The ministry identified programs supporting renewable power, including wind and solar, in California, New Jersey, Massachusetts, Ohio and California that violate World Trade Organization policies and trade treaties, according to a preliminary finding on the agency’s website today.

The finding comes a week after the U.S. Commerce Department announced tariffs as high as 250 percent on Chinese solar cells and is the latest salvo in a renewable-energy trade dispute, according to Theodore O’Neill, an analyst at Wunderlich Securities Inc. in New York.

“It’s a long, slow escalation of trade and currency wars as we race to the bottom,” O’Neill said today in an interview.
Chinese solar companies have criticized Commerce’s preliminary decision May 18 that they improperly benefit from government subsidies and sell solar cells below cost. At least four U.S. solar manufacturers filed for bankruptcy in the past year.

MarketWatch has more on the background of the dispute:

The U.S. Commerce Department last week announced a preliminary decision to impose 31% tariffs on several of China’s largest solar-panel companies that it had found guilty of dumping.

The Chinese government blasted the U.S. decision as “protectionist” and “unreasonable,” saying it provoked trade friction and would hurt both Chinese and U.S. companies as well as the clean energy sector.

The Ministry of Commerce didn’t say Thursday how it might respond to the U.S. trade violations it had uncovered.

Four Chinese solar companies plan to hold a news conference later Thursday to respond to the U.S. Commerce Department’s decision on tariffs, which followed U.S. antisubsidy tariffs of 3% to 5% on Chinese solar companies in March.

Read more about renewable energy in China, cooperation with the U.S. over environmental issues, and about U.S. trade with China, via CDT.

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Post tags: clean energy, renewable energy, U.S trade, U.S. environment
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Ryssdal: … Somebody’s making money.

Schmitz: Right. Developers are obviously making a lot of money. And of course the government of China itself is getting rich and that’s something that irks a lot of the people I spoke to. In the past five years, much of China’s economic growth has come from building infrastructure. The party has spent hundreds of billions of dollars on this and most of these contracts have gone to state-owned companies. So in other words, the government is giving money to itself. So one man I spoke to was really frustrated with this.

Man speaking

Ryssdal: “Nothing’s OK,” right? Everything is not all right.

Schmitz: Nothing is OK. So he’s saying that the Communist party originated from the poor, but now has basically left the poor behind. He’s a security guard who makes $5 a day and he lives in a 30-square-foot apartment with his wife and his daughter and he isn’t happy at all. So I asked him. I said how could the government improve the situation in China. And so get this, he said that China should start a war.

Ryssdal: No, come on. Really?

Schmitz: Yeah. And I said with whom and he said it doesn’t matter. 

The Los Angeles Times reported the study’s release last week, and described China’s use by economists as “a real-life laboratory to study how money, inequality and change are tied to our satisfaction with life”.

Easterlin and his fellow economists based their findings on six surveys on life satisfaction in China, most of them conducted by Western firms. The fall and rise of happiness levels in China mirror the trends seen in Russia and other European countries transitioning from communism, Easterlin said.

But what makes China especially interesting is that happiness levels dipped and rose while incomes were soaring, showing that joblessness can drag happiness levels down even as national wealth is on the rise. The results echo earlier studies that have found that growing wealth does not tend to increase happiness because expectations rise along with it. People also tend to compare their wealth with others’.

“If somebody got a higher salary this year than last, he might not be happy,” Jiaotong University professor Wang Fanghua told The Times last year. “But if his income is better than his friends’, then he will be happy.”

At TIME, Austin Ramzy noted that Bo Xilai’s gestures towards addressing economic inequality helped build his broad popularity among Chongqingers.

