China News - Spring 2013

From the British Press

An austere year

Government officials across China have begun the new year with a long list of austerity measures to give the impression of being down to earth and hard-working. In Xinjiang, officials have pledged to take no more than 45 minutes for lunch. In Hunan cadres promised to give up their Audis and BMWs for Chinese-made cars. In Gansu, officials are banned from claiming trips abroad as ‘work’. (In recent years, ‘study trips’ to Europe and the US have been popular for officials and their wives.) This list of promises has come after the Politburo ruled last month that there would be no more lavish banquets, red carpet receptions and fawning speeches. Instead there would be humbler images of ‘serving the masses.’ (From The Daily Telegraph 3/1/13)

China combats inequality

Last month China’s National Bureau of Statistics reported that inequality in China is slowly narrowing. China’s cabinet this week approved a plan to combat inequality which is impressively broad in scope. Backed by the National Development and Reform Commission, the country’s planning body, it proposes 35 goals which include some direct remedies for inequality, such as raising taxes for the rich and transferring money to the poor. Other more subtle methods, such as liberalising China’s artificially low interest rates, divert money from savers to investment-hungry enterprises. The plan is to pay a higher proportion of national income in the form of wages, rather than profits. To this end, the minimum wage will be increased to at least 40% of average urban wages by 2015. The measures also demand more respect for land rights and fairer compensation for those who sell their land.

Many of the plans are in keeping with existing trends. China has raised spending on education, social security, health care and public housing from 30% of its budget in 2009 to 36% last year, as pointed out by Qu Hongbin and Sun Junwei of HSBC. This percentage should rise by 2 percentage points more over the next three years. State-owned enterprises now distribute between 5% and 15% of their profits back to the state in dividends. The plan calls for these dividend ratios to rise by another 5 percentage points by 2015. (From The Economist 9/2/13)

China’s bullet train breaks records

Yesterday at 9.00am the first train on the new high-speed 1,428-mile Beijing-Guangzhou route left Beijing. An hour later, a second train left Guangzhou in the reverse direction. With an average speed of 186 miles per hour, the journey should take about eight hours to cover the distance between the political capital and the economic hub of the south and shorten the previous time by 12 hours. The route passes through five provinces and has 35 stops and is part of the 5,779 miles of the high-speed rail network currently operating in China. This is expected to increase to 11,185 miles by 2015. The high-speed development was halted for a while after the 2011 disaster at Wenzhou, which raised safety concerns. (From The Daily Telegraph 27/12/12)

New Chinese leaders

Despite initial media labels of ‘conservative’, analysts believe the new seven man Standing Committee of the Politburo divides four to three in favour of cautious reformers. Xi Jinping may follow a balanced, but still reformist agenda, according the North Square Blue Oak, an investment bank that specialises in China. At his side will be Li Keqiang, a reformer who is expected to become premier and nominally chief of economic policy. The two can probably count of the support of Wang Qishan, a well-regarded former banker and Yu Zhengsheng who comes from Shanghai, China’s commercial centre.

Two members expected to be staunch defenders of the state sector and socialist orthodoxy are Zhang Dejiang, a North Korean trained economist, and the propaganda chief, Liu Yunshan. This leaves the seventh man, Zhang Gaoli, who ran the ‘freewheeling’ city of Shenzhen and Shandong province, where he forged economic links with South Korea and Japan. He also built the financial district of Tianjin from scratch but left it heavily in debt. However, the standing committee operates by consensus and no outsider knows how much weight Xi will carry. (From The Sunday Times 18/11/12)

Chinese tourists create UK jobs

The British national tourist agency said yesterday that it expected 31.7 million tourists to visit next year (a million more than this year) and spend £19 billion - a rise over this year of 2.5%. The tourist industry is expected to get a boost from the decision to simplify the visa for Chinese visitors who are amongst the biggest spenders. Grant Hearn, the chief executive of Travelodge, welcoming the move, said that the number of Chinese outward bound visitors has doubled since 2007 to 60 million, but only 30,500 came to Britain. France receives eight times more Chinese visitors than the UK; Germany six times as many. According to the Tourism Alliance the Chinese spend almost £1,700 per visit, more than three times the average visitor. Every aircraft load of Chinese tourists pumps £1 million into the UK economy, creating 20 new full-time jobs and generating £160,000 for the Exchequer in air passenger duty and VAT. Tourism is the UK’s fifth biggest employer, supporting 2.6 million jobs and over the past two years, it has accounted for a third of all new jobs. (From The Times 28/12/12)

