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Beijing plans one private bank for every province

The China Banking Regulatory Commission wants to run a pilot program that will establish one private bank in every province, according to Caixin, a respected business publication.

The Chinese government work report says there will be no upper limit on the number of private banks that will be allowed. Beijing has issued licenses to five private banks so far.

In 2014, the regulator approved the establishment of 14 privately controlled financial services firms as well as 108 privately controlled country credit unions.

Under China’s dated Commercial Banking Law, the minimum capital requirement for setting up a bank is one billion yuan.

(Caixin)

Chinese iron ore tax reform on the cards

Chinese struggling iron ore miners are unlikely to find any comfort in proposed changes to the way the commodity is taxed, according to an article in The Paper.

An iron ore tax reform plan is in the final stages of being drafted and will soon be sent to State Council for approval and could come into effect before the end of this year, according to a report published by Economy & Nation Weekly yesterday.

Online news site The Paper picked up the story, noting that it too had earlier been informed by an unnamed 'industry insider' that China's iron ore tax reform plan should be released in 2015.

Following changes to how the country's coal resources are taxed, China's policy makers are now looking to expand the new way of calculating resource tax to other resources. Taxes are currently levied according to value rather than volume.

(The Paper)

State Council preparing to announce SOE reforms

State Council has established a 'Small Leading Group' to oversee the implementation of state-owned enterprise (SOE) reforms.

The leading group is headed up by the leaders of the State Council, according to comments made by Mu Hong, deputy director of the central leading group to comprehensively deepen reforms office and deputy director of the NDRC, on March 7.

Mr Mu is also quoted as saying that "we can expect that a series of plan for the implementation of SOE reform will meet the public this year" in an in-depth report in today's Beijing News.

(The Beijing News)

Land revenue expected to hit around 4 trillion in 2015

Revenue generated from China’s state-owned land use rights is expected to be around 4 trillion yuan in 2015 for the third year in a row according to official government projections.

According to a Ministry of Finance report, revenue from state-owned land use rights are expected to decrease by 4.7 per cent, to 3.9452 trillion yuan.

Chinese local government's fiscal positions had benefitted greatly from land related revenues due to explosive growth in the real estate industry.  However, the weak real estate sector is putting pressure on government coffers in the last two years despite the record high revenues collected. 

(Yicai)

China to raise retirement age 

China will gradually extend the age of retirement over the coming years to ease pressure on pension funds, a top official said on Tuesday.

According to The Beijing News, Yin Weimin, minister of human resources and social security, said the changes would be phased over the next five years.

According to the minister, people aged over 60 will make up 39 per cent of the population compared with the current 15 per cent by 2050.

Mr Yin said a detailed plan will be rolled out by 2017.

(The Beijing News) 

Asia Pathways

Already driving a housing bubble in all major Asian cities from Seoul to Jakarta, significant hot money inflows are what Hong Kong, China and Singapore seek to avoid. However, Greece’s exit from the eurozone coupled with subsequent quantitative easing by the People’s Republic of China (PRC) to jump-start flagging growth could quickly exacerbate this Asian dynamic.

“Grexit” and the knock-on effect

Though the markets are betting against it, if Greece pulls out of the European Union (EU), expect the euro to immediately free-fall as investors and speculators rush the exits to find a safe haven currency. The tide could be large indeed, and the usual actors, the US dollar and pound sterling, will no doubt soar. As the US dollar and pound sterling become more expensive with the scrum, savvy investors will look to the currencies of alternative safe haven economies with strong balance sheets (but smaller liquidity), such as the Hong Kong dollar, Singapore dollar, and Danish krone. Unlike the Australian dollar or New Zealand dollar (currently with weak balance sheets due to declines in commodity prices), the other three are pegged or in trading “bands” that are undisclosed by central banks, and thus their true market-derived values, most probably undervalued, are hidden.

The Hong Kong dollar and Singapore dollar

Already, the Hong Kong Monetary Authority (HKMA) has had to defend the Hong Kong dollar peg on a few occasions in recent years when speculative inflows tested the HK$7.75 = $1 rate floor. The Singapore dollar has traded in a “monitoring band,” which is no doubt heavily skewed toward the US dollar, administered by the Monetary Authority of Singapore (MAS) loosely between S$1.20 = $1 and S$1.40 = $1 in the past several years. A monitoring band is generally backed by a secret currency board, or basket of foreign currencies, say 70 per cent in US dollars, 25 per cent in euros, and 5 per cent Australian dollars (the exact compositions are closely held and never publicized), whereby a trading band is linked to just one currency.

PRC-style quantitative easing

A bigger red herring, or some may say “black swan event,” is now the PRC, where President Xi Jinping and the People’s Bank of China (PBOC) are now considering unleashing quantitative easing and widening the renminbi (RMB) or yuan trading band on a more grandiose scale than the EU (and according the Economist on 22 November 14, perhaps by $200 billion or more, in anticipation of a currency war with the Republic of Korea and Japan and to slow rising housing prices).

Predictably, then, a tidal wave of hot cash from the PRC with a devaluing RMB would swamp Hong Kong, China next door and Singapore down the road with Asian investors seeking to preserve their capital. Neither of these scenarios should be taken lightly by the HKMA or MAS, which have historically intervened to create the most stable and liquid currencies in Asia. Like Switzerland and Denmark, both may have to consider negative interest rates to discourage this cash inflow, but this would also crimp investment and thus growth in the regions.

It is doubtful the HKMA could seriously hold the dollar peg with the double whammy of both events simultaneously. A revaluation to HK$7 = $1 might not be out of the question. It might even be possible to bring the Hong Kong dollar to parity or beyond, as it traditionally was until February 2007, as a depreciating RMB converges in value to the Hong Kong dollar. This happened last month in Switzerland, when the Swiss National Bank (SNB) lifted its euro cap (essentially a SwF1.20 = €1 “ceiling peg”) due to an increasingly weak euro.

The Swiss franc undefended

Under Mario Draghi, the European Central Bank was preparing for quantitative easing (printing money) to jump-start the languishing EU economy. The Swiss had to act before it did, otherwise the cost of maintaining the peg with an ever-cheapening euro could have become prohibitive. Nonetheless, the SNB and in particular SNB Chairman Thomas Jordan proclaimed late in 2014 that the Swiss franc cap was here to stay and that “the franc is still highly valued … Enforcing the minimum exchange rate of 1.20 per euro is absolutely central to ensure adequate monetary conditions in Switzerland and the SNB stands ready to enforce it by buying unlimited foreign currency” (Bloomberg 2014). Obviously, this was not the Swiss economic reality.

