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    China plans to cut its growth target to around 7 per cent reports Reuters citing sources with knowledge of a recent high-level economic meeting in Beijing.

    According to the report, the new growth target, the lowest in 11 years, was endorsed by top party leaders and policymakers at a closed-door Central Economic Conference in December.

    "This year's economic growth target will be around 7 per cent, but the 7 per cent should be the bottom line,” said one of the sources, an ‘influential economist’ according to Reuters.

    China's economy expanded 7.4 per cent in 2014, its weakest pace in 24 years, and authorities are emphasizing a "new normal" as they retool the country's growth model to one they hope will be more sustainable.

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    Target lowest in 11 years, endorsed by top policymakers: report.

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    The slump in iron ore prices has helped China's largest steel firms post their best annual profits in almost three years reports China Business News.

    According to the report, medium and large sized steel mills achieved a combined profit of 30.4 billion yuan last year, according to figures released by the China Iron and Steel Association (CISA) yesterday.

    This was an 8.75 billion yuan increase on the profits posted in 2013, a more than 40 per cent improvement year on year.

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    China's largest steel firms post best annual profits in almost three years: report.

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    Petro China, one of China's three major oil companies, estimates that demand for oil will moderate to 2 to 3 per cent for 2015 reports Sohu.

    According to the news portal, China’s dependence on foreign oil will exceed 60 per cent of its total consumption this year.

    The company estimates the demand for foreign natural gas will increase 10.2 per cent in 2015, slower than the growth rate in 2014.

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    Petro China estimates demand for oil will moderate to 2 to 3 per cent for 2015: report.

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  • 02/01/15--19:18: China business news digest
  • Click here to subscribe to the China Spectator daily newsletter.

    Your daily digest of the biggest business news in China, translated and summarized every day.

    Chinese housing market recovers modestly

    House prices in 100 Chinese cities have posted a 0.21 per cent increase after eight months of continuous decline, according to a survey by China Index Academy.

    The data shows 44 cities posted price increases while 56 cities experienced declines during the first month of this year. The average price per square metre was 18,999 yuan in ten major cities including Beijing and Shanghai, up 0.59 per cent from the previous month.

    However, the average price per square metre fell 3.09 per cent in the 100 cities surveyed by the China Index Academy.

    (Sina Finance)        

    A quarter of listed property developers are in the red

    11 out of 47 property developers listed in Shanghai and Shenzhen have posted losses for the first time, according to data compiled by Choice, a financial information company.

    According to the data, one property developer posted a loss for the second time in a row and ten developers’ profits dropped during 2014.

    There are 140 property developers listed on Shanghai and Shenzhen stock exchanges.

    (Caijing)

    A quarter of Chinese provinces join $10,000 per capita club

    Eight Chinese provinces and municipalities have a per capita income of $10,000 or over, crossing a major threshold in terms of wage increases.

    Guangdong, one of the most prosperous provinces on China’s eastern coast, grew 7.8 per cent and its per capita GDP surpassed US$10,000 for the first time in history. Fujian province’s per capita GDP also crossed that threshold for the first time.

    Shanghai became the first Chinese city to have per capita income of US$10,000 in 2008. However, a senior government economist has warned about the wide disparity in national income despite the fact that some provinces are in the process of obtaining developed status.  

    (Sina Finance)

    Electricity use forecast to grow by 6% in 2015

    Demand for electricity is set to rebound in 2015, with total electricity use expected to expand by about 6 per cent on last year to 5.89 trillion kilowatt hours (kWh), according to data released by State Grid.

    Following more than 10 years of rapid expansion, the annual pace at which electricity use expanded slowed considerably in 2014, dropping to 3.8 per cent.

    In other news, sources say that two of China's largest coal producers have reached an agreement with power producers in annual coal price negotiations.

    (China National Radio)

    Online comments reveal support for SOE reform

    Internet users are devoting their attention to SOE reform and technological innovation, according to the China Youth Daily's 'online public opinion monitoring office' analysis of over 1.8 million online comments over the first 28 days of January 2015.

    Over 90 per cent of the comments were posted to Weibo.

    Close to a third of internet users expressed support for SOE reform, according to a report in yesterday's China Youth Daily.

    The report also said that over 40 per cent of internet users said that separating out the role over government and business was key to reforming state-owned companies.

    The report also said that while close to a third of internet users that SOEs do have a certain ability to innovate, they think that the strong innovative capacity of some state-backed firms is a result of government support. 

    (China Youth Daily)

    Military and Central Government organs to get special treatment on new property register

    The military and central government organs will not be required to list their assets in a planned nationwide property-registration system that is set to begin operation in March, according to a report in today's China Business Journal.

    The report says that assets of the military and central government will receive "special treatment" and must be registered in accordance with special rules.

    China issued draft rules that would regulate the establishment of a nationwide property-registration system in August last year. The rules are on track to come into effect on March 1, 2015.

    The government hopes that the property-registration system will help them track homeownership, fight corruption and eventually make it easier to rollout a property tax nationwide.

    The establishment of some kind of property registry has long been a stated goal of the central government but the plan has been delayed many times in the face of obstruction from local governments and other vested interests.

    (China Business Journal)

    Southern Weekend apologises for 'incorrect' reporting of Anbang Insurance ownership

    China’s Southern Weekend newspaper has apologised for a report on January 29 which speculated that one of China’s most prominent princelings, Chen Xiaolu, was the de facto owner of Anbang Insurance.

    In a one sentence explanation, the paper apologises to the company and its owners its incorrect reporting.

