Chinese Economics Thread

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China turns back to infrastructure for economic growth

China will accelerate approvals for infrastructure investment to combat a slowdown in the economy, the state-backed China Securities Journal reported on Tuesday, echoing a call by Premier Wen Jiabao for policies to maintain growth.

Dismal economic data for April last week suggested the world's second-biggest economy was heading for a sixth straight quarter of slowing growth.

The government had sought project proposals by the end of June, even for those initially earmarked for the end of the year, the paper said.

Citing government sources, it said Beijing did not rule out bringing forward next year's projects, if it thought more investments would be needed to stimulate the economy.

"This would be the first concrete evidence that Premier Wen's comments are being put into practice," Dariusz Kowalczyk, an economist at Credit Agricole-CIB, told Reuters.

"Improved China growth would benefit all regional currencies, as their economies heavily depend on exports to China."

Infrastructure investment was being approved much more quickly this year compared to the past 2 years, the report said.

Premier Wen signaled the central government’s willingness to take action in remarks at the weekend.

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China turns back to infrastructure for economic growth

I hope those infrastructure is put more into the western part China and the rural areas.

[Norfolk]

China turns back to infrastructure for economic growth

That makes me a little nervous.

Equation wrote:

I hope those infrastructure is put more into the western part China and the rural areas.

Very much agree.

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China's "too big to fall" state firms hurt economy

Blaming stagnant overseas demand seems like an easy excuse for China’s frustrating Q1 economic data, since the global outlook won’t improve for a while yet. In the meantime, the nation could do more to embrace a wake-up call it is currently ignoring.

China’s state-owned enterprises are hurting the economy. Not only do SOEs get favorable treatment in securing bank loans, causing vast sums to be misallocated to an unproductive sector of the economy, but they are often free of responsibility and do not need to concern themselves with the law of the market.

That has a detrimental effect on the more productive private sector, which is the biggest employer and main driver of growth, and which does have to abide by the market.

Government patronage is an implicit life-saving tool for state firms, for whom bankruptcy appears to be an ever more remote issue. A recent local government’s move to spare an SOE from becoming China’s first ever bond defaulter typifies this problem, as Reuters reports:

The Chinese official was adamant the city of Weifang would keep its rayon factory open noting that local authorities had just stepped in to help the plant's owner repay $60 million in commercial paper.

The bailout averted what would have been China's first ever bond default and was good news for domestic bond investors, who were reassured that in China even mid-sized state-owned firms can count on "too-big-to-fail" treatment.

SOEs are often poor performers, which means they often need government support to keep going.

The World Bank cites studies showing that average return on equity - even for state firms that do turn a profit - is lower than for the non-state sector. As China's economy slows and the cost of capital rises, the inefficiency of many state firms may again become a burden on the state, pulling investment away from areas of the economy where it could be more productive.

So why not let them default? It might do good for some, especially those that do have strong underlying businesses. Well, local governments bail out regional SOEs to save face and secure officials’ political performance. In Chinese politics, reputation is more important than effective business operations.

Effort is rarely taken to try to cover up this aspect. As in the Weifang case:

The rescue notwithstanding, the synthetic fibre maker's ordeal resembled a bankruptcy in everything but name. The hallmarks were all there: a sea of unpaid debts, a contest between creditors over who gets paid, and a potential takeover by stronger rivals.

The market adjusts its decisions, therefore, increasingly less on the basis of economic law. Bond investors have begun noticeably to look beyond credit ratings, favoring debt from state companies compared to similarly rated paper from private firms.

Thanks to state intervention in the economy local governments can step in to rescue troubled SOEs. Much of their emergency tools are funded by borrowing, but how much debt can China handle? And how sustainable is the so-called “China model”? I remain neutral.

In conclusion, to reference Reuters, the murky political involvement in saving Shandong Helon is not a positive sign for a country that must heavily on small, private-sector firms for future growth, as investments in infrastructure and basic industry yield diminishing returns.