When Bo Xilai, the rising Chinese Communist Party official who was purged in March, gave his last public comments before disappearing into detention, he was wrong about a lot of things. That bit about not being under investigation, for instance. But one line he uttered has the clear ring of truth, and it poses a serious issue for China’s leadership as it attempts to navigate this year’s political transition, the economic slowdown and the ripples loosed by Bo’s removal. Bo revealed that China’s Gini coefficient — a statistic that measures the gap between rich and poor — had entered into worrying territory. He described the number, which hasn’t been made public in more than a decade, as over 0.46. Anything higher than 0.4 is considered dangerously high and capable of fueling unrest.

In Chongqing, where Bo was Communist Party secretary for 4½ years, he made building economic protections like subsidized housing for the megacity’s poorest residents one of the tenets of his “Chongqing model.” The wholesale corruption he and his family have been accused of may have steered the wealth gap in the wrong direction, but Bo understood the political importance of appearing to care about the problem, just as he knew the appeal of cracking down on crime and reviving Mao-era culture.

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Post tags: Bo Xilai, economic growth, food prices, gini coefficient, happiness index, income divide, income inequality, inflation, property prices
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On a sweltering night in July 2011, 17-year-old Zhang Juanzi arrives at her farmhouse in the remote village of Silong in Hunan province. Despite the cramped 12-hour van journey from Shenzhen, the young girl bounds past the wooden doors to wake up her 5-year-old brother, Zhang Yi, whose face scrunches in the flickering light. He is thrilled by her arrival, but when he sees his mother, Huang Dongyan, he recoils into his sister’s arms. He will not look at Huang, who is squealing at him, begging him to say “Mommy ….”

Huang and her son have a strained relationship, one damaged by Huang’s absence. It has been months since they last saw each other. Her son seems to view Huang as a stranger who visits once or twice a year and demands his affection. Huang blames the country’s housing registration policy, or hukou system, for their broken bond. The hukou system denies social benefits to China’s some 150 million rural migrant laborers who move to urban areas for work. Because of this policy, migrant workers like Huang are forced to leave their children behind in the village to receive schooling, health care, and other necessary services.

Roughly 58 million children like Yi are left in China’s countryside without their parents. This might be economically necessary, but it is emotionally disastrous: Chinese University of Hong Kong researchers found that adolescents left behind in their villages were more likely to engage in risky behavior such as binge drinking, and have increased thoughts of suicide. The children separated from their migrant parents are also more likely to have learning disabilities and psychological problems, says Zhang Ping, a researcher at the Psychological Science Institute of Guangdong Province. In school, they lack focus; at home they lack guidance.

Xinhua photographer Liu Jie poignantly captured the problem of divided families last year in a set of group portraits in which absent family members were represented by empty chairs. See past posts on CDT for more on labour migration and the hukou system.

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Post tags: hukou, migrant workers, rural migration, Shenzhen, urban rural divide, Zhang Ping
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The speed with which China’s citizens have embraced all things digital is one sign that things are in motion in the country. But e-commerce, which has changed the balance of power between retailers and consumers, didn’t take off until the Chinese need for reassurance was satisfied. Even when transactions are arranged online, most purchases are completed in person, with shoppers examining the product and handing over their cash offline.

Chinese at all socioeconomic levels try to “win”—that is, climb the ladder of success—while working within the system, not against it. In Chinese consumer culture, there is a constant tension between self-protection and displaying status. This struggle explains the existence of two seemingly conflicting lines of development. On the one hand, we see stratospheric savings rates, extreme price sensitivity and aversion to credit-card interest payments. On the other, there is the Chinese fixation with luxury goods and a willingness to pay as much as 120% of one’s yearly income for a car.

Every day, the Chinese confront shredded social safety nets, a lack of institutions that protect individual wealth, contaminated food products and myriad other risks to home and health. The instinct of consumers to project status through material display is counterbalanced by conservative buying behavior. Protective benefits are the primary consideration for consumers. Even high-end paints must establish their lack of toxicity before touting the virtues of colorful self-expression. Safety is a big concern for all car buyers, at either end of the price spectrum.

Read more about advertising and consumerism in China via CDT.

