Archive for ‘Premier Li Keqiang’


China’s producer prices stall in June, fuel deflation worries

The producer price index (PPI) showed no growth in June from a year earlier, the National Bureau of Statistics (NBS) said on Wednesday. That compared with a 0.6% rise in May and a gain of 0.3% forecast by economists in a Reuters poll.

The June PPI reading was the lowest since August 2016 when the index last fell year-on-year. Factory gate prices slowed from May as well, falling 0.3%.

On the other hand, June consumer price growth in annual terms matched a 15-month high seen in May as supply shortages triggered by the African swine fever outbreak and extreme weather conditions continued to push up pork and fruit prices.

A cooling in producer prices, seen as a gauge of industrial demand that gives momentum to investment and profits in the Chinese economy, may rekindle worries about deflation and prompt the authorities to launch more aggressive stimulus.

“The bigger picture is inflation, apart from food inflation, is actually pretty weak and with the economy continuing to cool, I think the return to factory-gate deflation is very likely,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

Tommy Xie, China economist at OCBC Bank in Singapore, also said he saw the risk of produce prices contracting in annual terms as early as next month.

Upstream sectors were particularly weak, with prices for oil and natural gas extraction down 1.8% from a year earlier, the NBS data showed. Price gains in the coal mining sector also eased.

Although Beijing and Washington reached another truce in their trade war last month, economists expect continuing pressure on the Chinese economy as manufacturers shift more production abroad to avoid U.S. tariffs on China-made goods.

China’s factory activity shrank more than expected in June as tariffs and weaker domestic demand hit new orders for goods.

Beijing is fast-tracking more infrastructure projects but prices for some construction materials remain lacklustre.

Spot prices for steel rebar in June lingered below the levels of a year earlier and may worsen due to seasonal slackening of construction activity amid high temperatures and rainfall in summer.

Premier Li Keqiang pledged earlier this month to implement financing tools including reserve requirement ratio (RRR) cuts to support small and private firms, adding to expectations for further stimulus measures.

At the same time, however, he and other top policymakers have reiterated that China will not resort to large-scale stimulus.

Evans-Pritchard from Capital Economics said the government could adopt more monetary easing and off-budget fiscal support to bolster the economy.

“But I think the days of big drastic stimulus are probably over. The most we can hope for is really it (more government support) helps to dampen the headwinds and prevent the economy from slowing too sharply.”


The consumer price index (CPI) in June rose 2.7% in annual terms, driven by higher food prices. Fruit prices surged 42.7% from a year earlier while pork prices rose 21.1%.

Analysts polled by Reuters expected consumer prices to rise 2.7%, matching the pace seen in May.

Some economists said consumer inflation may accelerate due to dwindling pig stocks, but others contended price rises will cool.

“CPI may have peaked in June and could come off steadily in the second half,” said Wang Jun, Beijing-based chief economist at Zhongyuan Bank. “There are deflationary risks but the overall pressure is not big, because deflationary risk is only restricted to manufacturing products.”

Core inflation that strips out volatile food and energy prices was at 1.6% in June from a year earlier, the same annual pace as in May.

On a month-on-month basis, CPI fell 0.1% in June after no change in May.

Source: Reuters


China pledges to remove ‘unreasonable barriers and restrictions’ to help SMEs amid trade war

  • The mainland government will also seek to create a level playing field for businesses, most of which are privately-owned, in terms of market entry and regulation
  • Small and medium-sized firms are vulnerable to trade disputes and an economic slowdown even though they contribute the majority of growth and employment
China plans to make it easier and cheaper for businesses to access credit through subsidies and certain bank loans, according to a comprehensive policy guidelines jointly released by the Central Committee and the State Council on Sunday. Photo: Alamy
China plans to make it easier and cheaper for businesses to access credit through subsidies and certain bank loans, according to a comprehensive policy guidelines jointly released by the Central Committee and the State Council on Sunday. Photo: Alamy
China will “remove all sorts of unreasonable barriers and restrictions” to help small and medium-sized enterprises which are seen as vital to help employment and economic growth amid the trade war with the United States.
Beijing plans to make it easier and cheaper for businesses to access credit through subsidies and certain bank loans, according to a comprehensive policy guidelines jointly released by the Central Committee of the Communist Party of China and the State Council on Sunday.
The mainland government will also seek to create a level playing field for businesses, most of which are privately-owned, in terms of market entry and regulation.

