Chinese Economics Thread

Hendrik...
Most of those SOE are LOOSING money and some of them are Zombie company half death .They generate miserly 3% profit as aggregate
private economy is only 40% of the total economy but they generate something like 70% of the job created
Now I understand the need for SOE because for some industry only government has the capital and wherwithal to do it. Like Aerospace, transport , power etc
But the wealth created in China is by enlarge created by the private company! and tax are collected to support those SOE. In other word they are heavily subsidized! And borrow like there is no tomorrow creating debt burden
China's central SOEs deliver strong performance in H1
Xinhua| 2018-07-12 20:29:33
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China's centrally-administered state-owned enterprises (SOEs) reported fast profit growth in the first half of the year with a lower debt-asset ratio, data showed Thursday.

Combined profits of China's central SOEs totaled 887.79 billion yuan (133.1 billion U.S. dollars) in H1, up 23 percent from a year earlier, the State-owned Assets Supervision and Administration Commission (SASAC) said.

The growth rate was 2.1 percentage points higher than the pace in Q1.

In June, central SOEs' profits increased 26.4 percent year on year to a historic high of 201.88 billion yuan, according to Peng Huagang, a SASAC spokesperson.

The total revenues of central SOEs stood at 13.7 trillion yuan in H1, up 10.1 percent year on year.

"Such strong performance was partly due to China's ongoing supply-side structural reform," Peng said.

The real economy, especially the industrial sector, saw stronger profitability. In H1, central SOEs in the industrial sector raked in 515.28 billion yuan in profits, up 33.9 percent year on year, 10.9 percentage points higher than the average level.

Strategic emerging industries and new growth drivers contributed to the fast growth, with revenues of new businesses including internet applications accounting for more than 50 percent of total revenues.

Central SOEs also saw a drop in their debt-asset ratio in H1 thanks to government deleveraging efforts.

The average debt-to-asset ratio for central SOEs stood at 66 percent by the end of June, down 0.3 percentage point compared with the beginning of the year, the state assets regulator said Thursday.

"The decline indicated a stronger ability for the companies to forestall risks," Peng said.
 

plawolf

Lieutenant General
Most of those SOE are LOOSING money and some of them are Zombie company half death .They generate miserly 3% profit as aggregate
private economy is only 40% of the total economy but they generate something like 70% of the job created
Now I understand the need for SOE because for some industry only government has the capital and wherwithal to do it. Like Aerospace, transport , power etc
But the wealth created in China is by enlarge created by the private company! and tax are collected to support those SOE. In other word they are heavily subsidized! And borrow like there is no tomorrow creating debt burden

Careful, that’s the kind of short-term profit obsesses thinking that put the west on its current path of decline.

Yes, private companies are more profitable, but there are a phonebook’s worth of reasons for that, and not every one (hell, maybe not even the majority) are good reasons.

Private companies typically cherry pick to run only the most profitable services. They have zero or very minimal sense of social responsibility.

A lot of the time, SOEs are less profitable because they run loss making services that a lot of people (often the poorest and most disadvantaged in society) benefit from and depend on.

What is never captured in company profitability figures is the positive social and economic impact a lot of these loss making services have on the local economy and country as a whole.

A lot of the time, Chinese SOEs are used as engines of renewal for deprived areas and a means to address inequality and inflation.

Just look to the UK for the damaging distortion market forces will create if left unchecked.

London is bloated and the whole of the UK suffers because it effectively creates a two tier country.

Without SOEs leading the way to open up and develop China’s western hinterlands, you will have a similar situation as London developing along China’s coastline.

A lot of the social and economic problems of the last couple of decades, which were initially created as a result of the rapid development of the eastern coast, has been greatly reduced by China’s go west policy.

Fewer migrants are going to the coast to work because China’s development strategy is bringing money and jobs closer to home for them.

That helps to address the personal costs to migrant workers and their left behind children, but also help to defuse the social tensions in the eastern provinces from so much internal migration.

You also need to look to technology.

Left to market forces, all of China’s companies would be like ZTE, that puts profits above all other concerns, leaving themselves vulnerable to blackmail and disruption by foreign powers since its more profitable to buy off the shelf components rather than invest to develop them yourself.

It’s not just Chinese companies that are so inclined. a key reason western technology seems to have plateaued in recent years is because western governments have massively cut back on R&D spending after the end of the Cold War.

