Chinese Economics Thread

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China vows deeper VAT reform to boost economic vitality
Xinhua| 2019-03-20 23:43:45
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China will implement a slew of measures to cut the value-added tax (VAT) rates, making sure that tax burdens on all industries will only go down, not up, the State Council's executive meeting presided over by Premier Li Keqiang decided on Wednesday.

The Government Work Report this year set out the plan for larger-scale tax cuts, including lowering the VAT rate in manufacturing and other industries from 16 to 13 percent, and the VAT rate in transportation, construction and other industries from 10 to 9 percent.

A host of concrete measures were decided upon at the Wednesday meeting to achieve such targets, which will be enacted since April 1.

Input VAT eligible for deduction will be expanded and will cover passenger transportation services. Tax payers will be able to get their input tax on real estate payments deducted in full on a one-time basis, instead of on two occasions in two years.

Taxpayers whose main businesses are postal services, telecommunications, modern services and consumer services shall enjoy 10 percent additional input VAT deduction before the end of 2021. Increase in the overpaid VAT following this round of tax cuts will be refunded through due procedures.

"The planned VAT cuts must be delivered in no time. Its implementation must be closely monitored to ensure that tax burdens are meaningfully reduced in the major industries and lowered to various extents in some industries. All industries will see their taxes go down, not up," Li said.

"In case of increased tax burden due to inadequate deductions in certain individual industries, the government will work out targeted solutions," Li added.

In the Government Work Report this year, Li said that the government's moves to cut tax on this occasion aim at an accommodative effect to strengthen the basis for sustained growth while also considering the need to ensure fiscal sustainability.

It is also a major measure to lighten the burden on businesses and boost market dynamism, and is also the result of a major decision taken at the macro policy level in support of the efforts to ensure stable economic growth, employment, and structural adjustments.

In 2018, taxes and fees levied on enterprises and individuals were reduced by around 1.3 trillion yuan as a result of multiple preferential tax policies introduced by the government.

The Wednesday meeting also decided upon adjustments to the export tax rebate rates of certain goods and services and to the tax deduction rate of purchases of farm produce.

It was also decided at the meeting to increase transfer payments to local governments, focusing on supporting the central and western regions and counties and prefectures in difficulty.

"The share that goes to enterprises in the national income distribution needs to be increased to boost market vitality. This will help keep employment stable, expand tax sources and make public finance sustainable," Li said.
 
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Economic Watch: Chinese economy maintains stable progress with opportunities ahead
Xinhua| 2019-03-21 23:39:43
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China's economy will maintain resilience and progress partly due to further opening up, a stronger domestic market and booming high-tech industries, a senior official has said.

Ning Jizhe, deputy director of the National Development and Reform Commission, made the remarks in his article published in the latest issue of Secretary Work, a periodical under the supervision of the General Office of the CPC Central Committee.

China's economic development over the past 40 years was made possible due to, among other things, the incremental opening up of the economy. Despite a drastic decline in global cross-border investment in 2018, China's actual use of foreign capital hit 134.97 billion U.S. dollars, up 3 percent from a year earlier.

China has signed 17 free trade agreements with 25 countries and regions, with another 13 agreements under negotiations.

Robust domestic demand has become a key driver of the Chinese economy or even the global economy at large. China managed to grow at an annual speed of 6.6 percent last year, with consumption contributing over 76 percent to its growth.

Chinese consumption has become increasingly important for its trade partners. China was the world's second-biggest importer after the United States between 2012 to 2017, and has become the biggest trade partner of over 120 countries and regions.

Ning expects China's domestic consumption to be further unleashed owing to rising household incomes, better consumption environment and improved product quality, which will help ensure China's economy stay on track.

The country is also becoming an increasingly important global player in the innovation economy. R&D investment accounted for 21.5 percent of China's gross domestic product in 2017, and China has taken the global lead in the number of research and development personnel employed within the country.

China has become one of the regions to witness fast development of high-tech industries. Last year, output of new energy vehicles, fiber optics and smart televisions surged 40.1 percent, 23 percent and 18.7 percent respectively, year on year.

An increase in innovation is also tied to an increase in patent application filings within China. In fact, China had been the top nation for patent application filings for seven consecutive years by the end of 2017.