The Swiss franc peg had served to keep Switzerland in line with the eurozone economy and thus shield its exporters from non-competitive currency appreciation. Removing the peg put immediate upward appreciation on the Swiss franc, causing it to surge as much as 38 per cent against the euro in 1 day and causing havoc with forward currency markets, especially those “shorting” the Swiss franc in any way with approaching EU quantitative easing. Indeed, the sudden whiplash that followed led to the insolvency of at least one brokerage and severe multi-million dollar hits to Chase, Deutsche Bank, and Barclays. The latter two banks are still recovering from the financial crisis.

The Swiss episode serves as a strong reminder that while the Hong Kong dollar and Singapore dollar are both strongly linked to the US dollar, they are becoming more influenced by the RMB. For Hong Kong, China, this is due to its proximity to the PRC, where the RMB now serves as a defacto currency. For Singapore, the RMB serves as a proxy currency for the Association of Southeast Asian Nations member countries due to significant PRC investment in commodities trade. Events in Europe and the PRC are moving more quickly now. As seen with the SNB, currency pegs can become quite difficult to maintain if economies diverge, and can also be broken in the crossfire of a currency war with much collateral damage.

Originally published by the Asian Development Bank Institute publication Asia Pathways. Republished with permission.

Chinese counterfeiters are passing off Chinese grown fruit as Australian according to the peak body of Australian citrus farmers.

Citrus Australia says the counterfeiters are getting premium prices for the fake Australian fruit, and are even exporting it to other Asian countries.

Andrew Harty from Citrus Australia said trade at around 18,000 tonnes of mandarins and oranges to China and that fraudsters are trying to get a piece of that market.

“What is particular alarming to us is when we see fruit that has been dumped in a dye and we know that these dyes are quite toxic” he told ABC radio on Thursday.

"The colour is incredibly artificial, so it will be this glowingly deep orangey red colour."

Agriculture Minister Barnaby Joyce has confirmed that a draft submission on improving product labelling has been completed and will soon be presented to cabinet.

The drafting of the submission follows an outbreak of hepatitis A linked to imported frozen berries and consumer concern about the lack of information on packaging.

Chinese Deputy Finance Minister Zhu Guanyao has denied market speculation that Beijing is about to embark on a 3 trillion yuan debt swap deal.

Zhu says the government will soon release the details regarding the announced plan to swap shorter-term high interest local government debts with longer-term maturity and low yield public municipal bonds.

The total swap deal is one trillion yuan. Zhu says the accumulation of local debts is a historic problem and it is under control. “There are a lot of high quality assets,” he said according to a Xinhua report.

BEIJING—A drive against corruption in China’s military that has taken down at least 30 generals is exposing a problem that insiders and experts say could severely hamper the armed forces’ ability to fight: the rampant buying and selling of military ranks.

So widespread was the trade in ranks in the past decade that they came attached with unofficial price tags, with promotion to general costing at least 10 million yuan ($1.6 million) and to senior colonel more than half that, current and retired officers say. Even just enlisting as an ordinary soldier could cost 10,000 yuan in bribes, they say.

“It had become a vicious cycle,” said a retired Chinese officer, with officers who had paid for promotion looking to recoup their investment. The practice, he said, was “pervasive throughout the entire army in the past 10 years.”

President Xi Jinping has trained a wide-ranging antigraft campaign on the People’s Liberation Army, both to stamp his authority on the armed forces and shape a modern military capable of protecting China’s global interests—an agenda of prime concern for China’s neighbours as well as the U.S.

But the sheer number and seniority of officers detained or arrested thus far raise questions about the combat potential of a military that hasn’t fought a war in more than three decades, defence experts and insiders say. Officers detained recently span the army, navy and second artillery, which controls China’s nuclear deterrent, and include a general whose father is a former deputy military chief.

If you can’t depend on the military personnel system to select the best and most competent officers, especially for key operational positions, then trust and respect for the chain of command begins to get eroded,” said Tai Ming Cheung, an expert on the Chinese military at the University of California, San Diego. “When that happens, discipline begins to get undermined and it can quickly become a systemic issue that can rot away at the whole military apparatus.”

China’s defence ministry didn’t respond to a request for comment on the officers detained, the trade in ranks and the effect on operational capabilities

The scale of the problem also underlines the political risks Mr. Xi faces in targeting so many senior commanders. The armed forces are technically controlled by an 11-man Central Military Commission with Mr. Xi as chairman and only civilian.

Retired Maj. Gen. Yang Chunchang said in an interview this week with Hong Kong’s Phoenix Satellite Television, which has close ties to Beijing, that military graft had been so severe under Mr. Xi’s predecessor, Hu Jintao, that he had little control over the armed forces.

“It made the No. 1 leader of the military commission into a mere figurehead,” said Gen. Yang, one of several current and former officers who have spoken out on military corruption this week during an annual session of the national legislature.

He also said it was an open secret that different ranks in the military and armed police carried “price tags,” though he said the problem didn’t affect the entire armed forces.

Last month, the research firm Rand Corp. published a report on the Chinese military which said: “It is widely believed that positions in and promotions within the PLA can be bought (and often have to be).”

Though the impact of corruption is difficult to assess precisely, the report said, it likely undermines professionalism and affects combat capabilities. The corruption crackdown, it said, also risked weakening the military by denting morale and toppling officers who, although corrupt, were also effective commanders.

The most senior military figure formally accused of selling military posts is former Gen. Xu Caihou, one of two uniformed vice chairmen of the military commission when President Hu led it from 2004 to 2012. Official media said in October, Gen. Xu had confessed to taking “extremely large” bribes to help promote others.

Gen. Xu couldn’t be contacted for comment, and it isn’t known if he has legal representation.

Senior military officers briefed on Gen. Xu’s case were told that he and his family received about 40 million yuan ($6.4 million) in bribes from a protégé, Lt Gen. Gu Junshan, according to a person with direct knowledge of the briefing.

Gen Gu, formerly deputy chief of the military’s logistics department, was charged last March with bribery, embezzlement, misusing state funds and abuse of power, according to official media, which also said he had sold military posts. It hasn’t been possible to contact him or a legal representative.

Two other senior PLA officers who were recently detained are also suspected of having bribed Gen. Xu in exchange for promotion, according to two senior military officers with knowledge of the cases.

Those two cases were among 16 senior officers—including four lieutenant generals and nine major generals—who were placed under investigation last year, according to an announcement from the Chinese military in January.

Most handled logistics or were commissars in charge of maintaining political reliability rather than operations. But a commentary from the official Xinhua News Agency acknowledged that “graft in the armed forces could undermine their ability on the battlefield”.

