China Watch Blog

China Watch Blog has learnt that passengers on an Air China A319 plane were the first to land at the Xigaze Airport, after it completed a test flight and made a landing at the airport in Southwest China’s Tibet autonomous region at 9:50 am, Oct 30, 2010.

China Watch Blog has learnt that Mainland China can afford a yuan appreciation of 3 to 5% annually, central bank adviser Li Daokui said, but he expressed concern that the US Senate might back a trade sanction bill that would increase pressure on a faster yuan revaluation.

“Based on historical experience, yuan appreciation of 3 to 5% is affordable for China,” Li said during a forum.

However, Li said the pace of yuan appreciation should be based on domestic factors, rather than foreign pressure. “The yuan should rise in a controllable and gradual way, so the country’s export companies will not go bankrupt,” he said.

The reference rate of the Chinese currency was set at 6.6908 on Friday, having already gained 2.1% against the greenback from its level in mid-June, when China scrapped the dollar peg and pledged to increase currency flexibility.

“China has shown positive will on the currency issues, and is moving in the right direction, and we (China and the US) need more communication about real issues that matter to bilateral ties,” said Muhtar Kent, chairman of the US-China Business Council.

Kent said no one can pressure other countries regarding their monetary issues.

“In the future the pace of appreciation could probably go beyond our expectations,” Yuan Gangming, an economist with Tsinghua University, said on Friday. He said the pace should not exceed 5 percent annually.

China has been under great pressure to appreciate its currency, as some countries, led by the US, are blaming the country’s “undervalued” yuan and excessive current account surplus for global trade and economic imbalances.

At the meeting of G20 finance ministers and central bankers on Oct 22 and 23, the US proposed 4 percent as the maximum ratio of a country’s trade surplus or deficit to its GDP, but countries with trade surpluses, such as Germany and Japan, are not enthusiastic about the proposal.

Saudi Arabia, Germany, Russia and China all have surpluses larger than 4%, while Turkey and South Africa have deficits bigger than that, according to the International Monetary Fund.

“China could make substantive changes in its economic structure in three years and substantially reduce its reliance on external demand,” Li said.

Li said China’s ratio of trade surplus to GDP is likely to drop to below 5% this year, down from the pre-crisis level of 10%.

China Watch Blog has learnt that three men have been arrested for allegedly using fake soldier certificates to buy discounted flight tickets and selling them to others at higher prices.

Shanghai Daily reported that the suspects were also found changing passenger details to allow these passengers to pass security checks with their ID cards instead of the soldier certificates.

The scam was exposed after city police found Li Guoyong was carrying 52 fake soldier certificates as well as three flight tickets at Shanghai Hongqiao International Airport.

Li told police he bought the tickets, at a 50 percent discount, with the fake certificates.

Li worked at a ticket agency together with his cousin, Li Guobiao, and sold the tickets to travel agencies at a 5 percent discount off regular fares, according to police.

They used the counterfeit certificates to buy five tickets and sold them in early July. The ticket holders successfully boarded their flights.

Normally, these passengers would be asked to show their soldier certificates during security checks. However, police found the passengers boarded the planes with their ID cards.

Officers then traced the tickets to an agency in Guangzhou, Guangdong Province. The agency was operated by Li Guobiao’s brother, Li Guoqing.

Police also found an airline had given its login and password details to one of its branches years ago.

The login and password was never canceled and the secret information was later acquired by Li Guoqing and his partner, police said.

China Watch Blog has learnt that the Government has recorded an HK$18.4 billion (US$2.37 billion) deficit for the six-month period ending September 30, and spending for the April-to-September period was HK$147.4 billion, against HK$129 billion in revenue.

The deficit for the period was mainly because some major types of revenue – including salaries and profits taxes – were mostly received towards the end of a financial year.

At September 30, fiscal reserves stood at HK$501.8 billion.

Spending for September was HK$24.2 billion with HK$19.2 billion in revenue, resulting in a deficit of HK$5 billion.

China Watch Blog has reported that the Cabinet-level Council for Economic Planning and Development (CEPD) flashed a yellow-red light for Taiwan`s economic performance in September, indicating an slowdown of the economy from the overheated level of red light in the previous two months.

The pace of the economic growth may moderate further in the coming months, as the composite leading index, a barometer for future economic development, shed 0.4 points to 117.6 in September and its annualized sixth-month rate of change dropped, for the 10th straight month, by 2.3 percentage points to 1.8%.

Hu Chung-ying, vice minister of the CEPD, remarked that “Should the annualized rate of change drop to zero in October, the economy is likely to turn downward in six months, meaning the current expansionary stage of the economic cycle will end in the second quarter next year.”

The composite index for the business status in September dropped one point to 37, the upper limit of the yellow-red light range, representing the existence of possibility for an overheated economy. The CEPD uses five light signals to represent the monthly status of the economic development: red, yellow red, green, yellow blue, and blue, representing recession.

Hu Chung-ying pointed out that it will be very difficult to witness the appearance of red light again, citing higher comparison base in the coming quarters.

He pointed to the M-type development of the global economy in the post-financial tsunami era, with industrially developed nations at one end, still striving to cope with the problems of high unemployment, sluggish consumption, and deflation, and emerging countries at the other end, continuing to score sustained growth and face the problem of inflation.

He said, however, that the polarization will not last long and the two groups will blend into one eventually, adding that the global economy will continue to head for recovery, so long as the middle class in emerging countries can expand further and uphold the domestic demand.