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Post tags: advertising, consumerism, consumers, foreign companies
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No question, China has many problems. Years of one-sided investment-driven growth have created obvious excesses and overcapacity. A weaker global economy since the 2008 financial crisis and rapidly rising labor cost at home have slowed China’s vaunted export machine. Meanwhile, a massive housing bubble is slowly deflating, and the latest economic data is discouraging. Real growth in GDP slowed to an annualized rate of less than 7 percent in the first quarter of 2012, and April saw a sharp slowdown in industrial output, electricity production, bank lending, and property transactions. Is China’s legendary economy in serious trouble?

Not just yet. The odds are that China will navigate these shoals and continue to grow at a fairly rapid pace of around 7 percent a year for the remainder of the decade, overtaking the United States to become the world’s biggest economy around 2020. That’s a lot slower than the historical average of 10 percent, but still solid. Considerably less certain, however, is whether China’s secretive and corrupt Communist Party can make this growth equitable, inclusive, and fair. Rather than economic collapse, it’s far more likely that a decade from now China will have a strong economy but a deeply flawed and unstable society.

See also Tom Orlik’s guide to battling China bears at China Real Time Report, via CDT.

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Post tags: economic slowdown, GDP growth, housing bubble, income inequality, social justice, social stability, United States
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Nissan Motor Co Ltd said it aims to triple global sales of its premium Infiniti brand by 2016 and take 10 percent of China’s luxury vehicle market, challenging leaders like Audi AG and Mercedes Benz maker Daimler AG.

The target appears “challenging,” Yale Zhang, head of Shanghai-based consulting firm Automotive Foresight, said.

In order for Nissan to achieve it, the Yokohama-based automaker would have to “aggressively push localization over the coming two to three years and aggressively price locally produced cars,” Zhang said.

In China, Infiniti sold just 19,000 cars in the last fiscal year ended March, a fraction of the more than 300,000 sold in 2011 by Audi, Volkswagen AG’s premium brand.

While Nissan expands into emerging markets with the revival of their Datsun brand, they plan to enter China through Hong Kong with the luxury brand, Infiniti.ABC News adds:

Nissan’s upscale Infiniti brand unveiled its new global headquarters in Hong Kong on Tuesday, as the Japanese automaker uses the southern Chinese financial center to grab a bigger piece of the world’s top car market.

Infiniti is the first car maker to base itself in Hong Kong, a semiautonomous region of China better known for its banking prowess and stock market.

Ghosn said the company chose to move the high-end division to Hong Kong so staff could better observe the city’s luxury goods market. Many foreign brands have flocked to the city in recent years in pursuit of wealthy Chinese shoppers.

“During the next five years, Hong Kong and mainland China will together be our most important growth market,” Ghosn said.

© Melissa M. Chan for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: auto industry, auto market, luxury cars, Nissan
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After a serial of trials which first began in April 2009, Wu Ying was sentenced to death with a two-year reprieve, according to the Zhejiang Higher People’s Court website.

Legal experts immediately interpreted the sentence as life imprisonment under China’s legal environment.

Wu’s former lawyer Zhang Yanfeng said to media, “She’s been sentenced to life imprisonment, barring any wrongdoing in the next two years.” Zhang said the verdict was expected as provincial high courts are subordinate to the Supreme People’s Court.

New York University law professor Jerome Cohen told The New York Times last month that the SPC’s decision “seems a typical Chinese judicial compromise between what those who call for the death penalty wanted and what Wu’s many supporters, both popular and professional, have called for”. The new suspended death sentence may be an attempt to maintain a similar balance, compared with the lighter sentences Cohen held out as another possible outcome. But human rights researcher Joshua Rosenzweig described it as “a gutless decision, one that ignores core problems with the case“. Although some supporters expressed satisfaction at Wu’s likely escape from execution, questions about uneven punishment and institutional problems remain. From Chuin-Wei Yap at China Real Time Report:

The case attracted widespread media attention for the severity of the sentence and the long-running campaign in China’s blogosphere to save her.