This month, Chinese official media announced investigations into 14 more generals including Guo Zhenggang. He was identified by state newspapers as the son of retired Gen. Guo Boxiong, vice chairman of the military commission from 2002 to 2012.

Gen. Guo Boxiong hasn't been accused of wrongdoing. Neither he, his son or any legal representatives could be reached for comment.

One senior military figure suggested this week that Gen. Guo should be held responsible for his son’s actions, according to state media.

“If the father is in the military, and the son also joins, there’s nothing wrong with that,” retired Maj. Gen. Liu Jian—the grandson of Marshal Zhu De, a founder of the PLA—was quoted as saying on a news site affiliated with the Communist Youth League. “But if it reaches a certain point where you use the power in your hands to profit yourself and others, that’s not right. Also, parents are their children’s first teachers. If the child is not well educated, the parents can’t escape blame.”

Analysts say that targeting both former Gen. Xu and the son of retired Gen. Guo serves to signal that military corruption was out of control under President Hu, and to justify President Xi’s stronger-handed leadership.

Corruption in the military became widespread in the 1980s as it branched out into business, seeing opportunity in the new market reforms. Chinese leaders ordered it to withdraw from commercial activities in 1998. In the 2000s, though, graft flared anew, due in part to soaring value of land for development, including military land, insiders and analysts say.

Military housing and weapons procurement have been particularly rife with graft, those people say.

Some Chinese officers have drawn comparisons with the waning years of the last imperial dynasty, the Qing, arguing that military corruption was one of the main reasons for China’s defeat by Japan and the British.

Roy Kamphausen, a former U.S. military attaché in Beijing, said the buying of promotions appeared to become more prevalent in recent years, as corruption at large increased. One factor, he said, was a 360-degree evaluation system in the military, which meant that subordinates, peers and even superiors could all benefit from an officer’s promotion.

BEIJING—China’s leadership is preparing to radically consolidate the country’s bloated state-owned sector, telling thousands of enterprises they need to rely less on state life support and get ready to list on public markets.

The economic slowdown has heightened the imperative to eke better returns out of the state firms that tower over China’s economy, from the giants that dominate oil, banking and other strategic sectors, to smaller ones that run hotels and make toothpaste.

On Wednesday, China showed fresh signs of weakness, reporting that industrial production for the year’s first two months grew at its slowest pace since the global financial crisis, weighed down by overcapacity, while housing prices continued their swoon.

But instead of scaling back state firms’ role, as economists urge, the consolidation plan could tighten the state’s grip over economic activity and make already inflated behemoths even bigger.

Communist Party leaders plan to release broad guidelines in the next months for restructuring the country’s more than 100,000 state-owned enterprises, according to government officials and advisers with knowledge of the deliberations.

The leadership is determined to “crack a hard nut,” said Li Jin, deputy head of the China Enterprise Reform and Development Society, a trade group under the top state-firm regulator.

Strategically important industries such as energy, resources and telecommunications are marked for consolidation, the officials and advisers say. The merged entities would then be reorganized as asset-investment firms, with a mandate to make sure they run more like commercial operations than arms of the government.

Upper management will be under orders to maximize returns and prepare many of the companies for eventual listing on stock markets, these people say.

State companies are already under pressure to hand the government 30 per cent of their profits by 2020—from 15 per cent or less now. Some of this is to be earmarked for costs related to a rapidly aging population. The new plan adds a goal of making the biggest state companies profitable enough to go public by 2025, according to the officials.

By many measures, the state sector has grown more dominant in China’s economic life, despite Beijing’s recurring calls for a more vibrant private sector.

The plan could be controversial as it falls short of the steps advocated by some market-reform advocates: For one thing it takes large-scale privatization off the table.

“The idea of having asset managers oversee state assets is a good one, but it shouldn’t be done through combining existing state-owned enterprises that are already so big,” says Zhang Wenkui, a deputy director at the Development Research Center of the State Council, China’s cabinet. “That would only lead to less competition.”

Beijing has sought to improve state companies’ efficiency through consolidation in years past, with little success. For example, the government of Hebei province, which rings Beijing, merged two major steel makers to create Hebei Iron and Steel Group, which went on to scoop up more companies but which is now mired in losses and debt.

The State-owned Assets Supervision and Administration Commission, or Sasac, which oversees the largest state enterprises, declined requests for comment on the reform plan. In a speech to the legislature last week, Premier Li Keqiang vowed to “deepen the reform of state-owned enterprises” and to “speed up efforts” to set up state-asset investment companies. He didn’t elaborate.

The Wall Street Journal reported last month on a facet of the restructuring: plans to merge state oil companies to make them more viable globally by reducing competition at home.

Over the years, China has moved in fits and starts to restructure its vast state-owned sector. In the 1990s, then-Premier Zhu Rongji closed thousands of factories and managed to make some state firms profitable by setting up asset-management companies that took over their debts. But little has been done to improve the way state companies are run.

Once released, the new plan is expected to be implemented by various level of government, though resistance by local officials is expected.

“Making state enterprises more commercial would mean an end to a lot of government subsidies to their employees, like housing and electricity bills,” said an official in eastern China’s Jiangxi province. “That would make a lot of people upset and angry.”

The prospect of a shake-up has prompted market bets on consolidation. Shares in the two state-controlled train makers, China CNR Corp. and China CSR Corp., have doubled in price since December when they announced a merger plan. The tie-up was approved by regulators this month. Meanwhile, shares in the listed arms of two of China’s oil giants—China National Petroleum Corp., or CNPC, and China Petrochemical Corp., or Sinopec—have also risen on speculation they would be combined.

Asked about the chances of such a tie-up, Sinopec Chairman Fu Chengyu told China’s official Xinhua News Agency on March 3, “I don’t know.”

Beijing still sees a bigger role for the private sector: The plan supports efforts to invite private investment into state firms, though the officials and advisers say that private investors wouldn’t be permitted to hold controlling stakes in most state firms.

Beijing sees a combination of mergers, better supervision and the discipline of public listing as crucial to reducing waste and corruption and holding management accountable, Chinese officials say.

“State-owned enterprises should have the kind of governance and financial accountability that meets the criteria for publicly traded companies,” Guo Shuqing, governor of Shandong province and a former financial regulator, told reporters this weekend.

State firms have thrived on access to loans from state banks and government-set rules that limit competition from private businesses, which complain of being muscled out of the market unfairly. Economists have said the special status has come at a cost to Chinese taxpayers and consumers.