    The liberal newspaper had reported that Chen Xiaolu, son of Marshal Chen Yi, one of the ten founding marshals of the People’s Republic, owned more than 51 per cent of Anbang Insurance through three private companies he has shares in.

    Mr Chen denied the reports last week to Caixin saying he owned no shares of Anbang saying he only served as a consultant to the company. Mr Chen said he had been a business partner of Anbang Chairman Wu Xiaohui for 15 years, but did not intervene in company operations.

    The reports and subsequent denial and apology follow news that the previously obscure insurance company had increased its stake in Minsheng Bank late last year. The president of Minsheng Bank resigned last week amid media reports he is under investigation by anti-corruption authorities.

    Anbang became Minsheng's largest shareholder in December through a series of share purchases on the secondary market. 

    The insurance company rose to prominence internationally last year when it bought the iconic Waldorf Astoria for US$1.95bn in what was the largest-ever U.S. real estate purchase by a Chinese buyer. 

    (Southern Weekend)

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    Internet users throw their support behind SOE reform, and the military and government avoid property scrutiny.

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    China’s Southern Weekend newspaper has apologised for a report on January 29 which speculated that one of China’s most prominent princelings, Chen Xiaolu, was the de facto owner of Anbang Insurance.

    In a one sentence explanation, the paper apologises to the company and its owners its incorrect reporting.

    The liberal newspaper had reported that Chen Xiaolu, son of Marshal Chen Yi, one of the ten founding marshals of the People’s Republic, owned more than 51 per cent of Anbang Insurance through three private companies he has shares in.

    Mr Chen denied the reports last week to Caixin saying he owned no shares of Anbang saying he only served as a consultant to the company. Mr Chen said he had been a business partner of Anbang Chairman Wu Xiaohui for 15 years, but did not intervene in company operations.

    The reports and subsequent denial and apology follow news that the previously obscure insurance company had increased its stake in Minsheng Bank late last year. The president of Minsheng Bank resigned last week amid media reports he is under investigation by anti-corruption authorities.

    Anbang became Minsheng's largest shareholder in December through a series of share purchases on the secondary market. 

    The insurance company rose to prominence internationally last year when it bought the iconic Waldorf Astoria for US$1.95bn in what was the largest-ever U.S. real estate purchase by a Chinese buyer. 

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    Liberal newspaper says report that prominent princeling is the de facto owner of Anbang Insurance was wrong.

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    House prices in 100 Chinese cities have posted a 0.21 per cent increase after eight months of continuous decline, according to a survey by the China Index Academy.

    The data shows 44 cities posted price increases while 56 cities experienced declines during the first month of this year. The average price per square metre was 18,999 yuan in ten major cities including Beijing and Shanghai, up 0.59 per cent from the previous month.

    However, the average price per square metre fell 3.09 per cent in the 100 cities surveyed by the China Index Academy.

            

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    House prices in 100 Chinese cities post a 0.21 per cent increase after eight months of continuous decline: survey.

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    11 out of 47 property developers listed in Shanghai and Shenzhen have posted losses for the first time, according to data compiled by Choice, a financial information company.

    According to the data, one property developer posted a loss for the second time in a row and ten developers’ profits dropped during 2014.

    There are 140 property developers listed on Shanghai and Shenzhen stock exchanges.

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    11 out of 47 property developers listed in Shanghai and Shenzhen post losses for the first time.

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    Eight Chinese provinces and municipalities have a per capita income of $10,000 or over, crossing a major threshold in terms of wage increases reports Sina Finance.

    Guangdong, one of the most prosperous provinces on China’s eastern coast, grew 7.8 per cent and its per capita GDP surpassed US$10,000 for the first time in history. Fujian province’s per capita GDP also crossed that threshold for the first time.

    Shanghai became the first Chinese city to have per capita income of US$10,000 in 2008. However, a senior government economist has warned about the wide disparity in national income despite the fact that some provinces are in the process of obtaining developed status.

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    Eight Chinese provinces and municipalities have a per capita income of $10,000 or over.

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    Demand for electricity is set to rebound in 2015, with total electricity use expected to expand by about 6 per cent on last year to 5.89 trillion kilowatt hours (kWh), according to data released by State Grid.

    Following more than 10 years of rapid expansion, the annual pace at which electricity use expanded slowed considerably in 2014, dropping to 3.8 per cent.

    In other news, sources say that two of China's largest coal producers have reached an agreement with power producers in annual coal price negotiations.

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    Total electricity use expected to expand by about 6 per cent on last year.

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    Asia Pathways

    Latin America is firmly on the economic radar of Asia in the post-global financial crisis world economy. Both Asia and Latin America have grown faster than the world economy. As Figure 1 shows, during 2009–2013, annual average growth was 4.6 per cent in Asia, 2.4 per cent in Latin America, and 1.9 per cent for the world economy. Trade between the two regions has grown significantly, reaching a historic high of over half a billion dollars in 2014 (see Figure 2). This figure is projected to increase to $750 billion by 2020. Increased trade has prompted a flurry of diplomatic activity. In July 2014 the President of the People’s Republic of China (PRC), Xi Jinping, visited Argentina, Brazil, Cuba, and Venezuela. Shortly afterward, Japanese Prime Minister Shinzo Abe visited Brazil, Chile, Columbia, and Mexico. Pledges of trade, foreign direct investment (FDI) and foreign aid accompanied these high-level visits.

