Silent revolution of “made-in-China”

The “made-in-China” label has been shedding its cheap image and reputation for low value-added goods as China takes over the United States to become the top powerhouse in global trade.

Factories in the world’s second-largest economy are churning out ever more sophisticated products for people around the globe, the latest customs statistics showed.

Machinery, electrical and high-tech products continued to expand their share of total exports with their growth rates outpacing those of other major items. In 2013, machinery, electrical and high-tech goods accounted for about 80 percent of total exports, contrary to perceptions that textiles, shoes and furniture make up the bulk of made-in-China goods.

Rising labor costs and yuan appreciation have propelled exporters to use money accumulated from decades of hard work to move up the production chain.

The upgrade accelerated amid a lukewarm global recovery evidenced by the latest disappointing hiring numbers in the United States. In 2013, China’s exports rose 7.9 percent to 2.21 trillion U.S. dollars.

China still has to make 100 million T-shirts to trade for one airplane. Meanwhile, Premier Li Keqiang has promoted advanced high-speed rail with Chinese-owned intellectual property during his foreign visits.

China operates 12,000 kilometers of high-speed railway — more than half of the world’s total.

Employment trends underscore changes in industrial structure, according to a research note written by Louis Kuijs, China economist of the Royal Bank of Scotland.

In 2012, people working in transportation, electronics, computers, communication, machinery and equipment industries outnumbered those in textiles, apparel and leather by about four million, according to the research. In 2000, the latter industries employed almost twice as many workers than the former.

The domestic value-added component of exports is rising. The share of value added in exports rose from 63 percent in 2004 to 76 percent in 2012, Kuijs said.

China must rely on scientific and technological innovation to improve the overall quality of its economy and to move upward in the industrial value chain, Li said in a ceremony honoring scientists Friday.

At the lower end of the value chain, China is losing its edge as surging wages and rising currency rates darkened the prospects of low value-added goods.

“We paid junior workers 700 to 800 yuan per month in 2005. Now we have to give them more than 3,000 yuan,” said Lai Jushan, a senior manager of Hersun Plastics in Dongguan, Guangdong Province, China’s manufacturing hub.

Minimum wages have doubled since 2005 in Shenzhen, a metropolis bordering Hong Kong.

Adding to the across-board wage rises, the rising Chinese yuan has also eroded the profit margins of China’s low-cost industries. The yuan appears to be on track to break the 6 yuan per U.S. dollar mark in 2014.

The yuan has risen more than 36 percent since the currency’s landmark revaluation in 2005, taking a toll on Chinese exporters.

Upgrading has since become a necessity for export-oriented enterprises.

“It is a matter of life or death,” said Wang Mingxin, general manager of Zhejiang Xinle Textile & Chemical Fiber Co., Ltd. “We must upgrade, with a particular emphasis in research and development,” Wang said.

“About 90 percent of our staff used to work in the manufacturing department. In the future, we expect only 40 percent to work in manufacturing, and the others in development and design,” Wang said.

“China’s manufacturing sector has broadly been able to deal with the wage increases and appreciation of the currency that are part of successful development and rebalancing, ” Kuijs said. “It is well-placed to continue to upgrade its industrial structure and raise the share of medium and high tech products in its exports.”

Analysts expect Chinese exports’ growth to pick up moderately in 2014.

“Brushing aside the noise, we think the recovering global economy would reduce growth downside risk in 2014,” said Citi Senior China Economist Ding Shuang.

“Trade surplus and near-term capital inflow may lead to further appreciation of the Chinese yuan, but capital inflow may decline or even reverse following the US tapering and further opening of the capital account,” Ding said.

By Xinhua writers Wang Zichen and Zhang Yi

Xinhua News via CHINA US Focus http://ift.tt/1gCW8Mj

China Voice: Abe’s conduct goes against his dialogue request

Japanese Prime Minister Shinzo Abe’s willingness to seek dialogue with China and the Republic of Korea (ROK) went against his act of visiting a controversial war-linked shrine and raising defense spending, Chinese experts have said.

Last month, Abe visited the controversial Yasukuni Shrine that honors Japan’s war dead, including 14 class-A war criminals of WWII.

The criminals include former prime minister Hideki Tojo, who launched the attack on Pearl Harbor and started the war in the Pacific that cost millions of lives. He was also a commander of the Nanking massacre in China in which some 300,000 people were killed.

Abe said at a press conference last week that he wanted to explain the intention of his visit directly to China and the ROK, and that the door to dialogue is open.