New Beijing airport

China’s political and military leaders have given the green light to build a new seven runway international airport about 40 km south of Beijing. It was proposed more than four years ago but delayed by internal disputes over airspace rights. It is expected to be in use by 2018 and to have a capacity of 70 million passengers by 2025. It is being built to ease the burden on the current airport and to cater for increases in the future. The present airport, whose third terminal opened only in 2008, handles about 82 million passenger trips a year, making it the second-busiest in the world.

The exact location south of Beijing is not known at present and it is reported that hundreds of rural families have borrowed heavily to extend their homes in the hope that they will be due large sums in compensation if their property has to be flattened to build the airport. Delays were because the military effectively controls Chinese airspace and were unwilling to yield the necessary rights under Hu Jintao. Analysts think that his successor, Xi Jinping may have more influence over them, Chinese media, quoted Liu Weimin of The Civil Institute, who is calling for an update on civil aviation law made in 1995 and also better coordination between military and civilian traffic controllers. (From The Times 15/1/13)

Chinese New Year spending increases

Chinese retail sales during the week-long Lunar New Year hit a record 539 billion yuan (£55.7 billion) this year - up 14.7% from 2012. However, year-on-year growth slowed to its lowest since 2009, partly due to a crackdown on the spending of government officials, whose extravagant dining habits represent a major income stream during the holiday season. (From The Daily Telegraph 18/2/13)

Military spending (2011 figures)

China’s military spending is second to the US, although the actual amount is far less than that of the US. As a percentage of GDP China’s military spending is 11th highest in the world, below the UK, France and Turkey.

The countries with the highest spending are 1) US - $711,421 million, 2) China - $142,859 million, 3) Russia -$71,853 million, 4) UK - $62,685 million, 5) France - $62,535 million, 6) Japan - $59,327 million, 7) India - $48,889 million, 8) Saudi Arabia - $48 531 million, 9) Germany - $46,745 million and 12) Brazil - $35,360 million.

When considering the spending as a percentage of GDP, the ranking changes significantly as follows;- 1) Saudi Arabia - 8.4%, 2) Israel - 6.8%, 3) US - 4.7%, 4) Russia - 3.9%, 5) South Korea - 2.8%, 6) UK - 2.6%, 7) India - 2.6%, 8) Turkey - 2.3%, 9) France - 2.2%, 10) China - 2.0%. The world average is 2.5%. Information source: Deloitte 2013 via The Times 14/1/13.

China’s patent applications

China’s patent office received more patent applications than any other country’s in 2011, according to the World Intellectual Property Organisation, a UN body which follows 125 patent offices. China received 526,412 applications, exceeding those of America and Japan. Globally filings rose by 7.8% last year, breaking the 2 million mark, and growth was over 7% for the second year running. This was largely due to another surge in China - which has accounted for 72% of the world’s patent-filing growth between 2009 and 2011.

America contributed 16%. Almost 1 million patents were granted in 2011, with Japan approving the most. In 2011, 172,000 patents were actually granted in China, 225,000 in the US, 238,000 in Japan, 7,000 in Britain, 5,000 in India and only 3,000 in Brazil.

However, America has the most patents in force with more than 2.1 million out of an estimated total of 7.9 million worldwide. (From The Economist 15/12/12)

China’s high speed train on track

The world’s longest high-speed rail route was officially opened last week, linking Beijing with the southern commercial hub of Guangzhou. On Wednesday trains travelling at up to 186 mph began to leave Beiji ng and taking eight hours to cover the 1,428 mile journey that takes the older trains 21 hours. These older trains are still in service on a parallel track. Eventually the route will reach Hong Kong and is part of a plan to build a high-speed network of almost 10,000 miles by 2015. There was a setback in July 2011 when a collision killed 40 people. (From The Sunday Times 30/12/12)