    Figure 1: GDP Growth (annual %)

    Source: World Development Indicators, World Bank (Accessed January 2014)

    Figure 2: Total Trade between Asia and Latin America

    Source: Source: UN Comtrade (Accessed January 2014)

    This represents a dramatic turnaround. Before the 1990s, there was little trade between the two regions. Transport connections between these geographically remote regions were poor and trade barriers were high, resulting in few cultural, diplomatic, and business ties. It takes over a day to fly between Asia and Latin America. Latin Americans largely speak Spanish or Portuguese, which Asians do not. Latin America, whose goods were destined for the giant North American market, used to view Asia as a poor region riddled with economic crises and high risks for business.

    Why has trade grown?

    Several factors underpin recent trade growth between Asia and Latin America. First, falling trade barriers have fostered specialization according to comparative advantage with land abundant Latin America exporting commodities in return for manufactured goods imports from skilled labor abundant Asia. Second, strong demand for Latin American commodities and food from the PRC and other Asian economies has provided an alternative to declining markets in industrial economies, particularly since the global financial crisis. Third, Latin America has a significant and expanding regional market for Asian industrial goods and FDI. Fourth, advances in information and communication technology as well as better logistics have supported inter-regional trade.

    Fifth, the spread of free trade agreements (FTAs) across the Pacific has supported market access, rules-based trade, and business confidence. The number of FTAs has grown from 2 in 2004 (Republic of Korea–Chile and Taipei,China–Peru), to 9 in 2007, and further to 22 in 2013. At least 25 FTAs are expected by 2020. Tapei,China is Asia’s most proactive trade pact negotiator with Latin America, having concluded five FTAs. Singapore has signed four such deals with Latin American economies, and the PRC, Japan, and the Republic of Korea each have three FTAs. Meanwhile, Chile has eight FTAs with Asian economies and Peru has five.

    But much needs to be done before Asia and Latin America can reach their full trade potential. The two regions have to increase the number of economies participating in mega-regional FTAs like the Trans-Pacific Partnership, still under negotiation. Their economic ties need to cover more sectors, such as services. Cross-regional policy cooperation needs to be enhanced and structural reforms need to be accelerated.

    The Asia-Pacific Economic Cooperation (APEC) forum is a useful institution for creating business confidence, but few Latin American economies are in APEC. A newer institution, the Forum of East Asia Latin America Cooperation (FEALAC), agreed in August 2014 to set up a business body to promote cooperation in trade and investment. Brazil, Latin American’s largest economy, especially needs to strengthen ties with Asia, but currently has only one FTA with Asia and concerns have been expressed about its protectionist tendencies. Another key player could be Argentina, if it can sort out its financial crisis and escape going into default.

    Meanwhile, Mexico, Peru, Chile, and Columbia have formed the Pacific Alliance and are attempting to become more market friendly. Chile in particular has undertaken many reforms and has several FTAs with Asia.

    Why has FDI lagged?

    Asian FDI can help transform Latin American economies. Asian firms can provide valuable capital and expertise to upgrade Latin American infrastructure. Technology transfer and marketing connections from Asian firms can foster Latin American firms joining global value chains and promote internationally competitive industrialization. Small and medium-sized enterprises (SMEs) in both regions can benefit as suppliers, subcontractors, and service providers to multinationals. However, in contrast to growing trade between Asia and Latin America, FDI has remained lackluster during the past decade. The annual average greenfield investment from Asia to Latin America between 2003 and 2013 was $14.1 billion, while that of Latin American to Asia was only $1.2 billion. Firms from Asia’s major economies—Japan, the PRC, and the Republic of Korea—account for the bulk of Asian investment into Latin America and such investment reaches a broad range of economic sectors in Latin America, including automotives, machinery, electronics, metals, chemicals, petroleum, and food and tobacco (see Table 1).


    Table 1: Key Asian Companies Investing in Latin America

    PRC = People’s Republic of China.
    Note: Figures cover only greenfield investments.
    Source: fDi Markets (accessed June 2014).

    Geographical remoteness, differences in culture and business practices, and domestic regulations in Latin America help explain the low levels of Asian FDI. Cumbersome domestic regulations in Latin America have created an image problem for the region and impeded Asian investment (see Table 2). It takes an average of 47 days to start a business in Latin America compared to 12 days in Asia. Getting an electricity connection in Latin America takes an average of 90 days compared to 54 days in Asia. Furthermore, it takes an average of 215 days to deal with construction permits in Latin America compared with 109 days in Asia.

    Some Pacific Alliance members fare better than other Latin American economies on these indicators of the business environment. These economies have implemented economic reforms to boost growth and have expressed an interest in attracting Asian investors. But even they are not as open as some outward-oriented, market-friendly Asian economies like Singapore, the Republic of Korea, and Malaysia.

    Asian FDI can follow trade with Latin America in the future. This will bring economic benefits to both regions and help diversify sources of world growth. To realize the large potential of business between Asia and Latin America, governments should make a concerted effort to open up markets, cut redundant regulations, conclude comprehensive FTAs, build trade-related infrastructure, and promote inter-regional cooperation initiatives (like APEC and FEALAC).

    Table 2: Domestic Regulations in Latin America and Asia

    Source: World Bank Doing Business Report (2014) (accessed January 2015).

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

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    Will Asian investment follow trade with Latin America?

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    Three months after the Abbott government was elected, the Chinese Foreign Minister Wang Yi was telling Julie Bishop that the relationship between Australia and China was damaged goods, even while cameras were still in their meeting room to record his stern lecture. Mutual trust was threatened, he warned.

    Australia’s most challenging relationship was off track.

    Fast forward to November last year and garlands were being hurled at Chinese President Xi Jinping as he navigated a triumphant visit and signed a free trade agreement. The bilateral relationship was upgraded to a “comprehensive strategic partnership”.