Many of her supporters wondered aloud why she was facing death when corrupt officials found guilty of similar crimes were often granted lighter sentences ….

For the public that’s kept the issue alive for more than three years, it’s a gratifying conclusion. “It’s not just Wu Ying,” Wang Shuo, a prominent magazine editor, wrote on the Twitter-like microblogging service Sina Weibo. “If it’s non-violent financial crime, no one should die.”

“Wu Ying was unlucky to run into hole in the legal system,” added another Sina Weibo user writing under the handle Chaoxin Xinzhixing. “When will China’s legal system be more robust, so the public can be convinced?”

Tea Leaf Nation’s survey of Sina Weibo reactions reveals similarly mixed views, and notes that over 3.5 million posts on the subject were culled from search results overnight [Update: TLN reports that many of the culled comments later re-appeared].

Many netizens hailed the result. @杭州恰恰 wrote, “This is…a victory for public opinion! [Responsiveness to] public opinion is progressing!” @洪陈纷纭 wrote: “The power of democracy; the power of Weibo.”

Unfortunately, many netizens felt their victory, if it was theirs at all, was a Pyrrhic one. @Q版温故‘s comment aptly captured netizen sentiment: “No matter what, the result is progress. But this time, the progress is mostly because of the contributions of public opinion, and not law itself.” Instead of law, many commenters perceived realpolitik, hard at work. @闫英士 opined, “The real meaning is this: The death sentence is to save face, the commutation is to quiet citizen rage. But it all has nothing to do with Wu Ying herself, and certainly doesn’t prove the independence of the so-called judiciary.”

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Post tags: death penalty, death sentence, execution, Jerome cohen, Supreme People's Court, Wang Shuo, Wu Ying, Zhejiang
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Though some critics argue the Chinese government has been too slow to act, research, public concern and some hefty bills ($35 billion in Shanghai alone in the last 40 years), has sparked some momentum. Recently, the state council approved China’s Land Subsidence Prevention Project, a countrywide initiative to prevent land subsidence. Likewise, Beijing, which has descended more than a foot in the past decade, has also made an effort to reduce underground water extraction, with plans to close 800 water extraction wells in 2012, according to the Beijing Water Authority. By 2014, the city hopes to halt underground water extraction in urban areas altogether as part of the North-South Water Diversion Project. The project expects to bring 3 billion cubic feet of water supply to Beijing from the Yangtze River. This would not only satisfy one-third of the city’s total water demand, but would also cut the extraction of underground water in half.

But Li, who worked at the Chinese Academy of Science for 15 years, says such programs will not be enough. “It’s hard to quantify how much this might help, but the question is, is that a problem solved? The answer is no. The problem lies in the early issue with urbanization,” he says. Scientists expect the regulations to help curb the consumption of underground water supplies, but there a few things the government has less control over, such as global warming. As the land degradation and excessive guzzling of ground water continues, environmentalists predict waters surrounding Shanghai to rise 9 to 27 inches by 2050 as a result of melting ice caps.

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Post tags: Beijing, construction, Shanghai, south-to-north water diversion project, urban development, water conservancy, water crisis, water shortage, Yangtze River
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This may seem strange, given that the Chinese have propelled their country into the top ranks of global economic powerhouses over the past 30 years. There are those who predict a hard landing for an overheated economy — where growth has already slowed — but the acquisition of wealth is better understood not just as an economic cushion, or as pure greed, but as a political hedge.

China’s Communist leaders cling to Deng Xiaoping’s belief that their continuance in power will depend on economic progress. But even in China, a mandate based on competence can crumble in hard times. So globalizing one’s assets — transferring money and educating one’s children overseas — makes sense as a hedge against risk. (At least $120 billion has been illegally transferred abroad since the mid-1990s, according to one official estimate.)