In an analysis for The Wall Street Journal, economist Zhu Chaoping at UOB Kay Hian Holdings Ltd., a Singapore-based brokerage, found that assets at state-owned enterprises, defined as those majority-controlled by the government, jumped 90 per cent to 25.1 trillion yuan ($4 trillion) in 2012 from 2008. Return on equity among state-controlled manufacturers, however, averaged 11.6 per cent in 2013, compared with nearly 25.7 per cent for their private brethren, according to Mr. Zhu’s analysis.

When drawing up the plan, senior officials looked at Singapore’s holding company for state firms, Temasek Holdings, according to officials and advisers. Under the Temasek model, the government would confine itself to the role of a stakeholder, receiving dividends but leaving day-to-day running of the companies to professional managers at the asset-investment firms hired at market rates.

In the end, Beijing’s plan stops short of that. The government will retain its current practice of naming senior management teams for the newly formed companies, the officials and advisers say.

Beijing has quietly started experimenting with forming state investment companies through merging state firms. Last year, at Sasac’s direction, State Development & Investment Corp., a financial and industrial conglomerate, scooped up a securities firm, while Cofco Corp.—one of China’s largest food-processing firms—swallowed another state-owned food company. Cofco absorbed the assets of China Huafu Trade & Development Group “for free,” according to Huafu, which became a subsidiary.

Officials at the regulator, State Development and Cofco declined to comment.

Meanwhile, in the nuclear power sector, China Power Investment Corp. is merging with the State Nuclear Power Technology Corp., according to the securities filings made by China Power’s listed arms last month.

Making big state companies bigger is likely to draw renewed wrath from private Chinese companies and from Western businesses and their governments, which have criticized Beijing for years for essentially subsidizing state firms by giving them preferential access to credit, land and other resources.

Combining state firms would “run counter to” Beijing’s promise to broaden private participation in the economy, said Zhang Ming, an economist at the Chinese Academy of Social Sciences, a government think tank.

BEIJING—Chinese authorities are heightening scrutiny of New Zealand infant formula imports following a safety threat that sparked concerns over shipments from one of China’s biggest dairy suppliers.

China’s General Administration of Quality Supervision, Inspection and Quarantine said in a statement dated Tuesday it is requiring New Zealand companies importing milk powder to have government certification and an importers’ examination proving the safety of the products.

“We are still working through with the Chinese authorities on the precise nature of what they’d like to see,” said Scott Gallacher, Deputy Director General of New Zealand’s Ministry of Primary Industries, on Thursday at a news conference. But he added that the government would have no issue certifying the formula as it is confident all exports are safe.

New Zealand authorities informed China—along with other trading partners—that an anonymous threat had been made to poison infant formula but continues to reiterate the risk of it actually happening remains low. New Zealand officials and dairy enterprises are taking extra security measures to prevent poisoning, China said.

New Zealand police said Tuesday that unidentified people sent threats to Fonterra Cooperative Group—the world’s biggest dairy exporter—and industry lobby group Federated Farmers, to contaminate formula with a potentially deadly pesticide. The threats, sent in unsigned letters in November, said action would be taken if by the end of March New Zealand failed to outlaw the use of a poison, known as 1080, to kill pests such as rabbits, stoats and possums.

Fonterra Chief Executive Theo Spierings said the threat was a “despicable act,” adding that the dairy industry’s products were safe.

“We have done everything in our power to ensure the security of our already world-class chain,” he said.

Mr. Gallacher said Chinese authorities had told the ministry they knew of no consignments being held up as a result of this criminal blackmail threat.

However, “we are aware of one small exporter who may have been experiencing some of those problems and the Ministry of Primary Industry is following that up with the exporter,” he said.

The latest incident is the third involving Fonterra in recent years. In August 2013 the company said some of its exported whey-protein products may contain Clostridium botulinum bacteria, which can cause botulism—a severe and sometimes deadly food poisoning. The scare—ultimately a false alarm—prompted recalls across Asia, with China and Russia banning some milk products.

Earlier the same year, Fonterra acknowledged finding traces of the chemical dicyandiamide in its milk powder. Fonterra at the time said the government advised it that the low levels found weren’t a safety concern to humans.

Chinese authorities are aiming to avoid problems in a market that has faced problems in the infant formula industry. In 2008, a milk scandal in which local dairy producers added melamine to milk, mimicking protein content, caused the death of six infants.

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Your daily digest of the biggest business news in China, translated and summarized every day. China Spectator has not verified these stories.

China's investment in R&D surpasses 2% of GDP

China's total investment in research and development (R&D) already exceeds 2 per cent of GDP, according to comments made by Wan Gang, China's Minister of Science and Technology, at a press conference yesterday.

Professor Wan, who has a PhD in engineering, told journalists that enterprises accounted for more than 76 per cent of total investment in R&D, according to a China News Service report.

The minister also said the government should work to remove the various barriers that get in the way of such enterprise-led innovation and that the government should encourage innovation.

(China News Service)

Deputy finance minister denies QE plan

Chinese Deputy Finance Minister Zhu Guangyao has denied market speculation that Beijing is about to embark on a 3 trillion yuan debt swap deal.

Zhu says the government will soon release the details regarding the announced plan to swap shorter-term high interest local government debts with longer-term maturity and low yield public municipal bonds.

The total swap deal is one trillion yuan. Zhu says the accumulation of local debts is a historic problem and it is under control. “There are a lot of high quality assets,” he said according to a Xinhua report.

(Xinhua)

Official figures underestimate debt loading on China's toll roads

As of the end of 2013, China had invested 5.4 trillion yuan in constructing toll roads, resulting in debts in excess of 3.4 trillion yuan, according to figures released by the Ministry of Transport.

The amount of debt recorded in the Ministry of Transport report underestimate the real amount, according to an unnamed person with connections to the Ministry quoted in a report in today's Economic Information Daily.

The source says that "This 3.4 trillion yuan figure doesn't reflect the true situation in relation to national told road debts, the aggregate figure is calculated according to the figures for each road project, but in reality a lot of the 'cash investment' in these projects is raised from bonds or bank loans which are not included in this 3.4 trillion yuan figure."

Of the 5.4 trillion yuan invested in constructing toll roads up until the end of 2013, 'cash investments' accounted for 1.6 trillion yuan, accounting for just over 30 per cent of the total figure.

The same source says that despite the State Council releasing an order in 2009 saying that at least 25 per cent of the funding for certain infrastructure projects (including roads) must be made in the form of 'cash investments', many provinces have raised more than 10 per cent of these 'cash investments are raised by loaning money or raising debt through local financing platforms.

Ordinarily, 'cash investments' only refer to capital that has not been sourced through debt raisings or loans.

So, official figures underestimate the debt ratio of many of these toll road projects.

In 2013, China's toll roads made an aggregate loss of 66.1 billion yuan.

The report ends by saying the government plans to undertake systemic reform of the sector.

