we draw quick conclusions about how rosy everything will be, let's step back and examine what these figures are actually telling us. In essence, most of the benefits of pumping 5 trillion into the economy are temporary. When this pace of lending slows, many benefits will reverse into major problems.

First of all, I am more or less repeating some points that Mike Pettis raised in earlier notes. Also, unlike many sell side analysts, Stephen Green at Standard Chartered has issued several reports that give a more comprehensive view. Let's look at the latest figures. In conjunction with the stimulus program, the banks issued nearly 5 trillion RMB in new loans in the first quarter, a historically high level. Because there was basically no share issuance or new corporate bond issuance, the 5 trillion from the banks was really the main engine for 1Q 2009. The 5 trillion is almost the size of the US fiscal stimulus package and basically 1/6 of China's 2008 GDP. As far as I know, this is the largest monetary easing in this period of time as a share of a country's GDP (that didn't go into writing off bad debt, that is). Impressive indeed, but what did China get in return?

1. To be sure, fixed asset investment grew by 25+%, which was one of the intended effects of monetary easing of this magnitude.
2. Official PMI, which mainly reflects sentiment among SOEs or state corporation, went back into positive territory, but private sector PMI was still in negative territory at the end of March.
3. There has been a pretty impressive stock market rebound in the A share.
4. The housing market is showing some sign of life after a long winter. Sales in many major cities are going up significantly, even driving up prices in some cases.

So far so good, BUT...

When we look at figures for non-investment economic activities, things do not look good at all. In fact, it is down right disappointing after pumping 5 trillion into the economy.

1. First of all, export and FDI continue to fall at a pretty fast pace, which can't be helped.
2. More alarming, inventory for many industrial goods continue to build UP! According to a recent note by Stephen Green's team, refined oil inventory is up over 35% YoY as of the end of February.
3. Coal inventory seems to have gone down, but that's because many coal mines have ceased to operate. The 21st Century Business Herald reported that 50-70% of mines are "resting" for the moment. Iron ore mines are facing the same problem as international iron ore now costs less than domestic ore.
4. Electricity usage continues to be in negative territory.

Steel consumption has picked up somewhat from a collapse late last year. However, I think the problem there is continual over-capacity. The central government didn't want any major steel firms to go under, so they are spending billions to "merge" a bunch of steel firms. For example, Bao Steel based in Shanghai will buy up several steel producers in the Jiangsu/Zhejiang area. This maintains the over-capacity in the sector and will put upward pressure on inventory.

In electricity generation, there is rumor of a ,CIC2, a mega company that will buy up distressed electricity producers and coal mines from across China, boosting the on-going consolidation financed by bank loans. In the airline industry, billions have been injected into airlines to keep them afloat amidst disastrous bets on world oil prices.

There is then the widely cited figures of 12% increase in urban income at the end of 2008 and increase in car sales in first quarter. In the first instance, I have no idea how the income figures were produced, but they almost always miss migrant workers, who are also urban residents. On the car sales, China Economist already points to a recent FT article which questions whether sales of minivans will help car company profitability. Finally, employment, which supposedly was the main point of the stimulus, was only marginally improved by the 5 trillion. Most large projects haven't gotten going yet as land still needs to be procured. The biggest employment impact was that the 5 trillion prevented the mass bankruptcy of hundreds and perhaps thousands of firms. However, some firms are staying alive by laying off or furloughing workers, like the coal mines.

So, really, when it comes down to it, the 5 trillion bought:

1. some psychological relief
2. some more sales of real estate, thus delaying the bankruptcies of many developers
3. an upbeat stock market, for a while
4. prevented the bankruptcy of numerous state firms, especially in the airline, coal, electricity, and steel sector

The most alarming thing is that these "positive" effects of pumping money into the economy lasts only as long as the money keeps flowing. If for whatever reason, the central government decides to slow down the pace of lending (and there are signs they are thinking of doing so), ALL of the above benefits will collapse relatively quickly. Imagine; if the flow of funds slows significantly, the psychological relief will disappear quickly, as will short-term loans to developers; the upbeat market sentiment will follow as speculative funds withdraw suddenly from the market. SOEs, which are building UP their capacity and inventory as we speak, will face growing losses from depreciation and deflationary pressure on output. Without free flow of bank loans, they will begin to default on their previous loans. Speculative demand for real estate will also collapse, given that inventory is expected to reach over 1 billion sqmtr some time in 2009 (again citing SCB report by Green et al.).

What does this mean? The central government cannot stop or even significantly slow this pace of lending until export picks up in a significant way, else the bubble will burst. This is a race against time. At some point, this pace of lending will lead to a serious NPL problem or inflation, or both. If by that point, export and domestic household consumption remain anemic, I am not sure what options the central government will have.

