China Economy: News & Discussion

[Pintu]

http://timesofindia.indiatimes.com/...ill-working-in-China-/articleshow/6235220.cms

Google changes tune, search still working in China
AP, Jul 30, 2010, 06.54am IST

SAN FRANCISCO: Google says its search engine and several other services are working normally in mainland China after previously reporting the service had been completely blocked.

The company's system for tracking Internet access may have misinterpreted what was happening to its search, mobile and advertising services in China, according to a Google statement issued late on Thursday.

That probably caused a minor blockage to be exaggerated in a status report updated each day on Google's website.

The initial alert about Google's search engine being completely cut off from China raised questions about whether the country's communist government was retaliating against the company for taking a stand against its online censorship policies.

 

[Pintu]

http://timesofindia.indiatimes.com/...-Yuan-undervalued-IMF/articleshow/6230189.cms

China's Yuan undervalued: IMF
AP, Jul 29, 2010, 12.50am IST

BEIJING: The International Monetary Fund said China's yuan is undervalued in a mildly worded assessment on Wednesday of its controversial currency controls and praised Beijing's response to the global crisis.

The comments came in a review by the Washington-based fund of Chinese economic policy, the first in three years. Such reviews usually are annual but the process was postponed due to disagreements with Beijing. The IMF said several members of its board "agreed that the exchange rate is undervalued" but gave no details. The 24-member board includes the US, China, several other individual governments and members that represent groups of economies.

Beijing held the yuan steady against the dollar beginning in late 2008 to help China's exporters compete amid weak global demand. Washington and other trading partners complain that has hurt their companies and some US lawmakers demanded sanctions on Chinese goods. China's central bank announced in June it would allow a more flexible exchange rate and private sector analysts expect the yuan to gain in value over time.

The IMF said a stronger yuan would help to encourage Chinese consumer spending, helping to achieve Beijing's goal of reducing dependence on exports and making its economy more self-reliant. The IMF praised Beijing's rapid response in 2008 to the global crisis.

 

[Pintu]

http://timesofindia.indiatimes.com/...iliatory-tone-on-Yuan/articleshow/6231834.cms

China relieved over IMF's conciliatory tone on Yuan
PTI, Jul 29, 2010, 11.55am IST

BEIJING: China appeared relieved as the International Monetary Fund softened its stand on Yuan revaluation, partially backing Beijing's move to free its exchange rate system in a gradual manner.

Welcoming China's recent decision to return to a managed floating exchange rate system, the 24-member executive board of the International Monetary Fund (IMF) early this week softened its tone by dropping "substantially" when talking about Yuan's undervaluation in an annual report on US Treasury.

The downbeat tone from the IMF's long-held position, which claimed that the Chinese currency is "substantially undervalued", will ease pressure on the appreciation of Chinese currency Yuan, when the world's third-largest economy faces increasing risks of a slowdown, Chinese economists said.

China scrapped the Yuan's 23-month-old peg to the US dollar and pledged to seek greater flexibility in the value of its currency on June 19.

 

[badguy2000]

Chinese government revenue grow 30%+ in the past 6 months

 

[nitesh]

thieves are at it again:


India foils Chinese firm's bid to patent pudina, kalamegha for flu medicine

 

[Armand2REP]

Chinese banks reportedly face wave of bad loans
Aug. 8, 2010, 7:40 p.m. EDT

China plays down banking stress tests

By Michael Kitchen, MarketWatch

LOS ANGELES (MarketWatch) -- China's banks could see as much as 20% of their loans from state-controlled firms go bad, a report said Sunday, even as the nation's banking regulator said non-performing loans were on the decline.

Recent stress tests conducted by the China Banking Regulatory Commission (CBRC) showed 20% of all outstanding loans to state-owned companies were "in trouble" as of the end of June, the Japanese business newspaper Nikkei reported, citing an unidentified CBRC official.

The official was quoted as saying the loans failed to meet lending standards and could result in default, although "the risks are still manageable, and the loans are not seen as non-performing."