“Abe’s dialogue request with China and the ROK was nothing but to win the support of domestic public opinion and gain the initiative in international diplomacy,” said Liu Jiangyong, vice head of the Institute of Modern International Relations of Beijing-based Tsinghua University.

Abe’s visit came on the first anniversary of him assuming office. It was also the first visit by a serving Japanese prime minister since Junichiro Koizumi went to the shrine on Aug. 15, 2006, the day commemorating Japan’s unconditional surrender to Allied Forces in 1945.

“On the one hand, Abe shows initiative to seek dialogue in order to cover up his dangerous acts, on the other hand, he stresses enhanced military presence via raising the military budget,” Liu said.

In December, the Japanese cabinet approved a record-high 95.88 trillion yen (about 926.87 billion U.S. dollars) budget for the fiscal year. Defense spending was up 2.8 percent, marking the second straight year of rises.

“Abe is on a course of building Japan into a country capable of fighting that walks away from the path of peaceful development,” said Gao Hong, vice head of the Institute of Japanese Studies with the Chinese Academy of Social Sciences.

Gao added that Abe’s rhetoric on dialogue is deceptive, and his thoughts are to strengthen Japan’s military.

Chinese ambassadors to a number of countries have voiced their anger.

“China, together with the international community, will resolutely prevent Japanese right-wing forces turning back the wheel of history,” Cheng Yonghua, Chinese ambassador to Japan, was quoted as saying in a Monday article in the People’s Daily, the flagship newspaper of the Communist Party of China.

Cheng added that China will work together with the international community to safeguard international order.

The dispute over Abe’s visit to the Yasukuni Shrine is about more than symbolism because it reveals his real intention for Japan’s future and casts doubt upon his willingness to build an atmosphere of trust, respect and equality in East Asia, said Cui Tiankai, Chinese Ambassador to the United States, in an opinion piece published Friday on The Washington Post website.

“There might be the possibility of relations easing between China and Japan, but only if Abe scraps his position on history and comes back to the table,” Gao Hong added.

admin via CHINA US Focus http://feedproxy.google.com/~r/ChinaUsFocus/~3/u_C232RL6r0/

Five New Measures to Solve China’s Local Government Debt

The risk of China’s debt crisis is building up. The current main solution of de-leveraging and reducing debt is not only raising the real economy’s financing costs by a large margin, but also increasing the structural tension of liquidity. China needs structural solutions in order to effectively solve the issue.

Zhang Monan

At the end of 2013, the National Audit Office exposed Chinese government debt to be 20.7 trillion yuan ($3.4 trillion) by June 2013, and the overall government debt to be 30.28 trillion yuan. Of this, 17.9 trillion yuan is local government debt. The Chinese government debt ratio is 39.4 percent, much lower than the international warning line of 60 percent.

In fact, the main risks lie in the debt’s structure and the price risk. The government debt structure shows that 54 percent of government loans’ deadline is more than five years later. From 2011 to 2015, a lot of local government debts are entering a period of repaying capital and interest. In local governments’ outstanding obligations at the end of 2010, 24.49 percent and 17.17 percent should have been repaid in 2011 and 2012 respectively. And 11.37 percent, 9.28 percent and 7.48 percent should be repaid in 2013, 2014 and 2015. The rest is due after 2016.

The years 2011 and 2012 saw a considerable part of the government debt repaid, aggravating the local government’s financial pressure. According to the model prediction, the local governments will have their financing gap after 2014. Even if they borrow new loans to repay old debts, there will be absolute financing gaps for local governments after 2015.

The local government debt burden will be the heaviest in 2013 and 2014. The growth of matured debt will then increase speed in the future two years. But it will be very difficult for the government revenue to simultaneously increase. By then, local governments and their financing platform will face a greater pressure of repaying the capital and the interest.

Thus, to solve the looming debt crisis, the government must optimize the structure of its overall debt, instead of only controlling the debt growth. Besides allowing local governments to issue government bonds, there are five new solutions to the problems.

Firstly, the government can consider transferring its stock assets, such as roads, bridges, tunnels, water works, etc to investment groups and turn them into fixed assets of investment groups.

Second, the central government can set up “bad debt banks” for local governments, which are in charge of disposing of local government debts and non-performing assets. The banks should dispose of non-performing assets through a combination of debt or transfers.

Or, the central government can establish a property rights market of infrastructure construction, and build up investment projects for local governments to transfer parts of their State-owned stock rights, and to activate the assets of local government financing platforms as a new means of raising funds.