Profits mark a new milestone for Lenovo

Lenovo took another step towards becoming the largest computer company in the world yesterday, when it announced a record set of three-quarter results. Profits had risen by 34% between October and December to $204.9 million compared with the same period a year before. While rivals such as Dell and Hewlett-Packard struggle in Europe and North America, Lenovo is expanding its share of the global market, which at present stands at 15.9%. It has grown steadily since it bought IBM’s PC division in 2005, with profits driven by its computer business and a growing side-line in cheap smartphones. This reflects efforts to diversify its products to catch the millions of internet users changing from laptops and desktops to mobile devices and tablets. Sales of Lenovo’s smart-phones leapt by 77% to $998 million in the quarter. Analysts say that it is just a matter of time until it overtakes Hewlett-Packard to become the largest computer maker in the world. (From The Times 31/1/13)

Geely promises new future for black cabs

The Chinese car maker, Geely rescued Manganese Bronze (owner of the London Taxi Company) yesterday and promised a profitable future in which cabs would run on hybrid electric technology and hydrogen fuel. Geely, based in Hangzhou, paid £11 million to secure the deal. The jobs of 107 people are secured and there is the promise of new jobs being created in the long term strategy of developing new models using new technology which would reduce the carbon footprint of the traditional London cab. The priority is to build smaller and cheaper vehicles that also satisfy wheelchair access regulations for the global private hire market. Unite, the union which represents the Manganese Bronze workforce and more than 1,000 London cab drivers, praised the deal, which was brokered by PwC. From The Times 2/2/13)

China fairer and happier than UK

According Dr John Sentamu, Archbishop of York, China could teach Britain a lot about happiness because it is a more ‘equal’ society. He said that problems such as homelessness showed that it was time to reassess the values on which our society is based. He said that it is clear that the British are ‘not happy’ and that ‘fairer’ countries such as China, Japan and the Netherlands have more contented populations. Dr Sentamu was speaking on a visit to a Salvation Army centre in York to launch a project to tackle rough sleeping in the city.

He said it was possible to judge how healthy a society is by how it treats the most vulnerable people. Dr Sentamu was drawing on ‘The Spirit Level’ by Prof Richard Wilkinson and Prof Kate Pickett, which uses happiness indices from different countries to link social and health problems to inequality. The book has been cited by David Cameron and Ed Miliband and has shown itself to be popular and controversial The Archbishop said that the financial crisis had sent people on a ‘frighteningly swift downward spiral’ and that homelessness, ‘forces us to reconsider the values on which we are building our society.’ (From The Telegraph 8/1/13)

Elderly care partnership with China

Manchester University has secured a £1 million contract with Yuan Zhen Ltd, a Chinese investment company which specialises in providing health and social care for the elderly in China. The Edward Centre for Health Care Research, jointly led by Manchester Academic Health Science Centre (MAHSC), Health Technology Hub, MIMIT and TRUSTECH, will focus on exploration of care systems, technologies and products that could be developed and adopted for use in China. (From Unilife, Manchester University 4/2/2013)

Austerity in the PLA

According to a Xinhua report, the Chinese military have launched an austerity campaign. Soldiers who do not eat finish their food on one day; will eat the left-overs the next day. Unfinished rice and other dishes will be recooked into fried rice with eggs and fried steamed bread. Left over vegetables will be made into various pickles and appetisers. A large proportion of the £70 billion military budget is spent on feeding the 2.3 million troops of the PLA. (From The Daily Telegraph 26/2/13)

Labour camp reform

Reports surfaced yesterday on China’s state television website quoting Meng Jianzu, the most senior law enforcement official, as saying that the system, known as ‘laojiao’ was outdated and would be stopped this year. This is the re-education through labour system, in which the police could place citizens into a labour camp for up to four years without trial. However, this posting quickly disappeared and by late evening all that remained was a statement from Xinhua, which said that the government would put through, this year, the reform of the controversial re-education through labour system.

The prospect of reform comes less than three months after Xi Jinping was installed as Secretary-General of the Communist Party. Xi began his time in power, possibly a decade, with a pledge to address reform vigorously. Pu Zhiqiang, a human rights lawyer, said that through discussion on new media (the internet and weibo, China’s equivalent of Twitter), China’s leaders have realised how nasty the ‘laojiao’ system is and how much it is hated.