Private R&D just cannot match the scale and depth of government R&D. And as the endless lawsuits between Apple and Samsung shows, even when private companies do invest in R&D, they guard th fruits of those investments jealousy and rigorously.

The 10 key technologies that makes the iPhone possible were all initially developed by government funded (mostly military) R&D programmes.

It’s not like there was any western government restrictions on what private companies could research. So it’s pretty telling that all those 10 core technologies were delivered by government R&D and not private.

Indeed, since the iPhone, Apple and other western firms are struggling with the next big thing on their own.

Private R&D funding has only increased in that time, yet the likes of AI, self driving cars, quantum computing and communications, private space flight etc are all still based overwhelmingly on the initial fruits from government funded military programmes.

There are all these factors and so many others I don’t have time to get into to consider when judging the true worth and effectiveness of SOEs.

Judging their performance and worth purely on profits is about as insightful as Trump judging who is ‘winning’ a trade war based on how who can levy tariffs on the most value of imports.
 

Hendrik_2000

Lieutenant General
Nice that they have profit But where is the total asset(including loan)? So that we can ratio it to get true picture of profitability.

I have no problem with SOE as they have their function as Plawolf clearly explained.But they are not the engine that create the prosperity On the other hand without the infrastructure developed by SOE there is no prosperity either. In the early year of PRC the government initiate many large project mostly concentrated in the north east and Mongolia(SOE) The southern province has minimum number of those project

Yet over the last decades It is the southern provinces that drive the Chinese economy like this example. Initiative,hardwork,Good infrastructure,good government, infusion of capital and talent from Taiwan,Hongkong and other diaspora create wealth

 
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taxiya

Brigadier
Registered Member
My concern is Musk raises tons of cheap loans from Chinese and then deliver nothing. He likes to think big but can't execute. He got no talent in mass production and may very well run Tesla to the ground. Chinese will be the one left holding the bag
I agree with your concern, that is why I don't like him too. But then, he is just one of many 忽悠, there are many such people in China (乱集资), so from a overall perspective, he is not specially worse. Chinese investors have to grow mature regardless who is the 忽悠。
 

taxiya

Brigadier
Registered Member
Here is the story of Jinjiang formerly poor village that got rich by manufacturing shoe. And it is dirt poor in the past hundred of thousand were forced to migrate at the end of Qing dynasty mostly to SEA. Quanzhou dialect is prominent in Penang and Medan, Manila.Located close to Quanzhou. It is one of the oldest dialect in Fujian. Nowadays it attract migrant from all over China But they treat them as their own no difference they got social welfare benefit the same as local.
Thing will be better in the future because Jinjiang is selected as one of three memory chip fabrication


data=YDwYEe015aVSCjCJdR_waunqxCOE8jCQK_vHqHqLu_9TreY_ea0pUjVmdUwJcFJij74ugHEddboamW7L4dKWfDaAF3XvtuQONkscBJtEOozgJNACE0Jaj3B3vG1OEaGrOLhPhXulqQSUURbv05Ts8pS9hPngEjiGsasdmhu33cmCPq-A524mGmaPByp60l2cJbNSdnSVnRqpKqngrcDNI1cGZuQQYcn8fvIRm1fE9-rb_g


Fujian Jin Hua equips Jinjiang fab

China DRAM start-up, Fujian Jin Hua Integrated Circuit, is moving fab equipment into its Jinjiang fab (pictured) with the intention of running first silicon in Q3 2018, reports Digitimes.

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The fab is to make DRAM on a 32nm process supplied by UMC. It is being initially equipped to run 60k wpm. It is spending $5.3 billion to get to that point. The intention is to spend more, later, to expand the fab or build another.

With Samsung currently ramping up DRAM on an 18nm process, Jin Hua has a long way to go before it becomes competitive in the world market, but the China government is expected to find customers for its production whatever the yield, cost or timing of the eventual output.
I don't understand why you keep on claiming that private company's superior efficiency and contribution over SOE ignoring the fact. Are you ideologically obsessed to capitalism against communism/socialism? I don't demand you to love Communists, it is personal belief, but at least you should be willing to face the fact.

