Financial crisis? What financial crisis? Local governments across China simply can’t fathom the fuss. They’re not starved of credit. In fact, they’re enjoying a veritable financing feast.

Figurative chopsticks are digging deep into financing platforms offered by investment companies created by and operating inside local government offices, from city finance bureaus to local branches of the National Development and Reform Commission (NDRC).

These days, a single city hall may be sponsoring several financing platforms at once, perhaps one for construction projects and another for alternative energy programs. Investment vehicles are also doing business at provincial and township government levels.

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Post tags: economic stimulus plan, finance, financial policies
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China is planning to introduce rules by the end of the year to allow a handful of foreign investment banks to invest in joint ventures with local securities firms, according to senior government officials and banking executives.

…Under the revised rules, foreign investment banks would be allowed to own up to 33 per cent of a new securities industry joint venture with a local partner, officials said…..[Full Text]

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Post tags: financial policies, foreign investment
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China’s government recently announced that inflation hit a 10-year high of 6.5% in August. This increase in inflation is directly related to global trade imbalances, yet China is trying to control inflation without addressing that problem.

That carries two consequences. First, it is doubtful this strategy can work, which likely signals rising Chinese inflation. Second, the strategy aims to shift the onus of global trade adjustment on to the United States, which may come back to haunt China and the global economy.

China’s current inflation is a textbook case of prolonged undervaluation of a fixed exchange rate in tandem with export-led growth. As such, significant exchange rate revaluation should be a central element of its anti-inflation policy. [Full Text]

Thomas Palley is a former chief economist of the US-China Economic and Security Review Commission.

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Post tags: financial policies, inflation, Yuan rate
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China’s central bank raised interest rates for the second time in less than a month on Friday in an attempt to rein in soaring food prices, excessive bank lending and bubbles in the property and stock markets.

The People’s Bank of China lifted the one-year benchmark deposit rate by 27 basis points to 3.87 per cent and the one-year lending rate by the same amount to 7.29 per cent, effective immediately.

The PBOC has now lifted rates five times this year as it strives to contain headline inflation that reached 6.5 per cent in August, the fastest increase in more than a decade. [Full Text]

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Post tags: financial policies, interest rates, PBOC
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The country does not face an imminent risk of monopoly by foreign companies in any industry, according to the China Foreign Investment Report 2007 released by the Ministry of Commerce.

Wang Zhile, director of the Multinational Enterprise Research Centre affiliated to the Ministry of Commerce, made the observation in an essay for the report in response to people’s rising concerns about possible foreign monopolies in the country.

He explained that although foreign investors do have a large market share in certain industries, it does not necessarily mean monopolies. [Full Text]

Read also Ministry: Overseas-funded Companies Top 610,000 In China, Financial Policy Changes To Back Outbound Investment and Chinese Enterprises Arise As Popular Investors On Global Market by Xinhua.

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Post tags: financial policies, foreign investment, monopoly, overseas investment
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China will set its priorities for finance reform for the next five years at a top-level party conclave next week expected to focus on rural banking and an enhanced role for the country’s largest financial holding company.

The so-called finance work committee meeting, to be chaired by Wen Jiabao, the premier, has been held twice before – in 1997 and 2002 – and in both cases resulted in substantial and far-reaching policy changes.

The government has so far not announced the existence of the closed-door meeting, let alone its date or agenda, but has consulted extensively in recent months with local economists and scholars about the issues to be tackled.[Full Text]

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Post tags: banking, financial policies, financial reforms
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China’s central bank, under pressure from the U.S. and other Group of Seven nations to make the yuan more flexible, will in 2007 pursue a “stable currency policy” to promote economic growth.

The People’s Bank of China “will continue to strengthen and adjust financial control mechanisms, execute a stable currency policy, improve foreign exchange management and push for financial reforms and innovation,” Governor Zhou Xiaochuan said today. “We want to contribute to ensure stable and accelerated economic development.”

Zhou, who met with U.S. Treasury Secretary Henry Paulson in Beijing this month for the inaugural so-called Strategic Economic Dialogue between China and the U.S., has said he wants to increase the flexibility of the yuan at a “gradual” pace. U.S. lawmakers, who claim China unfairly keeps its currency undervalued to stoke exports, are keen for Zhou to move faster. [Full Text]

(Photot of Zhou Xiaochuan)

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Post tags: financial policies, Yuan rate, Zhao Xiaochuan
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The Bush administration, softening its tone of criticism toward China, reported to Congress on Tuesday that the Chinese had made strides in revaluing their currency, but that the progress was “considerably less than is needed.”

The muted tone, in contrast with a finding more than six months ago, came in a report that is required twice a year. It was issued four days after a trip to China by Treasury Secretary Henry M. Paulson Jr. and six other Cabinet-level officials. And it appeared to reflect Mr. Paulson’s preference for quiet persuasion over confrontation.

The administration has called on China to open its economy further, crack down on product piracy and let the value of its currency, the yuan, rise. Many economists contend that the Chinese have deliberately undervalued the yuan to promote exports. A low value for China’s currency makes its exports relatively cheap in the West and its imports more expensive. [Full Text]

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Post tags: financial policies, Henry Paulson, U.S. relations, U.S. trade, Yuan rate
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It is hardly a surprise that the large American economic delegation to China has returned with little to show.

Even at the final press conference, while the US treasury secretary, Henry Paulson, said China would make its currency more flexible but gave no timetable; the Chinese deputy prime minister, Wu Yi, did not indicate that such an agreement was reached.

China is proud of its size and age, and it does not like foreigners demanding concessions and prefacing sarcasm in their remarks, which resemble lectures. Giving lectures in China, Chinese leaders think, is a Chinese prerogative. But such apparent cultural sensitivity apart, this does not make the Chinese right….[Full Text]

(photo: A bank teller counts Chinese yuan notes at a branch of the China Merchants Bank in Beijing. Photograph: Michael Reynolds/EPA)

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Post tags: financial policies, foreign trade, Yuan rate
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China on Wednesday released rules governing the operations of foreign banks once the country fully opens its doors to them in line with its WTO commitments.

In a document released by the official Xinhua news agency, China said foreign-funded banks and joint-venture lenders needed to set aside at least 1 billion yuan ($127 million) in registered capital.

By doing so, they would be allowed to do “part of or all” foreign currency and yuan-denominated business, it said.[Full Text]

-Read the report from the Financial Times, China paves way for foreign banks
-Also read the story from Xinhua

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Post tags: banking, financial policies, WTO
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