    The early stumbles — now consigned to history — began with Tony Abbott’s sudden declaration a month after his election that Japan was Australia’s “best friend” in Asia. We’d never used that language before, simply ticked off Japan as a friend. Then, a month later, the Prime Minister went further, saying we were a “strong ally” of Japan. Up until then there had been no question of an alliance.

    That we were tilting away from China seemed confirmed in November 2013 after the Chinese abruptly declared an air defence identification zone over the East China Sea.

    Foreign Minister Bishop “called in” the Chinese ambassador and made it public. This went further than like-minded countries Singapore, New Zealand and Canada, which limited their comments to calls for restraint all round.

    It was possible to attribute this to the influence of Tony Abbott’s personal adviser on security, Andrew Shearer; but whatever the reason, by the close of 2013 Australia may have been shifting from neutrality on the status of disputed islands in the East China Sea.

    That was the way an angry Chinese Foreign Minister seemed to be pitching it to his Australian counterpart.

    All forgotten now, after Abbott acclaimed Xi for his commitment to a rules-based international order and even to democracy. Plus the FTA. Plus the “comprehensive strategic partnership”.

    So what happened? A cold warrior might say it goes to prove you lose nothing by standing up to Marxist-Leninists; they treat you with respect, take you more seriously. However, a review of Australia-China relations in the 16 months of the Abbott government prepared by the Australia-China Relations Institute at the University of Technology, Sydney, suggests the hardline approach was allowed to run for only the first three months. It was then reined in. The government quickly became more attuned to the China relationship.

    This diplomatic remodulation was clear as soon as Abbott went to Japan in April 2014. There was no reiteration of Japan as “best friend” or “strong ally”. Those words were retired. Then in May 2014 China positioned a deep-water drilling rig in the Paracel Islands and tension flared with Vietnam. But this time the Chinese ambassador was not called in. Bishop didn’t comment. There was a media statement with the Department of Foreign Affairs and Trade letterhead, imbued with neutrality, urging parties to ease tension.

    A still bigger signal emerged, and on a neuralgic question.

    In June, then defence minister David Johnston was asked whether ANZUS commits us in a conflict between China and Japan. He replied, “I don’t believe it does.” This caused no political blow-up. This was a vivid contrast with the panic around Alexander Downer’s statement in 2004 about the Taiwan Straits.

    In October a statement by Bishop on the Hong Kong protests was carefully pitched. The minister recognised the right of protest but insisted it be peaceful, urging “that the people of Hong Kong can have a genuine say in their elections”. When the protests were running strong she carefully rescheduled travel arrangements that ensured she flew over Hong Kong, not into it. The Chinese breathed a sigh of relief at what they saw as respect for their core interests.

    Meanwhile, a fresh dynamic was forming itself on the Chinese side. President Xi was designing a foreign policy that emphasised more robust “win-win” engagement with the world.

    A flawless visit to Australia, capped with an FTA, was going to be a symbol of this new foreign policy thrust. That we were, yes, a US ally made it perhaps even more desirable. But Abbott and Bishop had paved the way. They had been careful to see that their early statements about Japan had been relegated and that responses on the South China Sea were neutral. They did not buy into Hong Kong. And Johnston had not been hauled over the coals for his realistic reading of ANZUS applicability on the Senkaku/Diaoyu Islands.

    All of which leaves both sides pondering what does a “comprehensive strategic partnership” mean? For Australia, quickly signing up to membership in the Asian Infrastructure Investment Bank would remind China and the neighbourhood that there is more to our international personality than the Australia-US alliance, inviolable though that is.

    One exchange on the sidelines last year said a lot. On June 28, Hillary Clinton, promoting her memoirs, suggested in an interview with Fairfax that Australians might be “putting all their eggs in one basket” by trading so heartily with China. Here was a rare warning shot, sent in our direction by the US. Canberra responded entirely unruffled. On July 2, Malcolm Turnbull riposted that we’d willingly sell Washington all the iron ore it wants.

    The orthodoxy has been that “we don’t have to choose” — that is, between the US and China. It was aptly reinforced.

    Bob Carr is a former foreign minister and a former premier of NSW. He is director of the Australia-China Relations Institute at the University of Technology, Sydney. 

    This article first appeared in the Australian Business Review.

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    Despite a harder start, this Federal Government soon softened in its approach to China.

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    Casino revenues in Macau, the world's top global gambling market, fell for an eighth straight month in January as Chinese high-rollers were deterred by the country's economic slowdown and corruption crackdown.

    Data posted on Monday on the Macau gambling regulator's website showed that gross gambling revenue last month declined 17.4 per cent from a year earlier to 23.7 billion patacas ($A3.87 billion).

    Annual revenue last year fell 2.6 per cent to $US44 billion. The decline came after a decade of supercharged growth that began when the former Portuguese colony ended a 40-year casino monopoly, opening the door to foreign operators.

    Wealthy mainland Chinese patrons have powered Macau's casino growth but they started staying away last year as the economy sputtered and Beijing's massive corruption crackdown forced many to rein in lavish spending.

    Macau, the only place in China where casinos are legal, now rakes in about seven times the revenue earned on the Las Vegas Strip.

    The revenue decline comes as Macau faces the tough task of pivoting to a new model of growth, as dictated by Beijing.

    The authorities want to wean the city off growth dominated by so-called VIPs: wealthy patrons wagering staggering amounts on baccarat in private rooms brought over by junket agencies.

    Instead, the focus is now on family-friendly resort developments to attract China's burgeoning middle class.

    Junket operators are middlemen who facilitate travel and help clients get around China's capital controls by lending them money to gamble.