[Franklin]

China turns back to infrastructure for economic growth

When i first read this news my response was no no no no no no no no. China's economy has been growing too fast for too long and needs to cool down and rebalance. In order for the global economy to rebalance the West needs to get rid of its massive debt burden and China needs to shed it's excess capacity in production. Both these things require a painful process called bankruptcy. But neither side is willing to do this. I'm one of the few people who actually believe that the current slowdown in China is good for China in the long run and good for the rest of the world as well. But most of the analysts and the media and the Chinese government apparently disagree. China already has an enormous debt overhang from the last stimulus and now there going to ad more on to it with this round of stimulus. And what are they going to do when this round of stimulus wears off ? Do another one ? These are short term solutions that doesn't solve the long term problems of the economy. And the story below shows you part of that problem. It seems that the SOE's in China are playing the same role as the banks in the West. And who will have the balls to take them on ? Because of there protected status they are going to control ever larger portions of the economy and in the short run they are only going to grow bigger at the expense of every one else. That means they are only going to grow in importense and power and will be harder and harder to take on.

If the definition of insanity is doing the same thing but expecting a different result then all of the worlds leaders are looney's that belongs in a asylum.

America: print to spend and tax cuts for the rich.
China: infrastructure
Japan: deficit spending and keep interest rate at zero.
Europe:... well only god knows what Europe is doing.

Well at least when the collapse comes no one will be alone, misery loves company and there is enough space for everyone in the abyss.

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U.S. lets China bypass Wall Street for Treasury orders

China can now bypass Wall Street when buying U.S. government debt and go straight to the U.S. Treasury, in what is the Treasury's first-ever direct relationship with a foreign government, according to documents viewed by Reuters.

The relationship means the People's Bank of China buys U.S. debt using a different method than any other central bank in the world.

The other central banks, including the Bank of Japan, which has a large appetite for Treasuries, place orders for U.S. debt with major Wall Street banks designated by the government as primary dealers. Those dealers then bid on their behalf at Treasury auctions.

China, which holds $1.17 trillion in U.S. Treasuries, still buys some Treasuries through primary dealers, but since June 2011, that route hasn't been necessary.

The documents viewed by Reuters show the U.S. Treasury Department has given the People's Bank of China a direct computer link to its auction system, which the Chinese first used to buy two-year notes in late June 2011.

China can now participate in auctions without placing bids through primary dealers. If it wants to sell, however, it still has to go through the market.

The change was not announced publicly or in any message to primary dealers.

"Direct bidding is open to a wide range of investors, but as a matter of general policy we do not comment on individual bidders," said Matt Anderson, a Treasury Department spokesman.

While there is been no prohibition on foreign government entities bidding directly, the Treasury's accommodation of China is unique.

The Treasury's sales of U.S. debt to China have become part of a politically charged public debate about China's role as the largest exporter to the United States and also the country's largest creditor.

The privilege may help China obtain U.S. debt for a better price by keeping Wall Street's knowledge of its orders to a minimum.

Primary dealers are not allowed to charge customers money to bid on their behalf at Treasury auctions, so China isn't saving money by cutting out commission fees.

Instead, China is preserving the value of specific information about its bidding habits. By bidding directly, China prevents Wall Street banks from trying to exploit its huge presence in a given auction by driving up the price.

It is one of several courtesies provided to a buyer in a class by itself in terms of purchasing power. Although the Japanese, for example, own about $1.1 trillion of Treasuries, their purchasing has been less centralized. Buying by Japan is scattered among institutions, including pension funds, large Japanese banks and the Bank of Japan, without a single entity dominating.

Granting China a direct bidding link is not the first time Treasury has gone to great lengths to keep its largest client happy.

In 2009, when Treasury officials found China was using special deals with primary dealers to conceal its U.S. debt purchases, the Treasury changed a rule to outlaw those deals, Reuters reported last June. But at the same time it relaxed a reporting requirement to make the Chinese more comfortable with the amended rule.

Another feature of the U.S.-China business relationship is discretion: The Treasury tried to keep its motivation for the 2009 rule change under wraps, Reuters reported.