The report put the total amount of current loans to state-controlled enterprises at 7.7 trillion yuan ($1.14 trillion), meaning 1.54 trillion yuan are in the "problem" category.

As a result, the CBRC will order banks to increase their loan-loss provisions, it said.

The report followed statistics released by the CBRC, saying non-performing loans at Chinese commercial banks totaled 454.91 billion yuan as of the end of June, representing 1.3% of the lenders' total portfolio.

The regulator said the figure marked a 0.28-percentage-point drop, but didn't indicate the comparison period.

"In terms of the composition of NPL stocks, the balance of loss loans were 64.91 billion [yuan]; the balance of doubtful loans were 222.67 billion [yuan]; and the balance of the substandard loans were 167.33 billion [yuan]," the CBRC said.

The same statement said banks' loss-provision coverage ratio rose 31 percentage points during the January-June period to 186%. See full China Banking Regulatory Commission statement on bad loan figures in English.

http://www.marketwatch.com/story/ch...-of-bad-loans-2010-08-08?reflink=MW_news_stmp

 

[Armand2REP]

China Construction Bank faces the music, must pay off old NPLs

Published 11:22 PM, 9 Aug 2010

Reuters

HONG KONG - China Construction Bank Corp , the country's second-biggest lender, said the government had set up a fund to pay off $US37 billion ($A40 billion) in bad loans siphoned off into a bond before its listing.

CCB swapped an unspecified number of bad loans for a bond of 247 billion yuan ($A39.6 billion) with a tenure of 10-years in 1999, which had to be extended last September after the state-backed asset manager which issued the bond could not pay off the principal.

As a result, the new fund set up by the Ministry of Finance and the asset manager, China Cinda Asset Management Co Ltd (Cinda), will aim to pay off the principal using, among other methods, tax receipts from CCB from July 1, 2009, to September 21, 2019, the bank said.

If the principal amount of the bond is not fully repaid by maturity in September 2019, the ministry may extend the bond again or provide financial support or use other means to settle the outstanding principal.

The ministry continues to provide support for the repayment of the interest under the bond, it said.

Cinda was one of four asset management companies that Beijing established in 1999 to help deal with the non-performing loans of the country's biggest state-owned banks.

Cinda absorbed 373 billion yuan of NPLs from CCB and China Development Bank.

http://www.businessspectator.com.au...y-off-bad-bank-loa-86HME?OpenDocument&src=hp8

 

[Armand2REP]

With a new round of 20% NPLs and now banks being forced to pay back old debt, Chinese banking system will be facing a crisis.

 

[SHASH2K2]

With a new round of 20% NPLs and now banks being forced to pay back old debt, Chinese banking system will be entering a crisis.

Looks like bubble is going to burst. if Not its size will definitely reduce . China should get used to less that double digit growth rate.

 

[Armand2REP]

Looks like bubble is going to burst. if Not its size will definitely reduce . China should get used to less that double digit growth rate.

Yes, they are headed for a Japan like crash. Only the vast size of the country will keep them from the same stagnation, but it will be very low growth numbers from then on. The One-Child policy can be thanked for that. 65 million housing units are empty which is 25% of all units. The commercial vacancy rates are over 30%. China has built itself so much overcapacity it will take a generation to fill it. The only way to cope with the loss of so much construction is to increase domestic consumption, but they are losing that battle.

 

[badguy2000]

Yes, they are headed for a Japan like crash. Only the vast size of the country will keep them from the same stagnation, but it will be very low growth numbers from then on. The One-Child policy can be thanked for that. 65 million housing units are empty which is 25% of all units. The commercial vacancy rates are over 30%. China has built itself so much overcapacity it will take a generation to fill it. The only way to cope with the loss of so much construction is to increase domestic consumption, but they are losing that battle.

hi, guy,since MR. Vladimr , another china-to-collapse advocator,strangely disaapeared and you appeared here suddenly one year ago , you have been praying "china to collapse" for one year ,with many many reasons why "china to collapse"...from Reason A to Reason Z......