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    Revenues fall for eighth straight month as economic slowdown, corruption crackdown take hold.

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    China's State Council, or cabinet, said that it would look for ways to boost funds for local governments through financial transfers from Beijing as local authorities struggle to fund public services amid a slowing economy and weaker revenue growth. 

    The central government is also trying to make greater use of general fund allocations to local governments in place of project-tied funding, the State Council said in a statement on the main government website. 

    Beijing currently provides 41.8 per cent of its funds to local authorities as funding linked to specific projects, but it wants to bring that figure below 40 per cent to give local authorities more flexibility in their spending. 

    The central government also wants to speed up allocations of funds by asking provincial governments to give money to towns and cities within 30 days after legislators approve the local level budget, according to the statement dated December 27 and published Monday. 

    The current fiscal system was established in 1994 as part of a major reform spearheaded by then-Vice Premier Zhu Rongji in an effort to reverse a draining of funds and power from the central government to the provinces. Mr Zhu helped push through a tax-sharing system that tilted the balance more toward Beijing. 

    Since then, local governments have increasingly relied on land sales to fund their operations. 

    A downturn in the property market, however, has meant that total revenue from land sales rose just 3.2 per cent in 2014 to 4.2606 trillion yuan, from a 44.6 per cent increase in 2013. 

    National fiscal revenue grew 8.6 per cent to 14.035 trillion yuan ($US2.2 trillion) in 2014, the Ministry of Finance said on Friday. That was the slowest increase since 1991, when revenue rose 7.23 per cent.

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    Beijing prepares for fiscal transfers as local authorities struggle to fund services.

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    Graph for Tony's got it wrong on foreign investment

    Click here to subscribe to the China Spectator daily newsletter.

    When times get tough, one easy political fix is to turn to nationalism. Our embattled Prime Minister Tony Abbott appealed to nationalism, or rather xenophobia, at his make-or-break National Press Club address yesterday.  When he talked about his plan for the future, he started with Islamic fundamentalism and foreign investment.

    Yes, you heard me right, radical Islamic fundamentalism and foreign investment. After he talked about bringing tough legislation against home-grown jihadists, he moved on to talking about foreign investment after barely a moment of pause.

    “I am a friend of foreign investment but it has to come on our terms and for our benefit,” he said, “the government will shortly put in place better scrutiny and reporting of foreign purchases of agricultural land and better enforcement of the rules against foreign purchases of existing homes so that young people are not priced out of the market.”

    Let’s start with the alleged failure of the Foreign Investment Review Board to enforce rules against foreigner buying existing homes. Firstly, the rule was only introduced in 2010 under the Rudd Government. The policy was brought in as a knee jerk reaction to media reports and based on little evidence.

    At the time of the policy U-turn, the Board was chronically under-staffed and under-resourced to deal with a far bigger and significant issue -- the massive Chinese investment into Australia’s mining sector. Back then, the Board was getting something like one big investment proposal a week from Chinese investors, according to the then executive director Patrick Colmer.

    How under-resourced was it? Let facts speak for themselves. The budget for the board and its secretariat, essentially a division of the Treasury Department for year 2012-13, was a bit over $4 million and it employed 34 staff. But they had to handle 13,222 applications for foreign investment that included many complex and big deals that involved billions of dollars.

    Nearly a third of the division’s staff had to work on free trade agreement-related investment policy issues, which left the real estate unit with fewer than a handful of people to deal with more than 10,000 applications a year. That works out to be about one person for every 1,000 cases.

    If you ever wonder why there is not much enforcement or prosecutions going on, that is reason number one. Another important reason, which no one seems to pay much attention to, is the fact that people at the Treasury are ill-suited to carry out the type of enforcement and detective work that the government wants them to do.

    The Treasury Department is a policy agency and nearly all of its analysts are trained economists and lawyers whose jobs are mostly concerned with policy-making -- not detective work. That should be the job of a regulator like the Australian Securities and Investment Commission, the ATO or the Australian Prudential Regulatory Authority.

    At present, the Board is nothing more than an advisory body comprised of part-time members whose work is supported by a policy division of the Treasury Department. The government is fighting a “grave threat” with ill-trained and under-equipped troops.

    So, if the government wants the board to do its job properly, it must give it adequate resources, namely forensic accountants and experienced enforcement lawyers, not policy wonks. Even then, it is up to the Director of Public Prosecutions to weigh the merits of bringing cases against foreign investors for buying old houses.

    The government should stop blaming the board and give it a bigger budget and the right people to do the job. Kelly O’Dwyer’s ideas for higher stamp duty and application fees are good starting points.

    Apart from the alleged failure of the Board, another big issue is the politics of foreign investment. Despite all the hype about foreigners pricing young people out of the housing market, we simply don’t have enough evidence to support or debunk the allegation one way or another.

    Good policy making starts with good data collection, and at present, only Queensland requires foreign purchasers to disclose their nationalities. Until all states and territorial governments amend their laws and regulations, we simply don’t know how big the problem is. It is simply irresponsible to make policy on the run.

    Housing affordability is a huge problem in this country, especially for young people.  There are a host of factors behind it, negative gearing, restrictive planning laws, and poor infrastructure to outer suburbs -- not to mention youth unemployment. It is easy to make foreign investors the scapegoat for the housing problem.

    Despite the Coalition’s rhetoric that this country is open for business, the government has adopted an ambivalent attitude towards foreign investment. Joe Hockey’s first major act as the Treasurer was to reject ADM’ s takeover bid for Grain Corp. Now, the Prime Minister is talking about foreign investment in the same breath as Islamic fundamentalism. That is a concern.