“Small and medium-sized enterprises is an dynamic power for national economic and social important and is critical for expanding employment, improving people’s livelihood, and to foster innovation,” the guidelines said. “For now, they are facing problems of rising production costs, difficulty in obtaining credit and insufficient capabilities to innovate – these issues demand high attention.”

China will “remove all sorts of unreasonable barriers and restrictions, trying to ensure fair competition and provide sufficient market in terms of market entry, licensing, bidding and the military-civil infusion,” it added.

While most of the policies are not completely new, the move to pull them together into a larger policy document, which will serve as a guideline for local authorities, shows China’s intention to stabilise the domestic economic situation as its trade disputes with the US continues.

Beijing has also designed a variety of financial policy tools, including targeted required reserve ratio cuts and the use of small and medium-sized enterprise loans as collateral for medium-term lending facilities granted by the central bank, meaning banks will have more incentives to offer financing.

To further boost lending, it will also offer some exemptions for interest received from value added tax, while also providing tax breaks for small firms and start-ups, a lower social security contribution ratio and an increase in government procurement, according to the guidelines.

Small and medium-sized enterprises is an dynamic power for national economic and social important and is critical for expanding employment, improving people’s livelihood, and to foster innovation.New guidelines

The need for the Chinese government to support small businesses became even more obvious last summer when it began its trade was with the US. Small private businesses are more vulnerable to trade disputes and an economic slowdown than state-owned enterprises, which are often bigger and enjoy favourable treatments from the government and banks, even though they contribute the majority of growth and employment.
Employment is the top priority on the agenda of Premier Li Keqiang this year, as shown in his government work report revealed last month. China has vowed to create 11 million new urban jobs this year and cap the surveyed urban unemployment rate at 5.5 per cent.
Morgan Stanley economists noted that China’s real gross domestic product growth may slow to 6.2 per cent in the first quarter.
“The main drag is slower investment growth, led by property construction and manufacturing [capital expenditure] amid still-subdued export and business sentiment,” Morgan Stanley economists Robin Xing, Jenny Zheng and Zhipeng Cai said.
The National Bureau of Statistics is due to release the first quarter economic data on April 17.
Source: SCMP

China Focus: Premier Li’s Europe visit to inject impetus to China-EU ties

BEIJING, April 3 (Xinhua) — Chinese Premier Li Keqiang’s upcoming visit to Europe will intensify cooperation between China and European countries and provide new impetus to the China-EU comprehensive strategic partnership, a Foreign Ministry official said Wednesday.

Li’s visit, scheduled for April 8 to 12, will take him to Brussels for the 21st China-EU leaders’ meeting, and Croatia for an official visit and the eighth leaders’ meeting of China and Central and Eastern European countries (CEEC), Vice Foreign Minister Wang Chao said at a press briefing.

This is the first overseas trip to be made by Li this year as well as another significant high-level exchange between China and Europe after Chinese President Xi Jinping’s successful state visits to Italy, Monaco and France in March, demonstrating the importance that China attaches to its relations with Europe, Wang noted.


“The China-EU leaders’ meeting, a high-level platform for strategic communication between the two sides, has played a leading role in deepening China-EU relations and promoting dialogue and cooperation,” Wang said.

He stressed that this year’s meeting, the fifth co-chaired by Premier Li, European Council President Donald Tusk and European Commission President Jean-Claude Juncker, will be the last China-EU leaders’ meeting during the tenure of the current EU institutions, thus bearing transitional significance.

China and the EU are enjoying sound development of ties, close high-level connections, deepening cooperation and robust people-to-people exchanges, he added.

“We share broad common interests in deepening win-win practical cooperation, common positions on upholding multilateralism and free trade, and common goals in improving global governance and maintaining world peace and stability.”

Leaders of the two sides will exchange views on bilateral ties and major international and regional issues of common concerns, and witness the signing of cooperation documents on energy, competition policies and other areas, Wang said.

“We believe that this meeting will inject new impetus to the China-EU comprehensive strategic partnership, take our dialogue and cooperation across the board to a new level, and strengthen the stability, reciprocity and strategic significance of our relations,” Wang said.