 

[SHASH2K2]

Yes, they are headed for a Japan like crash. Only the vast size of the country will keep them from the same stagnation, but it will be very low growth numbers from then on. The One-Child policy can be thanked for that. 65 million housing units are empty which is 25% of all units. The commercial vacancy rates are over 30%. China has built itself so much overcapacity it will take a generation to fill it. The only way to cope with the loss of so much construction is to increase domestic consumption, but they are losing that battle.

Not to forget premature aging and baby breasts due to their wonderful milk powder.

 

[Daredevil]

China Output Growth Weakens; Inflation Accelerates

By Bloomberg News - Aug 11, 2010 6:50 AM GMT+0200

Aug. 11 (Bloomberg) -- David Riedel, president of Riedel Research Group Inc., talks about the outlook for China's economy and property market. Riedel speaks with Deidre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

China's industrial output rose the least in 11 months, retail sales growth eased and new loans climbed less than estimated, adding to signs that a slowdown in the world's third-biggest economy is deepening.

Production rose 13.4 percent in July from a year earlier, the statistics bureau said in Beijing today. Inflation quickened to 3.3 percent, the fastest in 21 months, boosted by a low year-earlier base for comparison and rising food costs.

The government is cracking down on real-estate speculation, curbing credit and closing factories to meet energy-efficiency targets after three quarters of growth of more than 10 percent. China can sustain an expansion of more than 9 percent in the third and fourth quarters, with inflation likely to peak this month and then fall, Morgan Stanley said.

"The overall picture is quite benign and a soft landing is underway," Wang Qing, a Hong Kong-based economist with Morgan Stanley, told Bloomberg Television. The government may ease investment controls and a 7.5 trillion yuan ($1.1 trillion) annual limit on lending in the fourth quarter, Wang said.

The Shanghai Composite Index was little changed as of the 11:30 a.m. local time break in trading after earlier rising as much as 0.9 percent.

Inflation Matches Estimates

July's inflation matched the 3.3 percent median estimate in a Bloomberg News survey of 29 economists. In June, prices rose 2.9 percent.

The government can meet a full-year target of 3 percent even as wages and global grain prices climb, statistics bureau spokesman Sheng Laiyun told reporters. The "lagging effect" of low bases for comparison pushing up the annual rate will fade from this month, he said.

Retail sales, new lending, producer prices and money supply increased at a slower pace in July and by less than economists had estimated. Urban fixed-asset investment rose 24.9 percent in the first seven months from a year earlier, the statistics bureau said. That compared with a median estimate of 25.3 percent and a 25.5 percent gain in the first half.

Investment is maintaining "strong momentum" and will be boosted by plans for regional development, including in the nation's west, and a pickup in private spending, Sheng said.

Tom Albanese, the chief executive of Rio Tinto Group, the world's third-biggest mining company, said Aug. 5 that economic growth of between 8 percent and 9 percent would be more sustainable for China, limiting bubble risks.

Lending Cools

July's industrial-output growth matched economists' median estimate. In June, the increase was 13.7 percent. July's gain was the smallest since August last year after excluding distortions caused by holidays at the start of each year.

New loans were 532.8 billion yuan last month, the central bank said in a separate statement today. That was less than the 600 billion yuan median estimate in a survey of economists and below June's level. M2, the broad measure of money supply, rose 17.6 percent, the least in 20 months.

Money-supply growth is "too restrictive" and may damp domestic demand, Goldman Sachs Group Inc. economists Song Yu and Helen Qiao said. Royal Bank of Scotland Plc said July's reduced lending could reflect off-balance-sheet transactions by banks.

Morgan Stanley estimated Aug. 9 that the government's energy-saving efforts could shave 1.5 percentage points from full-year industrial-output growth. In the latest phase of the campaign, officials told companies including Aluminum Corp. of China Ltd., the nation's No.1 producer of the metal, and steelmaker Hebei Iron & Steel Group, to shut outdated plants by the end of September.

Retail Sales

Retail sales grew an annual 17.9 percent in July, compared with 18.3 percent in the previous month, the bureau said. Economists had estimated an 18.5 percent increase. Producer price inflation slowed to 4.8 percent from 6.4 percent in June.