    It is time to remind us again the wise counsel of Colin Powell, a much-respected former US Secretary of State. “Capital is fickle; it will go nowhere where it is put in fear. Money will fly and go away from corruption and bad policies. It does not want to be around conflicts. It does not want to be around political unpredictability or instability. It goes where it is welcome and where investors can be confident of a return on the resources they have put at risk.” 

    Peter Cai is the Editor of China Spectator and a former Treasury Officer. Follow him on Twitter: @peteryuancai

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    Dong Wenbiao, the former chairman of Minsheng Bank has denied that he is currently being investigated by authorities in relation to allegations of corruption, according to a report in The Paper.

    Dong, who has made numerous public appearances over recent weeks, hosed down speculation that he had been caught up in the troubles engulfing the private bank.

    The bank's president, Mao Xiaofeng, resigned earlier this week, after media reports that he had been taken away to assist the country’s anti-corruption investigators.

    Dong Wenbiao resigned his position at the bank last August in order to take the reins of China Minsheng Investment Corp. one of China’s largest private investment funds.

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    Dong Wenbiao hoses down speculation he's been caught up in the troubles engulfing the private bank.

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    Despite a forecast of a fall, local government revenue from land leases in China reached a new high in 2014 reports National Business Daily.

    According to the paper, local governments collectively received over 4.25 trillion yuan from leasing land in 2014, a 3.2 per cent increase on 2013, according to fiscal revenue data released by the Ministry of Finance on Monday.

    The revenue from land leases exceeded initial estimates by 17 per cent.

    According to the draft budget announced last March, local governments were expected to collect 3.63 trillion yuan from land sales, which would have represented an 11.8 per cent fall on the amount raised in 2013.

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    Local governments received over 4.25 trillion yuan from leasing land in 2014, a 3.2 per cent increase on 2013.

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  • 02/02/15--18:49: China business news digest
  • Click here to subscribe to the China Spectator daily newsletter.

    Your daily digest of the biggest business news in China, translated and summarized every day.

    Former Minsheng Bank chairman denies he is under investigation

    Dong Wenbiao, the former chairman of Minsheng Bank has denied that he is currently being investigated by authorities in relation to allegations of corruption, according to a report in The Paper.

    Dong, who has made numerous public appearances over recent weeks, hosed down speculation that he had been caught up in the troubles engulfing the private bank.

    The bank's president, Mao Xiaofeng, resigned earlier this week, after media reports that he had been taken away to assist the country’s anti-corruption investigators.

    Dong Wenbiao resigned his position at the bank last August in order to take the reins of China Minsheng Investment Corp. one of China’s largest private investment funds.

    (The Paper)

    China local govt reap record revenue in 2014

    Despite a forecast of a fall, local government revenue from land leases in China reached a new high in 2014 reports National Business Daily.

    According to the paper, local governments collectively received over 4.25 trillion yuan from leasing land in 2014, a 3.2 per cent increase on 2013, according to fiscal revenue data released by the Ministry of Finance on Monday.

    The revenue from land leases exceeded initial estimates by 17 per cent.

    According to the draft budget announced last March, local governments were expected to collect 3.63 trillion yuan from land sales, which would have represented an 11.8 per cent fall on the amount raised in 2013.

    (National Business Daily)

    Details of new free-trade zones could be released soon

    China's central government could soon reveal details of the plan to approve new free-trade zone in Tianjin, Fujian and Guangdong, according to an unsourced front-page report in today's China Securities Journal.

    Chinese Premier Li Keqiang announced that the State Council had given approval for the establishment of the three new FTZs in December. 

    The paper says that details related to the three new trade zones along with more information about the expansion of the existing Shanghai FTZ could be announced soon.

    The report also states that the three trade zones will be formally established soon after the detailed plans are announced and that the new 2015 version of the 'negative list' related to foreign investment will apply in the new zones.

    Lanzhou and Guangxi have also lodged applications to establish free-trade zones with the related departments.

    (China Securities Journal)

    Guangzhou lowers its GDP growth target

    Guangzhou, one of China’s largest cities, has lowered its GDP growth target to a single digit for the first time in the last two decades after failing to meet its official growth target of 10 per cent last year.

    The city government’s growth goal for 2015 is 8 per cent. Apart from Shanghai and Tibet, 26 Chinese provinces have lowered their GDP growth forecasts. Shanxi, Gansu and Liaoning lowered theirs by as much as three percentage points.

    A researcher from the Guangdong Academy of Social Sciences says Guangzhou should follow Shanghai’s example of abolishing its GDP growth target once for all.

    (Caijing)

    China buys up half the world’s luxury goods

    Chinese buyers are responsible for 46 per cent of the global consumption of luxury goods, according to the Fortune Character Research Institute.

    Total Chinese luxury goods consumption in 2014 was US$106 billion, up 4 per cent from the year before. However, consumption in Chinese domestic market declined 11 per cent to US$25 billion.

    On the other hand, Chinese tourists spent a record US$81 billion outside of China. Between 2010 and 2014, the number of Chinese tourists going abroad more than doubled from 53 million to 117 million within four years.

    Chinese tourists are mostly buying luxury goods abroad due to price disparities. 

    (Beijing News)

    Minsheng Bank expected to appoint a new CEO in April

    Minsheng Bank, one of the largest private banks in China, is expected to appoint a new president in April following reports its chief executive was taken away by anti-corruption investigators.

    Minsheng’s shares fell as much as 10 per cent on the Hong Kong stock exchange and 6 per cent in Shanghai. One of Minsheng’s most prominent shareholders urged the government to resist the temptation to appoint an outsider who is unfamiliar with the bank to run it.