Re-education through labour was introduced by Mao in 1957 and evolved into a tool for stifling dissent. Many lawyers believe that it stands in direct contravention of the Chinese constitution. (From The Times 8/1/13)

From the Chinese press

Urbanisation the source of growth in coming decades

Vice Premier Li Keqiang believes that although China is now a medium-income country, it has significant development imbalances, the most prominent being the gap between urban and rural areas. However urbanisation is the strongest source of growth for China in the future and he suggested advancing the process through synchronised efforts in industrialisation, the flow of information, urbanisation and agricultural modernisation.

He said, ‘The largest divides in China are between the cities and the countryside and also between different regions. While our per capita GDP tops $5,400, the average in some eastern provinces tops $10,000, while that in some western regions is as low as $2,000 to $3,000.

Rural residents are also entitled to fewer public services than their urban peers. Such disparities are problematical, but also signify huge potential for expanding domestic demand’.

On the next page Zhou Qiren, a professor with the National School of Development at Peking University, who has given a speech entitled ‘Urbanisation should learn from Industrialisation’ said, ‘While urbanisation is more about the physical construction of a city, greater emphasis should be placed on the development of civil rights - the rights that allow people to make free decisions on where to live, where to find work and when and how to start their own business.’ (From China Today, February 2013)

Cracking down on food waste and expenditure

Every year a huge amount of food is wasted at banquets and conferences by government officials using public money. This extravagance by certain enterprises and government departments has also given a bad impression to the general public. Although progress has been made over the last few decades,

China is still a developing nation with over 100 million people still living in poverty and millions of low-income workers in the cities. China’s GDP per head of population still ranks low amongst the nations of the world.

The country still depends on large agricultural imports, which have to be paid for, and there is also a shortage of energy sources. These factors are hampering future development. Controlling governmental expenses is an important item in rooting out wasteful behaviour of officials. (From People’s Daily 22/1/13 via Beijing Review 31/1/13)

Chinese government support for the needy

The government earmarked 87.5 billion yuan ($14 billion) for subsistence allowances for the needy in cities and the countryside in 2012. This figure is an increase of 16.8% on the previous year. Help was given for renovation of dilapidated homes, to vagrants and beggars, to people affected by natural disasters and as support for more than 600,000 orphans. (From Beijing Review 21/2/13)

Finance for NGOs in China

In 2012, the Chinese government for the first time allocated 200 million yuan ($32 million) to finance non-governmental organisations (NGOs). With this fund 377 social work projects and more than 120 training programmes were carried out, with 17,700 people trained and 1.85 million directly benefited, according to the NGO’ Administration under the Ministry of Civil Affairs. Apart from the central government’s input, these projects involved a total investment of 320 million yuan ($51 million).

The Chinese government is trying to boost the development of social organisations and make their roles more effective. In 2011, a pilot scheme to simplify the registration process for social organisations was launched. The pilot scheme allowed social organisations to register directly with civil affairs authorities. Previously such organisations had to find an administrative sponsor to supervise their activities as a condition of registration. (From Beijing Review 21,2/13).

China’s expenditure on R & D

Chinese spending on science and technology during 2012 is likely to have topped RMB 1 trillion, which means that it is now on a level with many middle-income countries. According to the Vice Minister for Science and Technology, Cao Jianlin, China has the world’s most rapidly expanding number of research and development workers. The number grew by 12% annually from 2002 to 2011 and reached 2.88 million persons. China has the world’s second largest source of peer-reviewed scientific academic publications for the past five years and has the third largest number of patent applications. (From China Today, February 2013).

China’s commitment to reduce global warming

China showed its commitment at the recent UN Climate Change Conference in Doha. From 2006 to 2010, China’s energy consumption per 10,000 yuan ($1,605) of GDP was reduced by nearly 20% (equivalent to a cut of 1.46 billion tons of carbon dioxide.

There are plans to reduce energy consumption further by another 17% by 2015 and by 2020 China’s carbon-intensity will have been reduced to 40-45% from 2005 levels. The struggle to combat climate change forms part of the programme to transform China’s economic growth to a stronger and more balanced development. China is investing in hydropower, nuclear power, wind power, geothermal and ocean energy, biomass power and solar power. Other activities include afforestation, which has seen a significant increase during 2012. In the four years 2008 to 2011, China achieved an average of nearly 6 million hectares, but in the first six months of 2012, 4.72 million hectares had been afforested.