Looking ahead, Ning stressed that China should seize strategic opportunities to maintain high-quality economic development.

To fulfil the target, efforts should be made to enhance the counter-cyclical adjustment of macro policy to keep economic growth within a reasonable range, Ning said.

While facilitating the development of the services industry to upgrade consumption, China will encourage innovation and investment in the construction of new infrastructures, including big data and artificial intelligence.

More measures will be unveiled to prevent financial risks, reduce poverty and promote green development, according to Ning.

Besides, the country will also deepen the supply-side structural reform to create new development dynamics and accelerate industrial upgrading, push forward coordinated regional development and advance all-round opening-up, Ning added.
 
now I read this SCMP Editorial
New law a major step in protecting interests of foreign investors
  • If and when the trade war is settled, China needs to demonstrate its readiness to provide a safe, fair and attractive business environment for overseas firms and investors
  • The new foreign investment law will help achieve that
Updated: 10:48pm, 23 Mar, 2019
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Beijing is pulling out all the stops to make foreign investors happy. Chief among these is a new foreign investment law being rushed out by China’s legislature to meet the United States’ trade-war demands. There is no doubt
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is a significant step towards protecting the interests of foreign firms and investors. But it remains a work in progress as people still have to be convinced by its effectiveness and Beijing’s willingness to enforce it.
The new law aims to address complaints raised by Washington and others by guaranteeing fair treatment to foreign investors in China, prohibiting forced technology transfers, and barring Chinese officials from leaking commercial secrets obtained from outside sources. And to reassure investors from Hong Kong, Macau and Taiwan, Zhang Xiaoming, director of the central government’s Hong Kong and Macau Affairs Office, took the trouble to spell out that it would not change the legal status of their investments, which would still be considered “foreign” and be accorded the same treatment.

However, some groups want the legislation to go further. The
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, for example, says its language needs to be more specific and that there should have been more extensive consultation and input from industry stakeholders. This is understandable. But as its effects will be fundamental and far-reaching, it will take time for the country and individual industries to adapt to new standards and practices. It will set a benchmark for Chinese companies to follow and regulators to enforce.
There are concerns that the law’s broad protections will be overridden by other industry-specific regulations and the broad scope of a proposed national security review. While it aims to level the playing field for foreign investors, it also contains general restrictive clauses that foreign firms in China are required to follow. For instance, according to Article 35 of the draft legislation, Beijing can conduct national security reviews of foreign investments when it sees the need.

Outside investors understandably want laws that work heavily in their favour. But they also need to consider balance and reciprocity. Major Western countries, including the US, all have national security and emergency laws that can override commercial interests. Not to do so will offer carte blanche to freewheeling and dealing by industries at the expense of the national interest and security. It is true that governments need to exercise such powers judiciously and not abuse them. But if Western governments claim such a prerogative, it would be hard to argue China should not have it.

If and when the trade war is settled, China needs to demonstrate its readiness to provide a safe, fair and attractive business environment for outside investors. The new law is a big step forward.
 
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Chinese yuan to firm against U.S. dollar on dovish Fed, expected trade deal: UBS
Xinhua| 2019-03-24 01:31:27
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The Chinese yuan (CNY) would appreciate against the U.S. dollar (USD) in the following 12 months due to a more dovish U.S. Federal Reserve and anticipated trade deal between the United States and China, according to the latest research note by Swiss multinational investment bank UBS AG.

UBS, in the research note published Wednesday, forecast that the exchange rate of USD against CNY would stand at 6.7:1 for the next three, six and 12 months versus earlier forecast of 6.9:1, 7.0:1 and 7.0:1, respectively.

The USD-CNY exchange rate of 6.7:1 would be the center of gravity in 2019, and it would fluctuate in the range of 6.5:1 and 6.8:1 in the coming months, according to UBS.

The downward adjustment of USD-CNY exchange rate forecast reflects anticipated partial rollback of trade tariffs as the United States and China are expected to close a deal and recent dovish rhetoric of the Federal Reserve, said UBS.

"We also believe that greater confidence in China's growth trajectory, as activity stabilizes for now and financial assets in China see integration into international benchmarks, will lend support to the CNY," UBS said.