Corruption Scandal Unfolds More, Another Power Play??

So, a good friend of mine notified me of more dramatic movement in the Huang Guangyu money laundering case. Huang of course is the Guangdong native consumer electronics tycoon, who was arrested in November 2008 for market manipulation, money laundering, and bribery. His arrest led to the successive arrests of Public Security Ministry officials Zheng Shaodong and Xiang Huaizhu, as well as State Administration of Foreign Exchange official Xu Mangang, we now further have the arrests of former Guangdong Discipline Committee secretary Wang Huayuan and former Guangdong police chief Chen Shaoji. What's going on here??? Is this an attempt to undermine or even to uproot former Guangdong party secretaries Zhang Dejiang or Li Changchun??

My suspicion is that this is actually a play by Zhou Yongkang to gain absolute power in the law and politics system. Wang was a client of Chen, and Chen, as well as the other police officers arrested, were clients of former supreme court justice Xiao Hua, a Guangdong native who had a huge network of people in the court and police system. When Xiao retired last year from the court, Zhou likely saw a good chance to clean house and to make an example of Xiao's faction. After this, I don't think anyone else in the law and politics system would dare to challenge Zhou. This house-cleaning,however, creates huge problems for Hu Jintao and even his successor because they become completely reliant on Zhou to maintain stability in China.



广东省政协主席陈绍基接受调查
本文来源于《财经网》　 2009年04月16日 16:30 共有66条点评



字号：
黄光裕案、郑少东案相关涉案人供出线索，查出陈绍基家族巨额资产来源不明

　　【《财经网》广州专稿/记者 罗洁琪 罗昌平】 现任广东省政协主席陈绍基，因涉嫌经济问题，目前正在接受组织调查。《财经》记者经多个渠道

证实，陈绍基是4月11日前后被有关部门调查的。
广东省政协主席陈绍基
相关新闻：



相关专题：

* 还原黄光裕

　　新华网4月16日下午也披露了这一消息，称“据中央纪委有关负责人证实，广东省政协主席陈绍基涉嫌严重违纪，目前正接受组织调查”。

　　知情人士透露，陈绍基被调查，与正在接受调查的原国美电器董事会主席黄光裕，原公安部部长助理、经济犯罪侦察局局长郑少东有所关联。根据

黄光裕案、郑少东案相关涉案人供出陈绍基违法违纪的线索，相关部门调查了陈家族的资产，发现有巨额资产来源不明问题；且初步调查出陈绍基涉嫌

受贿，由其家属收取受贿资金。

　　广东省委一名官员透露说，4月14日下午15时，广东在正厅以上级别官员范围内，对此事进行了通报。省委主要领导在通报会议上表示：最近会有很

多不利于广东的声音出现。要努力树立广东干部的良好形象。

　　《财经》记者了解到，陈绍基最后一次公开露面，是4月5日在珠海出席前乒乓球世界冠军容国团纪念馆揭幕仪式。当时陈绍基的头衔除广东省政协

主席，还有中国乒协副主席。当天的公开活动中，陈绍基表现如常。

　　今年63岁的陈绍基系广东中山人，毕业于中山大学中文系，位居副总警监。

黄光裕案、郑少东案相关涉案人供出线索，查出陈绍基家族巨额资产来源不明

　　陈绍基从1993年始，担任广东省政法委书记达九年；并从1998年至2004年，一直担任广东省委副书记。自2004年始，陈担任广东省政协主席、党组

书记，并于2008年获得连任。陈还曾任中共第十六届中央候补委员，中共十七大代表，第十届全国人大代表，第十届全国政协委员。
广东省政协主席陈绍基
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　　在政界一路高升的同时，陈绍基在广东警界亦业绩彪炳，位居副总警监。陈绍基早在1982年就进入广东警界，随后，自省公安厅办公室副科长步步

