China Update

Good friend Mr. Tony Tsai, CEO – BHG Retail Innovation Institute and EVP Operations – The BJ Hualian Hypermarket Co. forwards key China updates:

"Five future development trends of China's foreign trade. Five future development trends of China's foreign trade are analyzed by Liu Jingdong, a researcher at the International Law Research Institute at the China Academy of Social Sciences. The five trends are as follows: 1) China will maintain its leading position in worldwide foreign trade for a long period of time; 2) the structure of China's imports and exports will change and energy and resources trade will play important roles in China's foreign trade; 3) legislation and policies regarding the environment will have a significant affect on China's foreign trade; 4) the renminbi will become the main currency for China's foreign trade settlement; and 5) trade protectionism against China will exist for a long period of time and trade friction between China and its major trade partners will increase."

"Three big mountains" for Chinese economy: housing vacancies, the trade surplus and foreign exchange reserves. Chinese decision-makers will lie awake all night thinking of three numbers. The first is 65.4m, the number of vacant houses in China. Second is $28.7b, the estimated value of China's trade surplus in July. The third is $2.45tr, China's foreign exchange reserves. The three numbers reflect the distorted part of the Chinese economy. China is encouraging investment by suppressing the cost of capital and other factors. The cost to get this investment is the sacrifice of the interests of consumers. Low salaries and low deposit interest rates have suppressed the purchasing ability of consumers."

"Vice governor of People's Bank of China: China to gradually deregulate restrictions on cross-border use of renminbi. Aug. 31, Hu Xiaolian, vice governor of the People's Bank of China, says in an interview with foreign media that China will gradually deregulate restrictions on cross-border use of the renminbi. However, variation in the exchange rate will not solve the China-US trade imbalance. China is also considering allowing enterprises to invest in overseas markets with the renminbi."

"China expands scope of property tax pilot program; evaluation technologies become mature. The Ministry of Finance and State Administration of Taxation has expanded the property tax pilot program across the country. Each province can select one city to take part in the pilot program. In addition, the State Administration of Taxation has accelerated technical training of local tax officials in property tax evaluation."

"China creates new regional economic structure; breaking regional economic development imbalance problems. From May to Dec. 2009, nine plans for regional development were upgraded and made strategic national plans. This indicates China is trying to reverse the imbalance in regional economic development across the country and transforming its export-oriented economic development model, which depends excessively on external demand, as well as exploring an overall way to combine energy-conservation, environmental protection, ecology and civilization."

"China to accelerate construction of credit system in rural areas. Du Jinfu, deputy governor of the People's Bank of China, says China will accelerate the construction of the credit system in rural areas, further supporting agriculture through financial measures."