The government is tightening oversight of bank lending after a record expansion of credit in 2009 and limiting multiple-home purchases to prevent real-estate bubbles.

In the latest move, the banking regulator has ordered lenders to transfer off-balance-sheet loans onto their books and make provisions for those that may default, three people with knowledge of the situation said yesterday.

The Shanghai Composite Index slumped by the most in six weeks yesterday after reports showed the property market cooling and imports rising at the slowest pace in nine months.

Easing Inflation

China International Capital Corp. sees inflation gradually slowing in the second half as the economy cools and commodity costs have only limited increases. London-based Capital Economics Ltd. said this week that the impact from floods that pushed up food costs should be "short-lived" and inflation may be in "sharp decline" by year-end.

Policy makers may allow larger gains by the yuan against the dollar in the next two months to counter price pressures, given that the government is "reluctant to raise interest rates," UBS AG economist Wang Tao said yesterday.

Growth in the world's fastest-growing major economy slowed to 10.3 percent in the second quarter from 11.9 percent in the first three months of the year. Premier Wen Jiabao's cooling measures come as export orders soften.

 

[amoy]

WATCH CHINA'S COASTS NOT THE CURRENCY
By Yukon Huang

China's exchange rate continues to be blamed for global economic imbalances, with the economist Paul Krugman one of Beijing's staunchest critics. Even after China announced a change in its currency policy in June, Mr Krugman argued that it did not "address the real issue, which is that China has been promoting its exports at the rest of the world's expense". Yet, arguably, it is the Nobel Prize-winning ideas that Mr Krugman developed three decades ago, not currency manipulation, that have led to China's unparalleled growth.

Deng Xiaoping, the architect of China's reforms, would almost certainly have disagreed with those who see appreciation of the renminbi as the solution to global trade imbalances. Instead, he would probably have noted that neither is China's exchange rate a noticeable drag on global growth, nor is it what helped China to develop. It was about the same time that Mr Deng began opening China to the world in 1979 that Mr Krugman began formulating his theories on the "new economic geography". These showed how economies of scale and declining transport costs encourage concentration of production in certain places, and in turn lead to new trade patterns. It is this process that transformed China into the world's most efficient producer-cum-exporter of manufactured goods.

Mr Deng initiated a strategy based on the three "Ds" of this new economic theory. China increased the "density" of economic activity by concentrating production in a few coastal cities geared to exports. It cut the "distance" between markets through an expansion of transport services. It undertook to reduce barriers to the movement of goods, helping to eliminate "divisions".

Deliberate "unbalanced" growth generated huge economies of scale and encouraged some 150m migrant workers to gravitate to the booming commercial centres around Guangzhou, Shanghai and Beijing. Over time, high-technology and export industries relocated to the coast and resource-based and domestically oriented industries established a presence in the interior.

This concentration and specialisation pushed 500m people out of poverty and led to annual gross domestic product growth of 10 per cent. The share of GDP that was traded surged from 10 per cent in 1979 to more than 70 per cent today. This extraordinary transformation was the result of a complex set of policies, with exchange rates having played only a minor role.

For much of this period, China's exchange rate was seen as overvalued not undervalued. Paradoxically, when China finally did allow the renminbi to appreciate from 2005 to 2008, its trade surpluses grew bigger rather than smaller. Other factors – notably savings and investment rates – were, and continue to be, the primary determinants of China's trade balances.

Mr Deng also foresaw that China's development would eventually reach a turning point. Indeed, forces are now beginning to reshape China's economic landscape in ways that may resolve the controversial role that China is accused of playing in shaping global trade imbalances – and in turn undo concerns over the issue in the US, and increasingly in Europe too.

Given the fragile global economy, China's major concern is to maintain rapid growth and lessen the inequality that came with its original unbalanced growth. Urban household incomes are more than three times rural ones – the highest differential in the world – and coastal incomes more than double those in the interior.

