To Reform or Not Reform?—Echoes of the Late Qing Dynasty

To Reform or Not Reform?—Echoes of the Late Qing Dynasty

A ChinaFile Conversation

ORVILLE SCHELL, JOHN DELURY, JEFFREY WASSERSTROM, PETER C. PERDUE, JOSEPH W. ESHERICK, ROBERT KAPP

Orville Schell:

It is true that China is no longer beset by threats of foreign incursion nor is it a laggard in the world of economic development and trade. But being there and being steeped in an atmosphere of seemingly endless political and economic tension where questions of how far the leadership is willing (able?) to go in making reforms does make one think back to the end of the Qing, China’s last dynasty, during its waning years at the end of the 19th century. While the analogy is not perfect, one is left to ponder whether Party General Secretary Xi Jinping might end up being the Empress Dowager Cixi of the Communist era, a victim of the same wager: Fail to reform rapidly enough and risk stasis. Reform too rapidly and risk instability and even upheaval. Read more of this post

The capital-freeze index: Which emerging markets are most vulnerable to a freeze in capital inflows?

The capital-freeze index: Which emerging markets are most vulnerable to a freeze in capital inflows?

Sep 7th 2013 |From the print edition

*Based on current-account balance, credit growth, short-term gross external debt and external debt payments as % of reserves, and financial openness

THE risk of an abrupt end to capital inflows is now a worry for much of the emerging world. Some places are more vulnerable than others. A large current-account gap implies lots of net borrowing from abroad, which could presage a credit crunch if funding dries up. A high level of short-term external debt relative to a government’s stock of reserves means an economy lacks the means to tide borrowers through temporary difficulties. Rapid credit growth often signals overstretched firms and overvalued asset prices. A more open financial system may boost growth in the long run, but it also makes it easy for capital to flood out fast. Read more of this post

Farming as rocket science: Why American agriculture is different from the European variety

Farming as rocket science: Why American agriculture is different from the European variety

Sep 7th 2013 |From the print edition

BEFORE growing up to become farmers, a startling number of America’s rural kids are taught how to build rockets. Every year rural skies fill with mini-missiles built by children. The largest fly hundreds of feet, carrying altimeters, parachutes and payloads of eggs. Baseball diamonds are popular launch sites, as are alfalfa fields: the latter tend to be large and, compared with other crops, alfalfa tolerates a fair bit of trampling. All this tinkering and swooshing explains a lot about American farms. Read more of this post

What happened to biofuels? Energy technology: Making large amounts of fuel from organic matter has proved to be more difficult and costly than expected

What happened to biofuels? Energy technology: Making large amounts of fuel from organic matter has proved to be more difficult and costly than expected

Sep 7th 2013 |From the print edition

SCIENTISTS have long known how to convert various kinds of organic material into liquid fuel. Trees, shrubs, grasses, seeds, fungi, seaweed, algae and animal fats have all been turned into biofuels to power cars, ships and even planes. As well as being available to countries without tar sands, shale fields or gushers, biofuels can help reduce greenhouse-gas emissions by providing an alternative to releasing fossil-fuel carbon into the atmosphere. Frustratingly, however, making biofuels in large quantities has always been more expensive and less convenient than simply drilling a little deeper for oil. Read more of this post

The hopes, fears and worries of Europe’s quest for renewable energy

The hopes, fears and worries of Europe’s quest for renewable energy

Sep 7th 2013 |From the print edition

SUNDAY June 16th this year was a Goldilocks sort of day across Germany, not too hot but not too cool, with bright sunshine and a reasonable offshore breeze. Just right for Germany’s solar panels and wind turbines to produce, at their peak, a record 60% of Germany’s electricity on a slow weekend. But France and Belgium also had lots of nuclear power that could not easily be cranked down. So for several hours, generating companies had to pay customers to take their surplus power. Read more of this post

This land is whose land? A new law may do little to break India’s land-acquisition logjam

This land is whose land? A new law may do little to break India’s land-acquisition logjam

Sep 7th 2013 |From the print edition

UNDER a bodhi tree, their brightly coloured saris draped over their heads, some 500 women brave the midday heat just outside the pretty and rather prosperous village of Dhinkia. Just a few hundred metres of rolling sand dunes from the sea, Dhinkia, in the eastern Indian state of Odisha (formerly Orissa) is a hub of protest. The women, one from every village family, are staging the village’s daily dharna, a sit-in. Sisir Mohapatra, a former sarpanch or village head, makes a rousing speech. He seems respected, though his police record would suggest he is a mafia don: he says he faces 35 criminal charges, and of his 60-strong extended family in Dhinkia, 40 are also wanted by the law. They claim that the charges are all trumped up. Their real crime is to oppose the biggest single foreign-investment project India has ever attracted. Read more of this post

China’s banks are hogging the country’s market earnings, and that spells trouble; A stronger service sector is crucial to “rebalancing” the economy away from investment-fueled growth, but not if it’s driven by bad lending.

