China Watch Blog

Watch out for this issue and keep an eye on how the money is going to be spent. China began selling 19.5 billion yuan ($2.87 billion) of three-year local government bonds Tuesday, the sixth sale of such bonds this year, Global Times reported.

The Ministry of Finance (MOF) is issuing the bonds on behalf of five provinces and municipalities — Hebei, Shanghai, Shenzhen, Guizhou and Shaanxi. The bonds pay a fixed annual interest rate of 2.37 percent, MOF said in a statement on its website.

China Watch Blog has learnt that China is planning a major energy plan.  To promote the development of the emerging energy industries and meet the carbon emissions reduction targets of 2020, the National Energy Administration (NEA) has compiled a development plan for emerging energy industries from 2011 to 2020 that will require direct investments totaling 5 trillion yuan, according to the NEA on July 20.

Jiang Bing, director-general of the Policy Planning Department under the NEA, said that the plan has specified major policy measures for the development and utilization of nuclear, wind, solar, biomass, geothermal, unconventional natural gas and other new energies. The plan has also detailed the industrialized application of new clean coal, smart grid, distributed energy and alternative-fuel vehicle technologies.

According to initial calculations, the new plan will greatly ease China’s excessive reliance on coal in 2020 and cut sulfur dioxide emissions by about 7.8 million tons and carbon dioxide emissions by about 1.2 billion tons in a year. Furthermore, this will contribute 1.5 trillion yuan in added-value per year and create 15 million job opportunities.

The key energy structural adjustment tasks during the 12th Five-Year Plan period include taking effective measures to increase energy efficiency, enhancing the utilization levels of traditional clean energy and expanding the utilization scales of natural gas and other clean energies. It also includes accelerating the construction of hydropower and nuclear power facilities, according to a People’s Daily report.

China Watch Blog has spotted this China Daily News which quoted senior World Trade Organization (WTO) experts on Friday welcoming China’s improved offer to join the WTO government procurement agreement (GPA). They said it was a significant step that would improve the nation’s global image.

Criticizing the tactics adopted by countries like the United States to pressure China, the experts said the GPA member nations themselves are unable to ensure fair and equal treatment for foreign nations.

Deputy US trade representative Demetrios Marantis had earlier said in Washington that China has submitted a new offer to join the WTO agreement on government procurement. He said the revised offer includes significant improvements and was better than the earlier proposal submitted by China in 2007.

WTO experts from China have also welcomed the revised offer. Although details about the new offer are still unclear, “the revised offer indicates that China is more positive and flexible on the GPA issue”, said Tong Zhiguang, former vice-minister of commerce and chief WTO negotiator.

The Ministry of Commerce declined to elaborate on the new proposal and said it was still under negotiation.

“Given that China is one of the leading exporters and trading nations in the world, the relaxation of curbs on government procurement will not hurt the nation too much,” Tong said.

Marantis said the new proposal is a “solid step toward ensuring China’s huge government procurement market is open to US companies”. US officials estimate the size of the government procurement market in China at around $500 billion.

Australia has got its first female prime minister after the ruling party dumped Kevin Rudd and installed his deputy as leader, and the question is whether what are her views of supply chain management, as well as transport logistics.

New leader Julia Gillard will lead the government to general elections due within months, and eyes will be on her to find out what her views are towards the China market.

News agencies report say Gillard is unlikely to alter Australia’s key foreign policy positions such as its troop commitment to Afghanistan. If this is true, she will probably continue Rudd’s China policy and continue building on what her predecessor has done.

Beijing would like to delay tightening monetary policy until it gets a clearer read of the property market and the fallout from euro-area weakness, economists said.

China has kept rates on hold, preferring more targeted administrative measures to curb the property speculation and to curtail bank lending that have fanned inflation.

The measures appear to be working. Property prices slowed in May from April while banks issued 639.4 billion yuan in new loans in May, down from the previous month. New yuan lending in May was less than the 774 billion yuan extended in April.

Initial market jitters that China’s economy, now a prime engine of global recovery, could be hit hard by the European debt crisis eased after data released on Thursday showed its exports soared 48.5 percent year-on-year in May on strong foreign demand for Chinese products.

While Beijing was expected to keep rates and other tightening measures on hold for now, strong exports meant a revaluation of the yuan was likely in the coming months, analysts said.

But, any reform on yuan revaluation will be done in keeping with China’s timing, they said.

China Watch Blog has learnt that industrial profits in China rose 91.55% in the first four months of the year from the same period a year earlier, according to a wide sample of provinces, the statistics agency said.

The data covered industries operating in 24 of the country’s 31 provinces and accounting for 82% of nationwide industrial revenues.

The year-on-year profit increase was 11.1 percentage points lower than the pace in the first quarter for the same sample of provinces, the National Bureau of Statistics said on its website.

China Watch Blog has learnt that the MTR Corporation will close down its rail freight business on June 16 due to low market demand, killing all hopes of Hong Kong  building a port rail link in the future.

In the past 10 years, while the total cargo volume has increased by over a quarter and cross-boundary cargo movements between the Mainland and Hong Kong have grown by almost 30%, rail freight volume dropped more than 80%.

“The freight volume for cargo transported to and from Hong Kong using rail in the past three years in terms of tonnage is 141,000 tonnes, 109,000 tonnes and 84,000 tonnes in 2007, 2008 and 2009 respectively, accounting for 0.05%, 0.04% and 0.03% of all cargo movements to and from Hong Kong, and 0.11%, 0.08% and 0.06% of all cargo movements between Hong Kong and the Mainland,” a government spokesman said.