Documents dealing with China's new status as a direct bidder again demonstrate the Treasury's desire for secrecy -- in terms of Wall Street and its new direct bidding customer.

To safeguard against hackers, Treasury officials upgraded the system that allows China to access the bidding process.

Then they discussed ways to deflect questions from Wall Street traders that would arise once the auction results began revealing the undeniable presence of a foreign direct bidder.

"Most hold the view that foreign accounts only submit 'indirect bids' through primary dealers. This will likely cause significant chatter on the street and many questions will likely come our way," wrote one government official in an email viewed by Reuters.

In the email, the official suggested providing basic, general answers to questions about who can bid in Treasury actions.
"For questions more extensive or probing in nature, I think it prudent to direct them to the or Treasury public relations area," the official wrote.

The granting to China of direct bidder status may be controversial because some government officials are concerned that China has gained too much leverage over the United States through its large Treasury holdings.

For example, economist Brad Setser, who is a member of the National Economic Council and has also served on the National Security Council, has argued China's large Treasury holdings pose a national security threat.

Writing for the Council on Foreign Relations in 2009, Setser posited that China's massive U.S. debt holdings gave it power over U.S. policy via the threat of a swift, large sale of U.S. debt that could send the market into turmoil and drive up interest rates.

But Treasury officials have long maintained that U.S. debt sales to China are kept separate from politics in a business relationship that benefits both countries. The Chinese use Treasuries to house the dollars they receive from selling goods to the United States, while the U.S. government is happy to see such strong demand for its debt because it keeps interest rates low.

A spokesman for the Chinese embassy in Washington did not respond to calls and emails seeking comment.

The United States has, however, displayed increasing anxiety about China as a cybersecurity threat. The change Treasury officials made to their direct bidding system before allowing access to China was to limit access to the system to a specially designed private network connection controlled by the Treasury.

China is among the most sensitive topics for bankers and government officials who court the country as a financial client because of its size and importance, and none would agree to comment on the record for this story.

A former debt management official at the Treasury who did not want to be identified said that as China's experience in the U.S. Treasury market has deepened over time, Chinese officials may have felt more comfortable taking the reins in the management of their holdings.

Their request to bid directly, in his view, came from a confidence that their money managers could buy U.S. debt more efficiently on their own than through Wall Street banks, which can often drive up the price of Treasuries at an auction if they know how much large clients are willing to pay. Such a practice that is not specifically illegal, though most traders would deem it unethical.

Evidence of China's growing sophistication as a money manager in the U.S. markets is clear in its expansion of operations in New York. Its money management arm, the State Administration for Foreign Exchange (commonly called SAFE), has an office in Midtown Manhattan and a seasoned chief investment officer -- former Pacific Investment Management Co derivatives head Changhong Zhu -- in Beijing.

A woman who answered the phone at SAFE's New York office said no one in the office was authorized to talk to the media.

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It's time for "Remanufactured in China

"Made in China" has created miracles. Now, can "Remanufactured in China" achieve the same glory? Remanufacturing is an advanced mode of the recycling economy. Through lot production by professional repair of used car parts, engineering machinery, and machine tools, remanufacturing can save energy by 60 percent, materials by 70 percent, cost by 50 percent, and emission into the air by 80 percent, while the quality and performance of the remanufactured products are as good as, if not better than, new products. Developing remanufacturing is of great significance energy conservation and environment protection; moreover, it is an important impetus for promoting the upgrade of the manufacturing and modern service industries and the reform of the economy. China's remanufacturing is materializing, with energetic development prospect.

Enterprises: eager to try and act

What really encouraged Ge Hong, deputy secretary general of China Internal Combustion Engine Industry Association (CICEIA), was that: in the internal combustion engine remanufacturing industry development seminar organized by CICEIA in 2011, the 70 chairs in the meeting, originally considered sufficient, were not enough. "More than 100 people took part in the meeting. Those who didn't grab a seat just stood in the back until the end of the meeting", said Ge Hong, "It reflects that people are paying more attention to remanufacturing and that market demand is increasing".

