News Briefs

China takes gradual approach to financial liberalization

The People’s Bank of China says the country will be more open to foreign capital this year even though the prospect of a strong economic recovery is still unclear.

Although the impending withdrawals of various countries’ economic stimulus packages may also complicate the efforts to end the global economic crisis, the Chinese government has decided to increase the penetration of foreign capital into the country’s financial industry in an appropriate way.

An editorial in the “Global Times” quotes some western officials who said if China opened its market to western financial institutions the way it opened its market to five-star hotels, the potential risks would be huge for the country itself and the world at large.

The editorial warns the doors to free trade should not swing open too quickly and that market openness should be managed at the right pace, as China has done during the past three decades. But it also notes that the stakes are higher in the country’s financial industry. It argues that if China is fully open to foreign capital, the capital operation pattern common in developed economies such as the United States and several European nations will not suit its existing financial system on such short notice. As a result, chaos would erupt sooner or later in the financial sector.

The editorial concludes that China should gradually liberalize its financial industry, because a sudden torrent of foreign capital would be undesirable. It calls for a prudent approach to financial liberalization that would yield a productive outcome as evidenced over the past three decades of gradual financial reform whereby more market competition has been encouraged and distressed loans have been effectively curbed. Such a policy has shielded China from being hit as severely by the current financial crisis and enabled it to rebound quicker than other advanced nations.

Facebook plans to enter China

Popular social networking site Facebook is considering to enter China’s internet market, according to Sina.com report on April 9.

Facebook spokesman Larry Yu said the Palo Alto social media king is “interested in China, just as we are many other countries, and while we are studying and learning about them all, we have no specific plans for China at this time.”

Facebook registered the Facebook.cn domain name in 2007.

It has more than 400 million users around the world, about 70 percent from outside the USA

China had 384 million Web users at the end of 2009, the most of any nation, according to the China Internet Network Information Center.

Sina.com didn’t give any further details about Facebook’s plans.

China’s banking regulator to ban lending to speculative home buyers

China’s banking regulator said on April 11 that banks should not extend loans to home buyers who intend to use the money for speculative purposes.

Lenders should increase their awareness about financial risks and raise the down payment ratio “by a large margin”, said the China Banking Regulatory Commission (CBRC) in a statement.

Down payment ratio of a second or more houses should be no less than 40 percent and the interest rates should be strictly in line with risks, according to the statement.

The action is the latest in a campaign by the central government to dampen China’s overheated property market.

China to unveil new overseas investment policy

China will unveil a new policy on April 13 to attract overseas investment, a leading official from China’s top economic planning agency said at the Boao Forum for Asia on April 12.

This policy will be jointly announced by three government departments at a press conference, deputy minister of the National Development and Reform Commission (NDRC) Zhang Xiaoqiang said, without elaborating.

He said that China’s investment environment is healthy, which has encouraged foreign companies to invest in the country.

“China will strictly restrict foreign-invested manufacturing that consumes too much energy and resources, or causes heavy pollution,” he said.

However, China encourages investment in the high-tech and service sectors and other fields that would harness the country’s advantages in its labor force, Zhang said.

Debate over whether or not the climate in China has worsened for foreign investors has been heated lately.

Zhang said the world should take a positive attitude toward foreign investment policy in China and pay attention to the country’s actual situation.

Due to the global downturn, cross-border investment declined 40 percent globally last year, while China’s foreign direct investment dropped only 3 percent from 2008.

“Politicians and the media tried to prove with their mouths but entrepreneurs answered the question with their real action,” Zhang said.

Zhang made the remarks as a growing number of Western companies are complaining of a deteriorating investment environment in China.

Google closed its Internet search service last month in the Chinese mainland but directed users to its uncensored search engine in Hong Kong, after threatening to leave China due to censorship and attacks by hackers.

Charles-Edouard Bouee, Asia president of strategy for consulting company Roland Berger, told the Global Times that every foreign company is seeking success in China.

“For me, I want to be the most international of the Chinese firms or I want to be the most Chinese of international firms,” he said.

China works toward balancing foreign trade

The goal of China’s foreign trade policy in 2010 was to improve its trade balance while maintaining steady export growth, said the Ministry of Commerce (MOC) spokesman on April 16.

The country’s trade surplus was expected to shrink by another 100 billion US dollars in 2010, said Yao Jian, the MOC spokesman, at a press conference.