To reduce inequality, China will need to increase the share of wages in total income, and favour consumption over investment. This process will be made easier when the distribution of economic activity is more balanced between the coast and inland. More by accident than design, China's policy of stable exchange rates has nudged along this shift.
Fixed exchange rates have caused large current account surpluses, which in turn have inflated wages and property prices, especially on the coast. Consistent with Mr Krugman's theories, rising coastal production costs and declining transport costs are motivating companies to relocate inland. With this, income disparities will fall over time. Mr Deng predicted this, suggesting gaps between interior and coastal incomes would widen, then narrow. Today, interior provinces grow faster than coastal ones.

What would be the impact of a major appreciation – as the west frequently calls for – of China's exchange rate? A one-off appreciation would not encourage companies to move from the coast, because the effect on prices would be neutral rather than differentiated across regions. Indeed, this "shock" approach would be disruptive, with social and political consequences.

A stronger currency earlier in this process would have made it more difficult for the interior to compete. But the process now under way, supported by moves towards flexible exchange rates, will encourage wages and consumption to rise, thereby alleviating trade tensions and reducing China's income disparities. But America must realise that an excessive focus on China's exchange rate is not helpful in moving China's policies in the right direction when other factors matter more. Mr Krugman might note the irony that the accuracy of his older theories may ultimately assuage his more contemporary worries.

The writer is a senior associate at the Carnegie Endowment and former country director for the World Bank in China. His most recent book is Reshaping Economic Geography in East Asia

 

[nitesh]

http://www.dnaindia.com/opinion/int...up-to-china-with-us-help-gordon-chang_1423110

Critics of your book say that China hasn't 'collapsed' in the time frame you set, and you've been proved wrong. How do you respond to that?
We've to wait until August, 2011, to say for sure. But right now, it's hard to be optimistic about China's economy or its political system. I know many people have a bullish view of China, but you also see a lot of investors — Jim Chanos, Marc Faber — who are figuring out how to short-sell China. They're not political persons, they have no incentive to upset Beijing. They're like me: they call them as they see them. People are becoming concerned about the Chinese economy, and there are signs that things won't turn out the way the optimists read it. I'm deeply sceptical: the closer you look at it, the worse it looks.


What do you expect to happen between now and August, 2011, that hasn't happened until now?
What we will see in China is a prolonged, sharp economic contraction; for a couple of quarters in end-2008 and early 2009, we did have zero growth in China — and probably even negative growth. What we'll see is a more prolonged contraction.

The Chinese think they've solved their economic problems. They temporarily bridged a difficult period, but they did so at the cost of creating problems that are more difficult to solve. They're going to pay an enormous price. They can postpone the inevitable, but they're going to make the final reckoning even worse. A year from now you're going to see a very different economy in China.

 

[nitesh]

BBC News - US indicts 11 executives for honey smuggling

 

[Armand2REP]

Inflation in China: perhaps 6%, twice official figures
It's the opinion of experts, analysts, government officials, based on data and precise facts. Warning that Beijing may underestimate the problem and not take appropriate measures.

Beijing (AsiaNews / Agencies) - Inflation could now be at 6% in China, almost double the already alarming official figures. This is the opinion, based on accurate data, of Michael Pettis, a professor of finance at Beijing University, but also of many other experts and government officials.

According to official figures, inflation was 3.3% in July, a 21 month record: already more than the 3% per year posted instead by Beijing as the official limit, but which was put down to the effects of phenomena such as recent floods, as well as with increased global food prices caused by the disasters that hit Pakistan, Russia and other countries. But everyday consumers are finding increases higher than 3.3% the cost of shoes and apparel was up by 50% in Shanghai compared to a year ago, fruit and fish have grown by over 20% in Ningbo (Zhejiang) and the list is long. The cost of housing, education and medical care have increased greatly, but official figures do not speak of this. According to a survey by the Economist Intelligence Unit, 84% of rural residents are "concerned" about health care costs, which according to official figures have grown only 2.8% this year. Among other things, analysts note that this figure does not include "gifts" to doctors and administrative staff to help obtain appropriate care. In big cities, home to tens of millions of migrants, prices of food and rent have sky-rocketed into double-digit increases. Analysts point out that millions of restaurants, cafes and beauty salons evade taxes.