(Economic Information Daily)  

SOE reforms to go upstream at CNPC

Following the successful sale of a 30 per cent stake in Sinopec's retail division to a pool of 25 foreign and domestic investors, China's other oil giant is reportedly looking to diversify ownership of some of it's core upstream assets, according to an article in today's Economic Information Daily.

According to the report, China National Petroleum Corporation, PetroChina's state-owned parent, plans to sell up to 49 per cent stakes in certain oil field blocks in Xinjiang over the course of this year to other 'local' investors.

A cooperation agreement has already been signed with Xinjiang Energy Co, Ltd and the Aksu government in relation to blocks in the Tarim Basin oil field which is said to be approaching actual settlement.

The oil major is also reportedly actively engaged in other negotiations.

The paper quotes industry analysts as saying that this represents a breakthrough in terms of allowing investment in areas that have previously been off limits to other companies.

Up until now, reforms in the oil and gas sector have been limited to opening up opportunities in downstream retailing and refining.

(Economic Information Daily)  

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Managing China’s opaque local government debt problem is without doubt one of the biggest challenges for Beijing. The central government has taken a significant step this week to address this crucial issue, ordering a swap plan amounting to one trillion yuan of low interest municipal bonds that will replace the often-opaque local government debt.

The basic idea behind this bond swap is simple and straightforward. China’s local government debts are not only large but also opaque and hidden. Because local governments were not allowed to issue municipal bonds directly, many of them have turned to so-called local government financing vehicles (LGFV).

As a result, a lot of local government debts are short-term, high-interest and opaque, having been borrowed from the country’s mushrooming shadow banking sector. The repayment of these short term debts will reach their peaks around the first half of 2015, so a lot of Chinese local governments are scrambling for resources to avoid a default. The State Council, the Chinese cabinet, estimates the total debt repayment amount is 1.9 trillion yuan for 2015.

Considering the repayment pressure and high interest rates, Beijing has essentially offered its own gold-plated credit rating to part of the outstanding local government debts. The Ministry of Finance is swapping short-term debts of two to three year maturity into low-yield municipal bonds of seven-year maturity.

This move is designed to address the problem of maturity mismatch, high interest costs for local government as well as improving transparency. In essence, local governments have financed their long-term infrastructure projects with short-term high interest loans. Now, they are able to exchange their short-term debts with low cost and longer term financing instruments.

This move will take the pressure off the immediate repayment problem during the first half of 2015. ANZ chief economist for Greater Asia Liu Li-Gang said in a note to clients “lengthening the maturity of debt will significantly erase the debt burden for local governments. A simple projection shows that the debt repayment will be lowered 50 per cent from 2015 to 2017 if the debts can be extended to 7 years from 3 years.”

A spokesperson from the Ministry of Finance estimates the total interest savings for local governments would be about 50 billion yuan a year.

Apart from swapping short term financing instruments into longer-term public municipal debts, Beijing is also stripping local government financing vehicles’ power to raise money. This is very significant, and means future borrowing will be capped and that local governments can only raise money through issuing public debt in the future.

According to directives from the Ministry of Finance, local governments must bring debts without revenues to pay for them onto their books and make them official government debts. For debts with revenue stream such as tolls roads, local governments should set up dedicated funds to pay for them or turn them into Public and Private Partnerships.

This will improve transparency of the debt problem in China. Beijing is forcing local governments to show their hands so they can understand the true scale of the problem. Hainan province became the first local government to report its debt position publicly after the new directive. Its debt surged 22 per cent since last audit in 2013.

If they don’t reveal their debts now, their future borrowing will be capped.

Apart from lowering interest rates and improving transparency, the new debt replacement program will do much to convert once opaque and illiquid debts into highly liquid and low-yield debts explicitly or implicitly backed by the central government’s gold-plated credit rating.

This is a significant move in China’s battle to deal with its ballooning debt problem. The swap program will ease the immediate pressure on repayments during 2015 and give important breathing space for local governments to find ways to de-leverage in the next few years. Local governments either have to sell off their assets or turn to PPPs to reduce their debt problem burden.

Improved transparency is also good news. The first step in dealing with a worsening problem is to get a grip of the scale of the problem. Budgetary transparency is a good thing even it means local governments have to reveal more hidden debts. It is better to come clean now.

Tackling the debt problem is a huge challenge and Beijing has made the right move this year. The bigger challenge for years to come is to how to deleverage. Experiences elsewhere have taught us this process is not going to be easy or without pain. 

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China should be able to roll out its planned bank deposit insurance program by the end of June and may remove all controls on interest rates by the end of this year, central bank Governor Zhou Xiaochuan said on Thursday. 

"I believe it (deposit insurance) can be launched in the first half of this year," Mr Zhou told a news conference. He added that "there is a good chance" that the remaining controls on deposit interest rates can be scrapped. 

China currently has no deposit insurance system but the government has been widely seen as standing behind the nation's banks, which are predominantly owned by the state. 

But Beijing plans to bring in more private capital into the financial sector in the future. It also has been moving ahead gradually with plans to liberalise deposit interest rates, which are now guided by the People's Bank of China. 

The central bank sets benchmark interest rates and allows banks to offer rates that are up to 1.3 times the benchmark. 

Asked about the prospects for a removal of those curbs he said: "If there is an opportunity this year, deposit rates will be freed up." He then went on to say: "There is a very good chance of that." 

Greater competition in setting deposit rates combined with many smaller new entrants to the financial sector could lead to failures of weaker banks. That has created pressure for an insurance system covering bank deposits. 

Under a plan announced late last year, depositors would be insured on deposits of up to 500,000 yuan ($US81,000). 

Mr Zhou also said that the central bank was maintaining its prudent monetary policy. 

Many economists have called for the central bank to take a more aggressive stance in loosening monetary policy as the economy shows slower growth. Economic growth slowed to 7.4 per cent last year, the slowest pace in nearly a quarter of a century. The government has set an even lower target of about 7 per cent for this year. 

China hopes that its currency can be included in the Special Drawing Rights created by the International Monetary Fund in the near future, Yi Gang, vice governor of the People's Bank of China said on Thursday. 

"We are actively talking with the IMF and hope it can fully consider the progress China has made in internationalising the yuan," Mr Yi told reporters at a news conference. 

The value of the SDR, a kind of synthetic currency, is determined by a basket of major currencies. Originally, SDRs were intended to serve as a shared currency for international reserves, though that aspect never really got off the ground. 

If the yuan, also known as the renminbi, is included, it will help make SDRs more representative and push reforms at the IMF itself, Mr Yi said. 