The statement came less than a week after the country posted its first monthly trade deficit for March in six years, which was valued at 7.24 billion US dollars, according to the General Administration of Customs (GAC).

The GAC said the March deficit mainly stemmed from shrinking exports of labor intensive products, surging imports volumes and rising commodity prices, and predicted the country’s trade surplus might continue decrease for the rest of the year.

Echoing the GAC, Yao said the country’s foreign trade was likely to keep heading toward a more balanced state, while some experts predicted China’s trade would soon return to surplus.

“The trade deficit registered in March demonstrated expanding domestic demand accompanied by lukewarm demand in the international market,” Yao said.

“Because such a situation would continue, the monthly trade deficit seen in March would remain, at least in the first half of 2010,” he said.

The deficit also proved that, in an era of economic globalization, it was market supply and demand, and other factors that decided trade balance rather than exchange rates, said Yao.

Yao portrayed the deficit in March as the continuation of a shrinking trade surplus that started to appear in 2008, and also as a result of the central government’s macroeconomic policy in balancing the economy.

In recent years, China has worked hard to restructure its economy away from excessive dependence on exports and the manufacturing sector, while a whole range of measures have been taken to expand domestic demand.

The goal of China’s foreign trade policy was to further balance trade while maintaining stable growth in exports, he said.

Yao expected the ratio of China’s trade surplus to its gross domestic product (GDP) to fall to 3 to 4 percent from last year’s 5.7 percent.

When an economy’s ratio stays between 5 percent and minus 5 percent, its trade can be considered as more or less balanced, said Yao Jian, citing a commonly accepted standard adopted in the economics field.

The conclusion coincides with another set of data provided by the GAC chief Sheng Guangzu in an exclusive interview with Xinhua on April 15.

Sheng said the ratio of China’s trade surplus to its total trade volume declined to 2.3 percent in the first quarter this year from more than 10 percent registered between 2006 and 2008.

“When the ratio is below 10 percent, it means the country’s foreign trade can be deemed as balanced,” said Sheng citing an international standard.

Sheng also said that China never worked towards having a trade surplus and the country was committed to making its foreign trade more balanced.

China’s trade surplus would continue to shrink as a result of the country’s efforts to restructure and balance its foreign trade, he said, echoing the views of Yao.

EU becomes largest export destination of China’s trade hub

The European Union surpassed the United States in the first quarter of 2010 as the largest export market for Suzhou city, a trade hub in east China’s Jiangsu Province, said local customs.

Suzhou sold 8.83 billion US dollars worth of goods to the EU during the first quarter, up by 57.1 percent year on year, while exporting 7.98 billion US dollars worth of goods to the U.S. for the same period, up by 25.2 percent year on year, said a spokesperson with Suzhou Customs.

“The EU has been Suzhou’s number one export destination for years except for the second half of 2009 when it was overtaken by the USA,” said the spokesperson.

The trade rise was due to many countries’ stimulus packages which raised their global purchasing power as well as China’s policy incentives, such as export tax rebates, according to the spokesperson.

Suzhou’s international trade was worth 59.95 billion US dollars from January to March, which was the fourth largest in China after Shanghai, Beijing and southern Guangdong Province’s Shenzhen. Suzhou covers 8,488 square km with a population of 8.26 million people in 2009.

China Shipping Container Lines posts sharp profit fall in 2009

China Shipping Container Lines Company Limited (CSCL) on April 22 posted a loss of 6.49 billion yuan (USD 950.31 million) in 2009, down from a net profit of 134.69 million yuan (USD 19.73 million) in 2008.

Revenues fell to 19.94 billion yuan from 2008’s 35.25 billion yuan (USD 5.16 billion), a year-on-year decline of 43.4 percent, said the company in a statement filed with the Shanghai Stock Exchange.

Loss per share was 0.5554 yuan, from earnings of 0.0115 yuan per share in 2008, according to the statement.

CSCL said the sharp fall in revenues and profits mainly stemmed from a shrinking market amid the global downturn, a decline of 42.7 percent from the previous year in cargo fares and a 28 percent rise in management costs.

The company said it expected its revenues in 2010 to grow 31 percent from 2009 to reach 26.17 billion yuan (USD 3.83 billion), while operation costs would increase on rising fuel prices.