    (Beijing News)

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    BEIJING—President Xi Jinping’s two-year antigraft campaign is hitting China’s vast financial sector, according to officials with knowledge of the matter, after investigators began questioning a senior executive at a major bank over his political ties and a board member at a second lender regarding possible corruption.

    Mao Xiaofeng, until recently a rising star at China Minsheng Banking Corp. , resigned as president for “personal reasons,” Minsheng said on Saturday. Chinese anticorruption officials are questioning Mr. Mao over his ties to a former top Chinese Communist Party official, Ling Jihua, who is himself being investigated by graft inspectors, according to an official at one of China’s financial regulatory agencies.

    And late Monday night, Bank of Beijing Co. said that Lu Haijun, a board member, is being investigated over “possible serious violations” of party discipline—a euphemism for corruption among Chinese officials. A statement the bank posted on the Shanghai Stock Exchange said its operations aren’t affected by the probe.The bank is partly owned by the Beijing government.

    Mr. Mao, at Minsheng, couldn’t be reached for comment. It isn’t clear whether he will face accusations of wrongdoing. In China, authorities have broad powers to detain people.

    Minsheng, China’s largest non-government-controlled bank by assets, didn’t respond to requests for additional comment. Earlier, it too said its operations weren’t affected.

    Mr. Ling, a onetime top aide to former President Hu Jintao, was put under investigation by the party’s discipline commission in December for unspecified violations of party discipline, according to a statement from the antigraft agency at the time.

    Mr. Mao, a 42-year-old banker who has a master’s degree from Harvard University’s Kennedy School of Government, is the highest-ranking Chinese banking executive to have been touched by the antigraft campaign.

    The probe of Mr. Mao, which was reported over the weekend by Caixin, an influential Chinese magazine, represents a widening of President Xi’s assault on corruption since he took the helm of China’s Communist Party in late 2012. Dozens of officials in state-controlled industries ranging from oil to resources to railroads have been detained or charged over corruption allegations.

    Now, investigators’ focus is shifting toward the financial industry, which has fallen under official scrutiny in the past.

    The Communist Party’s Central Discipline Commission, headed by President Xi’s top enforcer, Wang Qishan, recently has formed a department to mainly focus on the financial sector, according to the Chinese officials familiar with the matter. “Finance is Wang Qishan’s old stomping ground,” said one of the officials, referring to Mr. Wang’s experiences cleaning up the country’s debt-laden lending sectors in the late 1990s. “He knows how the industry works.”

    Officials at the discipline commission didn’t respond to requests for comment.

    President Xi is also stepping up the party’s oversight over the watchdogs responsible for policing the country’s banking, securities and insurance sectors—all of which have grown in size and complexity in recent years. The Communist Party’s secretive Central Policy Research Office, led by President Xi’s top political adviser, Wang Huning, recently has started to give instructions to the country’s three top financial regulators, according a party official with direct knowledge of the matter.

    Those agencies—the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission—generally answer only to the State Council, China’s cabinet. Media officials at those agencies didn’t respond to requests for comment.

    The move is aimed at improving coordination among the three regulators as the industries they oversee become increasingly intertwined, the party official said. In recent years, as Beijing pushes for greater financial liberalization, many of the country’s banks have branched out into brokerage and insurance, while insurers have increasingly expanded their businesses into lending.

    Minsheng was founded in 1996 by Jing Shuping, a prominent Chinese lawyer and businessman, as the first bank in the country that wasn’t controlled by the government. In the following years, the bank has also built up a sizable brokerage business.

    In recent weeks, China’s Anbang Insurance Group Co. has increased its stake in Minsheng to more than 22 per cent from 5 per cent, becoming the company’s single largest shareholder. The sharp increase in its stake is leading to market speculation that the insurer would take control of Minsheng, as Mr. Mao’s resignation might lead to a shake-up of the bank’s management team. Minsheng’s Hong Kong-traded shares plunged as much as 10 per cent early Monday before rebounding to end the day down 3 per cent.

    In a statement issued Monday, Minsheng said Anbang’s investment is “purely financial” and reflects the insurer’s “positive outlook” for the bank. Anbang, which attracted attention recently for its $1.95 billion purchase of the Waldorf Astoria hotel in New York, is known within the country for its political connection: It counts Chen Xiaolu, son of a leading revolutionary figure, as a board member and adviser.

    Attempts to reach Mr. Chen and media officials at Anbang weren’t successful. Mr. Chen told local media last week that he has no stake in Anbang and doesn’t receive any compensation from the company.

    With a market value bigger than Deutsche Bank AG’s, Minsheng has been one of the fastest-growing banks in China in recent years. The bank’s latest financial statements show it generated $7.3 billion in profit for the 12 months through Sept. 30, while bad loans accounted for 1 per cent of its total lending. But some analysts are concerned that the bank’s loans to small businesses are prone to default amid a slowing Chinese economy.

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    China Minsheng Bank president questioned over ties; Bank of Beijing board member is investigated.

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    BEIJING—Yu County, a sprawling mountainous area in China’s northern industrial province of Hebei, is known for its ancient temples and coal mines. These days, the temples remain, but the mines are vanishing.

    “We used to have around 300 coal mines in the area. Now it’s down to 70-plus,” said a manager of a local pit who identified himself only as Mr. Cheng. Shrinking profit margins and a failure to meet safety standards have led many to close, Mr. Cheng said. His own midsize company, Kanghe Coal Mining Co., was swallowed by a larger competitor, state-owned Kailuan Group Co., last year.