Wang Chao said China-CEEC cooperation (16+1 cooperation) was a beneficial mechanism of regional cooperation between China and Central and Eastern European (CEE) countries, and has provided a platform for China and CEE countries to deepen traditional friendship and enhance mutually beneficial cooperation.

Initiated in 2012, the 16+1 cooperation has gained broad support and active participation from 16 CEE countries, and has built up an all-round and multi-tiered cooperation framework, said Wang, adding that the 16+1 cooperation has played a positive role in promoting trade and expanding pragmatic cooperation across-the-board between China and other countries.

This year marks the 70th anniversary of the founding of the People’s Republic of China. Some CEE countries also established diplomatic relations with China 70 years ago.

Wang said this year’s meeting, to be held in Croatian city Dubrovnik, was of important significance to the promotion of the steady, long term development of 16+1 cooperation as well as China-Europe relations.

Noting the theme of this year’s meeting of building new bridges of openness, innovation and partnership, Wang said leaders attending the meeting would review new progress of 16+1 cooperation, have insightful discussions on key future work directions, and announce a series of new measures on pragmatic cooperation.

China hopes that the 16+1 cooperation will become a bridge of openness, innovation and partnership through enhancing exchanges and cooperation of mutual benefit and win-win results, he said.

According to the vice minister, outcome documents charting 16+1 cooperation will be released after the meeting and related parties will ink cooperation agreements on infrastructure construction, trade, finance, education, quality inspection, personnel exchanges, and mutual recognition of driving licenses.

China believes this year’s meeting will inject new impetus to relations between China and the CEE countries and the development of the China-Europe comprehensive strategic partnership, he said.


“Li’s visit will be the first ever by a Chinese premier to Croatia since the establishment of diplomatic ties. Therefore, it is significant in consolidating traditional friendship and advancing our comprehensive cooperative partnership as well as China-EU relations,” Wang Chao said.

Hailing Croatia as an important member of CEE countries and a key stop on the ancient Silk Road, Wang said relations between China and Croatia had been growing rapidly with the development of the Belt and Road Initiative and 16+1 cooperation.

In addition to close top-level exchanges, fruitful cooperation in trade, investment and infrastructure construction, and ever-deepening friendship between the two peoples, China-Croatia relations face a broad space for future development, he added.

During Li’s visit, the two sides will issue a joint statement summarizing any important consensus reached by their leaders and mapping out future cooperation. The prime ministers of the two countries will witness the signing of government cooperation documents and commercial contracts covering multiple sectors.

China hopes the visit will help synergize both countries’ development strategies, enhance mutual understanding and political trust, deepen cooperation and bring bilateral ties to a higher level, Wang said.


Li Keqiang says decoupling from US ‘not realistic’, denies China would ask tech firms to spy

  • Premier refutes spying suggestion, saying it is ‘not how China behaves’ and that Beijing would never require Chinese companies to do so
  • He says ‘the whole world would like to see’ resolution to tariff war with mutually beneficial outcomes
Premier Li Keqiang admitted relations between China and the US had seen some “twists and turns”, particularly over trade. Photo: Simon Song
Premier Li Keqiang on Friday said economic decoupling from the United States was “not realistic”, while refuting claims that Beijing would ever require Chinese tech companies to spy on foreign governments or individuals.
During a news conference in Beijing at the end of the annual legislative meetings, Li admitted relations between China and the US had recently seen “twists and turns”, particularly over trade, but said he hoped ongoing negotiations to resolve the tariff war would deliver mutually beneficial outcomes.
“I believe that result is also what the whole world would like to see,” he said. “As two large economies, China and the US have become closely entwined through years of growing their relationship and years of cooperation. It is neither realistic nor possible to decouple the two economies.”
While the world’s two largest economies have held off on applying further tariffs this year, multiple rounds of discussion in Beijing and Washington have yet to yield a trade deal to resolve the dispute – one the US hopes will be address issues including its trade deficit with China, market access, industrial subsidies, intellectual property protection, forced technology transfers, and cybertheft. Chinese Vice-Premier Liu He spoke by phone with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Thursday and they made “concrete progress” towards a deal, according to state news agency Xinhua.
But as trade tensions have played out, Washington’s hawks have pushed for a “decoupling” between the two economies or at least a “partial decoupling” in the hi-tech sphere.
Premier Li Keqiang reassures Hong Kong over mainland China’s foreign investment law

Li on Friday also rejected the claim that Beijing had or would mandate Chinese tech companies to assist in spying on foreign governments or individuals, a key concern for countries considering using hi-tech equipment from China in sensitive sectors.