From March 19 to 23, 2012, a survey team led by Ge Hong conducted a survey in 8 major internal combustion engines remanufacturing enterprises in 6 cities in 5 provinces. According to Ge Hong, there are currently 3 types of internal combustion engine remanufacturing enterprises in China: manufacturer service providers, upgraded extensive repair enterprises, and industrial chain of manufacturing base. "Generally speaking, China's internal combustion engine remanufacturing industry possesses an excellent foundation for industrial development; remanufacturing enterprises have established numerous characteristic products and technologies and the recycling system is improving. Some production capacity has been established", said Ge Hong in conclusion of their survey.

Nonetheless, some key technology standards still need to be improved, the industrial support system is incomplete, and industrial administration and polices need to be updated. These are some of the problems that are impeding the thriving development of the internal combustion engine remanufacturing industry. "Enterprises, in particular, should make continuous effort to improve technology system and standard system, enhance discipline, carry out stringent requirements, and promote the standardization of the remanufacturing market", appealed Ge Hong.

Remanufacturing of internal combustion engine possesses a very important position in the remanufacturing sector. It can reflect the development status of the entire industry. Currently, China possesses a remanufacturing capacity of an aggregate of 230,000 units of automobile engine, transmission, steering gear, and power generator. Besides, China's automatic nanometer particle recombination brushing electroplating, among other technologies, has reached international advanced standard.

According to survey, friction and erosion cause about 10 percent of GDP loss in China every year. The number is 4 or 5 percent in developed countries. In face of the gigantic development space, many companies are, as Ge Hong describes, "rubbing their fists and wiping their palms and eager to start action".

Pattern: Chinese characteristics possess advantages

It's necessary to have a clear understanding of the concept of remanufacturing before we can establish a remanufacturing pattern with Chinese characteristics. Professor Yi Xinqian, consultant and director of the expert commission of the Maintenance and Remanufacturing Division of China Construction Machinery Association, says that, take engineering machinery as an example, many companies are beginning to take action, but they don't have a very clear understanding of the concept of remanufacturing, frequently mixing the concept of remanufacturing with machinery repairing.

From the perspective of consumers, remanufacturing has not yet gained extensive recognition in society. A survey shows that only 10 percent of the people who are surveyed understand clearly the remanufacturing of car parts, and 45 percent know nothing about it, with many holding suspicious or even denying attitude towards remanufactured products. This somewhat reflects the public's lack of professional understanding of remanufacturing. "Only by making manufacturers and consumers correctly aware of remanufacturing can the development foundation for the remanufacturing industry be consolidated", said Yi Xinqian.

For remanufacturing companies, they also need to establish the idea of collaboration. "General parts of engineering machinery are manufactured by specialized enterprises. Therefore it is neither possible nor economic for a single enterprise to remanufacture whole engineering machine. Developing remanufacturing industrial cluster is a good option", said Yi Xinqian.

Presently, Wuhan has already established China's first remanufacturing base that features engineering machinery. It attracts companies of engineering machinery remanufacturing, parts and accessories production, and storage and logistics, forming an industrial cluster of engineering machinery remanufacturing.

Policy: thorough optimization centering on the industry

In 2008, the National Development and Reform Commission approved 14 enterprises, including Dongfeng Cummings and Weichai Power, to be the pilot companies of the car parts remanufacturing industry; in 2009, the Ministry of Industry and Information Technology designated 35 enterprises and industrial cluster regions to be the first pilots for the remanufacturing of electro-mechanical products; in 2010, 11 ministries and commissions, including the National Development and Reform Commission and the Ministry of Science and Technology, published the Opinions on Promoting the Development of the Remanufacturing Industry; in 2011, the Outline of the 12th Five-Year Plan passed by the National People's Congress listed the remanufacturing industry as one of the key projects of the recycling economy. In September 2011, the National Development and Reform Commission issued the Notice on Deepening Work of Remanufacturing Pilots, making it clear that the products category and pilot range will be further expanded, policy support will be enhanced, and the formulation of Remanufacturing Products Catalogue will be accelerated

Currently, industrial associations are playing a vitally important communication role in promoting the development of the remanufacturing industry. Yi Xinqian points out that, on one hand, industrial associations introduce the government's policy and procedures about the development of the remanufacturing industry to enterprises, guiding them to choose the correct technology path and direction; on the other hand, industrial associations also help enterprises to seek help from universities, colleges, and research institutes regarding technology problems that enterprises come across, facilitating the integration of production, academy, and research.