    What is happening in Yu County is an illustration of the bleak times for the global coal industry. Tougher environmental standards coupled with shrinking demand have led to the closing of mines across China and sent coal prices to their lowest in six years. China’s coal output likely fell 2.5% in 2014, the first annual decline in 14 years, the China Coal Industry Association said last week. And while full-year data aren’t yet available, official statistics show China consumed 1.1% less coal in the first three quarters of 2014 than a year earlier.

    While coal is expected to remain a major part of the global energy supply, the Chinese figures are telling for a commodity that has been losing favour as a fuel in much of the world. China accounts for half of global coal consumption and a third of seaborne trade, using the commodity to produce electricity and steel, two building blocks of the country’s rapid urbanization.

    Now, slowing electricity demand and rising alternative sources of power are cutting into coal’s dominance in China.

    “We see the recent coal slowdown as the new norm. If this isn’t yet the peak coal moment for China, it is not far from it,” said Li Shuo, an energy analyst for environmental watchdog Greenpeace.

    The pain is widespread. Order books are thinning for major coal exporters from Indonesia to Australia. In the U.S., the world’s second-largest coal producer, a clampdown on the fuel because of carbon emissions is also hurting the industry.

    Data from the U.S. Energy Information Administration shows that U.S. consumption of thermal coal, the variety used for electricity generation, fell by 0.2% in 2014. In Japan, the latest data indicate flat to slightly lower demand for thermal coal last year.

    The drop-off in buying has already rattled the global markets. China’s imports of thermal coal fell by 15% last year. Imports of coking coal, used for steelmaking, were down 17%.

    That has been felt most acutely in countries such as Australia, where Glencore PLC, the world’s largest thermal-coal exporter, shut its mines for three weeks over Christmas in a bid to cut a global glut of the fuel.

    Such measures are unlikely to counter the longer-term headwinds in coal. Beijing is mandating that the mineral’s share of China’s energy consumption fall to at most 65% from 70% by 2017, and then to 60% by 2020.

    To achieve this, the government has begun forcing smaller mines to close or be absorbed into state-owned companies, as Mr. Cheng’s Kanghe Coal Mining was. Last year, nearly 1,000 small collieries were shut, well in excess of the government’s target of 800, said Song Yuanming, deputy head of the State Administration of Coal Mine Safety.

    “Starting last year, the situation of coal supply exceeding domestic demand has become severe and it’s caused large losses among producers,” Mr. Song told reporters at a recent conference. To head off deeper losses, he said, “we must control domestic output and control imports.”

    The closures are part of a raft of policies to slim the industry by curtailing excess capacity, he said.

    More than 70% of China’s coal-mining companies are operating at a loss, with more than half cutting or delaying employee wages, the China Coal Industry Association said last year. It isn’t just small miners in Yu County.

    Blaming weak markets, the country’s largest producer, China Shenhua Energy Co. , in October posted an 18.5% fall in profit for the third quarter, its biggest decline in six years. It hasn’t disclosed full-year earnings yet. Last week, the country’s second-largest producer, China Coal Energy Co. , said it expects 2014 net profit to drop by as much as 85% compared with 2013.

    The government has also banned certain types of highly polluting coal starting this year, a move aimed mainly at restricting low-grade exports from Indonesia and Australia, analysts say.

    Chinese thermal-coal prices are at six-year lows, down 16% from the start of last year to 511 yuan ($82) a ton.

    For the moment, there are few markets to take up the slack. Japanese and Korean imports are static. Demand in Europe has fallen. India is importing more, but not enough to offset weaker demand elsewhere.

    But while a few producers have pared back output, Australia is still tipping rising volumes of thermal coal into the seaborne market. Many miners are forced to keep shipping fuel due to fixed infrastructure costs. When the coal industry was booming, many producers agreed to long-term deals—so-called take-or-pay contracts with rail and port operators—to lock in space at export terminals. Those agreements mean they would need to pay for access even if they were to cut production.

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    Output likely fell 2.5% in 2014, in first decline in 14 years.

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    HONG KONG— Alibaba Group Holding Ltd. Executive Chairman Jack Ma said Monday the company’s financial affiliate should go public but he hasn’t decided on a timetable or a listing location.

    His comments came after Bloomberg reported last week, citing unnamed sources, that Zhejiang Ant Small & Micro Financial Services Group which contains Alibaba’s Alipay payment processing and financial services arm is planning for an initial public offering that could take place next year.

    “I think Ant Financial should go public but it is still a baby,” Mr. Ma said on the sidelines of an event for young entrepreneurs. “I haven’t considered when and where to list the operation.”

    In his first public comments on accusations by a Chinese regulator that Alibaba’s e-commerce platforms sell fake products, Mr. Ma said: “we don’t want to be understood by the world that Taobao is selling fake products.”

    The Chinese e-commerce giant’s spat with the country’s regulator known as the State Administration for Industry and Commerce started with a white paper made public on Wednesday accusing Alibaba of failing to crack down on the sale of fake goods, bribery and other illegal activity on its sites.

    SAIC oversees a broad array of matters involving market order in China. That includes certain business licenses as well as trademark administration.

    The Hangzhou-based company has long grappled with allegations that its biggest e-commerce platform Taobao is home to a large number of counterfeit products.

    Separately, in a statement the Chinese e-commerce giant also said it is spending 1 billion Hong Kong dollars (US$129 million) to create the Alibaba Hong Kong Young Enterpreneurs Foundation to help select Hong Kong startups build their businesses through Alibaba platforms.

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    Executive chairman says Ant Financial is still in its infancy.

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