China’s Fiscal Revenue Up 4.8% in May
China’s fiscal revenue has registered its first positive year-on-year growth for the first time this year.
The national fiscal revenues in May grew by 4.8% over last year’s figure, or over 30 billion yuan, to nearly 657 billion yuan, according to China’s Ministry of Finance (MOF).
Fiscal revenues at the central and local levels rose by 5.7% and 3.3%, to a total of 406.3 billion yuan and 250.6 billion yuan respectively.
The growth contrasts with a 13.6% decline in fiscal revenue in April.
However, the fiscal situation remains tight. The first five months of 2009, saw a 195.5 billion yuan dip, a decline of 6.7% on last years numbers, in the national fiscal revenue.
According to the MOF, fiscal revenues in the first five months of this year reached over 2.7 trillion yuan, 40.9% of the estimated figure for total annual fiscal revenue as set out in the 2009 budget.
The ministry attributed the decline over the first five months of the year to three mains factors: the slide in business profits as economic growth slowed, tax cut schemes launched earlier in the year to spur the country’s economy and the effect of the downward trend in both the consumer price index (CPI) and the producer price index (PPI).
While fiscal revenue has begun to rally, the country’s fiscal expenditure continues to soar, registering a year-on-year increase of 14.5% to 460.8 billion yuan in May, according to the MOF.
Total expenditure in the five months was 27.8% higher than the same period last year, reaching a total of 2.24 trillion yuan.
China still registered a fiscal surplus of 461.1 billion yuan in May, but the ministry indicated that the outlook for the rest of the year was grim, with an annual budget deficit of 950 billion yuan projected for this year.
Click here to read the original statement (in Chinese) from China’s Ministry of Finance.
Anticipating china’s Growth Enterprise
Original article: [Chinese]
In the past week，we’ve seen the release of a growing number of policies related to the establishment of China’s new Nasdaq-style Growth Enterprise Board (GEB).
From the announcement of new regulations covering IPOs on June 5, to the June 8 call for input from investors, plus all the other measures that have been announced in the preceding weeks, we can see the structure of the new board is begininig to take shape.
The institutional design of the GEB is more detailed than those of previous markets, and, in terms of the qualifications for entry for both enterprises and investors, it is more specifically targeted.
The new board will have a positive effect on the development of small and medium sized enterprises, the transfer of industrial policy, advancing regional economies, optimizing structures and, most importantly, guiding the rational flow and distribution of social capital.
Everyone is united in their hope for a healthy, commercial and properly functioning board.
But of course, although our aims are clear, there is still a lot of work that needs to be done. The quality of the companies that list, and the regulation of the board, are two important questions that need to be addressed.
According to the draft rules of the GEB, the standard for a company to list on the board is that it has:
“Two consecutive years of profit, with net profit no less than 10 million yuan, and continuous growth; or one year of profit, and net profit of no less than 5 million yuan and operating revenue of no less than 50 million yuan over the past year with operating revenue growing at no less than 30% on average over the past two years;”
“The total capitalization of shares listed must not be less than 300 million yuan, and the issuer must also only deal in this one kind of business operation.”
When compared to the requirements for listing on the stock market, these standards might seem low, but when looked at in relation to other Growth Enterprise Markets, the criterion are quite high.
Similarly, in regard to raising capital on the GEB, the qualifications required of underwriters are also quite strict.
These measures constitute a new approach, and to some extent, guarantee the quality of the companies that will list on the board.
But the market is still apprehensive, and with good reason too, about how these policies will be implemented.
In reality, the quality of companies listing on the main boards is also a big problem. In particular, a lot of improvement still needs to be made in the areas of public disclosure of information and the regulation of insider trading.
In addition to this, the high risk associated with investing in GEBs provides regulators with many additional challenges.
In other words, small and risky enterprises need tighter supervision and more market-oriented regulation. Therefore, regulatory bodies need to pay close attention and consider innovative policy to monitor these kinds of businesses.
However, a larger cause for concern is how to stop the GEB turning into a speculative tool.
By the end of 2008, in various cities around the world, 12 growth enterprise markets had closed down. Aside from the exceptions of Japan and America, all other markets had met with serious difficulties.
In reality, the history of Hong Kong’s Growth Enterprise Market (GEM) can serve as a reference point for us.