The appreciation of Chinese yuan, Singaporean dollar, Egyptian pound and Nigerian naira offer the best expression of stronger currencies from emerging markets against the U.S. dollar as the Federal Reserve reinforced its patience and signaled the end of quantitative tightening, according to a research note by Bank of America Merrill Lynch on Friday.

The Federal Reserve on Wednesday left interest rates unchanged after concluding a two-day policy meeting, in a move that met market expectations and reflected the central bank's patient approach regarding monetary policy changes.
 

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BEIJING, March 23 (Xinhua) -- China will cut the time needed for patent review by at least 15 percent this year, an official said Saturday.

The review time for trademarks will also be reduced to within 5 months, said Gan Shaoning, deputy head of the National Intellectual Property Administration, at the ongoing 20th China Development Forum.

The administration will further strengthen intellectual property (IP) protection by optimizing the mechanisms governing IP, raising the costs for IP infringements, and treating all market entities as equals in terms of IP protection, Gan said.

China has vowed to strengthen IP protection across the board, improve the system of punitive compensation for IP infringements, and promote invention and creation and their industrial application, according to the government work report delivered by Premier Li Keqiang to the annual national legislative session earlier this month.

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BEIJING, March 23 (Xinhua) -- The amount of non-cash payments in China continued to rise from a year earlier in the fourth quarter of 2018, according to a central bank report.

The amount of money involved in non-cash payments, including commercial papers, bank cards and other payment vehicles, was 960.89 trillion yuan (about 143.41 trillion U.S. dollars) in the fourth quarter, up 0.33 percent year-on-year, according to the People's Bank of China.

Mobile payment became more popular among Chinese consumers. Banks and financial institutions transacted 78.22 trillion yuan of mobile payment, surging 45.47 percent year-on-year.

When eating out or shopping, it's common nowadays that Chinese consumers pay by scanning a QR code on the restaurant table or by showing a similar code on their smartphones to the store clerk.

The report also showed that online payment remained prevalent in the fourth quarter, with the total amount reaching 507.91 trillion yuan. Non-bank payment vehicles transacted 56.63 trillion yuan, up 22.26 percent from a year earlier.

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BEIJING, March 23 (Xinhua) -- China's container transport for export purposes slightly contracted for the week ending Friday, according to the Shanghai Shipping Exchange.

The average China Containerized Freight Index (CCFI) stood at 813.37, down 0.9 percent from a week earlier, the exchange said.

The sub-index for West/East Africa route saw the strongest rally of 9.5 percent week on week, while that for the Persian Gulf/Red Sea route led the fall by dropping 3.9 percent.

The CCFI tracks spot and contractual freight rates from Chinese container ports for 12 shipping routes across the globe, based on data from 20 international carriers.

The index was set at 1,000 on Jan. 1, 1998.

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BEIJING, March 22 (Xinhua) -- China is set to achieve its target of keeping annual water consumption below 670 billion cubic meters by 2020, a senior official said Friday.

Annual water consumption has been capped below 610 billion cubic meters since 2016, Wei Shanzhong, vice minister of water resources, said at a press conference.

China has long been worried about a water supply bottleneck that could jeopardize future economic growth, thus leading the government to adopt the strictest water management regulations.

The country has witnessed improved efficiency in water consumption over the years. China's water consumption per 10,000 yuan (about 1,492 U.S. dollars) of gross domestic product plunged 30 percent in 2017 compared with 2012.

The amount of water consumed for 10,000 yuan of industrial value added plummeted 32.9 percent during the 2012-2017 period.

As China has striven to develop farmland infrastructure, its irrigation efficiency index rose to 0.54 in 2017 from 0.51 in 2012. The index refers to the ratio of the water that is used by crops against the total irrigated water.

China aims to build the whole country into a water-saving society by 2035.

Thanks to tougher efforts to crack down on polluters, the quality of water in rivers, lakes and reservoirs also improved, Wei said.

However, China still faces serious scarcity of water resources. The country's per capita water resources' share lags far behind the world average.

China is also a country with unbalanced water resources among its regions. North China, which has a population of 168 million, accounts for only 4 percent of the country's total water resources.