升至广东省公安厅厅长，并在公安厅厅长及党委书记位置上任职七年。在1993年至2000年的七年任期内，陈绍基为广东警界赢得“最威名显赫的年代”，

当时的广东公安被誉为“逢大案必破”。2001年8月14日，公安部授予广东省公安机关“打黑尖兵”荣誉称号。

　　在广东警界曾经光辉的上世纪90年代，有个关键的人物不容忽略。他就是正在接受中央纪委调查的公安部部长助理、经济犯罪侦察局局长郑少东。

郑少东1980年从警，在广东省公安厅历任刑警总队副总队长、刑侦局局长，广东省公安厅常务副厅长等职。在调任国家公安部之前，郑少东曾经是陈绍

基手下的得力干将、仕途被看好的“警界少帅”。

　　但是，自国美电器董事会主席黄光裕案发后，郑少东和陈绍基分别成为涉案被查的首名副部级官员和首名省部级官员。

　　2008年11月19日晚间，黄光裕因涉嫌操纵股价问题，被北京警方带走调查。随着调查逐步深入，与黄光裕案牵连的商人、官员与掮客逐渐浮现。今

年1月12日，有关办案人员将时任公安部部长助理、公安部经侦局局长郑少东，公安部经侦局副局长兼北京直属总队总队长相怀珠带走。随后，二人因涉

嫌在金融大案中受贿被实施“双规”审查。

　　在黄光裕案揭底过程中，陆续牵连出的商界及政界人物还有：黄光裕的胞兄即新恒基集团董事长黄俊钦、中关村科技发展（控股）股份有限公司董

事长许钟民、国家外汇管理局管理检查司司长许满刚、港澳赌业重量级人物连超等。


浙江省纪委书记王华元接受调查
本文来源于《财经网》　 2009年04月16日 19:03 共有55条点评


字号：
由黄光裕、郑少东系列案件牵出，涉嫌在广东任职期间严重违纪

　　【《财经网》上海专稿/记者 陈中小路 罗昌平】受黄光裕、郑少东系列案件的牵连，现任浙江省纪委书记王华元于4月12日左右被中央纪委“带走”

调查。
浙江省纪委书记王华元
相关新闻：



　　新华网4月16日下午从中央纪委有关负责人处证实，浙江省纪委书记王华元涉嫌严重违纪，目前正接受组织调查。据中央组织部有关负责人证实，王

华元因严重违纪，中央已决定免去其领导职务。

　　多方消息显示，王华元此番被中央纪委调查，主要涉及其在广东任职期间的相关问题，与正在接受调查的原国美电器董事会主席黄光裕，原公安部

部长助理、经济犯罪侦察局局长郑少东案有所关联。

　　现年61岁的王华元系安徽宣城人，曾长期在空军服役，担任过空军航空兵第九师二十六团政委、空军航空兵第九师政治部主任、空军航空兵第九师

政委、南京军区空军航空兵训练基地政委等职。1996年后，王华元开始在广东省相关政府部门任职，并于1998年至2006年长期担任广东省纪委书记。

2006年，王调任浙江省省委常委、纪委书记。王华元是第十五届、第十六届、第十七届中央纪委委员。

　　王华元的最后一次公开露面，是4月10日在浙江省德清县举行的浙江省纪检监察调研工作会议，王华元出席会议并讲话。此后，便传出其被中央纪委

“带走”调查的消息。

现任广东省政协主席陈绍基也与王华元同期被中央纪委“带走”调查，据悉两者涉案有关联。目前，陈绍基已被有关部门发现存在巨额资产来源不明以及

受贿等相关问题。陈早年曾长期担任广东省政法委书记，而郑少东过去曾是陈手下的得力干将，长期在广东省公安厅任职，后才提拔至公安部。
浙江省纪委书记王华元
相关新闻：



相关专题：

* 还原黄光裕

　　陈绍基和王华元的仕途自1996年开始有交集。当年，王华元由广东省文化厅副厅长调任省纪委副书记，此时陈绍基担任广东省委常委，政法委书记

，省公安厅厅长、党委书记。二人在政法战线上的工作关系持续到2004年。当年2月，陈绍基由主管政法工作的广东省委副书记选举为省政协主席。王华

元接任了主管政法的省委副书记一职。

　　《财经》记者获悉，与王华元、陈绍基涉案关系最深的，则是有“公海赌王”之称的港澳赌业重要人物连超，此人因涉嫌为黄光裕“洗钱”等问题，已

于 2008年末被内地警方刑拘。连超与内地富豪及官员关系熟稔，经常邀请他们上船“一试身手”。而王华元和陈绍基，则可能涉及过去对连超相关的走私

、洗钱乃至组织黑社会等违法行为的保护。

　　自国美电器董事会主席黄光裕案发后，从中央到地方多个部门要员已卷入。2008年11月，黄光裕因涉嫌操纵股价问题，被北京警方带走调查。随着

调查逐步深入，与黄光裕案牵连的商人、官员与掮客接连卷入此案，其中包括原公安部部长助理、公安部经侦局局长郑少东，原公安部经侦局副局长兼

北京直属总队总队长相怀珠，国家外汇管理局管理检查司司长许满钢，港澳赌业重量级人物连超，以及此番涉案的王华元和陈绍基等人。■

Read the Facebook Era, by my sister!

For those of you who like to use facebook and are thinking about the commercial applications of Facebook, read my sister Clara Shih's new book on the topic. She has worked at Oracle, Microsoft, Google, and is now working on a joint project between Salesforce.com and Facebook. It's an awesome read, and it only costs 17.99 (NOT 80 dollar like my book!). To buy, the book, follow this link.