In the past two years, there have only been four companies that have listed on the GEM. Daily business transactions don’t even amount to one percent of the trade on the main stock exchange.
However, the biggest problem is that the listing regulations of the GEM are too loose, the senior management of listed companies frequently cash in their stocks.
Also, because the circulation on the GEM is low, venture capital, private equity and other major shareholders are better able to manipulate share prices.
We can forsee such boards enduring erratic rises and falls in share prices that would go well beyond anything that takes place on the main boards. This would have a negative effect on the stability and health of any growth enterprise board.
Until recently, the A-share market has carried the burden of having a reputation for its “speculative cycle”, but now investors are also starting to worry that this phenomena might also emerge on the GEB.
Dealing with this problem will require a lot of ingenuity from the market and regulating bodies.
We think that the most important task for regulators is to devise methods to ensure the quality of companies listing on the GEB and to strengthen regulations managing the delisting process.
Among the regulations that have already been announced, we can already see that policymakers have drawn on the experience of other boards, however we still think they have some way to go in achieving this main task.
When we consider that this GEB, which has been mulled over for ten years, is about to come into existence, all the market players and government departments have plenty of ideas and expectations of how it will look.
How we can turn these hopes and dreams into reality will require more than good intentions, we need wisdom and to an even greater extent, we need courage.
Chinese Political Parties Voice Up on Unemployment
The first motion presented to China’s top political advisory body’s annual plenary session, which opened on Tuesday, dealt squarely with unemployment.
The motion, entitled “Resolutions on Solving Employment Pressure Caused by the Global Financial Crisis”, was submitted by the China Zhi Gong Party, which has strong ties to overseas Chinese.
It noted that the financial crisis had dampened employment opportunities at a time when college graduates were at a peak in China, and suggested leaders should not look for a quick fix in economic growth, which it said would not necessarily correlate to job creation.
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Other parties had also released proposals related to employment, including the China National Democratic Construction Association (CNDCA) and the China Democratic League.
The CNDCA suggested in a draft resolution that laid-off workers who have returned to the countryside should seize the chance to improve their entrepreneurial skills and work together to found local firms.
A People’s Daily poll online asking readers to vote on the issues leaders should focus on reflected how Chinese have become increasingly anxious about their livelihoods. Health care, food safety, the income gap, and employment topped the list.
Meanwhile, Chinese forums were being bombarded by feedback, with many netizens writing open pleas for solutions to unemployment, a lack of healthcare and retirement benefits, corruption, and other ills that they said hit lower echelons of the society hardest.
One netizen in a China.com forum had this to say to leaders involved in the meetings: “What of the 40, 50 year olds who’ve lost their job, are sick and unable to find new job? They’ve worked their whole lives building New China, and yet we can’t give them what they need to survive? They are not asking much, just enough to get by.
Economic Issues to Dominate China’s Political Consultative Session
China’s top political advisory body opened its annual plenary session in Beijing on Tuesday (March 3) afternoon, with economic issues poised to dominate the nine-day conference attended by over 2,100 delegates nationwide.
Proposing countermeasures to overcome the global financial crisis and the economic downturn would be the main task for the Chinese People’s Political Consultative Conference (CPPCC), said its chairman Jia Qinling in his opening speech.
The CPPCC national delegates comprised of politicians from the Communist Party of China (CPC) and eight other recognized parties in China, leaders of minority ethnic groups, representatives of various social groups and organizations, scholar and experts from various fields.
During the plenary session, the delegates would voice their views and concerns related to a wide range of issues - from legislative, policy making to developmental matters touching on social, economy and politics.
The gathering is also an event to exhibit China’s ethnic diversity, as reps of various minority groups came dressed in traditional costume.
The CPPCC session opened two days ahead of the plenary session of China’s parliament, the National People’s Congress.
These two events, which run almost concurrently in Beijing through March 13, are commonly known as the Two Sessions (Liang Hui) in Chinese. Liang Hui is closely followed by the public and observers alike, as issues brought up in them impact the course of policy making in the country.
In outlining the main tasks for the CPPCC this year, Jia stressed the need to form special task forces to review economic problems and draft suggestions, especially on ways to enlarge domestic demand, maintain healthy economic growth, accelerate industry restructuring, and improve China’s development model.