The premier initially sidestepped a question about Chinese technology spying, but later made a point to go back and “very explicitly respond” to it after taking a separate question about China’s economic reform.

“Let me tell you explicitly that this is not consistent with Chinese law. This is not how China behaves,” Li said. “We did not do that, and we will not do that in the future.”

His comments come as the US has been pushing for a ban on the use of Chinese telecoms giant Huawei’s technology in critical 5G networks over national security concerns, with US Secretary of State Mike Pompeo warning European countries in February that using the company’s equipment could hurt their ties with Washington.
In recent months, Huawei has come under growing scrutiny and pressure, with the US levelling serious fraud charges against the company and its executive Sabrina Meng Wanzhou related to alleged violations of US sanctions on Iran. Washington has ordered Meng be extradited from Canada, where she remains awaiting extradition proceedings.
Huawei pleads not guilty to US charges of bank fraud and violating Iran sanctions in case that triggered a global firestorm
Huawei’s founder and president Ren Zhengfei, who is also Meng’s father, has claimed in interviews that he would “definitely” refuse any requests by the Chinese government to hand over user data. But observers have been sceptical that the tech giant would be able to refuse these requests from Beijing, which has responded strongly to the actions taken against Huawei, including with what has been seen as the reciprocal detentions of two Canadians in China – former diplomat Michael Kovrig and businessman Michael Spavor.
Li’s annual press conference on Friday – an event where questions are carefully screened and planned in advance – comes after the conclusion of the yearly gathering for the National People’s Congress, a largely rubber-stamp legislative body. National delegates also voted to approve a new foreign investment law that touched on intellectual property and technology transfer concerns raised by the US, although foreign business bodies warned that the legislation was vague and pushed through quickly in light of the trade war.
As businesses and market watchers look to a proposed summit between Chinese President Xi Jinping and his US counterpart Donald Trump at the Mar-a-Lago estate in Florida to clinch a trade deal, Li stressed that China was seeking cooperation rather than confrontation.
“We need to continue to follow the principles of cooperation before confrontation, mutual respect, equality, and mutual benefit to continue to grow the China-US relationship, including their economic and trade ties,” Li said. “As for their differences and disagreements, we have confidence that people of the two countries have the wisdom and the capability to defuse their differences and manage them properly to pursue steady and sound growth of the US-China relationship.”
Source: SCMP

Xi sends condolences to Ethiopian, Kenyan presidents over plane crash

BEIJING, March 11 (Xinhua) — Chinese President Xi Jinping on Monday sent messages of condolence respectively to his Ethiopian and Kenyan counterparts, Sahle-Work Zewde and Uhuru Kenyatta, over the plane crash that killed 157 people on Sunday.

In his messages, Xi said he was shocked to hear about the crash of the Ethiopian Airlines plane and the massive casualties it caused, including Ethiopian, Kenyan and Chinese victims.

On behalf of the Chinese government, the Chinese people and in his own name, he expressed deep mourning for the victims and extended his condolences to the bereaved families.

Xi said that he believes the Ethiopian government is capable of properly handling the aftermath of the tragedy. He added that China would provide any necessary support and assistance.

Also on Monday, Chinese Premier Li Keqiang sent a message to his Ethiopian counterpart, Abiy Ahmed, offering his condolences over the plane crash.

Source: Xinhua


China central bank pledges more policy support as bank lending slides

BEIJING (Reuters) – China’s central bank on Sunday pledged to further support the slowing economy by spurring loans and lowering borrowing costs, following data that showed a sharp drop in February’s bank lending due to seasonal factors.

The central bank is widely expected to ease monetary policy further this year to encourage lending especially to small and private firms vital for growth and job creation.

The central bank’s “prudent” monetary policy will emphasize on counter-cyclical adjustments, said People’s Bank of China (PBOC) Governor Yi Gang, using a phrase that implies the need to fight an economic slowdown.

“The global economy still faces some downward pressure and China faces many risks and challenges in its economy and financial sector,” Yi said at a press conference on the sidelines of the country’s annual meeting of parliament.

There is still some room for the PBOC to cut reserve requirement ratios (RRRs), although the amount of room is less compared with a few years ago, Yi said.

