Xi Jinping declares the start of a new era
Oct-24-2017 By : fcccadmin
The Chinese Communist Party is holding its 19th National Congress. On October 18, General Secretary Xi Jinping delivered a landmark speech to the 2,280 delegates assembled in the Great Hall of the People in Beijing that lasted for three and a half hours. He gave an overview of his first five-year term in office and the country’s reform and development planned for the next five years and beyond. A new era to create a modern socialist country is starting, he declared, laying out a sweeping vision to transform China into a strong global power.
“Right now both China and the world are in the midst of profound and complex changes. China is still in an important period of strategic opportunity for development. The prospects are bright, but the challenges are severe,” he told the delegates. “The great rejuvenation of the Chinese nation is no walk in the park or mere drumbeating and gong-clanging. The whole party must be prepared to make ever more difficult and harder efforts,” he said.
The principal contradiction facing Chinese society now is the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life. “While China’s overall productive forces have significantly improved and in many areas our production capacity leads the world, our problem is that our development is unbalanced and inadequate,” he said. Previously, the principal contradiction was described as one between “the ever-growing material and cultural needs of the people and backward social production.” The country is seeking to move from high-speed to high-quality growth, he added.
Xi pledged that China would continue to open up, make state-owned enterprises bigger and stronger, deepen financial reforms and fend off systemic financial risks. “Development remains the foundation and the key to all the problems China faces,” he said. He also raised the need for wealth distribution, environmental protection and poverty reduction, identifying the widening income gap as one of the grave issues that had not been adequately addressed.
Xi again promised greater market access to foreign investors to counter complaints from Washington and Brussels about Beijing’s protectionism. He said China would significantly lower the threshold for entrance to China’s markets, protect the legal interests of foreign businesses in China, and treat locally registered companies in an equal and fair way. “Opening leads to progress while closing only leads to backwardness. China won’t close its opened door – the door will only be opened wider and wider,” Xi Jinping said. However, pledges to business were only a small part of his speech, which focused on making China a “great modern socialist country”.
Fighting poverty was crucial for China to become a moderately prosperous society, Xi said. Addressing concerns over rising property prices, he said houses were for people to live in, not for speculation.
Party General Secretary Xi Jinping announced that a leading group for the comprehensive rule by law would be set up, that the anti-corruption struggle would continue and that there would be “zero tolerance” of graft. No one would be able to put themselves above the law, he said.
The key theories and thoughts of Xi Jinping are to be added to the Party’s charter as “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era”. It will be the guiding ideology for the country’s development in the coming years.
China has set 2020 as the target year to finish building a moderately prosperous society, just one year before the Communist Party celebrates its 100th anniversary. Two key components of the 2020 goal are to eradicate poverty nationwide, and to double the country’s GDP and per capita income from 2010 levels. By 2049 – the centenary of the founding of the People’s Republic of China – it should become a “modern socialist country that is prosperous, strong, democratic, culturally advanced and harmonious” and with a pioneering global influence.
Strong GDP growth dragged down by property and construction
By : fcccadmin
China posted relatively solid economic growth of 6.8% in the third quarter, driven by a stronger services industry, although there were signs of weakness in real estate and construction as property cooling measures start to bite. China’s property sector grew 3.9% in the quarter from a year earlier, decelerating from 6.2% in the second quarter and the slowest pace in nearly two years, the National Bureau of Statistics (NBS) said.
Growth in construction activity slowed from 5.4% in the second quarter to 4%, the weakest expansion since the fourth quarter of 2000. Property and construction together account for 13.3% of the economy, with property alone directly impacting 40 other industries. Softening in those sectors appeared to be the main drag on the otherwise fairly resilient Chinese economy. Third-quarter growth eased only slightly to 6.8% from 6.9% in the previous quarter, as had been widely expected.
Analysts have long predicted a slowdown in the property sector and construction after city governments began rolling out measures from late last year to cool soaring home prices and deter speculators. Property sales dropped for the first time in more than 2½ years in September and housing starts slowed sharply.
China had posted forecast-beating growth in the first half of the year, led by a sharp turnaround in the long ailing industrial sector, which accounts for a third of the economy. A construction boom – fueled by the housing frenzy and government infrastructure spending – has spurred demand and prices of building materials, with the resulting return of factory gate inflation boosting earnings for China’s heavily indebted heavy industry. But industrial growth slowed to 6.3% in the third quarter, from 6.6% in the previous period and there is uncertainty about how “smokestack” industries will fare over the coming months as China implements drastic measures to reduce winter air pollution, the South China Morning Post reports.
Data also showed that total sales of consumer goods rose 10.4% year-on-year to CNY26.32 trillion in the first three quarters. The pace was unchanged compared with the same period of last year. The official Purchasing Managers’ Index (PMI) rose to 52.4, the highest this year. Growth of imports and exports both accelerated. China’s average per capita disposable income grew 9.1% year-on-year to CNY19,342 in the first three quarters, Fixed-asset investment expanded 7.5% in the first nine months, marking the slowest rate of growth since a 6.3% reading in December 1999.