"With support from every side, enterprises should also enhance their responsibility", said Yi Xinqian with sentiments, "Enterprises engaged in remanufacturing should have strong social responsibility, and have a firm grasp of the profound significance of this industry on the development of the economy and society".

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This week front page issue from the Economist magazine

Resilient China
How strong is China’s economy?
Despite a recent slowdown, the world’s second-biggest economy is more resilient than its critics think

CHINA’S weight in the global economy means that it commands the world’s attention. When its industrial production, house building and electricity output slow sharply, as they did in the year to April, the news weighs on global stockmarkets and commodity prices. When its central bank eases monetary policy, as it did this month, it creates almost as big a stir as a decision by America’s Federal Reserve. And when China’s prime minister, Wen Jiabao, stresses the need to maintain growth, as he did last weekend, his words carry more weight with the markets than similar homages to growth from Europe’s leaders. No previous industrial revolution has been so widely watched.

But rapid development can look messy close up, as our special report this week explains; and there is much that is going wrong with China’s economy. It is surprisingly inefficient, and it is not as fair as it should be. But outsiders’ principal concern—that its growth will collapse if it suffers a serious blow, such as the collapse of the euro—is not justified. For the moment, it is likely to prove more resilient than its detractors fear. Its difficulties, and they are considerable, will emerge later on.

Outsiders tend to regard China as a paragon of export-led efficiency. But that is not the whole story. Investment spending on machinery, buildings and infrastructure accounted for over half of China’s growth last year; net exports contributed none of it. Too much of this investment is undertaken by state-owned enterprises (SOEs), which benefit from implicit subsidies, sheltered markets and politically encouraged loans. Examples of waste abound, from a ghost city on China’s northern steppe to decadent resorts on its southern shores.

China’s economic model is also unfair on its people. Regulated interest rates enable banks to rip off savers, by underpaying them for their deposits. Barriers to competition allow the SOEs to overcharge consumers for their products. China’s household-registration system denies equal access to public services for rural migrants, who work in the cities but are registered in the villages. Arbitrary land laws allow local governments to cheat farmers, by underpaying them for the agricultural plots they buy off them for development. And many of the proceeds end up in the pockets of officials.

This cronyism and profligacy leads critics to liken China to other fast-growing economies that subsequently suffered a spectacular downfall. One recent comparison is with the Asian tigers before their financial comeuppance in 1997-98. The tigers’ high investment rates powered growth for a while, but they also fostered a financial fragility that was cruelly exposed when exports slowed, investment faltered and foreign capital fled. Critics point out that not only is China investing at a faster rate than the tigers ever did, but its banks and other lenders have also been on an astonishing lending binge, with credit jumping from 122% of GDP in 2008 to 171% in 2010, as the government engineered a bout of “stimulus lending”.

Yet the very unfairness of China’s system gives it an unusual resilience. Unlike the tigers, China relies very little on foreign borrowing. Its growth is financed from resources extracted from its own population, not from fickle foreigners free to flee, as happened in South-East Asia (and is happening again in parts of the euro zone). China’s saving rate, at 51% of GDP, is even higher than its investment rate. And the repressive state-dominated financial system those savings are kept in is actually well placed to deal with repayment delays and defaults.

Most obviously, China’s banks are highly liquid. Their deposit-taking more than matches their loan-making, and they keep a fifth of their deposits in reserve at the central bank. That gives the banks some scope to roll over troublesome loans that may be repaid at a later date, or written off at a more convenient time. But there is also the backstop of the central government, which has formal debts amounting to only about 25% of GDP. Local-government debts might double that proportion, but China plainly has enough fiscal space to recapitalise any bank threatened with insolvency.