Chinese banks made 885.8 billion yuan ($131.81 billion) in net new yuan loans in February, down sharply from a record 3.23 trillion yuan in January, when several other key credit gauges also picked up modestly in response to the central bank’s policy easing.

Yi said combined January-February new loans and total social financing (TSF), a broad measure of credit and liquidity in the economy, could paint a more accurate picture as they showed a rise of 374.8 billion yuan and 1.05 trillion yuan from a year earlier, respectively.


Analysts say China needs to revive weak credit growth to help head off a sharper economic slowdown this year, but investors are worried about a further jump in corporate debt and the risk to banks as they relax their lending standards.

Corporate bond defaults hit a record last year, while banks’ non-performing loan ratio notched a 10-year high.

Pan Gongsheng, a vice governor at the PBOC, told the same briefing that China will control the amount of bond defaults in 2019, using both legal and market means.

Pan conceded that bond defaults increased last year, but the level of defaults was not high compared with China’s average bad loan ratio.

Premier Li Keqiang told parliament on Tuesday that monetary policy would be “neither too tight nor too loose”. Li also pledged to push for market-based reforms to lower real interest rates.

Chinese policymakers have repeatedly vowed not to open the credit floodgates in an economy already saddled with piles of debt – a legacy of massive stimulus during the global financial crisis in 2008-09 and subsequent downturns.

Sources have told Reuters the central bank is not ready to cut benchmark interest rates just yet, but is likely to cut market-based rates.

Yi said the downward trend in TSF has been initially curbed and broad M2 money supply growth will be more or less in line with nominal gross domestic product growth in 2019, Yi added.

Central bank data showed growth of outstanding TSF, a rough gauge of broad credit conditions, slowed to 10.1 percent in February from January’s 10.4 percent, versus a record low of 9.8 percent in December.

M2 money supply grew 8.0 percent in February from a year earlier, missing forecasts, the central bank data showed. Yi said China’s macro leverage ratio, or the amount of debt relative to GDP, was at 249.4 percent at the end of 2018, a fall of 1.5 percentage points from a year earlier, Yi said.
Analysts note there is a time lag before a jump in lending will translate into growth, suggesting business conditions may get worse before they get better.
Most economists expect a rocky first half before conditions begin to stabilize around mid-year as support measures begin to have a greater impact.
China’s economic growth is expected to cool to around 6.2 percent this year, a 29-year low, according to Reuters polls.
Growth slowed to 6.6 percent last year, with domestic demand curbed by higher borrowing rates and tighter credit conditions and exporters hit by the escalating trade war with the United States.
Source: Reuters

Xinhua Headlines: China advances all-round opening-up at “two sessions”

Xinhua Headlines: China advances all-round opening-up at "two sessions"

Visitors are seen at a tulip fair at Baiwankui garden in Nansha free trade zone in south China’s Guangdong Province, Feb. 9, 2019. (Xinhua/Liu Dawei)

BEIJING, March 7 (Xinhua) — China expects to see wider opening-up as it pledges to do more to attract foreign investment and promote global cooperation at the ongoing annual “two sessions.”

“We will promote all-round opening-up and foster new strengths in international economic cooperation and competition,” Chinese Premier Li Keqiang said when delivering the government work report to the annual legislative session Tuesday.

At the session, further relax of controls over market access has been announced, a draft foreign investment law will be deliberated, and the Belt and Road cooperation has been promoted.


The government will further shorten the negative list which outlines fields off-limits to foreign investors, Ning Jizhe, deputy director of the National Development and Reform Commission, told a press conference on the sidelines of the annual legislative session Wednesday.

China will roll out more opening measures to the agriculture, mining, manufacturing and service sectors, and allow wholly foreign-funded enterprises to operate in more sectors, Ning said.

John Huang with the British information service provider Experian believes that international investors will welcome China’s further opening-up.

“Some core industries, once considered to be ‘the most difficult areas to open up,’ such as automobile manufacturing and financial services, are now welcoming foreign investment,” said Huang, managing director for decision analytics of Experian Greater China.

“The Chinese government’s consistent commitment to opening-up has given foreign enterprises confidence about the business environment here,” said SangBoem Han, CEO of LG Display from the Republic of Korea.

In July 2018, LG Display opened an OLED panel factory in south China’s Guangdong Province with a total investment of 46 billion yuan (6.9 billion U.S. dollars).

