Tuesday, March 31, 2009
So, it has come to this. Local governments are now quite desperate about the real estate markets because of course their friends and relatives are real estate developers. Governments all over the country are wracking their brains trying to find ways to increase real estate demand. In some places, the government is using its own funds to buy up housing for future use. In less affluent localities, however, more desperate measures are used. In Hanting in Shandong, the local mayor simply ordered all government units to help sell apartments on behalf of local developers. Failing that, they are pressured to buy apartments out of pocket. That's public service for you! I think this just illustrates the intimate connections between local officials and local developers!
By the way, the paperback edition of my book is out. I know some of you have been waiting for the more affordable version to come out. It is now available!
来源：南方都市报 2009-03-31 08:46:31 作者：
本报讯 据《经济参考报》报道 商品房滞销，区政府下发红头文件要求副科级以上干部替开发商卖房，并制定了具体考核办法。记者近日在山东省潍坊市寒亭区采访，发现当地很多干部对区政府下达的卖房任务感到苦不堪言，怨声一片。
Sunday, March 08, 2009
At a meeting between Hu Jintao and Guangdong delegates to the NPC session this year, Hu was quoted as saying:
"Now many countries are saying that China is good and hope that China will emerge (to help them), but honestly we are still a developing country. Don't over estimate the fact that we have almost 2 trillion dollar in our foreign exchange reserve. If you take that amount and divide it by 1.3 billion people, how much per head is that? Therefore, we truly need to conduct our own affairs well."
Okay, what do we learn from this?
Chinese commitment to help bail out other countries is nearly zero. Perhaps a few billion will be thrown at the IMF or World Bank, but beyond that, there will be little. There were some currency swaps recently between China, Japan, South Korea, and Hong Kong, but I view them as largely symbolic gestures than genuine help. Also, part of conducting China's affair well is to continue to expand China's export markets. Earlier in the session he said to the Guangdong delegates that:
"If the European and American markets don't do well, we ca develop the markets in Southeast Asia, South Asia, Middle east, Gulf states, and African states, consolidate and pioneer international markets"
Eh well, I guess all of the above except for the resistant South Asian market! Clearly, beyond doing everything possible to maintain stability, China does not have a fundamental interest in facilitating re-balancing; this process will have to be pushed forward by falling consumption from the US and Europe. As Michael Pettis pointed out recently, the Chinese stimulus package mainly builds up even more capacity, which exacerbates the imbalance. Although there are components which seek to increase domestic consumption over the long run, they are relatively minor parts. (I do give them credit for reducing fixed asset investment by 300 billion RMB though, but only to give to the large SOEs through a 'strategic revaitalization plan'! Great job! deciples of Oscar Lange)
China and other countries "manipulate" their currrencies with the blessing of the US ... the dollar is being propped up and massively overvalued by China and other foreign countries.
Friday, March 06, 2009
As we know, the CIC through Huijin has been buying up shares of the listed state banks (BOC, CCB, ICBC, BOCOM) since late last year in the A share market and possibly the H share market. A colleague of mine asked a very good question? Why? What policy purpose does it serve?
Well, certainly the simple answer is that CIC wants to prop up the prices of the banks shares in both Shanghai and Hong Kong. The effect on the market is not just the direct support, but also expectation effect. It creates a winning trade consistently since traders know that below a certain level, the CIC will intervene.
I think the main reason for this intervention is to prevent a large book loss on the CIC's balance sheet beyond the losses from overseas investment. That's mainly a self serving reason. The public policy reason is that all of the banks will need to recapitalize in the near future due to rapid increases in lending. One way of course is to do so through share issuance. State share holding of these banks would not have to be as diluted the more these shares are "worth" on the market. This is de facto a back channel way for China's foreign exchange reserve to turn into funds for the stimulus, through bank recapitalization.
Wednesday, March 04, 2009
In this revealing NYT article, we find out that former Mao secretary is at it again. Since being purged by Mao and suffered horrible ordeals during the Cultural Revolution, Li Rui has been the unrelenting critic of regime policy and a sort of a conscience of the CCP regime. He is now calling for deficit reduction and more democratization. In terms of democratization, he has been singing the same tune for decades, to little avail. On deficit, however, I think Li Rui should stick to what he knows best. The current deficit, though historically high in absolute amount, is relatively small as a share of GDP (3.33%). Moreover, what he perhaps does not realize is that local governments are on a whole broke and cannot finance the stimulus, so the money would have to come from banks and central debt issuance.