That space also gives the government room to stimulate growth again, should exports to Europe fall off a cliff. China’s government spent a lot on infrastructure when the credit crunch struck its customers in the West. But there is no shortage of other things it could finance. It could redouble its efforts to expand rural health care, for example. China still has only one family doctor for every 22,000 people. If ordinary Chinese knew that their health would be looked after in their old age, they would save less and spend more. Household consumption accounts for little more than a third of the economy.

Time is on my side

That underlines the longer-term problem China faces. The same quirks and unfairnesses that would help it withstand a shock in the next few years will, over time, work against the country. China’s phenomenal saving rate will start falling, as the population ages and workers become more expensive. Capital is also already becoming less captive. Fed up with the miserable returns on their deposits, savers are demanding alternatives. Some are also finding ways to take their money out of the country, contributing to unusual downward pressure on the currency. China’s bank deposits grew at their slowest rate on record in the year to April.

So China will have to learn how to use its capital more wisely. That will require it to lift barriers to private investment in lucrative markets still dominated by wasteful SOEs. It will also require a less cosseted banking system and a better social-security net, never mind the political and social reforms that will be needed in the coming decade.

China’s reformers have a big job ahead, but they also have some time. Pessimists compare it to Japan, which like China was a creditor nation when its bubble burst in 1991. But Japan did not blow up until its income per head was 120% of America’s (at market exchange rates). If China’s income per head were to reach that level, its economy would be five times as big as America’s. That is a long way off.

Starbucks Digital Network in partnership with Yahoo!

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Chinese innovative products shining at Hannover fair

China becomes a partner country of Hannover Messe again after 25 years. In 1987, only about 20 domestic enterprises participated in the exposition when China attended Hannover Messe as a partner country for the first time. But this year, nearly 500 Chinese enterprises take part in all the eight Theme Exhibitions, taking up about 10 percent of all exhibitors. The exhibition area covers about 9000 m2 nearly doubling that of the last exhibition. Moreover, China's central exhibition area themed with "Green Intelligence" specially displays China's latest products and technologies in new energy and intelligent manufacturing.

Hannover Messe is like a mirror reflecting the figures of Chinese enterprises, particularly numerous private enterprises that keep growing and walking onto the world stage.

Compete and display on the same stage

Hannover Messe provides a perfect platform for China to shows its technological innovation to the counterparts all over the world and break down the stereotypes of "Made in China".In the central exhibition area of this Hannover Messe, there are E50 pure electric vehicle launched by SAIC Motor, intelligent micro-grid sandbox model of Baiyun Power Group, ultra-high voltage grid technology of XJ Electric Equipment Group. These products represent the top level of China's industry in technology.

According to Hu Maoyuan, chairman of SAIC Motor, E50 pure electric vehicle can be fully charged in 6 hours with household power source. SAIC Motor has basically built a domestic leading system for R&D of 3Es (electric motor, electronic control and electricity storage) core technology and key components of new energy vehicles.

An engineer of Shanghai SIASUN Robot & Automation Company told the reporter, the mobile and welding robots displayed by the company take up 80% of the domestic market share and they can be used for carrying the engines on the assembly line or the whole vehicle and have been purchased and used by General Motors Corporation. At present, SIASUN robots can already compete with European, American and Japanese counterparts.

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China counter-challenges U.S. over subsidies at WTO

China filed a complaint at the World Trade Organization (WTO) on Friday to challenge U.S. tariffs charged on Chinese goods that the United States considers to be unfairly subsidized.

The dispute, revolving around so-called countervailing duties, relates to 22 products with an annual export value to the United States of $7.3 billion, China's mission to the WTO said in an emailed statement.

There was no immediate reaction from U.S. officials. China did not name the products subject to countervailing duties.

The case begins with China "requesting consultations" with the United States to try to find an amicable settlement. But it may later move to arbitration if the two cannot agree, and the United States could be forced to scrap its duties and even compensate China if it is found to have broken the rules.