He also said China's monetary regulators are closely watching domestic price levels. He noted that a prolonged drop in industrial prices reflects pressure on global commodities, including oil and iron ore.

BEIJING—Not long ago, a clear sign that China’s politicians were in a late-night session was the warbling sound of karaoke notes.

But as President Xi Jinping steps up his national campaign against waste and graft, the mood of the biggest annual political gathering, which ends Sunday, is decidedly more subdued.

China’s gathering of its rubber-stamp parliament has for years been a showy symbol of the country’s swift economic rise, with delegates sporting pricey watches and haute couture.

While Mr. Xi has curbed the gatherings’ excesses since he assumed power in 2012, this year’s session struck an unusually disciplinarian tone. Upon their arrival, the event’s participants received a list of rules dictating modest conduct in keeping with an economy that has slowed to its lowest pace in two decades, and a public weary of seeing taxpayer money spent on pointless meetings.

Karaoke sessions at hotels? Banned. Smoking? Nixed. Once-ubiquitous pricey gift exchanges? Taboo. Woman delegates have swapped their high-heeled shoes for flats. Organizers recycled tablecloths from last year. Even the podiums, once nestled amid elaborate floral arrangements, are nearly bare.

To enforce the rules, Beijing has for the first time dispatched a team of blue-badged inspectors to police participants, which include stars such as Yao Ming and Jackie Chan. Authorities have also installed in hotels red “whistle-blower” boxes for those willing to snitch on colleagues who violate the rules. (Organizers declined to make an inspector available to comment on the complaint process.)

Anxious to avoid running afoul of the rules, the 5,000-odd delegates are eating at self-service hotel buffets—yogurt and stir-fried celery instead of seafood or alcohol—while some are shunning hotel toiletries, even toting their own towels and toilet paper.

“Even if we’re given them, we won’t use the hotel toiletries,” said Zuo Dongling, a delegate to the Chinese People’s Political Consultative Conference, a government advisory body. “We bring our own.”

Mr. Xi’s campaign has chilled ostentatious behaviour not only at the annual gathering, but across the country in government and the private sector as well.

One city government in Liaoning province, rather than gifting packets full of money for this year’s Lunar New Year holiday, handed out mantou—a type of steamed bread that cost about 10 cents apiece, local media reported. Across the country, sales of expensive Maotai liquor have slowed. Catering revenue has been hit. Five- and six-star hotels, meanwhile, have taken the extraordinary step of willingly dropping stars from their rankings to make their properties look more parsimonious—the better to attract bureaucrats whose travel budgets have been slashed.

Back at this week’s political meeting, the sleek Audis that used to choke Tiananmen Square, which is converted into a temporary parking lot, are largely supplanted by delegate-ferrying buses. In the Great Hall of the People, where smoking is banned, some delegates puffed away inside toilet stalls. A half-a-dozen others lighted up in the cold outdoors, collecting butts in a paper cup of water on a windowsill, since there are no ashtrays. “I think the new work style is great,” said one delegate outside after quickly handing his cigarette to an aide, who stubbed it out on the sole of his shoe.

A delegate from Hong Kong, Chau On Ta Yuen, said he brought his own tea and even his own bottled water. “Beijing’s water is too chemically heavy,” he said. “It’s not good for making tea, anyway.”

This week’s meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference are notoriously dull, so delegates tend to snap photos of each other, nap and play on their mobile phones as the leadership reads verbatim off previously circulated reports. But this year, delegates say that they have been encouraged to work hard and pay attention.

The rules, in fact, instruct hotels to close any entertainment centres or card-playing rooms. Delegates told reporters they were keeping to their rooms and studying material for their meetings. Absences require written approvals, they said.

Delegates hoping to flash their star power have also been disappointed. “In the past, to create the mood, they’d set up a karaoke session and everyone would sing,” said delegate Zhong Youping. “Now they want everyone’s attention to be focused on their work.”

Another delegate, Li Heping, said there were few entertainment options. “You could go to the hotel gym, I guess,” he said. “Or go to sleep early.”

BEIJING—China’s top judge used a high-profile speech in Beijing to apologize for a spate of wrongful-conviction cases, part of an effort to shore up eroded public confidence in the country’s court system.

Chinese courts revised more than 1,300 criminal decisions in 2014, including a number of major wrongful judgments, said Zhou Qiang, chief justice of China’s Supreme People’s Court, Thursday as he delivered the court’s annual work report to the national legislature.

“With regard to wrongful convictions, we feel a deep sense of self-blame and demand that courts at all levels draw a profound lesson,” he said.

Atoning for miscarriages of justice—particularly in death-penalty cases—has been the centrepiece of a government campaign to reform law-enforcement institutions and instil public confidence in a legal system often seen as favouring the powerful over ordinary Chinese.

The Supreme People’s Court recently ordered retrials in a handful of high-profile cases, including that of an 18-year-old from Inner Mongolia who was executed in 1996 for the rape and murder of a woman in a public bathroom. The youth was posthumously exonerated in December, nearly 10 years after another man confessed to the crime.

Revisiting mistaken judgments “never really happened in Chinese criminal justice,” said Fu Hualing, a law professor at the University of Hong Kong. “It’s a matter of credibility, and it’s a good thing”.

President Xi Jinping last fall ushered in the legal reform drive, saying that a better-functioning legal system is necessary if the Communist Party is to effectively govern an increasingly complex and contentious society. Mr. Zhou, a champion of judicial professionalism, has gained a reputation as a reformer, with space to push for changes to make the courts more independent and better protect the rights of lawyers.

Mr. Xi, however, has put limits on those reforms, requiring that the legal system continue to serve the interests of the party.

Political considerations are one reason China’s legal system produces so many wrongful convictions and mean they are unlikely to go away soon, according to Joshua Rosenzweig,a Hong Kong-based human-rights researcher.

“A lot of these cases were pushed through because of the pressure everyone was under to solve the latest grisly murder,” Mr. Rosenzweig said. “The police, prosecutors and the courts are often coordinated by the party based on interests other than determining the truth.”

As Mr. Zhou was delivering his speech in Beijing’s Great Hall of the People, a lawyer involved in another high-profile wrongful-conviction case cast doubt on the promises for change.

In a post on social media, Chen Guangwu, a lawyer for the family of Nie Shubin, a 21-year-old who was executed in 1995 for a rape and murder that another man later confessed to, said he hadn’t received access to the case file three months after the top court ordered a retrial.

“I think the local court is being interfered with,” Mr. Chen told The Wall Street Journal, saying he had asked multiple times to be given access to the documents. “This is how things work in China. They try to avoid sensitive incidents, sensitive times and sensitive places.”