Yu Yongding, an economist at the Chinese Academy of Social Sciences, tells the agency Bloomberg that "there was a jump in prices which is not revealed in data".

Even more radical is Pettis, who wonders how a country that has grown by 10.3% in the second quarter of 2010, and must review the salaries of workers (experts talk of wage increases around 8.4% in 2010 to meet the shift the in consumer prices) sees prices increase by so few percentage points.

Furthermore this data is already the result of robust intervention by Beijing, which periodically releases its reserves of wheat, rice and maize onto the market to contain costs, from telephone to running water, electricity and fuel. Meanwhile, bank interest is still at 2.25% since November 2008 so they are now lower than inflation and savings are loosing value.

Underestimation of inflation may prevent immediate appropriate action, forcing the government to take radical measures and interventions on the cost of money or a currency appreciation. Also there is danger of mass protests in the country, if people can no longer keep up with the increased cost of living.

Among other things, China does not indicate which data it takes into consideration when calculating inflation, so official figures cannot be verified.

But Patrick Chovanec, Tsinghua University professor of business management, said on his blog that "in recent weeks, many official sources have made statements predicting with a clear and explained certainty that inflation this year ... will be just 3%".

CHINA Inflation in China: perhaps 6%, twice official figures - Asia News

 

[Daredevil]

A China Newly Rich and Still Quite Poor

By DIDI KIRSTEN TATLOW

BEIJING — On a warm Friday evening in August, more than 400 guests at Vogue China's fifth anniversary party milled around in the giant atrium of a hip Beijing hotel, gossiping and guzzling Champagne.

Models, including Liu Wen, the first Chinese to walk the runway for Victoria's Secret, perched on stage in a glamorous opening ceremony that featured a soprano in a fire-engine red gown rising through the air on a pedestal amid showers of bronze confetti.

Then the sophisticated crowd of creative industry and high society types hushed, as the actress Li Bingbing descended from the dais. Ms. Li's career is flourishing. She stars alongside Hugh Jackman in Wayne Wang's new movie "Snow Flower and the Secret Fan" and was on the April cover of Vogue China.

As Ms. Li passed by our group, an assistant scrambled to gather the train of her pearl-gray gown. She waved her empty glass in the air. Another assistant leaped to relieve her of it. She smiled and sailed into a blitz of paparazzi.

The atmosphere was gilded and jubilant, in keeping with China's remarkable rags-to-riches tale of the last 30 years.

These are fairy-tale days, for some, though not all.

Two nights earlier, He Xiongfei, a noted private publisher, had handed me his latest book: "The Good Grain People" by Aisin Gioro Wei Ran.

The book describes the beginning of Mr. Wei's 25-year project, dubbed "Ten-Thousand Village Journey," begun in 2006, to visit thousands of villages and document the poverty he sees.

"I'm just one person. I decided that the best thing I could do would be to tell people what's really going on," Mr. Wei said in an interview.

In the introduction, Yu Jianrong, a leading rural affairs researcher, notes that Chinese urbanites have little notion of just how poor many farmers are, especially in remote provinces.

There's plenty of grinding poverty in the book. Yet the vivid details of the farmers' lives, their humanity and, often, intelligence, make for compelling reading.

We meet, for example, 8-year-old Zhang Chengcheng from Maying village in the western province of Qinghai, whose mother and grandmother are blind from birth.

His father, driven by poverty, left home as a migrant laborer. Chengcheng cares for the rest of the family alone. From early morning he cooks, shops, fetches water and keeps house. When his seemingly endless chores are done, he studies.

Deeply moved, Mr. Wei writes: "If I hadn't seen with my own eyes what this 8-year-old boy can do, I wouldn't have believed it. In the cities, how many children's parents tell them just to study, taking on everything else themselves. This 8-year-old runs a household and cares for two blind people, and he's still at the top of his class."

Mr. Wei visits a family of beekeepers in the mountains, who live in terror of inadvertently finding themselves on a toll road, which could wipe out their income. Such toll roads — sometimes illegal — have become common in recent years.