The dispute adds more heat to a trade relationship that has barely stopped simmering despite the United States seeing signs of China "making progress" towards easing restrictions on its currency, one of the biggest causes of friction.

Although China's pace of overall export growth has slumped to single digits this year, the trade deficit with the United States set an annual record of more than $295 billion in 2011, putting extra pressure on U.S. manufacturers whose markets are still recovering from the financial crisis.

The latest complaint comes just eight days after the U.S. Commerce Department set punitive tariffs on Chinese solar panels that it said Chinese exporters had dumped at unfairly low prices on the U.S. market. China's Commerce Ministry said the U.S. action violated WTO rules and distorted trade.

Two more trade disputes are due to be ruled on by WTO dispute panels within days or weeks. One concerns China's exports of grain-oriented electrical steel.

The other is a U.S. complaint about China closing its electronic payments market to firms such as VISA (V.N), Mastercard (MA.N) and American Express (AXP.N), and giving a monopoly to China UnionPay.

China's statement said the latest case was launched because the United States had broken WTO rules in many areas, including rules regarding "public body, specificity, facts available and subsidy finding on the export restriction measures."

[antiterror13]

Thanks escobar .... has been extremely good indeed

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Disease costs 13% of China's GDP

The economic burden of disease currently consumes about 13 percent of China's gross domestic product (GDP), Vice Minister of Health Wang Guoqiang said Friday.

China is currently facing "dual disease burdens," or health problems usually found in a developed country as well as those typical in a developing economy, Wang said at a conference on traditional Chinese medicine (TCM) held in the country's southwest Guangxi Zhuang Autonomous Region.

The severe situation could be attributed to rapid globalization, industrialization, and urbanization, an aging population and changes in the lifestyles of Chinese people, Wang said.

Wang said the trends have exposed the Chinese to deteriorating food and drinking water safety, workplace safety and environmental problems, which have become major issues threatening the nation's health.

More than 700 million of China's working population are currently in a state of sub-health or have chronic diseases, according to Wang.

Many contagious and endemic diseases also plague China's remote and poverty-ridden areas, where medical resources have lagged behind.

Wang said China should boost advances in TCM research, education, culture and industrialization, and apply TCM advances in medical treatment and health care in order to improve the overall health of the Chinese population.

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China moves faster in approving infrastructure projects

AS reported in JRJ.com, the central government has requested local governments to report their all infrastructure project investment for this year before end-June for faster appraisal and approval, and related central government subsidies for these projects will likely be appropriated earlier than expected.

This likely represents the central government's endeavor to boost the slowing economy, which highly depends on real estate fixed-asset investment. China's commodity property FAI growth fell from the peak of 63 percent in November 2010 to 9 percent in April 2012.

As reported by the China Securities Journal, since end-February, China has tremendously accelerated the appraisal and approval process for major infrastructure projects, such as highway networks, airport and railway lines. For example, the airport projects in Fuyuan of Heilongjiang, Shihezi of Xinjiang, Qingyang of Gansu and Jiangbei of Chongqing have recently received approval from the National Development and Reform Commission.

Observers said these are strong evidence of infrastructure FAI acceleration, adding that the central government's focus should be relaunching and completing the suspended major projects, most of which are in central/western China and some of them were suspended since last August.

Earlier, the central government also said to allocate more capital for the development of social housing, with the Ministry of Finance and Ministry of Housing and Urban-Rural Development jointly allocated 10.5 billion yuan (US$1.67 billion) subsidy for low-rental housing projects, of which Eastern China accounts for 5.1 percent (540 million yuan), Central China accounts for 40.2 percent (4.22 billion yuan), and Western China accounts for 40.2 percent (4.22 billion yuan). This amount can also be used for public rental housing if the needs for low-rental housing have be satisfied.

In our view, the implications of these are: 1) With signs of a slowing economy, there will be more government stimulus; 2) Government's economic stimulus would focus more on infrastructure investment and social housing; 3) Basic tone of government tightening on the property market would remain unchanged with housing purchase restrictions to continue; and 4) There, however, would be more support on mortgages to first-time home buyers and genuine upgraders. We believe that companies focus on infrastructure and social housing would benefit directly.