China saw a record foreign direct investment of 135 billion U.S. dollars in 2018 despite a global economic downturn and rising protectionism.

“In the early days, foreign firms received preferential policies regarding land, electricity and taxes in China,” Han said, “but more recently, the government has increased its protection of intellectual property and improved efficiency.”


On Tuesday, Premier Li emphasized opening up based on rules and related institutions.

This will help China better conform with the international rules, said Zhang Jin, a national political advisor and businessman from Guangdong.

“This is also in line with China’s further integration with globalization and engagement in international competition,” Zhang said.

A highlight at this year’s “two sessions” is the draft foreign investment law, which is to be submitted to this year’s session of the 13th National People’s Congress (NPC) for review.

Once adopted, the unified law will replace three existing laws on Chinese-foreign equity joint ventures, non-equity joint ventures (or contractual joint ventures) and wholly foreign-owned enterprises.

The foreign investment law would be highly significant to protect legitimate rights and interests of foreign investors and ensure fair competition, said Loh Jen Yuh, president of China & Investment Management of CapitaLand Group, one of Asia’s largest real estate companies.

“The law shows China’s openness and the rule of law,” said Han, who hoped that the enact of the law would further improve China’s business environment.


Along with the efforts to attract foreign businesses, China is also stepping up the implementation of the Belt and Road Initiative (BRI) to benefit more participants.

To date, a total of 152 countries and international organizations have signed cooperation documents with China on the BRI.

“Many countries along the Belt and Road have shown their intention to cooperate with Chinese manufacturers,” said Wu Gang, a national political advisor and chairman of wind power firm Xinjiang Goldwind Science & Technology.

“We are more confident in going global under the government’s favorable policies related to the BRI,” said Wu, whose business has gained great market shares in Pakistan and Australia.

According to the government work report, China will continue to “promote the joint pursuit” of the BRI, aiming at “shared growth through discussion and collaboration.”

China has signed free trade agreements with over 20 countries and regions. According to Zhao Ji, a national political advisor and president of China’s Northeastern University, the country’s efforts to strengthen the opening-up are especially important against the weak global economic growth.

“The development of China, which has been closely connected with the world, will continue to play a key role in promoting globalization,” Zhao said.

Source: Xinhua


China Focus: More reform needed to benefit private enterprises

BEIJING, March 6 (Xinhua) — China should push forward its reform to facilitate the development of private enterprises, a political advisor said Wednesday.

The reform should give them tangible benefits in terms of steady development and fair competition, Liu Shijin, deputy director of the economic committee of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), said at a press conference.

Compared with state-owned enterprises, private enterprises have seen more difficulties partly due to insufficient credit support, Liu said.

The reform of existing financial enterprises should be promoted, and more importantly, the country should relax market access for the development of a number of financial institutions and financial products that provide special services to smaller firms, Liu said.

The private sector plays an important role in the economic system, contributing more than 50 percent of tax revenue, 60 percent of GDP, 70 percent of technological innovation, 80 percent of urban employment and 90 percent of new jobs and new firms.

“The private sector and the country’s economic and social development have been closely related to each other, and formed a community of a shared future,” Liu said.

However, the difficulties that private firms and small businesses face in accessing affordable financing have not yet been effectively solved. The business environment still falls short of market entities’ expectations, according to a government work report delivered Tuesday by Premier Li Keqiang at the opening of the annual legislative session.

Loans to small and micro businesses by China’s large state-owned commercial banks will increase by over 30 percent in 2019, the report said.

The country also announced reducing the tax burden on and social insurance contributions of enterprises by nearly 2 trillion yuan (about 298 billion U.S. dollars) this year, with a focus on the manufacturing sector and smaller businesses, according to the report.

Liu said that the government’s policy of supporting the development of private enterprises had been “explicit and consistent.”

The non-public sector’s status and functions in the country’s economic and social development have not changed. The principle and policies to unswervingly encourage, support and guide the development of the non-public sector have not changed, and the principle and policies to provide a sound environment and more opportunities to the sector have not changed either, according to an important symposium on private enterprises last year.

Private enterprises have truly felt the government’s unchanged stance on, confidence in and policy support for the private sector, said Nan Cunhui, a member of the Standing Committee of the CPPCC National Committee and chairman of power equipment giant CHINT Group.