Also featured in his six-point work schedule was the need for CPPCC to explore friendly ties abroad, including publicity works to improve international understanding on China’s political system.
In the coming days, CPPCC delegates would take turns to present their proposals. Last year, a total of 4,472 proposal were submitted. Among the suggestions subsequently being incorporated into government policies included the ones for micro-loans and funding for rural and agricultural development.
A day prior to the opening, CPPCC spokesman Zhao Qizheng had told a press conference that many delegates intended to raise questions over the four-trillion-yuan stimulus package introduced by the Chinese government late last year.
Proposals expected to touch upon the issue might include how to supervise spending under the stimulus package and avoid redundant projects.
Number Game:China’s Statistics
Numbers Game: Analyzing China’s Macroeconomic Statistics
By Sun Jianfang
The release of China’s April economic data met with conflicting interpretations and suspicion over inconsistencies when released earlier this month.
Although most commentators were optimistic, many government officials started to question the likelihood of a V-shaped recovery and suggested that the economy may remain in the doldrums for an extended period.
When they surveyed business sentiment in March, officials from the National Bureau of Statistics (NBS) reported that the outlook was generally optimistic. However, when they undertook a similar survey recently, the confidence of some businesses had taken a big hit.
Company profits and corporate tax receipts are two of the best indicators of minor changes taking place in the industrial economy. While national tax revenues registered a year-on-year decline of 10.3% in the first quarter this year. In April, revenue dropped further, with a 13.6% year-on-year decline. These numbers show that business is still doing it tough
Despite this, economists generally interpreted April’s numbers as a sign that the economy was starting to pick up. Retail figures and the growth in the amount of fixed capital investment both exceeded expectations, and, although inflation and foreign investment fell, there was a slowing in the pace of the decline.
Others have also noted the large number of inconsistencies in April’s economic figures. For instance, although the rate of growth in industrial value-addedoutput had decreased on the March figure, and the national power output dipped 3.55% year-on-year, down from the 2% drop in March, the fixed asset investment numbers still registered a record high of over 30% growth.
Another example of statisitical inconsistency can be seen in April’s export figures. China’s Customs said the country’s export realized a month-to-month growth of 8.3% in April; however, according to China’s Ministry of Commerce, the indicator was down 5.5% on the March figure.
Others have questioned the money supply data released in May. According to the central bank, by the end of April, broad money supply (M2) gained nearly 26% to 54.05 trillion yuan from a year earlier. However, a source close to the central bank told EO that additional loans before the end of April were no more than 80 billion yuan, but by April 31, the figure suddenly balloned to 600 billion yuan.
Wang Xiaohui, macro-analyst of Sinolink Securities, was also confused with the increase of money supply. “China’s bank’s loans fell considerably in April, meanwhile, the central bank withdrew a portion of the currency from circulation through open market operations. Furthermore, foreign trade surplus ought to have dropped off slightly in April. These three factors didn’t support an increase of money supply in April,” he said.
Although they had common concerns about the accuracy of the statistics, economists held that macroeconomic situation had gradually begun to improve.
Zhang Liqun, researcher of Development Research Center of the State Council, remarked “some people doubted its accuracy when the government announced the value-added for industrial companies registered a year-on-year increase of 8.3% in March. However, judging from the 7.3% growth in April’s value added indicator, the economy has a basis for recovery.”
Dong Xian’an, macro-analyst of Southwest Securities, projected that China’s industrial output would begin to rally in May, and that output would be up 10% year-on-year in the third quarter.
Chu Jianfang, chief macro-analyst at Citic Securities, predicted that the decline of China’s producer price index (PPI) was about to bottom out in the second quarter and would probably begin to bounce back in the following months.
Hua Sheng, an economist, told the EO that judging from the April’s economic indicators, China had been in the early stage of recovery but instability still existed.
Although they agreed on little else, most economists concurred that for the coming two quarters, the economy was stepping out of a deflationary phase.
When questioned by EO on the prospects for China’s economy, a common response from government officials was that “a turn for the better doesn’t mean things improve immediately.” They questioned the likelihood of a V-shaped recovery and predicted that the economy was likely remain subdued for an extended period.