The Good and the Bad of State Banks Going Public
Editorial
On Sept 25, China Construction Bank, became the latest state-owned bank listed in the A-share market. It follows in the footsteps of the Industrial and Commercial Bank, Bank of China, and the Bank of Communication, who have all moved to strengthen their coffers via public listings. While positive in many regards, we argue that this trend has the downside of exacerbating excess liquidity in the market. Also, while this enables banks to raise substantial funds for future development, it also increased the capacity of banks in providing credit as a means to generate profits for their shareholders. An expanding credit market could set off a chain reaction of re-investment into the stock market, thus pushing up inflation.
Chinese Formula in Surviving Inflation
Cover story
This week's feature series examines how Chinese are preparing stave off the effects of inflation on their savings, with special emphasis on how Chinese of different socio-economic backgrounds invest and acquire assets to prepare for a rainy day.
Financial Policy to Cool Overheated Property Market
News, page 3
The Government has tightened financial controls to curb speculative and opportunistic investments in the property market, settin a higher bar for down-payments purchases of second properties and a higher capital-loan ratio for developers seeking credit from banks to fund projects. Policy announced on Sept 27 aims both to restrain developers from withholding land and property to manipulate the market and reduce risk factors for the creditors. It raises the bar on down-payment for a second home to 40 percent of the property value; similarly, units for commercial use require 50 percent. Meanwhile, developers must have a capital equivalent to 35 percent of the cost of a project to qualify for loans.
Cheaper Subway Fares in Beijing
News, page 5
In an effort to draw more commuters underground to ease traffic congestion above, the Beijing subway fare has been reduced to 2 yuan per ride with unlimited transfers. The Beijing Municipal Government will subsidize 1 billion yuan a year to fund the reduction, which makes the fare the lowest nationwide. Previously, the subway fare was dependent on distance and the number of transfers made. Since the Beijing subway went online in 1971, the city has adjusted fares eight times-- but this is the first time it has lowered them.
Declining Income vs GDP Growth
Comments, page 8
Despite China's rapid economic growth during the past decades, the percentage of individual income contribution to GDP has dropped. In 1989, incomes made up 16 percent of GDP; in 2003 that figure reached 12 percent. EO commentator Tung Dahuan argues that this proves minimal growth in incomes despite the fact that on average this group contributes ＄12,642 (95,000 yuan) per capita of wealth to the country every year. The average monthly salary is 1,750 yuan.
Influx of Mainland Investors in HK Share Market
Money & Investment, page 17
There has been an influx of mainland investors targeting Chinese state-owned enterprises listed as H-share in Hong Kong. Mainland investors were especially interested in SOE's that had returned to the the A-share market, including China Constructions Bank, Petro China and China Mobile.
Investigating the Suspended Broadband Deals in Philippines
Corporation, page 25
The EO investigates the reasons behind what has been called an overpriced deal between Zongxin Telecommunication Equipment (ZTE) and the Philippine government involving broadband equipment. Philippines President Gloria Macapagal Arroyo had suspended the ＄329 million deal amidst allegations of bribery made against her husband, who is accused of influencing the Government to award the contract to ZTE despite its quoting a higher price than other bidders. Our article shows that the issue is highly politicized, and that the price may have been higher because the Phillipine government was given a soft, low-interest loan and full ownership over the facilities, whereas other bids did not allow for the government to assume ownership.
China Needs Land Reform
Observer, page 41
The Chinese Government should undertake land reform and allow farmers to trade their land in the market directly. In an interview with Observer, US-based Wen Guanzhong, an economist researching land reform policy, says the rule to place all farm land under property of the collective has led to a monopoly by the Government in acquiring land cheaply, putting farmers at a disadvantage. Recently, some farmers have bypassed the authorities and collectively signed contracts with developers to construct houses for sales on their farm land. Wen says if the Government takes action, as prescribed by the law, to demolish the houses or penalize those involved, the farmers and lower-income groups would be hurt first and hardest.
Female Writers of the 1940s
Lifestyle, page 51
We review "Collections of Little Misses", a book highlighting several unsung Chinese female writers of the 1940's. The book contains the works of the eight writers, all of whom were contemporaries of Zhang Ailing, the iconic female writer of modern Chinese literature. Their lives were no less dramatic than their own literary creations; some were oppressed during the Cultural Revolution and committed suicide, some abandoned writing under political pressure, and some vanished without a trace. Of the eight-- Tang Xuehua, Si Jimei, Yu Zhaoming, Xing Heli, Zheng Jiahuan, Yang Yifu, Lian Yuanxiu and Cheng Yuzhen-- only two survive, one now residing in New York, the other in Shanghai.