“The only change is that what we receive keeps becoming better and better,” he said.

The tax-cut measures for the manufacturing sector put forward in the government work report is a big stimulus to private enterprises and the whole sector, Nan said.

Private firms also need to have the conditions for equal development and a level playing field, Liu said.

Policy support is important, but what’s more important is a stable law-based environment that does not change with short-term policy changes, Liu added.

“We will strive to create a positive business environment in which entrepreneurs can be free of concerns in doing business and running companies,” the government work report said.

Source: Xinhua


China ‘exaggerated’ GDP data by 2 percentage points for at least nine years, new study says

  • Mainland has overestimated its nominal and real growth rates by about 2 full percentage points on average between 2008 to 2016
  • Calculations suggest that the current nominal size of the economy is about 18 per cent lower than the official level of US$13.4 trillion at the end of 2018

13 Feb 2019

The paper, “A Forensic Examination of China’s National Account”, was submitted to the “Brookings Papers on Economic Activity”, a journal published by the US-based Brookings Institute. Photo: EPA
The paper, “A Forensic Examination of China’s National Account”, was submitted to the “Brookings Papers on Economic Activity”, a journal published by the US-based Brookings Institute. Photo: EPA
China has overestimated its nominal and real growth rates by about 2 full percentage points on average between 2008 to 2016, with the miscalculation increasing each year, according to a new study published on Thursday.
The results indicate that the actual size of China’s economy at the end of 2018 was well below the government’s official estimate.
It also raises questions not only about the quality of economic data from the world’s second largest economy, but also the willingness of the government to take the steps necessary to accurately report information.
Using the study’s findings and applying them to government figures starting with the level of nominal gross domestic product (GDP) at the end of 2007 and the growth rate for 2008, calculations by the South China Morning Post show that the current nominal size of the Chinese economy is about 18 per cent lower than the official level of 90 trillion yuan (US$13.4 trillion) at the end of 2018.
The calculation assumes that the government’s official 2017 and 2018 nominal growth rates are overestimated by 2 percentage points, as suggested by the study.

Overestimates of growth in 2007 and previous years would further reduce the current size of the Chinese economy.

SCMP calculations show the adjusted nominal GDP level in China is about US$11.5 trillion using current exchange rates, still more than twice the size of Japan’s economy at US$5.16 trillion, but well below the economy of the United States at US$20 trillion.

The paper, “A Forensic Examination of China’s National Account”, was submitted to the “Brookings Papers on Economic Activity”, a journal published by the US-based think tank Brookings Institute twice a year on macroeconomic issues that are influencing the public policy debate. It will be formally presented in Washington on Thursday.
“Our estimates suggest that the extent by which local governments exaggerate local GDP accelerated after 2008, but the magnitude of the adjustment by the NBS did not change in tandem,” the authors said.

The study focuses primarily on nominal, non-inflation adjusted growth.

The paper comes at a sensitive time for Chinese policymakers, who are battling a slowing economy due to their campaign to reduce debt and risky lending as well as the effect of the trade war with the United States. The inflation-adjusted growth rate of 6.6 per cent last year was the slowest since 1990.

On Tuesday, the government announced that it had lowered its growth target for 2019 to a range of 6 to 6.5 per cent, down from “about 6.5 per cent” last year due to the multiple headwinds the economy is facing. The government also announced new tax cuts and additional government spending to help stabilise growth.
The paper’s four authors – Chen Wei, Chen Xilu and Michael Song from the Chinese University of Hong Kong and Chang-Tai Hsieh from the University of Chicago – used a mix of economic indicators that are less likely to have been manipulated by authorities to prove that the National Bureau of Statistics (NBS) have not done enough to correct the errors in the data collected from provincial governments over the past decade.

Our estimates suggest that the extent by which local governments exaggerate local GDP accelerated after 2008, but the magnitude of the adjustment by the NBS did not change in tandem.Report authors

It has long been believed that local Chinese officials inflate figures reflecting their economic performance, which is closely tied to their opportunity for promotion. Since 2003, the NBS has produced a national gross domestic product (GDP) figure that is lower than aggregate provincial data after examining other data such as the census and land sales.

Local statistics bureaus generally overstate industrial output as a portion of overall production as well as the size of investment within overall expenditures, the two different approaches to calculating GDP, according to the paper. The methods of data collection are often the cause, for example, calculations of investment spending have been based purely on government reports on specific projects rather than on the financial statements of the investing firms involved.