Nearby, in the village of Shenba Donggou, he meets He Laoda, who labored for years, naked because of the heat and filth, pulling carts underground in privately run coal mines, with ropes that cut into his flesh. He made only a few hundred renminbi a year. A stint in the gold mines of Inner Mongolia yielded no wages at all and he ate out of trash cans, before finding a construction site boss who paid him 900 renminbi, or about $130, for working a year. He returned home for the first time in four years, able to give his family 500 renminbi. He kept 100 renminbi for himself.

Said Mr. Yu, the rural affairs expert: "All these years, people have known about rural poverty, but haven't appreciated emotionally just how bad it is in these remote areas, what it really means for the people affected by it. This book gives us a real, emotional knowledge."

There's a palpable sense of social tension in China these days, a shadow side to the triumphalism of its spectacular economic rise. Policy makers and economists frequently single out the by-now glaring rich-poor gap as a key factor. Increasingly, the poor are resentful, and the wealthy barricade themselves in walled compounds, hire bodyguards or send their families overseas.

Official data put the richest 10 percent of Chinese at 23 times richer than the poorest 10 percent. By comparison, the United Nations assesses Colombia's richest-poorest 10 percent gap at 60.4, the United States' at 15.9 and Germany's at 6.9.

A new study suggests the disparity might be even larger.

People are concealing income amounting to a stunning 9.3 trillion renminbi, up to 30 percent of reported gross domestic product, according to the study, sponsored by Credit Suisse and written by Wang Xiaolu, an economist. Eighty percent of that hidden income, it says, is owned by the already-rich and is most likely "illegal or quasi-illegal."

Factor that in, and some of the Vogue partygoers, most likely among the top 10 percent in terms of income, are about 65 times richer than the poorest 10 percent of rural households, such as 8-year-old Zhang Chengcheng's.

Mr. Wang said his team found a link between growing economic inequality and China's political system.

"The facts show that gray income has its origins in the misuse of power and is closely connected with corruption," the report says.

Mr. Wei isn't interested in taking pot-shots at China's rich. He himself worked successfully in business management for years, and his name indicates his descent from the family that ruled China during the last imperial dynasty.

But he is deeply interested in whether people like Chengcheng can make it out of the poverty they were born into.

His next goal is to set up a poverty alleviation foundation. He is talking with several major Chinese corporations about funding.

"Every country is the same," he said. "There are rich and poor people. We need the rich people to help us develop. There is so much they can do."

 

[Daredevil]

Seems like a melamine laced milk scandal except that now Oil is laced with carcinogen benzoapyrene. Kudos to China's CCP for its very effective policies and greed.

Chinese officials suppressed tainted oil recall

(AFP) – 13 hours ago

BEIJING — Authorities in central China waited five months before notifying the public that a brand of cooking oil contained excessive carcinogens, a state-run newspaper reported Friday.

Officials in central China's Hunan province were trying to "maintain social stability" by not announcing they had recalled Hunan Jinhao Camellia Oil Co Ltd's products in March and April, the China Daily reported.

The company published an apology this week for failing to inform consumers its products contained excessive amounts of benzoapyrene, a chemical that can cause cancer and other health problems.

It admitted it "did not inform the public about the substandard products in time and did not inform people thoroughly about the recall process."

Camellia oil is widely used for cooking in China.

Nine batches of the oil totalling 42 tonnes produced between December 2009 and March were recalled, the company has said.

But the China Daily said the company earlier announced last month that there was nothing wrong with its products and that Hunan's Bureau of Quality and Technical Supervision also publicly denied any problems.

However, a groundswell of rumours and reports about possible risks snowballed on the Chinese Internet, forcing the company and officials to come clean, it said.

The report made no mention of any punishments planned over the scandal.

China's government has repeatedly pledged to notify the public in a timely and transparent manner of any health risks from product safety scandals, which are common and widely blamed on lax supervision of its giant food industry.

In one of the biggest cases, huge amounts of the industrial chemical melamine were found in 2008 to have been illegally added to dairy products to give the appearance of higher protein content.