The decreasing rail freight volume is due to a combination of factors, most notably market competition, he said. Compared with other modes of freight transport, rail does not have unique advantages in the local market in terms of flexibility, time or costs.

All interested wine exporters, please be informed that the Trade & Industry Department has started accepting applications for Hong Kong wine exporters’ registration which is to complement the customs facilitation measures the Mainland and Hong Kong will introduce for wine entering the Mainland through Hong Kong. The facilitation measures will be implemented as a pilot in Shenzhen soon.

The registration will facilitate the customs clearance of wine entering through designated ports in the Mainland, exported by designated Hong Kong exporters registered with the department, and imported by designated Mainland importers registered with Mainland Customs.

Through their Mainland import partners registered with Shenzhen Customs, registered Hong Kong exporters may, from June 15, make use of the facilitation measures at Shenzhen ports for their wine entering the Mainland through Hong Kong.

They may ask Shenzhen Customs to conduct wine duty valuation 10 working days before the shipment is imported into the Mainland. When the shipment arrives on the Mainland, Shenzhen Customs will normally complete the customs procedure within one working day.

If no pre-valuation has been conducted, Shenzhen Customs will normally complete the clearance within three working days for wine that has been imported into the Mainland before, provided that all necessary documents have been submitted.

For wine new to the Mainland market, the relevant process will normally take seven working days. If customs clearance cannot be completed within that timeframe, the Mainland importers may ask for release upon paying a guarantee deposit.

The registration is voluntary. Non-registered wine exporters may continue to export wine to Shenzhen in accordance with the general procedures of Mainland Customs.

Hong Kong companies interested in registering as a Hong Kong wine exporter should have engaged in wine business for not less than six months. Applications should be lodged at the department. The registration is valid for two years, with an application fee of HK$585.

Transport logistics professionals had better contact your wine exporter friends soon for business.

Yes, you guessed it.  China is planning to raise the proportion of profits it collects from major State-owned enterprises (SOEs) in a move to balance income distribution. Analysts said the move should be bolder and the collected profits used to improve public well-being.

The Ministry of Finance said last week that it might raise the ratio of profits of SOEs to be submitted to the State coffers.

According to existing rules, monopoly enterprises under the administration of the central government in sectors like tobacco, oil, petrochemicals, power, telecommunications and coal mining should submit 10% of their post-tax profits, while the ratio for those in the iron and steel, transportation, electronics and trade sectors should be 5%.

Financial corporations and companies in sectors like railways, transportation, education, culture, science and technology and agriculture are not included in the profit submission framework.

The Ministry of Finance did not reveal by how much the ratio would be raised.

“It should be raised properly, and even if it were raised by 10 percentage points, it doesn’t matter too much for those central enterprises, given their high profit level,” said Zhang Wenkui, researcher with the State Council’s Development Research Center.

Central enterprises have been criticized by the public for having taken advantage of their monopoly or market predominance to make excessive profits. Some of them have further fueled public anger as they bid to purchase land at high prices, which is believed to have pushed up home prices.

The central government collected profits of 14 billion yuan ($2 billion), 44.4 billion yuan and 98.9 billion yuan respectively in 2007, 2008 and last year from SOEs. In 2009 alone, however, the enterprises made profits totaling 965.6 billion yuan.

“Even if all the profits were collected, it is reasonable,” said Zhong Jiyin, economist with the Chinese Academy of Social Sciences. The monopoly status of those enterprises has barred entry of private firms and jeopardize the health of the overall economy, he said, adding that the collection of their profits should weaken their ability of monopolizing the market.

But the most crucial matter is how to use the collected money, Zhong said, pointing out that the money must be used to improve the well being of the public, for example, in subsidizing tax cuts and increasing income of the poor to promote social equality.

China All-Day Economy Watch Blog has reported that China may start levying a carbon tax and further boost prices of fossil fuel for the next five years as a crucial incentive to cut greenhouse gas emissions and help realize green targets.

“We expect China will start to levy various taxes only if they are helpful in mitigating greenhouse emissions and developing a low-carbon economy,” Xinhua reported, citing Jiang Kejun, a senior researcher with the Energy Research Institute under the National Development and Reform Commission.

“I think a carbon tax is likely to be levied during the 12th Five-year plan (2011-15) period,” said Jiang. The National Development and Reform Commission is a Cabinet department responsible for the country’s mid- and long-term development plan.

Apart from a carbon tax, Jiang said the government may begin to levy environmental and resource taxes, and the country will greatly boost subsidies to support low-carbon technology research and development.

At a weekend climate change forum organized by the China Centre for International Economic Exchanges, Jiang said that the government is serious about realizing its target of cutting carbon intensity by 40-45% by 2020 from 2005 levels and the government will implement “tougher measures” in the coming five years to realize the green goal.

Jiang said the taxation and fiscal incentives are just part of a portfolio of possible policy changes, which may turn into reality when China implements its low-carbon development pathway.

“We can possibly surpass the United States between 2020 to 2025 in terms of research and development investment,” said Jiang. “If this comes true, we can start to dream of becoming a low-carbon technology leader in the world.”

However, Jiang is pessimistic about the coming 10 years. China’s total 400-billion-yuan ($59 billion) investment in scientific research and development, Jiang said, “is only about one sixth of the US’s total, or only equal to what the US invests in clean energy research.”

In clean technology research, Jiang said: “If we don’t strive for radical efforts, we will still be left behind by the US, Europe and some other countries and regions.”