China’s banks are hogging the country’s market earnings, and that spells trouble

By Gwynn Guilford @sinoceros September 5, 2013

Considering China’s massive debt problem, investors might be wary of the country’s banking sector. But relax: Chinese banks are doing just peachy. In fact, as David Cui, China strategist at BofA Merrill Lynch, flags in a note today, “banks alone accounted for 56% of total market earnings” of mainland-listed companies. Here’s a look at that:

​Cui doesn’t necessarily think this is a good thing. “This large and rising share is unhealthy,” he and the BofA Merrill Lynch China strategy team wrote in a related note. More evidence of China’s engorged banking sector came out a few days ago, when the China Enterprise Confederation, an advocacy group for Chinese enterprises, reported that, of China’s top 500 service-sector companies, the country’s 39 leading banks generated 68% of profits so far in 2013. The surge in banking profits helped China’s service sector eclipse that of the top 500 manufacturers for the first time in the history of CEC’s analysis. The profits of the 268 manufacturing companies among China’s top 500 companies fell nearly 18% in 2013, hitting 438 billion yuan ($71 billion) (link in Chinese) in H1 2013. That compares with the 39 top banks’ 1.04 trillion yuan in profits. A stronger service sector is crucial to “rebalancing” the economy away from investment-fueled growth, but not if it’s driven by bad lending. The CEC’s vice president, Li Jianming, considers the trend a bad omen. He compares China’s ballooning banking sector to that of the US; America’s financial industry accounts for something like 30% of operating profits. Read more of this post

China’s Yunnan Province ‘Busted’ For Fake Data; Exaggerated 2013 Output By Over 150%

Chinese Province ‘Busted’ For Fake Data; Exaggerated 2013 Output By Over 150%

Tyler Durden on 09/05/2013 09:39 -0400

Still believe that China’s PMI is above 50 and suggesting a global growth expansion? Still believe in Santa and the Tooth Fairy? Well, none other than China’s own National Bureau of Statistics has been forced to admit that at least one of its major provinces has dramatically overstated industrial output. As Sina reports, according to a NBS report, the government in China’s Yunnan province had coerced local companies to report inflated industrial output value, resulting in artificially high economic figures. With government leadership promotions driven by the performance of economic numbers in each province, it should hardly be surprising but the scale of the fraud is remarkable. In 2012, one county in Yunnan province reported CNY6.34 billion in output while audits showed only CNY 2.82 billion and in the first half of 2013, Yunnan published CNY 2.75 billion in output while audits showed a mere CNY1.06 billion! The province was also found to have faked investment data.

Chinese county’s fake economic data exposed

2013-09-05 11:54:36 GMT2013-09-05 19:54:36(Beijing Time)  Xinhua English

BEIJING, Sept. 5 (Xinhua) — China’s National Bureau of Statistics (NBS) on Thursday announced it had uncovered a serious case involving the faking of economic data by a county government in southwest China’s Yunnan Province. According to the NBS’s publicized report, the government of Luliang had coerced local companies to report inflated industrial output value, resulting in artificially high economic figures. Twenty-eight sampled local companies reported a total of 6.34 billion yuan (1.03 billion U.S. dollars) in industrial output value in 2012; however, the actual value was only 2.82 billion yuan, based on initial calculation, according to the report. Similarly, 25 sampled local companies reported 2.74 billion yuan of industrial output value in the first half of 2013, but the NBS initially verified the actual value to be only 1.06 billion yuan. Meanwhile, the county was also found to have faked investment data. Companies complained that if they did not fraudulently report higher data, their reports would be returned by local government departments. They also said that fake reports would ensure they would enjoy favorable policies such as securing bank loans. The NBS said that the misconduct has seriously affected the authenticity and independence of company data. The NBS did not specify the reasons behind the county’s faking of data but it is a well-known fact that local government leaders are assessed for their performances based on economic data. Nice-looking data sheets mean promotion opportunities. In February 2012, the NBS launched a unified data collection system through which companies can send their data directly to the government’s statistics center or authorized provincial branches, in an effort to ensure the authenticity of official economic data and dispel discrepancies in this field. The scheme covers a total of 700,000 major enterprises, which contribute about 80 percent of the country’s GDP. However, many other small and medium-sized companies as well as individual businesses are not included.

China’s Regulators Wary of Interbank Lending to transfer loans off their balance sheet

Updated September 5, 2013, 8:07 a.m. ET

China’s Regulators Wary of Interbank Lending

RICHARD SILK

China’s regulators are on the lookout for risks posed by the rapid growth of interbank lending, a vice governor of the central bank said Thursday. The interbank market all but seized up and interest rates rose to almost 30% in late June, after capital outflows exacerbated a seasonal spike in liquidity demand. The People’s Bank of China proved reluctant to supply cash to the market, surprising an industry that had gotten used to regular liquidity support. “The rapidly expanding interbank market has brought new challenges for implementing monetary policy and avoiding financial risks,” said Hu Xiaolian at a conference in Beijing. “For example, some banks have been using the interbank market to transfer loans off their balance sheet.” Read more of this post