One method that the authors used to probe the accuracy of the NBS’s adjustments was comparing the growth of official GDP with the growth of revenue from value-added tax (VAT), which taxes the value added to a product at each stage of production.

Local governments have fewer incentives to manipulate VAT revenue, since a large portion of it is eventually transferred to the central government, therefore overstating VAT would only increase fiscal revenue losses.

Premier Li Keqiang confirmed China had lowered its growth target for 2019 to a range of 6 to 6.5 per cent at the National People’s Congress on Tuesday. Photo:
Premier Li Keqiang confirmed China had lowered its growth target for 2019 to a range of 6 to 6.5 per cent at the National People’s Congress on Tuesday. Photo:

Although the NBS adjusts downwards local statistics, it does not report the adjusted local statistics, perhaps out of a desire to not confront powerful local leaders.Report authors

“Although the NBS adjusts downwards local statistics, it does not report the adjusted local statistics, perhaps out of a desire to not confront powerful local leaders,” the authors said.

Since September, the NBS has named and shamed local governments on its website for manipulating data, but it remains to be seen if local governments fall in line.

In a post in January, the NBS said it had passed 14 cases of data falsification on to local governments before February 2018 but that it had not been updated even though local officials are required by law to punish those responsible for manipulating data within six months after receiving a notice of a violation.

The NBS’s ability to fix China’s GDP data problem is bound by its limited political power, the authors indicated.

“There are three problems with China’s GDP. One is that it doesn’t necessarily measure the right thing. Two is statistical bias in the way data is collected. Three is really a macro policy problem by the government which should write down all the bad debt,” said Michael Pettis, professor of finance at Peking University.

“The NBS is only trying to fix the second problem.”

Source: SCMP


China’s February exports seen falling most in 2 years, imports down again – Reuters Poll

BEIJING (Reuters) – China’s exports likely contracted in February after a surprise bounce in January, while imports fell for a third straight month, a Reuters poll showed, heightening anxiety over whether Washington and Beijing can resolve deep differences over trade.

China’s exports in February are expected to have fallen 4.8 percent from a year earlier, according to the median estimate of 32 economists in a Reuters poll, following a 9.1 percent rise in January.

Such a drop would be the biggest since December 2016, and suggest a further weakening in global demand.

Imports in February are expected to have fallen 1.4 percent from a year earlier, compared with the previous month’s 1.5 percent decline.Stronger-than-expected imports could prompt some China watchers to say the economy is showing signs of bottoming out in response to a string of stimulus measures in 2018.

But most analysts typically caution that China’s data early in the year can be highly distorted by the timing of the Lunar New Year holidays, when some business rush out shipments or scale back output before shutting for a extended break. As such, analysts’ estimates for February varied widely.


In recent weeks, the United States and China appear to have moved closer to a trade deal that would roll back tit-for-tat tariffs on each others’ goods, with Beijing making pledges on structural economic changes, a source briefed on negotiations said on Sunday.

But President Donald Trump will reject any pact that is not perfect, Secretary of State Mike Pompeo said this week.
Even if concrete steps such as dismantling tariffs are agreed, it would not be a panacea for all of China’s economic woes. Its exporters would have to piece supply chains back together, win back market share and contend with slowing demand globally.
Factory surveys have suggested exports and imports will remain weak in coming months, with February’s official gauge showing export orders fell to their weakest level since the global financial crisis.
China’s overall trade surplus is seen to have shrunk sharply to $26.38 billion in February from $39.16 billion the previous month, according to the Reuters poll.
In response to growing domestic and global pressure, China’s government this week unveiled a 2019 economic growth target of 6.0-6.5 percent, down from an actual 6.6 percent in 2018, the slowest pace in nearly 30 years.
China to slash taxes, boost lending to prop up slowing economy
Premier Li Keqiang told parliament on Tuesday that China will shore up the economy through billions of dollars in additional tax cuts and infrastructure spending, and will lower real interest rates.
“A set of pro-growth measures are planned despite positive progress in U.S.-China trade talks, which makes us think that either China doesn’t have full confidence in a trade truce or that the damages from the trade conflict cannot easily be undone,” said Iris Pang, Greater China economist at ING.
Source: Reuters