ODI drops, but improvement expected
By : fcccadmin
China’s non-financial outbound direct investment (ODI) dropped 41.9% year-on-year in the first three quarters. Chinese companies invested USD78 billion in 5,159 enterprises from 154 countries and regions during the January-September period, according to the Ministry of Commerce (MOFCOM). The investment was mainly channeled into leasing and commercial services, manufacturing, wholesale and retail, and the information technology sector. Outbound investment to countries involved in the Belt and Road Initiative stood at USD9.6 billion during the nine-month period, accounting for 12.3% of total ODI, up 4 percentage points from the same period in 2016. No new projects were reported in property, sports and entertainment, where the government has been seeking to limit investment.
China’s ODI has seen rapid growth in recent years. However, noting an “irrational tendency” in outbound investment, since last year Chinese authorities have set stricter rules and advised companies to make investment decisions more carefully. In August the Chinese government said that overseas investment in areas including real estate, hotels, cinemas, and entertainment would be limited, while investments in sectors such as gambling would be banned. Investment conducive to the country’s industrial upgrading would still be encouraged, the Shanghai Daily reports.
But a new rise in ODI is expected. China’s capital outflow finally stopped in September after a 22-month flight. The People’s Bank of China (PBOC) bought a net CNY850 million of foreign exchange in September, marking the first net increase since October 2015. In over-the-counter foreign exchange transactions between banks and their clients, companies and individuals sold more to banks in China than they bought from the banks last month, according the State Administration of Foreign Exchange (SAFE).
President Xi Jinping included the goal of building world-class enterprises in his keynote speech to the 19th Communist Party Congress, and Xiao Yaqing, Director of the State-owned Assets Supervision and Administration Commission (SASAC) said state-owned enterprises (SOEs) must have a leading role in investments abroad. SASAC oversees 98 central government-owned enterprises with a total CNY54 trillion in assets. Xiao highlighted the prospect of cooperation with private and foreign companies in tapping international markets, the South China Morning Post reports.
Shanghai’s pilot FTZ to become free port
By : fcccadmin
Shanghai’s Party Secretary Han Zheng confirmed plans to turn the city’s pilot free trade zone (FTZ) into a world-class free port. The port has entered the “planning stage” and needs to get the green light from the central authorities before moving forward, he added. The announcement of the plan to deepen reform and further open up the economy, has sparked a boom in shares that are port and transportation-related or with Shanghai in their names.
Shanghai Waigaoqiao Free Trade Zone Group Co and Shanghai International Port Group Co were among the stocks that jumped by the daily limit of 10% on October 20. In May, Beijing approved a plan to comprehensively expand the opening-up of the China (Shanghai) Pilot Free Trade Zone, which, according to Han, marked the ‘3.0 version’ of the FTZ since its debut in 2013 and first expansion two years ago. “System innovation is the core task of the zone,” he said.
Experts said import cargo controls would be further relaxed and customs clearance streamlined in accordance with international practice. “The prospective free trade port is likely to test the waters for trade facilitation measures and provide policy support to the high-tech sector,” according to Sun Yuanxin, Deputy Director of the Research Institute for the Shanghai FTZ at the Shanghai University of Finance and Economics. “It will take about three to four years to redesign a comprehensive set of rules and revise related regulations,” said Zhu Min, Deputy Director of the Shanghai Municipal Development and Reform Commission.
Shanghai’s FTZ has become a growth engine, contributing to a quarter of the city’s economic output this year, according to Weng Zuliang, Party Secretary of Shanghai’s Pudong New Area. A total of 49,000 enterprises, 20% of with foreign investment, had been established in the zone in the first eight months of 2017, exceeding the number of companies registered in the previous two decades. Earlier this year, the Ministry of Commerce (MOFCOM) announced the launch of an additional seven free trade zones to accelerate the nation’s opening-up and boost the Belt and Road Initiative, taking the number of FTZs to 11, the China Daily reports. Shanghai also plans to accelerate the development of a scientific innovation center with “global influence,” Shanghai Mayor Ying Yong told reporters.
Foreign banks to be allowed bigger stake in Chinese financial institutions
By : fcccadmin
China will accelerate the opening up of its banking sector to foreign investors and consider steps to increase the upper limit of shareholding in Chinese financial institutions by foreign banks, Guo Shuqing, Chairman of the China Banking Regulatory Commission (CBRC) said. Guo is expected to be appointed Governor of the People’s Bank of China (PBOC), replacing Zhou Xiaochuan, who has reached the retirement age.
The market share of foreign banks in China by assets has declined during the last five years, which is not beneficial for promoting competition and structural optimization in the banking sector, Guo said. By the end of 2016, the total assets of foreign banks in China had reached CNY2.93 trillion, accounting for 1.29% of the total assets of financial institutions in the Chinese banking sector, falling from 1.82% as of end-2012, according to the CBRC. “We will give more space to foreign banks in the form of their establishment, the percentage of their shareholding and their scope of business,” Guo said.
Since December 2003, the CBRC has allowed a single offshore financial institution to own up to 20% of a Chinese financial institution, and a maximum combined stake of several foreign banks of 25%. As the Chinese economy adjusts to a “new normal”, international financial institutions are facing a series of external challenges – from economic restructuring to low interest margins and digitization.
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