ENGLISH EDITION OF THE WEEKLY CHINESE NEWSPAPER, IN-DEPTH AND INDEPENDENT
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Issue 541, 24-10-2011
Summary:1. All Unclear for Local Government Bonds
2. Tougher Times for China's Textile Industry
3. Pollution in the Bohai Sea
4. Murder on the Mekong

All Unclear for Pilot Local Government Bond Scheme

News, Cover

~While a company can’t issue bonds without providing clear and comprehensive accounts, China’s local governments can, despite their mysterious budgets and balance sheets. Last week, the State Council gave the green light to Shanghai, Zhejiang(浙江), Guangdong (广东) and Shenzhen for the pilot local bond issues. Meanwhile, the Ministry of the Finance is unable to answer investors’ questions about these governments’ expenditure and creditworthiness.

~The EO learned that “the pilot procedure for local government bond issue” limits the risks from different aspects, but it is totally dependent on the central government and doesn’t mention the claims that investors might have on the local governments. While the official in Guangdong said “local government finances aren’t not the main focus for investors, the credibility of the central and local governments is.” Standard Chartered Bank economist Wang Zhihao (王志浩) thinks that investors will seek greater transparency from local government issuing bonds.

~Local governments rely on the principle that “we (the central government) won’t let the local governments go bankrupt.” Wang says that the biggest challenge in local government bonds will be changing this situation whereby the central government is always the ultimate guarantor. The bankruptcy of local government is an efficient way to solve its debt crisis and can be a chance for the government to reconstruct. However the bankruptcy system will have to be different from that of the enterprises.

~Although the size of local government bond issues will be determined by the Ministry of Finance, the biggest attraction for those administrations taking part in the pilot scheme is the right to decide for themselves how to use the proceeds of the bond issue, and the Guangdong official said that his peers in mid- and west China are also seeking to issue their own bonds.

~ The central government has been trying to keep a firm grip of the economy since the 1990s, and it’s hard for the local governments to balance their books. “Local governments don’t just want the cash; they also want control over it. After all, they’re governments too,” says the official in Guangdong.

~However, it’s hard to monitor local government bond issuance. More laws and regulations are required, says a scholar from the National Development and Reform Commission.

 Original article: [Chinese]

 

Tougher Times for China's Clothing and Textile Industry

News, page 4

 ~Zhang Yu, who has owned a private clothing manufacturer in Guangzhou since 1994, is leaving the industry.

~ “I am really not optimistic about the industry. My friends in the industry have the same attitude; we tried to overcome the difficulties in 2008, but now most of us have no confidence in it,” Zhang said.

~It is ten years since China joined the WTO, and the textile and clothing industries are experiencing the biggest challenges.

~The textile and clothing industry was the first to attract private capital after China’s Reform and Opening Up (改革开放), and, by the year 2000, private companies accounted for 90% of its production.

 ~”At that time, the policy fully supported enterprises,” said Zhang, who thinks the best time was from 2005 to 2007, when his business grew from four production lines to 12.

~2005 was a milestone year for the industry. The Agreement on Textiles and Clothing, who imposed quotas of exports, came to an end. China’s industry continued growing, which worried the EU, and prompted calls for restrictions on imports of some Chinese goods.

~ “In the end, we had to renegotiate with the US and the EU, and set new quotas for some of the products,” said Sun Huaibin from the China National Textile and Apparel Council.

~This process showed Chinese that, although WTO entry meant huge potential growth in trade, there was no such thing as “complete freedom”.

~The industry also suffered during the 2008 crisis, but by 2009, Zhang and other factory owners in the Pearl and Yangtse deltas were hit by a labor shortage. Zhang moved further inland, where factories are less common, but his business struggled.

 Original article: [Chinese]

 

 

 

Pollution Ends Fishing in the Bohai Sea 

Nation, page 9

~“Half of the shrimps died this year. If the situation continues, we’ll have to give up sea-farming,” said Zhang Xinmin, a villager who lives near Tianjin. Zhang’s experiences are common upon those living along the Bohai Sea.

~Pollution in the sea where Zhang makes his living has got worse and worse every year, with previous surveys showing that 80% of the offshore areas are dangerous for marine life and human use. That figure reached 100% in spring.

~In 2009, a village near Yingkou city saw rapid industrial development, reclaiming land along the coast.

~The Bohai Sea is contained in China’s only large bay, covering 80,000 square kilometers areas with an average depth of less than 20 meters. It used to be the north’s main source of fish, but nowadays even officials from the State Ocean Administration acknowledge that the sea “has almost lost its function as fishing field.”

~With the development of the economic zone around the Bohai sea – where GDP has jumped from 5.5 trillion yuan to 9 trillion in the four years up to 2010 - the water quality is getting worse and worse. The area of pollution has grown from 10,000 square meters to 17,000 square meters.

~80% of pollution of its pollution comes from through rivers or pipes dumping inland waste into  the sea.

Original article: [Chinese]

 

Murder on the Mekong

Nation, page 11

~ The killing of 13 Chinese sailors aboard two ships on the Mekong river, has become a focus of media attention in recent weeks. Many questions about what happened to the sailors remain. A witness Min Bo (民波), who worked as a chef for four years on a Chinese vessel called the Minsheng (民盛号), was still panicked when she returned to the Chinese port. "Armed robbery targeted at Chinese ships happens from time to time on the river, and in recent years, the situation has been getting more and more serious" Min told the EO.