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Yen-yuan direct trading likely to start in June

Japan and China are expected to start direct trading of their currencies as early as June as part of efforts to boost bilateral trade and investment, reports say.

With the planned step, exchange rates between the yen and the yuan will be determined by their transactions, departing from the current "cross rate" system that involves the US dollar in setting yen-yuan rates, Kyodo News said.

The two governments are eyeing setting up markets in Tokyo and Shanghai, the Yomiuri Shimbun said.

The yen-yuan exchange system would help businesses in the world's second- and third-largest economies reduce risks associated with exchange rate fluctuations in the US dollar and cut transaction costs, Kyodo said.

It will be the first time that China has allowed a major currency except the US dollar to directly trade with the yuan, Kyodo said.

[Kurt]

China moves faster in approving infrastructure projects

In my opinion China is doing lots of things right. You can't do much nonsense with infrastructure spending in China's western regions that is at the same time a very convenient measure to ease economic bubble pressure due to the overheating on the coastal ports. These spending rounds keep the national GDP growing, but shift the growth to regions that still have ample ability to stomach two digit growth numbers because of the low starting level. It will take at least one economic cycle more before China runs into serious problems.

State owned enterprises and princelings will likely be at the root of money dumping problems, but China does have the ability to bankrupt at least the SOE with increased economic growth and redistribute them to new oligarchs, Russian style, who are princelings. So overall the risks are manageable because for one loss another gain can be made by the same group.
This reminds me very much of the old Chinese bureaucracy that at least since the Song dynasty worked along similar lines of state ownership. The rich civil servant families running (de facto owning) all large companies and private ownership limited to small business (including disowning expanding companies of private businessmen), indeed a very old Chinese way. Add to this the tax breaks for the bureaucracy affiliated with power and you have a mix not dissimilar to the US.

In the US a financially powerful group wants an exit from state regulations, in essence they want none to mind their business, especially no public control, usually exercised in a democracy. Via the tax breaks they have found a common ground to increase their profits and thus political leverage (buying support and buying election propaganda) at the expense of destroying the community organization. This is very similar to the socio-political structure in less developed countries that for this reason don't advance economically, but have a very secure elite in power that doesn't have to worry much about upstarts. So these measures are a means to ensure a freeze of the current wealth and power distribution and it has been going on in all Western countries since the dawn of the Cold War because the financial elite doesn't feel like needing so much cozy feelings for the population to protect them.

Europe has at the core the German&Dutch economies with very similar structures and success and the Balto-Scandinavians who formed a group to better press their EU interests. Of these Germany wields the most economic power. The common Germans have suffered in buying power due to the Agenda 2010 of the previous chancellor, but it has eased the unemployment level and instilled more growth. All the political measures currently proposed by Germany are not aimed at easing the situation in the economically troubled countries, but rather to enhance certain problems to push for more reforms that in effect would Germanize the economic structures of these countries. The problems of Greece, Ireland, Spain, Italy and Portugal are internal structures and for this reason the German ambition is to worsen the economic effects until the internal structural problems are solved. This will take a long time and create much suffering, not dissimilar to Agenda 2010 (one of the reasons for the downfall of this chancellor) and Germany wants to profit from this engagement by braindraining the troubled countries for their own advancement. It's a kind of new attempt to conquer Europe, but this time the French may play along. It is a major shift due to the ascendancy of Germany that started with the breaking up of Yugoslavia and now continues with restructuring Europe's economy and gouvernance along German lines, a measure that would prove impossible through other means than monetary dependency.

Yen-yuan direct trading likely to start in June

This is a brilliant idea to bind Japan economically as much as Taiwan and thus secure Chinese interests and dominance in the region, while at the same time giving the Japanese more leeway in face of US demands (that can be quite unpopular) and better access to a major economic growth region that can instill Japan with better chances for their youth. This measure has the ability to stabilize the Japanese political system that is currently sliding into a conflict between two major camps after decades of Liberal Democratic Party (Japan) dominance.