Some developed counties want to put binding targets on China because it has become a major greenhouse gas emitter, but China has to feed over a billion people and still has to lift 100 million people out of poverty.

At a press conference in Doha on 4 November 2012, Ban Ki-moon, Secretary General of the UN said, ‘Even without the binding treaty, China is making a lot of effort’. Christiana Figueres , Executive Secretary of the UN Framework Convention on Climate Change, said that China has already taken a lead in tackling climate change as a responsible developing country. From Beijing Review 13/12/13)

Chinese investment in the US increasing

China is now transforming from a big exporter to a major investor. In the next five to ten years, during which China is predicted to replace the US as the world’s largest economy, growth in Chinese foreign direct investment (FDI) will be mainly driven by a surge in the flow to the US. This is likely to influence Sino-US economic relations. Industry insiders in both the US and China share the view that both sides risk missing great opportunities unless they can clear up misunderstandings and overcome obstacles. The two sides need to work together and lay firm foundations for deepening and restructuring Sino-US relations and speed up Chinese investment in the US.

‘China bashing’ was a prominent feature in the recent US presidential election. Washington and Beijing should seek a new cooperation model for the future. Chinese outward investment is set to grow very rapidly and could be contributing more than $1 trillion to the world economy by 2020. The Chinese Minister of Commerce expects China’s inbound and outbound foreign investment will tend towards an approximate equilibrium within the next five to ten years. (From Caijing 17/12/12 via China Today, February 2013)

Returned students to China

More than 72% of overseas Chinese students have returned to China after finishing education abroad since the late 1970s, according to a government-backed agency. From 1978 to 2011, about 818,400 Chinese students returned home, said the report issued on 18 November 2012 by the Chinese Service Centre for Scholarly Exchange of the Chinese Ministry of Education. In 2011 alone, nearly 186,200 chose to return home - nearly 40% higher than the previous year. (From Beijing Review 29/11/12)

Social security net to be strengthened

New challenges to China’s social security system will be posed as even more people leave the countryside with the accelerated urbanisation process. At the end of 2011, official figures indicated that 51.27% of China’s population were urban residents. The major components of social security in China are the basic pension, medical insurance and living allowance systems. All three components in each province, municipality and autonomous region are funded separately and schemes are different for rural and urban residents.

A new five year road-map was outlined last November which provided details of a multi-tiered and sustainable system for urban and rural residents. One emphasis was on ensuring the smooth transfer of social security between different localities. The reforms should help remove barriers to labour migration. The basic medical insurance system and the minimum living allowance had achieved universal coverage by the end of 2011 and the basic pension was the last one to be instituted. Official figures show that by the end of last September, nearly 750 million people had joined some form of pension insurance system.

There are different systems for government employees, urban enterprise employees, unemployed urban residents and rural farmers. As many as 125 million elderly people receive pensions every month, according to a report issued in November 2012. Those still not covered by pension insurance include mainly migrant workers, farmers whose land has been expropriated and certain private sector employees. The government plans to extend coverage to 807 million people by 2015 and these marginalised groups will be included. (From Beijing Review 31/1/13)

China’s ‘international safe communities.’

The World Health Organisation (WHO) launched the ‘safe community concept’ at the First World Conference on Accident and Injury Prevention which was held in Stockholm, Sweden, in September 1989. The conference manifesto states, ‘All human beings have an equal right to health and safety’. Regarded as a cost-effective way of injury prevention, a safe community can be a municipality, a county, a city or a district. China now has 64 such communities and a total of 1,589 communities in 22 provinces which have started efforts to build safe communities covering a total population of 120 million people.