~ Zheng Guangyu (郑光宇), a major share holder in the Minsheng says "business this year is really good but nobody expected this violent robbery."

~ According to Zheng, most of the ships working the Mekong are Chinese cargo vessels. Some registered in Burma to avoid Chinese fees and supervision, but the owners and sailors are all Chinese. He says although four countries including China, Thailand, Burma and Laos signed a navigation agreement covering river-borne trade on the Mekong, China and Thailand benefited mostly due to the different economic situations of the four countries.

~ River transportation on the Mekong is basically monopolized by Chinese ships and with profits increasing year after year, it's suspected that other countries are beginning to get a little frustrated with China's dominance of the trade. This could be one of the reasons for the violent robbery.

~ Sun Zhongfu (孙忠富), the captain of Minsheng, told the EO that China cut the Thailand-China route after the attack and since the big Chinese ships stopped working the line, many small boats from Thailand have been able to ge more business.

~ He Jinsong (和劲松), a researcher of Southeast Asian studies in Yunnan, says there were signs that risks were building before the incident, but there is a lack of cooperation between the four countries. Mr He said that Chinese sailors had been the target of the violence and that this may only be the beginning. Mr He urged the Chinese government to take the investigation more seriously and to offer support to the sailors who have been prevented from working due to the closure of the route.

~ An expert from Yunnan University says that the incident is a great challenge for the relationship of China with the other three countries or even with ASEAN. He mentioned the Prime Minister Yingluck cancelled her planned visit to China after the accident.

 Original article: [Chinese]

 

 

Profile: Ed Chen - Former CEO of Wal-Mart China

~ Ed Chen (陈耀昌) announced his resignation from Wal-Mart China on Oct 17, after serving for five years as both president and CEO of the global retail giant's China office.

~ Chen was born in Hong Kong and received his education in the US. Before entering Wal-Mart, he was in charge of the Taiwan branch of Hong Kong's Huikang supermarket. Chen's experience in managing Chinese supermarkets and his familiarity with Chinese retail, were two of the reasons Wal-Mart decided to appointed him as President and CEO for their China region five years ago.

~ After Chen joined the company, he introduced many discount stores which were adapted to the habits of Chinese customers. Perhaps his most important contribution was to oversee the opening of so many new Wal-Mart outlets.

~ According to the published data, in 2009 Wal-Mart had more than 160 stores in China, the figure climbed to 353 by Oct 1 this year, which means Wal-Mart has more stores than any other foreign supermarket chain in China. However, Wal-Mart does not make as much money from a single store as its main competitor Carrefour does.

~ "Recently, Wal-Mart has mainly focused on opening stores in second and third-tier cities, opening one after another, only to have them operate at a loss, this was not an expansion, but was only the completion of a task," one former senior Wal-mart employee told the EO.

~ In 2009, in order to save costs, Chen laid off up to ten thousand of the company's employees.

~ Chen's focus on sales put huge pressure on sales staff. In order to achieve their sales targets, Wal-Mart was accused of repeatedly cheating on prices and selling products that has passed their use-by date.

~ A source close to Wal-Mart's high level management said, Wal-Mart China consistently missed their revenue targets, which led to the company's gloabl headquarters losing confidence in Chen.

~ Wal-Mart had high expectations for the China market, they thought that aside from the US, China was the only other country where their annual revenue could reach 100 billion dollars a year. However, although they've already been operating in China for 15 years, Wal-Mart China has only racked up losses.

~ In 2010, Wal-Mart China's revenue was 7.5 billion dollars, accounting for just 2 percent of the global revenue, far less than the target of 100 billion dollars.

~ "Chen actually is a very excellent professional manager, and he is very capable, He knows about China, knows about retail, but he only doesn't know about Wal-Mart," a source with rich experience in the industry told the EO.

Original article: [Chinese]

 

 

 

Problems and Reflection on China's Taxi Industry

Observer, page 45

~ China's taxi industry is notoriously unstable, with drivers frequently going on strike. The EO’s newly-recruited head of investigative reports, Wang Keqin (王克勤), examines the causes.

~Taxi drivers strike for the right to raise prices when petrol appreciates, for reductions in the charges that they’re required to pay and for tighter control of “illegal taxis”. However, Wang found that the root cause is monopolized management and unfair distribution of profits between taxi companies and their drivers. In big cities like Beijing and Shenzhen, drivers are required to pay companies a deposit that is almost as much as the price of a new car. The companies recover the investment within a year, and over a seven year period can earn profits in excess of a million yuan, whereas drivers “wake up every morning owing hundreds of yuan in debt".

~ Local governments limit the number and price of taxis, ensuring high profits and poor service.

~Instead, Wang suggests that administrations break up their monopoly markets for taxis. He argues that freeing up the market would remedy traffic problems, low profits and illegal taxis, and describes the implications of his alternative approach for employment, prices, taxation, and the relationship with government and buses.

Original article: [Chinese]

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