The massive scandal was blamed for the deaths of at least six infants and for making 300,000 others ill in China.

 

[Daredevil]

Lights on or off?

By Rose Scobie

Looking out the window from the Cloud 9 bar atop Shanghai's Jinmao tower I could not quite wrap my head around the fact that I was not in an airplane. I thought the visual experience of witnessing a toy-size city could only be had on an aircraft, or the Peter Pan's Flight ride at Disneyland. The contentment I felt while sipping my 10 dollar martini in the world's highest bar and marveling at the urban sprawl below was almost enough to erase my memories of what I had witnessed earlier in my China trip, women begging for money while holding their child with one arm, migrant workers sleeping on sidewalks and street hawkers hastily packing up their goods at the sounds of police sirens.

Like in any country that has embraced capitalism, the contrast between the wealthy and the impoverished in China is stark. As the income gap grows and Chinese citizens become more exposed to this inequality, they become less eager to put up with it for the sake of a harmonious society. One of the main points of contention is the high cost of home ownership.

China is in the midst of a property bubble. Minxin Pei, an adjunct senior associate at the Carnegie Endowment for International Peace, believes two main culprits are to blame, local governments who intentionally drive up land prices because they depend on the real estate sector for over 40 percent of their financial revenue and greedy state-owned enterprises who use cheap credit from China's banking system to purchase high-priced land and invest in luxury housing units.

A third factor expanding the bubble is speculation; property is the de facto investment choice for rich Chinese. Former Morgan Stanley star chief Asia-Pacific economist attributes this choice to the fact that many investors in China have never experienced a housing bubble and trust that the government will not allow property prices to fall. He also writes that property has become a "safe haven" for speculators because they no longer trust a depreciating dollar and are nervous about rising inflation.

Middle-class and low-income citizens are dealing with the results of these actions. Unable to afford a home of their own and egged on by rumors circulating such as the purchasing of an entire block of south-facing apartments in central Beijing by a coal boss from Shanxi province, citizens have begun to take action.

On August 4th, the National Bureau of Statistics (NBS) released data showing that the area of unsold residential apartments at the end of June was 191.82 million square meters, up 6.4% on the same period last year. When this data was released, the NBS failed to release figures in relation to vacancy rates, an important real estate bubble indicator. In response, Sina.com, a news and entertainment portal, launched a nationwide investigation into the housing market of over 100 Chinese cities. Online netizens submitted photos of dark apartment windows to highlight the vacancy rate in cities. The website researched 100 Shanghai property projects and based on information submitted by volunteers found that 51.23 percent of flats were unlit, in Beijing 65.6 percent of apartments polled were dark and in Hainan, China's fastest growing province, the rate was over 70 percent. Instead of making these empty apartments more affordable developers have chosen to turn on the lights to give the appearance that people live there.

The central government began to implement policy in April in attempts to slow the skyrocketing housing prices including stepping up its investigation of the financing of developers, increasing the size of down payments for loans granted to second and third-home buyers, and cutting the discount offered on home buyer interest rates. These policies have been effective at slowing the rate of housing price growth, but prices are still rising. Further action to quell speculation was taken last week when the China Banking Regulatory Commission suggested that commercial banks in major cities stop offering loans to third-home buyers.

Despite these policy actions, real estate investment continues to climb and in the first seven months of this year, real estate construction investment was up 37.2 percent from the same period last year, totaling 2.38 trillion yuan. The government is not blind to the actions of local governments; four government ministries issued a notice last week stating that they planned to conduct a joint-audit of the debt owed by local government financing vehicles. A local banking supervisory agency official stated, "The purpose of the new investigation is to let central ministries, bankers and local governments get together to address the risk of the bad debts." While this is a step in the right direction, the government needs to take bold steps to alter local government dependency on the property market for financial revenue, or else real estate investment will continue to increase which means the construction of more empty apartments mocking the citizens who cannot afford them.

The tallest building in Beijing opened its doors this week. Perhaps officials will stop and think about how many empty apartment buildings they are looking down upon while they are up there enjoying the view.