Third, the government can set up a special account for public earnings in local government budgets to turn some quasi-municipal bonds into municipal earning bonds and lower the government financing’s influence on social financing and, especially, the financing of the real economy.

Fourth, the government should establish a management and reserve system for land transfer revenues, a land acquisition performance evaluation system, and to make local government balance sheets match spending responsibilities with earning capacities in order to improve the transparency of local government budget execution.

Fifth, the central government should end its covert guarantee system, which is closely related to the unrestricted expansion of local government debt. The government’s covert guarantee is actually a way of using government credits. Because local governments cannot easily read their financing costs, their debts become low-risk and high-yield assets, squeezing the real economy out of the financing market and distorting the national industrial structure.

Since the international financial crisis of 2008, local governments have obtained huge amounts of money for their financing platform and the industries they support through off-balance-sheet loans and inter-bank debt financing.

It is especially noteworthy that the ambiguity of debt liability and the blurring of labor and rights distributions among governments of various levels will necessarily transfer the debt crisis risk to higher authorities, threatening the central government finance directly, once the accumulated debt risks exceed the endurance of local governments. That’s why the central economic work conference for 2014 stressed that the provincial and city governments must be responsible for the local government debts in their own prefectures.

Zhang Monan is a researcher at the Strategic Studies Department of the China International Economic Exchange Center.

Zhang Monan, researcher, China Center for International Economic Exchanges via CHINA US Focus http://feedproxy.google.com/~r/ChinaUsFocus/~3/1NFPQdMAQas/

China chides Japan for carping over fishing curbs

Beijing reacted sharply on Monday to criticism by Japan of new fishing restrictions imposed by China in the South China Sea, expressing “resolute dissatisfaction” with a Japanese official’s comments at the weekend, and noting Japan has no direct stake in the issue.

“The person who made these remarks, if he’s not ignorant, then he has ulterior motives,” Chinese Foreign Ministry spokeswoman Hua Chunying told a regular briefing. “I’d like to recommend that this Japanese official, before making remarks, should first do some basic research and understand fully China’s laws and regulations.”

Read Full Article HERE

Sui-Lee Wee, Reuters via CHINA US Focus http://feedproxy.google.com/~r/ChinaUsFocus/~3/HpxIvqRryqM/

China Stocks Fall to Five-Month Low

Chinese stocks fell, sending the benchmark index to a five-month low, as declines for technology and consumer shares overshadowed a rally for Aluminum Corp. of China Ltd. and raw-material companies.

The Shanghai Composite (SHCOMP) fell for a fourth day, losing 0.2 percent to 2,009.56 at the close. The gauge rose as much as 0.7 percent after China’s securities regulator said it plans to tighten supervision of initial public offerings. UBS AG sees the pace of IPOs accelerating in coming months, dragging down small-company stocks.

Read Full Article HERE

Weiyi Lim, Bloomberg via CHINA US Focus http://ift.tt/1j3I9Do

China’s water squeeze worsens as wetlands shrink 9 pct

China’s wetlands have shrunk nearly 9 percent since 2003, forestry officials said on Monday, aggravating water scarcity in a country where food production, energy output and industrial activity are already under pressure from water shortages.

China has more than a fifth of the world’s population but only 6 percent of its freshwater resources, and large swathes of the nation, especially in the north, face severe water distress.

Read Full Article HERE

Stian Reklev and Kathy Chen, Reuters via CHINA US Focus http://ift.tt/1j3Ic20

China Securities Regulator Probes Sinovel Wind Group

Sinovel Wind Group Co. 601558.SH -9.92% Sinovel Wind Group Co. Ltd. China: Shanghai ¥3.54 -0.39 -9.92% Jan. 13, 2014 3:04 pm Volume : 14.72M P/E Ratio N/A Market Cap¥15.80 Billion Dividend Yield N/A Rev. per Employee ¥1,182,870 4.003.803.603.4010a11a12p1p2p 01/13/14 China Securities Regulator Inv... 01/13/14 China Securities Regulator Pro… More quote details and news » 601558.SH in Your Value Your Change Short position , one of China’s largest wind turbine manufacturers, said it is under investigation by the country’s securities regulator for allegedly violating securities laws.

In a filing to the Shanghai Stock Exchange late Sunday, Sinovel said it received a notice of investigation from the China Securities Regulatory Commission and that it would actively cooperate.

Read Full Article HERE

Grace Zhu, The Wall Street Journal via CHINA US Focus http://ift.tt/1hiUrVo