Party Elders Press for Checks on China’s Stimulus Plan
New York Times
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By JONATHAN ANSFIELD
Published: March 3, 2009
BEIJING — As China’s government doles out $584 billion to stimulate its ailing economy, critics inside and outside the Communist Party have pressed for details about the murky spending plan and demanded the right to follow the money.
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Times Topics: China
A cluster of liberal Communist Party elders recently wrote to President Hu Jintao and the rest of the party leadership, seizing on the economic troubles and the need for more accountability to promote democratic reforms.
“We very much endorse the central authorities’ investment of 4 trillion renminbi” — $584 billion — “to drive the economy,” they explained in the letter, dated Jan. 20, a copy of which was obtained by The New York Times.
“At the same time, we are extremely worried that the privileged and the corrupt will seize this opportunity to fatten themselves, damage the relationship between the party and the people, and intensify social conflict.”
They pressed for checks and balances on the recovery program. More sweepingly, they urged that state media be freed from censorship and that courts allowed to operate without interference from the ruling party, reforms the party has repeatedly rejected in the past.
The stimulus plan has led to calls for greater transparency from other quarters as well.
A Shanghai-based lawyer, Yan Yiming, has threatened to sue the National Development and Reform Commission, China’s de facto central planning agency, unless it publishes an inventory of items approved for financing. Mr. Yan’s crusade attracted legions of supporters online.
The government is working hard to look responsive, though without releasing much new information. On Sunday, a senior central planning agency official said the government would publicize project details as the plan was approved.
A party-run liaison group called the Chinese People’s Political Consultative Conference has also sought to use the country’s annual parliamentary session, which opens on Thursday, as a forum to show that the government is listening to demands for greater openness.
The chief drafter of the letter by the party elders was Li Rui, 91, a secretary to Mao Zedong before being felled in a 1959 purge. Other signatories included a retired propaganda minister, Zhu Houze, and a publisher, Du Daozheng, along with 13 other aging members of the elite.
Beyond the stimulus, a defense lawyer, Zhang Sizhi, one of the elders, said it was also fair to describe their letter as a vision of reforms vital for the party to endure in the long term.
“The greater the difficulties,” the elders said, “the greater the need for democracy.”
The government has vowed to spend its way out of the economic slump through public works projects, subsidies and tax breaks. It is also trying to speed up social reforms like universal health care.
But the details have remained sketchy. In November, China rushed out its stimulus plan with no public scrutiny, scant details of the spending breakdown and none of the acrimonious debate that slowed action in the United States.
The central government is financing less than one-third of the package, leaving local governments, banks and private enterprise to finance the rest. The mandate from Beijing is to “ensure growth” and “expand domestic demand.”
In their letter, the elders said they feared that the open-ended mandate would set off a binge of uncontrolled spending by regional and local interests, leading to waste and corruption. China spent years before the recent crisis trying to rein in freewheeling local governments and state-backed business interests.
Already, there are signs of a spending spree. Banks doubled their lending in January compared with the same month of 2008, state media say.
Some securities analysts estimate that loan recipients, mostly state-owned firms, funneled as much as a third of new loans into stock market trades, which may help explain a surge in the Shanghai Composite Index this year despite the deepening gloom. To track the loans, regulators have asked banks to submit account records.
The elders behind the letter amassed political clout in the 1980s, as rehabilitated reformists serving progressive party leaders. But those leaders were later purged, and the deadly Tiananmen Square crackdown of 1989 ensued. Two decades later, their agenda of accelerated democracy remains a distant dream.
The party leadership has not responded to the letter, Mr. Li’s son said Tuesday.
One of the elders, 80-year-old Du Guang, said the call for democracy had become even more relevant during the economic downturn. He said he was skeptical of the party’s measures to supervise the stimulus spending.
Mr. Du also criticized the focus on public works projects instead of the country’s weak social services network. “You have to look at how to expand demand in the long term,” he said. “Social spending is more important than building railways, expressways and other basic infrastructure.”