Increasing water demand has resulted in groundwater overdraft and water level declines in the North China Plain, Wei added.

He called on efforts to raise water use efficiency, promote water-saving irrigation techniques and limit the development of high water-consuming industries while pledging to continue to transfer fresh water from the country's south to its drought-prone north.

When asked if the government will ease strict controls over water protection amid the economic slowdown, Wei said environmental protection does not contradict with economic development and vowed to strengthen protection and management of water resources to promote green development.
 

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BEIJING, March 24 (Xinhua) -- On average, Chinese people had more than five bank cards at the end of last year as more people in the world's second-largest economy turn to non-cash transactions, according to a report from the central bank.

The People's Bank of China (PBOC) said in a report on the country's banking payment service that bank cards in use totaled 7.60 billion at the end of 2018, up 13.51 percent year on year.

Last year, a total of 220.31 billion transactions worth 3,768.67 trillion yuan (about 562 trillion U.S. dollars) were made through non-cash payment instruments such as commercial bills and bank cards, according to the PBOC report.

Among the bank cards in use, the number of debit cards rose 13.2 percent year-on-year to reach 6.91 billion.

PBOC data shows spending per card reached 12,200 yuan on average, up 19.06 percent from a year earlier.

Further, credit card loans that were more than six months overdue hit 78.86 billion yuan at the end of last year, accounting for 1.16 percent of the total outstanding credit loans.

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BEIJING, March 23 (Xinhua) -- China is steadily promoting the reform on construction project approval with the aim to dramatically reduce approval time, according to the Ministry of Housing and Urban-Rural Development.

The country aims to meet the goal of reducing the average time cost from more than 200 working days to less than 120 working days in the first half of the year, according to the ministry.

Success has been achieved in 15 pilot cities and the coastal Zhejiang Province, and 13 regulations and normative documents will be amended and promulgated to facilitate the reform, it said.

China will also lay the groundwork for a national unified engineering construction project approval and management system in the first six months.

As part of the reform to improve business environment, the system is projected to be fully established by the end of 2020.

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XI'AN, March 19 (Xinhua) -- The permanent resident population of Xi'an, capital of China's Shaanxi Province, exceeded 10 million by the end of 2018, up 387,000 from the previous year, local authorities said.

Male residents account for 51.2 percent with a total population of about 5.12 million, while the female population stands at about 4.89 million, according to a communique released by the city's statistics bureau.

The city's urban population reached 7.4 million last year, accounting for 74.01 percent of its permanent residents.

The communique also said that Xi'an saw a year-on-year rise of 8.7 percent in per capita disposable income of its residents in 2018.

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BEIJING, March 21 (Xinhua) -- China will raise the basic pension in 2019, the 15th straight year it had done so, to strengthen people's sense of fulfillment and happiness, an Economic Daily report said Thursday.

Starting from the beginning of this year, the average monthly payment for retirees from enterprises, government agencies and public institutions was lifted by 5 percent from 2018 levels, according to a circular jointly issued by the Ministry of Human Resources and Social Security and the Ministry of Finance.

The State Council, China's cabinet, decided to maintain a 5-percent pension rise this year, given that both the average salary increase and the consumer price rise were stable in 2018, said Jin Weigang, head of Chinese Academy of Labor and Social Security.

The increase, set to benefit 118 million retirees across China, was equivalent with the rise rate in 2018.

However, the rise rate this year was lower than the 5.5-percent increase in 2017, due to moderating economic growth and a rapidly aging society, which result in a heavier burden on the pension funds.

A slower rise rate is conducive to the pensions' sustainable development, Jin said.

China raised pensions by at least 10 percent annually during the 2005-2015 period before the pace slackened in 2016.

From 2005 to 2016, the average monthly pension payment for enterprise retirees went up to 2,400 yuan (about 350 U.S. dollars) from around 640 yuan, official data showed.

The government estimates that the number of people aged over 60 in China will reach 255 million, 17.8 percent of the country's total population, by 2020.
 
I thought China leapfrogged straight from cash transactions to "cardless" (and cashless) payments via mobile platforms, rather than having to go through the card based traditional "cashless" transactions. Interesting to read card transactions going up.
 
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