Meng Bin, the judge with the Shandong High People’s Court who is overseeing the retrial, didn’t respond to calls for comment.

The Supreme People’s Court has repeatedly declined to comment on its handling of wrongful-conviction cases

The risk of political interference and rushed judgments is even greater in cases that touch on central government interests, legal scholars said. That is particularly a concern, Mr. Rosenzweig said, in cases involving terrorism or endangering national security.

Chinese courts issued judgments in 558 cases involving terrorist attacks or charges of inciting separatism in 2014, Mr. Zhou said in his report, a 14.8 per cent increase over the previous year.

Cracking down on terrorism and separatism has been a priority of Mr. Xi’s following a proliferation of violent attacks the government has attributed to religious extremists from Xinjiang, home to the mostly Muslim Uighur ethnic minority. Representatives from Xinjiang said at a meeting in Beijing on Tuesday that the country’s “strike-hard” campaign against terrorism has been carried out according to law.

BEIJING—Chinese courts heard almost nine times as many cases against polluters in 2014 than the year before, evidence of the government’s campaign to clean up China’s environment after years of lax enforcement.

An annual report by the Supreme People’s Court, released Thursday, said courts concluded 16,000 cases related to environmental violations in 2014. That is 8.5 times more than the previous year, according to the government’s news agency, Xinhua. Civil cases seeking damages from pollution rose slightly more than 50 per cent, to 3,331 cases, the agency said.

The climb in cases comes amid an overall push by Beijing to tighten and enforce regulations and use other measures to deal with pollution that has left the country with toxic air, foul water and contaminated soil. Provinces with high levels of pollution such as Hebei—home to the nation’s dirtiest skies, as well as a chunk of the nation’s steel industry—have closed various heavily polluting industries.

A recently revised environmental law stiffens penalties for polluters and relaxes some restrictions on nongovernmental groups bringing suit against polluters. The law, which went into effect this year, also creates a system in which polluters are fined on an accumulating basis for the number of days they are in violation, instead of one-off fines.

A 2013 interpretation on handling environmental pollution cases issued by the high court and the Supreme People’s Procuratorate, the national prosecutors’ office, also made it easier to seek convictions for pollution, said Cao Mingde, a professor at the China University of Politics and Law who specializes in environmental law.

Meanwhile, a change in public sentiment, said Mr. Cao, has helped push up the number of civil cases, including those involving farmers or residents suffering as the result of pollution. “More people are aware of their rights now,” he said.

According to a report issued Thursday by the prosecutors’ office, the number of cases involving individuals suspected of crimes such as polluting, illegal logging or illegal grassland exploitation has also risen to 25,863 people, representing an increase of more than 23 per cent.

Last week, the Ministry of Environmental Protection announced that it had punished several dozen agencies that assess environmental impact for violations that included faked documentation.

Six Asian airports have made the list of the top 10 airports in the world, with Singapore's Changi Airport retaining the No.1 position for the third year running.

Airports in South Korea, Japan, Hong Kong and China ranked in the top 10 at the 2015 World Airport Awards held by airline consultancy Skytrax in Paris.

South Korea's Incheon International Airport and Hong Kong International retained their ranks of second and fourth respectively.

Tokyo International Haneda rose one spot to fifth place, while Central Japan International Airport near Nagoya jumped five spots, coming in seventh place in 2015.

Changi Airport was also voted the best airport for leisure activities.

"This recognition is particularly pleasing for us as it comes at a time of transformation at Changi Airport," said Changi Airport Group's chief executive Lee Seow Hiang.

Based on 13.02 million customer nominations, the World Airport Awards include 550 airports worldwide.

The survey evaluates customer satisfaction across key performance indicators such as check-in, arrivals, transfers and shopping facilities.

THE TOP 10 AIRPORTS:

1 Singapore Changi Airport

2 Incheon International Airport

3 Munich Airport

4 Hong Kong International Airport

5 Tokyo International Airport (Haneda)

6 Zurich Airport

7 Central Japan International Airport

8 London Heathrow Airport

9 Amsterdam Schiphol Airport

10 Beijing Capital International Airport

Trade Minister Andrew Robb has announced a significant breakthrough in Australia's free-trade agreement with major trading partner China.

Mr Robb said Australia had secured the much-coveted 'most favoured nation' provision in the China-Australia Free Trade Agreement. 

The most favoured nation clause is recognised by the World Trade Organisation and sees parties agree to specific trade advantages. 

Mr Robb said the clause will apply to most of the major services sector as well as investment. 

The clause will put Australia on the same footing as the EU and the US in terms of trade with China. 

Last year Prime Minister Tony Abbott and Chinese President Xi Jinping agreed in principle to the multi-billion dollar free trade agreement.

At the time it was described as "a game changer" that the Abbott government believes will supercharge the Australian economy.

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It’s not just frozen berries you have to worry about. This week, Australia’s peak body for citrus farmers got out ahead of a potentially disastrous story for their industry.

Citrus Australia announced this week that Chinese counterfeiters are getting premium prices for fake Australian fruit, and are even exporting it to other Asian countries. Australia is now trading over 18,000 tonnes of mandarins and oranges a year  to China -- a market these fraudsters are trying to get a piece of.

“What is particular alarming to us is when we see fruit that has been dumped in a dye and we know that these dyes are quite toxic,” Andrew Harty from Citrus Australia told ABC Radio on Thursday.

"The colour is incredibly artificial, so it will be this glowingly deep orangey red colour," he said.

As readers will know, the list of food safety incidents in China over the past decade makes for nausea-inducing reading. Kebabs made from cat and rat meat, chlorine in soft drinks, soy sauce made from hair clippings and pork buns filled with so much bacteria they glow in the dark (Food safety in China: Killing the chicken to scare the monkeys, 25 July 2014).

But cutting corners on safety and quality is not limited to the food industry. Last week, “60 Minutes” in the US ran an expose on Lumber Liquidators, a retailer of hardwood flooring and accessories. The company is accused of selling Chinese-made laminate flooring that contains potentially carcinogenic formaldehyde.

The story may never have seen the light of day were it not for a blog post by a 25-year old short seller, Zhou Xuhua. In an interview with Bloomberg, Zhou said his suspicion was raised when he saw a surge in the company’s gross profit margin and noticed that it sourced some of its products from China.

“This report shows that Lumber Liquidators lacks a proper product quality control system, and its products may be hazardous to the unsuspecting consumers,” Zhou wrote in the post on investing website Seeking Alpha.

According to Bloomberg, hedge fund manager Whitney Tilson pitched the story to “60 Minutes”. “It’s pretty amazing what he did on his own,” Tilson told Bloomberg, calling Zhou “the pioneer” of the Lumber Liquidators story.