In a separate report are details of China’s Road Safety Day, which has been designated as 2 December by the Central Government. China had 238 million vehicles and 256 million drivers by the end of October 2012. There has been an annual increase of more than 16 million vehicles and 20 million drivers over the last five years. These are figures released by the Chinese Ministry of Public Security which also stated that 80% of China’s road accidents are caused by violations of traffic regulations. (From Beijing Review 29/11/12)

Beijing and Shanghai allow visa-free 3-day stay

Starting 1 January 2013, these two cities allow a 72-hour visa-free stay for citizens of 45 counties. Tourists holding third country visas and plane tickets can aply for transit without visa (TWOV) at the international airports of both cities. In 2011 London and Paris adopted TWOV programmes and received 20.1 million and 18.1 million visitors respectively. The figure for Beijing is likely to much smaller. TWOV is expected to bring 600,000 to 800,000 visitors which will boost the number of transit passengers of Beijing Capital International Airport to 1.28 million by 2015. (From China Today, February 2013)

According to the Annual Report on Chinese International Migration 2012, jointly released by the Centre for China and Globalisation and the Beijing Institute of Technology, there were more than 45 million overseas Chinese in 2010, the world’s greatest number of emigrants. In 2011, more than 150,000 Chinese gained permanent residency overseas, with the US, Canada and Australia being the top three destinations. The top destination was the US and some 87,000 permanent residence permits were granted in 2011. Of these, 3,340 were approved through investment. Chinese applicants also represented 75% of Canada’s investment immigration over the past three years.

The report, issued on 17 December believes that the main factors for emigration include better education facilities, a safer investment environment and a better quality of life. The report noted that this emigration is likely to bring losses to China in terms of assets and talent and could complicate the development of the economy. It could also pose obstacles to China’s supervision over non-performing assets. (From Beijing Review27/12/12)

Job targets met

In the first 11 months of 2012, 12.02 million jobs were created in China, surpassing the target of nine million. The urban unemployment rate stood at 4.1% at the end of September, which was below the annual target of 4.6% The employment situation has been better than expected amid the domestic and global situation. In the first half of 2012, employment in China’s central and western regions expanded by 9% and 14% respectively. The target for 2013 is to create at least nine million new urban jobs and keep unemployment under 4.6%. The focus will still be employment for college graduates, a growing sector that reached 6.8 million in 2012. This information was released by the Chinese Ministry of Human Resources and Social Security on 18 December 2012. (From Beijing Review 27/12/12)

Improvements in China’s health

A Chinese government white paper issued on 26 December 2012 reported that the health of the Chinese people is amongst the top of the developing countries, with an overall life expectancy (in 2010) of 74.8 years, 72.4 years for men and 77.4 for women. The mortality rate of children under the age of five years has kept dropping from 34.9 per thousand in 2002 to 15.6 per thousand in 2011. This figure is ahead of the UN Millennium Development Goal schedule. The infant mortality rate had dropped from 29.2 per thousand in 2002 to 12.1 per thousand in 2011.

A total of 47,773 centenarians were living in mainland China as of 16 October 2012: 9,505 men and 38,268 women (80.1%). Of these, 12,457 were urban dwellers and 35,316 rural dwellers (73.92%). The report issued by the China Gerontological Society also reported that the oldest person in China, and possibly the world, is Luo Meizhen, a 127 years old woman of the Yao ethnic group in Guangxi Zhuang Autonomous region. The oldest living married couple are Zhang Wanjing and Wang Yuxiu in Hainan province; they have a combined age of 214 years. (From Beijing Review 3/1/13)

Billionaire’s emigration

According to the Annual report on International Politics and Security issued by the Chinese Academy of Social Sciences, China is becoming the biggest exporter of migrants, with about 45 million Chinese living abroad. Out of the 20,000 Chinese with at least 100 million yuan ($15 million) in personal assets, 27% have already migrated and a further 47% are considering it. Nearly 60% of those surveyed said they wanted better education for their children.

Furthermore, 14% of China’s millionaires (those with assets of more than 60 million yuan ($9.5 million)) are leaving or planning to leave.

The emigration of rich people has led to a massive outflow of private money and dealt a heavy blow to China’s tax revenues, market consumption and also the employment market. In most cases, emigration has nothing to do with a lack of patriotism. In fact many of those who have emigrated continue to do business in China, but to a certain extent, this could reflect a lack of confidence in the country’s future. This is indeed depressing in the light of China’s impressive progress. (From Beijing Review 20/12/12)

SinoFile is compiled by Walter Fung.

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