…

Today, the party’s 80 million members are still powerful, but most join the party for career advancement, not idealism. Every day, there are some 500 protests, demonstrations or riots against corrupt or dictatorial local party authorities, often put down by force. The harsh treatment that prompted the blind human-rights advocate Chen Guangcheng to seek American protection is only one of the most notorious cases. The volatile society unleashed against the state by Mao almost 50 years ago bubbles like a caldron. Stories about the wealth amassed by relatives of party leaders like Mr. Bo, who have used their family connections to take control of vast sectors of the economy, will persuade even loyal citizens that the rot reaches to the very top.

Last week, The Guardian reported that three retired CCP officials called on leaders to disclose their family wealth before the issue further erodes the party’s grip on power ahead of the upcoming leadership succession.

© Scott Greene for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: Bo Xilai, CCP legitimacy, chinese communist party, corruption, Deng Xiaoping, luxury, princelings
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What ails China’s lending environment, and why won’t an RRR cut fix it? MarketWatch’s Craig Stephens thinks banks might have a supply-side problem, battling higher funding costs as their expanding suite of wealth management products – and the higher returns they offer investors – squeezes their margins. But Bob Davis and Tom Orlik write in The Wall Street Journal that the problem lies on the demand side, that the government can no longer “turbocharge the economy as they have in the past” by pushing state-owned banks to churn out new loans because the system lacks an ample supply of borrowers willing to take them:

The hesitation to borrow runs across the Chinese economy, from massive state-owned steelmakers struggling with overcapacity to small exporters trying to figure out when the European crisis might abate.

“We don’t need any expansion of credit because we are playing it safe,” said Stanley Lau, managing director of Renley Watch Manufacturing Co., a Hong Kong watch exporter that manufactures in southern China.

“Because of growing uncertainty over the economy, a lot of businesses are reluctant to borrow and, instead, they have decided to put their project or expansion plans on hold,” a senior executive at one of China’s largest banks said.

Even beyond the steelmakers and manufacturers, the troubles plaguing China’s cooling property market don’t help banks’ lending prospects either. Average home prices in 70 Chinese cities fell again in April, as the government continues to demonstrate a commitment to a price correction that it began in 2010. And while property prices may rebound in the 4th quarter as supply begins to ease, one research analyst told China Daily, housing ministry official Zhang Xiaohong told local media on Friday that Beijing won’t reverse its course and that “There is still room for property developers to continue to adjust prices to boost sales volume, but there is no more room for property speculation.” For now, reports Robin Kwong in The Financial Times, developers can only continue to push their large inventories of unoccupied properties:

This dynamic is reflected in the plight of Number 8 Royal Park, a super-luxurious development in Beijing where liveried footmen have been chaperoning potential buyers to assay opulently decorated 520 sq m apartments. The developer is still holding firm on its price tag of over $10m, but sales appear to have stagnated. Staff are still urging clients to buy flats in the same two towers that were on offer a year ago.

The Globe and Mail’s Mark MacKinnon points out that the Chinese government’s handling of the housing market reflects not just an attempt at a market correction, but also a play for political preservation:

That bubble is now deflating, although some economists say the market is still overvalued and that falling property prices will not constitute the main drag on GDP this year.

“You can make a pretty strong case that it’s overvalued, the property market, so I personally don’t think there will be any reversal…I think they’ll hold the line,” said Alaistair Chan, China economist with Moody’s Analytics, who said this year’s forecast for GDP growth may end up around 8 per cent from their previous prediction of 8.2 per cent.

Just as important for China’s government, though, is that restricting property prices to try to keep them within reach of the rising middle class is seen as key to preserving political stability. For an authoritarian regime obsessed with maintaining a “harmonious society,” this has been a relatively dramatic year, with labour protests, self-immolations by Tibetan activists, continuing food inflation and a rare and colourful political scandal involving the murder of a British businessman that felled one of China’s most popular politicians – all ahead of an expected transfer of power at the top that is supposed to begin with the Communist Party’s national congress in October.