Short sellers and the media have long had a symbiotic relationship. Short sellers bet on a stock’s price decline by selling it using borrowed shares. To help push the price lower, they get their story out into the press and then buy the stock at the lower price to return to the borrower and pocket the difference.

The Enron collapse would not have come about were it not for the initial digging of short sellers. The world’s largest short seller, James Chanos, is acknowledged as the source for an early article about the energy giant in Fortune magazine that set the investigative ball rolling. And, in 2010, Chanos went on the record to announce what he thought the next big crash would be -- China.

On a macro-level, we’re still waiting on that one. But when you zoom in down to individual companies and their supply chains, short sellers are digging up plenty of evidence for opportunities to short stock.

The reason these problems are rife in China is because there is a lack of oversight -- with regulatory bodies anaemic at best. And the market is cut-throat competitive, with many factories operating on razor-thin margins. The Chinese market provides a target-rich environment for short sellers.

Short sellers started aiming their sights on the world’s second-largest economy some years ago, with the last wave peaking in 2011 after wiping more than US$21 billion off the market value of US-listed Chinese companies.

That wave had to peak because short sellers were beginning to receive death threats and their China-based researchers were either being jailed or deported. After a three-year lull, short sellers have returned to scrutinising Chinese companies, but this time they are doing so incognito.

Anonymous Analytics, a group of unnamed investment analysts that claims links to the Guy Fawkes-mask wearing hacker collective, most recently took aim at Chinese company Tianhe chemicals in 2014. Previous targets have included Joy Global, Qihoo 360, Huabao International and Chaoda Modern Agriculture.

The damage done to the companies’ share prices have varied significantly. Perhaps the biggest impact the anonymous group has had is with Chaoda, a fruit and vegetable producer. The company was suspended from Hong Kong trade in 2011 after an Anonymous Analytics report questioned its finances. It remains in suspension.

From the perspective of many short sellers, China is filled with companies with overstated earnings, flawed business models or which are guilty of outright fraud. With short sellers like those at Anonymous Analytics and 25-year old Zhou digging through the books, companies are best advised to keep their dealings in order.

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Your daily digest of the biggest business news in China, translated and summarized every day. China Spectator has not verified these stories.

CSRC to loosen restrictions on debt-backed M&A activity

In what's being presented as bid to ameliorate China's widespread overcapacity in the Chinese economy, China's securities regulator is considering has loosened current controls on debt financing of merger and acquisition activity.

The CSRC is considering adjusting/has adjusted existing rules that place restrictions on commercial bank when it comes to lending that backs M&A activity.

The regulator plans to lift the maximum permissible term of such loans from five to seven years.

The maximum debt weighting of M&A offers is also going to be hiked to 60 per cent from the existing 50 per cent level. This means that at least 40 per cent of the total transaction cost in any merger or acquisition cannot be debt funded. 

The proposed move will likely lead to an increase in M&A activity and authorities hope that it will also help to address overcapacity in some sectors of the economy.

(Caixin) 

MOF: UK has submitted application to join AIIB 

The UK officially lodged an application to join the Asian Infrastructure Investment Bank (AIIB) yesterday, according to a statement from China's Ministry of Finance.

The ministry said that the application will be considered in keeping with due process and in consultation with the other founding members.

If all goes to plan, the UK will be recognised as a founding member of the bank by the end of March.

The ministry said that it welcomed the UK's decision to apply to join the bank.

Lou Jiwei, China's Finance Minister, recently said that 27 countries had expressed a willingness to become founding members of AIIB.

When the bank was officially founded in October 2014, 21 countries agreed to become founding members, including China, India and Singapore.

Since then, Indonesia, New Zealand and other countries have joined the bank, according to an article in The Paper, 

The cut off date for becoming a founding member of the AIIB is March 31, 2015.

(The Paper) 

(Ministry of Finance)

SAIC Motor, Alibaba to invest $162 million in internet-connected cars

Chinese e-commerce giant Alibaba and China’s biggest automaker SAIC Motor announced the launch of a 1bn yuan (A$162 million) fund to develop an Internet car on Thursday.

The future car will use Alibaba’s own Yun OS operating system, cloud computing and big data services to provide a better driving experience.

Services such as e-commerce, digital entertainment, maps and communications would be provided in the connected vernicle.

The “Internet Car” project will proudly "lead China's Internet car development", the companies said in a joint statement.

The pair aims to launch their first car in 2016, according to a spokeswoman.

(Caixin)

Personnel shake-up at anti-monopoly regulator

Xue Qiang, a former deputy section chief of the legal affairs section of the NDRC's Price Supervision and Inspection & Anti-Monopoly Bureau, has jumped ship and joined an American law firm.

Mr Xue, who in the past helped conduct research on many of the NDRC's major anti-monopoly cases, is now employed as a high-level consultant by Jones Day.

The news of the personnel shift follows the promotion of Xu Kunlin, the bureau's head, to the position of director of the NDRC's pricing agency late last year.

Zhang Handong is now head of the bureau, which is one of three agencies charged with monitoring compliance with China's anti-monopoly law.

(Beijing News)

The UK officially lodged an application to join the Asian Infrastructure Investment Bank (AIIB) yesterday, according to a statement from China's Ministry of Finance.

The ministry said that the application will be considered in keeping with due process and in consultation with the other founding members.

If all goes to plan, the UK will be recognised as a founding member of the bank by the end of March.

The ministry said that it welcomed the UK's decision to apply to join the bank.

Lou Jiwei, China's Finance Minister, recently said that 27 countries had expressed a willingness to become founding members of AIIB.

When the bank was officially founded in October 2014, 21 countries agreed to become founding members, including China, India and Singapore.

Since then, Indonesia, New Zealand and other countries have joined the bank, according to an article in The Paper, 

The cut off date for becoming a founding member of the AIIB is March 31, 2015.

A decision by Britain and New Zealand to join a China-led development bank has encouraged a rethink by Australia.

The $57 billion Asian Infrastructure Investment Bank is being promoted by China as a way of financing regional development.

Britain this week joined discussions with other founding members to set out the bank's governance and accountability policies.

Australia, the US, Japan and Korea have declined to support the bank, citing concerns about its governance.

Treasurer Joe Hockey told reporters in Sydney on Friday the government is reconsidering its position in the light of UK and NZ support.

"Quite obviously China has improved the governance structure it is proposing for the Asian Infrastructure Investment Bank," Mr Hockey said.

"So much so that New Zealand has now signed the MOU (memorandum of understanding), as has the UK.

"This is something that will obviously be taken into account by the government over the next few weeks as we continue our dialogue with those people behind the bank."