Here is the fact behind your "good" example of private better than SOE.
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Fujian Jinhua Integrated Circuit Co., Ltd. (JHICC for short) is an advanced IC manufacturing enterprise, which is mainly invested and established by Fujian Electronics & Information (Group) Co., Ltd., and Jinjiang Energy Investment Co., Ltd. JHICC has conducted technical cooperation with Taiwan United Microelectronics Corporation and invested 5.65 billion US dollars to build a 12” fabrication facility in Jinjiang City to develop advanced memory technology and process technics and carry out the manufacturing and sales of related products. ...

First main investor is SOE
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福建省电子信息(集团)有限责任公司
福建省电子信息(集团)有限责任公司(以下简称集团)于2000年9月设立,注册资本人民币28.05亿元,是福建省人民政府出资组建的电子信息行业国有独资资产经营公司和投资平台。2016年,集团实现营业收入193.64亿元,利润总额9.77亿元,资产总额321.68亿元。位列2017年(第31届)中国电子信息百强企业第34位。

The second main investor is SOE
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(Home page)
it's capital source
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晋江能源投资有限公司
公司概括
公司名称 晋江能源投资有限公司 英文名称 Jinjiang Energy Investment Co., Ltd.
成立日期 1999-07-13 国统局类别 科学研究和技术服务业
注册地址 福建省晋江市梅岭世纪大道679号电力大厦裙楼5层 公司类别 工业企业
经济性质 国有企业 控股情况 国有控股
法人代表 林长衍 最新财政年 2012
从业人员 -- 企业规模 其他
主营收入 216,295,564(CNY) 利润总额 165,190,444(CNY)
资产总计 4,880,918,482(CNY) 注册资本 1,000,000,000(CNY)
主营业务 公司主营业务由电力投资、城市供水和交通基础设施投资三个主要板块组成。
 

nugroho

Junior Member
for private company, R&D must be able to be transformed to income as soon as possible, long term goal R&D only exist in SOE or government body.
To make China prosperous in long time need long term R&D.
 

Icmer

Junior Member
Registered Member
I think Hendrik's main point is that Chinese economic growth from 1980 to 2010 was overwhelmingly driven by private investment in the coastal southern provinces. These provinces were economically neglected in the time of Mao. Very little in the way of positive economic benefits were derived as a result of central planning policies in Guangdong, Fujian, Zhejiang, and Jiangsu. Land reform was pointless since the rural landownership system in the south was different than that in the north, or even in Taiwan (landlords participated in production and did not own expansive plots due to the nature of the terrain.) Cities like Guangzhou and Shanghai were largely economic backwaters until the 1990s. It's no wonder that people in these provinces have very few kind words to say about Mao.

I don't think anyone is disputing that state investment is more necessary than ever before now that China is increasingly being driven to climb up the economic value chain through innovation.
 

taxiya

Brigadier
Registered Member
I think Hendrik's main point is that Chinese economic growth from 1980 to 2010 was overwhelmingly driven by private investment in the coastal southern provinces. These provinces were economically neglected in the time of Mao. Very little in the way of positive economic benefits were derived as a result of central planning policies in Guangdong, Fujian, Zhejiang, and Jiangsu. Land reform was pointless since the rural landownership system in the south was different than that in the north, or even in Taiwan (landlords participated in production and did not own expansive plots due to the nature of the terrain.) Cities like Guangzhou and Shanghai were largely economic backwaters until the 1990s. It's no wonder that people in these provinces have very few kind words to say about Mao.

I don't think anyone is disputing that state investment is more necessary than ever before now that China is increasingly being driven to climb up the economic value chain through innovation.

By saying "Cities like Guangzhou and Shanghai were largely economic backwaters until the 1990s", I am sure you are not from Mainland China. (please don't take offence. :))

The contribution of private investment in the coastal region is undeniable.

BUT, the southern provinces have been economically advanced than the north for a long time since the Song dynasty 1300s till today. For most time after 1300s, south has been the main source of grain which is the foundation of an agricultural empire. The Sui dynasty (500 AD) dug the Grand canal to transport grains from Zhejiang and Jiangsu to feed the capital in the north. Shanghai and Guangzhou had been the commerce and financial centers during the Qing dynasty. Shanghai has been the very first industrial hub of China since 1900s. Up till 1980s, "Made in Shanghai" is the prestige's products to buy for Chinese, only to be replaced by "Made in Shenzhen" later. There is no disadvantage or negligence by Mao and central government of the south. If one want to pick the very disadvantaged corner of some southern provinces, one should not ignore the equally "neglected" economic backwaters in the deep west, such as Sichuan, Gansu, Qinghai, Tibet and northern Shaanxi.