My new Wall Street Journal Asia editorial

Here it is, comments welcomed:

Asian Wall Street Journal,
April 3, 2009
Victor Shih

Legless Stimulus in China

China's 'Legless' Stimulus


China touted the effects of its $588 billion economic stimulus package at the Group of 20 meeting this week in London. Chinese policy makers, including President Hu Jintao, argued that the stimulus package proves Beijing is playing its part in jumpstarting the global economy. Some investors have been swept up in a wave of optimism about the package's positive impact.

There is considerable evidence, however, that even if the stimulus manages to produce some positive headline numbers, it is likely to fall short on its ultimate aim of creating employment and jump-starting private consumption. This result is the outcome of a political system dominated by state planners, large state corporations and local officials.

More than three-quarters of the stimulus package will be spent on construction, including transportation infrastructure, earthquake reconstruction, welfare housing and rural infrastructure. Much of the money spent on earthquake reconstruction may prove productive. After more than a decade of intensive infrastructure building elsewhere in China, however, it is dubious that additional construction on such a massive scale can generate economic returns beyond boosting short-term employment for a few months.

Furthermore, the central budget finances only around one-quarter of the stimulus package. At least half of the remainder will be financed by banks in China. Banks are eager to finance these government-sponsored projects because they come with implicit government guarantees and thus pose less risk than private borrowers do. In addition to $588 billion in central projects, local governments have also proposed more than $3 trillion in additional investment projects. Not all of these projects can be financed, but local plans could potentially double the size of the central stimulus. Banks may end up financing as much as three-quarters of these local projects because local governments are typically cash-strapped, thus further crowding out private consumption and investment.

Local and central governments are in some cases at an impasse over how much land should be allocated to central projects. Land sales to developers and land mortgaging have been major sources of local discretionary spending in recent years, but the stimulus projects will demand large tracts of land from the local land banks at little compensation. Thus, local governments do not want to "waste" this land on public projects, especially when the central government has set a strict limit on the amount of farmland that can be developed. The Chinese press reports that sometimes local governments are simply stalling on central projects, especially when it comes to welfare housing. In other cases, local governments are resettling residents with little compensation to reduce the cost of obtaining land. The Ministry of Land and Resources apparently deems these problems serious enough that it has organized an internal work group to monitor them.

Of the remainder of the money, the government announced at the March National People's Congress a $54 billion fund for enterprise "innovation and restructuring." Most of this money will go to state-owned corporations. A significant portion of the $31 billion allocated to pollution reduction will also end up in state firms.

These firms may not use the cash effectively. Large state firms' profitability fell 25% at the end of 2008 from the end of 2007. Some state-owned corporations, such as China Eastern Airlines, stay afloat only due to central subsidies after botching deals on commodities futures. In addition, subsidies embedded in the stimulus and bank loans will be used by state firms in the steel, automobile, electricity, and coal industries to buy state-owned and even private competitors, which contradicts at least the spirit if not the letter of the antimonopoly law by creating oligopolies.

From the perspective of building behemoth national champions, rescuing ailing state firms and subsidizing sector consolidation may be a fine strategy. However, from the perspective of generating employment and private consumption, it may not be particularly effective. To be sure, state-owned corporations have been ordered to not fire anyone, but with overcapacity looming over them, they are certainly not doing much hiring. In addition, it is unclear whether the no-firing rule applies to newly acquired subsidiaries of these state behemoths.

The stimulus is thus legless: It looks impressive at the top, full of grandiose plans and ample financing from state banks, but lacks a solid foundation. The epic scale of central expenditure and state bank lending will generate some positive investment and GDP figures. Its impact at the grassroots level, however, is dubious. Beyond the short-term boost in employment and relatively small sums spent on social welfare and health, ordinary Chinese will see few benefits, limiting their capacity to spend.

Already, the People's Bank of China's fourth-quarter monetary report indicates that household propensity to consume declined yet again. Given horrendous export figures in the first quarter of 2009, household propensity to consume is likely to decline again. The central leadership in Beijing has voiced its intention to boost domestic consumption. If they seek to maximize society's welfare over the long term, these leaders may be relied upon to carry out the right policies to boost consumption.

But these are heroic assumptions. In an autocratic regime, generating employment is not the only means of holding on to power. State corporations and local officials demand their large slices of the stimulus package. Even if the current leadership is sincere about its desire to reorient the economy, they are under pressure to address the concerns of powerful rent-seeking interests, who directly influence the leadership's ability to stay in power. Ordinary citizens and small firms are largely absent from the political process, and exert no direct influence on the implementation of the package.

This is not to say the American stimulus will perform any better, but the Chinese political system certainly diminishes the effectiveness of the stimulus. When China claims that it has done enough to jump-start domestic demand, G-20 leaders should take that message with a large grain of salt.

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