As a result, some property developers are settling in with what they have, and downgrading any ambitions of big acquisitions.

Wen Calls for Growth

Chinese Premier Wen Jiabao took time during his weekend trip to Wuhan to reiterate the government’s aim of fine-tuning the economy to support growth, according to The China Daily:

“The relationship between maintaining growth, adjusting economic structures and managing inflation, must be properly handled,” Wen said in comments reported by Xinhua News Agency. “We should continue to implement a proactive fiscal policy and a prudent monetary policy while giving more priority to maintaining growth.”

The government, he said, will continue to carry out anticipatory adjustments and fine-tuning, boost domestic consumption and promote steady and relatively fast economic growth.

Even if he was only repeating the same long-deployed talking points, Chinese stocks rose today and Bloomberg News reports that Wen’s comments led analysts to speculate that the fine-tuning may become a little more heavy:

The shift in language suggests authorities are “seriously concerned about growth” and “ready to introduce further measures,” Bank of America Corp. said in a research note today. The government on May 12 cut banks’ required reserves for the third time in six months following data that showed trade, industrial production and lending were below forecasts in April.

“The April data has been a wake-up call for China,” said Alaistair Chan, a Sydney-based economist at Moody’s Analytics. “There will probably be some stimulus measures through monetary policy, more bank lending and infrastructure projects being brought forward.”

The Battle For Securities Reform 

Caixin catches up with Guo Shuqing, who took over the helm at the China Securities Regulatory Commission (CSRC) last October and has already begun to put his stamp on the job with a flurry of recent regulatory changes. The CSRC’s top priority, and “core challenge” of reform, Guo says, is in the arena of public listing:

Guo has said that a registration system for public listings is in fact not so different in nature from China’s current approval system. In the United States where a registration system is used, regulatory agencies conduct even stricter checks on companies than do their Chinese counterparts. The key is how to define the roles and responsibilities of the regulators, the exchanges and other intermediaries.

In this light, the recently released guidelines on share issue reform tackle the technical details but fail to address the underlying problems of the system. Rent-seeking can’t be eradicated without changing the vetting system. Take the newly appointed officers of the CSRC. As they become familiar with the job, and the temptations for corruption that come with it, won’t they also become less inclined to change the system? Based on the historic lessons at home and abroad, support of the top leadership is vital for a reformer.

Reforms are easier when the stock market is at a low ebb, but they will only get harder and harder. It will be a long-drawn-out war.

Is China Deleveraging?

The Wall Street Journal’s Tom Orlik writes that while China’s credit-fueled growth (which saw the ratio of credit to GDP rise to 173% by the end of 2011) may have saved China’s economy from the global financial crisis, the trend has begun to reverse amid an environment ripe with inflation, an overheated property market, among other things. It’s good for the ratio to come down and it should continue to come down, but this comes with consequences that Beijing can temper in a number of ways:

The government has options for responding. It could further lower the reserve requirement ratio, which would encourage firms to take on more loans as it lowers the cost of capital and signals that the government intends to keep demand on track—buoying confidence about future orders and profitability.

A further step would be to relax the floor on lending interest rates. China’s banks are currently allowed to lend at a discount of up to 10% to the government-set benchmark. People’s Bank of China governor Zhou Xiaochuan said in April that the next step in interest rate reform could be liberalizing the lending rate—suggesting the floor could be lowered.

Beijing also has room to ratchet up its own spending. There are signs that this is already underway. Investment funded from the state budget grew 29% year-on-year in the first four months of this year, partially offsetting a meager 4.2% increase for investment financed by bank lending.

© CDT Money for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: China Securities Regulatory Commission, economic growth, fine-tuning, GDP, Guo Shuqing, middle class, property market, reserve requirement ratio, stock market reform, Wen Jiabao
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