Once again, I object any regionalism that somehow claim being victimized or superior or deserving more credit/privilege or contributing more than others. There is only one people, that is Chinese, no other sub entities/identities should be encouraged or advanced.

P.S.
The true economy backwater in the south is surely not Zhejiang, Jiangsu. Guangdong is only partially, the north-west part. Fujian was somehow held back because its close distance to Taiwan, being the main trade and immigration source to Taiwan, it was held back in early Qing before the reunification in late 1600s due to the economical blockade of Taiwan, then it was held back from 1949 to 1970s when there were artillery shootings between Jinmen (Taiwan) and mainland, nobody would build serious industry in a battle field. Resenting that arrangement is wrongfully placed.

The true backwater in the south is Guizhou, Guangxi, north-west Guangdong, Yunnan, Jiangxi, Hunan and part of Hubei not along the Yangtze River. And I will skip the backwater in the west and north as this should not be a competition of being the victim.
 
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Icmer

Junior Member
Registered Member
By saying "Cities like Guangzhou and Shanghai were largely economic backwaters until the 1990s", I am sure you are not from Mainland China. (please don't take offence. :))

The contribution of private investment in the coastal region is undeniable.

BUT, the southern provinces have been economically advanced than the north for a long time since the Song dynasty 1300s till today. For most time after 1300s, south has been the main source of grain which is the foundation of an agricultural empire. The Sui dynasty (500 AD) dug the Grand canal to transport grains from Zhejiang and Jiangsu to feed the capital in the north. Shanghai and Guangzhou had been the commerce and financial centers during the Qing dynasty. Shanghai has been the very first industrial hub of China since 1900s. Up till 1980s, "Made in Shanghai" is the prestige's products to buy for Chinese, only to be replaced by "Made in Shenzhen" later. There is no disadvantage or negligence by Mao and central government of the south. If one want to pick the very disadvantaged corner of some southern provinces, one should not ignore the equally "neglected" economic backwaters in the deep west, such as Sichuan, Gansu, Qinghai, Tibet and northern Shaanxi.

Once again, I object any regionalism that somehow claim being victimized or superior or deserving more credit/privilege or contributing more than others. There is only one people, that is Chinese, no other sub entities/identities should be encouraged or advanced.

P.S.
The true economy backwater in the south is surely not Zhejiang, Jiangsu. Guangdong is only partially, the north-west part. Fujian was somehow held back because its close distance to Taiwan, being the main trade and immigration source to Taiwan, it was held back in early Qing before the reunification in late 1600s due to the economical blockade of Taiwan, then it was held back from 1949 to 1970s when there were artillery shootings between Jinmen (Taiwan) and mainland, nobody would build serious industry in a battle field. Resenting that arrangement is wrongfully placed.

The true backwater in the south is Guizhou, Guangxi, north-west Guangdong, Yunnan, Jiangxi, Hunan and part of Hubei not along the Yangtze River. And I will skip the backwater in the west and north as this should not be a competition of being the victim.
It should've been obvious from the context that I was only referring to the economic history of the PRC.

The majority of the south was economically neglected until the 1980s. I stand by the "economic backwaters" statement. Shanghai contributed a large portion of national tax revenue for the PRC, yet received little in the way of favorable development policies until the 1990s. Yes, the inland provinces are still largely backwaters today, but this does not negate the fact that the coastal provinces were as well until the 1990s.
 
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Icmer

Junior Member
Registered Member
There is no disadvantage or negligence by Mao and central government of the south. If one want to pick the very disadvantaged corner of some southern provinces, one should not ignore the equally "neglected" economic backwaters in the deep west, such as Sichuan, Gansu, Qinghai, Tibet and northern Shaanxi.

Had the central government not suppressed the commercial culture of China during the 1950s and 1960s, we would not be having this discussion. As you noted, the south has a propensity for commercial achievement due to its relatively advanced level of economic development since the Southern Song. This is a low-hanging fruit that was not picked until the 1980s. What a shame. The Republican-era government during the Nanjing decade did a better job of allowing the south to prosper than Maoist China did.
 
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