|
 |
|
GLIMPSE ON SHANGHAI: The Jinmao Tower seen from the sky deck of the Shanghai World Financial Center, the highest building of the city, which has received more than 6 million visitors since its opening three years ago (ZHANG YANHUI) |
Numbers of the Week
25.3%
China's industrial enterprises with annual sales revenue of more than 20 million yuan ($3.2 million) saw their profits increase 25.3 percent year on year in the first 10 months of 2011, said the National Bureau of Statistics.
780 million tons
Cargo throughput of tracked large ports totaled 780 million tons in October, up 12.6 percent year on year, according to data from the Ministry of Transportation.
TO THE POINT: In an attempt to boost liquidity, China's central bank decreases the reserve requirement ratio for the first time in three years. The November purchasing managers index tumbles below the boom-and-bust line of 50 percent, indicating downside growth risks. As they tighten delisting rules on the growth enterprise board, China's securities regulator tries to protect interests of investors. The Ministry of Commerce has released a development outline for the service trade sector. Chinese shipbuilders face a bumpy road ahead due to weakness in demand. Credit card fever is sweeping through the country, though debt risks still loom large.
Loosening Liquidity
The People's Bank of China, the central bank, reduced the reserve requirement ratio for the first time in three years to replenish liquidity.
The latest cut, effective December 5, drops the ratio by 0.5 percentage points to 21 percent for large commercial banks and 17.5 percent for small and medium-sized banks. The move is expected to release around 396 billion yuan ($62.38 billion) into the banking system.
Analysts believe it signals that policymakers are taking actions to switch the focus to maintaining growth since inflation is already tapering off.
"This move is within market expectations, and it will help ease the banks' credit strains," said Lian Ping, chief economist with the Bank of Communications. "It will also help stabilize economic growth by strengthening the banks' ability to lend."
Guo Tianyong, Director of the China Banking Research Center at the Central University of Finance and Economics, said the moves should not be seen as a drastic switch in the country's monetary policy.
The purchasing managers index (PMI), a barometer of manufacturing activities, stood at 49 percent in November, down 1.4 percentage points from October, said the China Federation of Logistics and Purchasing (CFLP).
This is the first time that the figure has dropped below the boom-and-bust line of 50 percent in 33 months. A reading below 50 percent indicates economic contraction.
"The index shows the Chinese economy will continue slowing down in the near future," said Zhang Liqun, a researcher with the Development Research Center of the State Council. "Enterprises will face daunting challenges of tepid market demand."
"But a hard landing is less likely given robust investments and solid consumption growth," he added.
Inflation is likely to decelerate faster than expected, leaving room for China to step up selective easing measures, which should filter through to keep China on track for a soft landing, said Qu Hongbin, chief China economist with the HSBC.
The new orders sub-index, an effective gauge of domestic demand, stood at 47.8 percent in November, diving from 50.5 percent last month. The input prices sub-index, a measure of how much factories pay for raw materials and other intermediary goods, dropped sharply to 44.4 percent, down 1.8 percentage points from October.
The Ministry of Commerce on November 28 released a five-year development plan for the country's service trade sector.
As part of the plan, the government pledged greater efforts to propel 30 service sectors, including tourism, air transportation, insurance, banking, securities and information services. Policymakers also vowed to hand out generous policy incentives, such as favorable taxes and financial assistance.
The goal is to help service trade grow at least 11 percent annually to reach $600 billion in 2015.
China's service trade totaled $362.4 billion in 2010, jumping 89 percent from $191.7 billion in 2006, and making the country the world's fourth largest service trader. But China still reported a $21.93-billion service trade deficit last year, shrinking 25.7 percent from 2009.
"While China boasts strong traditional service businesses like tourism and transport, it remains less competitive in capital-intensive and knowledge-based sectors like finance," said Li Fangting, an analyst with the Shenzhen-based research firm CIConsulting.
In 2010, services accounted for only 9.7 percent of China's overall trade volume, less than half of the global average level of 21 percent.
Zhang Jianping, a researcher at the Academy of Macroeconomic Research under the National Development and Reform Commission, said the support measures will inject fresh steam into the service businesses, and accelerate the economic rebalancing toward more sustainable growth.
The Shenzhen Stock Exchange on November 28 issued a set of new regulations, stipulating that a company will be delisted if it is publicly denounced by the stock exchange three years in row. China's bourses will publicly denounce companies that violated rules in corporate operation.
Moreover, firms will also be delisted if their shares trade below par value for 20 consecutive trading days. In China, most stocks register a par value of 1 yuan ($0.15).
Previously, Chinese companies were subject to 11 delisting requirements, including reporting losses for two straight years, negative assets and bankruptcy.
Meanwhile, stocks with daily transaction volume of less than 100 million shares for 120 consecutive trading days will be immediately delisted. Formerly, they were classed as "special treatment" stocks and would only be delisted if the situation occurred again.
Those new rules will be seeking public opinions for one month before they are formally enacted.
"The new policies will help improve the quality of listed companies and deal a heavy blow to those poor-performing firms," said Li Daxiao, Director of the Beijing-based Yingda Securities Research Institute.
China's shipbuilders are facing some chilly headwinds as demand turns lackluster and overcapacity worsens.
In October Chinese shipyards received new orders of 730,000 deadweight tons, the lowest of this year, said the China Association of the National Shipbuilding Industry. The figure brought the amount in the first 10 months to 55.21 million deadweight tons, nose-diving 45.5 percent from a year ago.
Since the latter half of 2009, the industry has been losing momentum because of uncertainties hanging over the world economy, said He Jianzhong, a spokesman of the Ministry of Transport (MOT).
In addition, rising fuel and labor costs are also eating into profit margins of the companies, he said, adding that the MOT is mulling measures to help shipbuilders better endure the downturn.
The MOT will work with other departments to phase in a tax rebate scheme in the ports of departure to reduce financial burdens on the shipyards, said He.
Zhang Changtao, a researcher with the China Shipbuilding Economy Research Center, said Chinese firms should upgrade their technology and develop more high-end products such as container vessels and drilling ships.
Credit cards are gaining popularity in China, adding fuel to the country's consumption boom.
By the end of September 2011, Chinese banks had issued 268 million credit cards, an increase of 4.9 percent from a quarter ago, according to data from the People's Bank of China, the central bank, in a recent report. Newly extended credit card debt loans totaled 2.45 trillion yuan ($385.83 billion).
However, the credit card fever was not without concerns as many cardholders are falling behind their monthly obligations. The credit card debt that was overdue for at least six months was 10.65 billion yuan ($1.68 billion) by the end of September.
Accelerating urbanization and a wealth boom are enabling Chinese consumers to buy more on credit. China's credit card market is expected to grow 31 percent annually during 2011-14 on the back of several factors, such as rapidly growing middle-class population, government support, and low penetration of credit cards, said the U.S. consulting firm RNCOS, in a report.
The market is currently dominated by state-owned banks such as the Industrial and Commercial Bank of China, but a greater involvement of foreign banks is likely as they make inroads into the emerging sector, said the report. | 
