Shanghai’s stock market is making billionaire

 Source: http://www.nytimes.com/2007/04/21/business/worldbusiness/21garden.html?_r=1&n=Top%2fNews%2fWorld%2fCountries%20and%20Territories%2fChina&oref=slogin 

China’s stock markets are ever more profitable to the Chinese people. On April 19, Yang Guoiang, owner of the real-estate company, Country Gardens, became a billionaire as it went public that day. Country Gardens was valued at $15 billion. Many others are also making fortunes by investing in stocks. This has allowed for China’s middle class to continue to grow. Today, there are new entrepreneurs in the real-estate branch in the block.

The same would not have been true early in 1990s since the government did not allow companies to acquire public land and sell them. In the late 1990s, the government finally moved to make reforms to the market to allow companies to acquire and sell public land. How will the CCP react to this rising acquisition of public land? Will they set forth new restrictions?

I believe it is too late for them to take such drastic steps primarily because people are gaining a voice and power through the wealth that they are acquiring through the stock market. Besides, the CCP has made it clear that it intends to increase protection of private property rights in the follwing years.

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China enjoys trade relations with other countries

Source: http://www.nytimes.com/2007/04/18/business/worldbusiness/18yuan.html?pagewanted=2&n=Top%2fNews%2fWorld%2fCountries%20and%20Territories%2fChina&_r=1

As China’s trade surplus continues to increase, its trade relations have also diversified. Until recently China had been the second-biggest exporter to US markets. Early this year it ranks the biggest. Nevertheless, China’s exchange rate of the yuan to the dollar has been the cause of the recent protectionist stance of the US against China’s exports. The CCP has condemned the US stance on their currency value. While the government has not directly recommended business entrepreneurs in trading with other countries other than the US, trade relations have diversified. As global leaders continue to increase trade relations with developing countries for the purpose of increasing their profits and avoiding placing all their eggs in one basket, government officials are hoping for greater diversity to emphasize their global influence.

Chinese officials are expected to go on another buying trip to the United States before next month’s round of meetings in Washington to discuss economic policies with the United States. By wrapping together a lot of separate purchase agreements in a few heavily promoted announcements, the officials hope to portray the United States as needing the Chinese market.

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China to increase interest rate

Source: http://www.nytimes.com/2007/03/18/business/18chinabank.html

The People’s Bank of China on Sunday will increase interest rates.

Statistics released in the last week indicated that the Chinese economy had rebounded from a brief period of slower growth last fall and is now charging along at a pace so brisk that it might rekindle inflation.

Due to this change, China may be running into some trouble in the near future. Its markets may become less appealing to investors seeking lower interest rates.

 Higher interest rates could widen China’s trade surplus, economists said, as its exports keep rising but its demand for imports may slacken somewhat. Higher interest rates tend to brake investment spending on costly industrial equipment.

Higher economic regulation by the central bank means that the CCP is seeking to increase its control over the economy rather than decreasing it as others have suggested it to do.

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China claims a “peaceful rise”

Source:  http://www.nytimes.com/2007/03/17/world/asia/17china.html?_r=1&oref=slogin

Wrapping up the National People’s Congress, Mr. Wen assured that China’s economic and military rise was peaceful and was not directed at disrupting the world order that the US dominates.

On claims that it is still a developing country, China has gotten away with charges of excessive pollution caused by greenhouse gas emissions.

Despite still having, in theory, the status of a developing country, China’s deep influence in the outside world is raising many concerns.

Mr. Wen provided us with this intriguing comment:

“The two great tasks are, first, develop the productive forces of society and, second, advance social justice and fairness,” he said. “The speed of the fleet is not determined by the fastest vessel, rather it is determined by the slowest one.”

Even so, China still claims that “Beijing still amounts to a small player in world financial markets and ‘will not have any impact on U.S.-dollar denominated assets” globally.”

Many have come to believe that China is underestimating its own development in the eyes of others. Many think that its rise is faster and stronger than shown in the CCP’s remarks.

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China’s new property and tax laws

Source: http://english.aljazeera.net/NR/exeres/64430693-7593-48A6-BD88-D6FEE787032C.htm

 A new tax law is promising to make commerce in China more equal.

Under the new tax law, foreign-financed companies and Chinese enterprises will pay the same rate of 25 per cent, ending complaints about unequal treatment.

China is not only moving to make its tax law more equitable to promote sustainable development, but is also moving to provide it through investing its reserves to make its stocks stronger.

Two weeks ago, the Chinese market plunged and triggered a global sell-off, dragging down bourses in New York, Hong Kong,
London and elsewhere. 

China‘s stock markets have grown rapidly in recent years but are subject to wild swings in prices and accusations of insider trading and other systemic abuses. 

Wen said a new investment arm created to handle some of
China’s $1 trillion in foreign exchange reserves will not affect holdings of US dollar-denominated assets. 

“It is true that in
China’s foreign exchange reserves, US dollar-denominated assets account for a large proportion,” he said. 

“I can assure you that by instituting such a foreign exchange company, it will not have an impact on the US dollar-denominated assets.” 

China is believed to keep as much as 70 per cent of its reserves in US Treasury bills and other dollar-denominated assets.

China’s economy as well as the CCP’s control over it continues to be as strong as ever.

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China to protect private property

Source: http://www.nytimes.com/2007/03/16/world/asia/16china.html?n=Top%2fNews%2fWorld%2fCountries%20and%20Territories%2fChina

China has passed its first policy that directly protects private property.

Pros and cons are now being heard. 

But the leadership’s strategy did not resolve the underlying tensions. Hundreds of scholars and retired officials signed a petition against the law, which they said “overturns the basic system of socialism.”

The petition claimed the law did too little to distinguish between private property gained legally through hard work and public property that falls into private hands through corruption. They also argued that China could not give state-owned property and private property the same legal status and still call itself socialist.

Supporters of the law dispute the assertion that it will protect the ill-gotten gains of corruption, arguing that it will protect only legal property. In the past, Chinese have bought and sold property freely, but doing so in a legal vacuum. Supporters say they hope the law strengthens the rights of property holders, especially middle-class homeowners.

While this new policy may benefit the middle-class foreign companies investing in China may actually loose.

As well as approving the property law, the legislature revised a corporate tax, ending an advantage foreign investors enjoyed over local companies for more than two decades.

There was no mention as to whether China is reconsidering reducing the size and scope of the government in currency regulation.

Those measures, along with the property law, suggest that they will not casually abandon the pro-growth policies that have made China a leading economic power.

The CCP may very well still keep its exchange rate at levels that has given it quite some gains.

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China’s high trade surplus worries US

Source: http://www.nytimes.com/2007/03/13/business/13yuan.html

 The US is placing pressure on China to take greater reforms towards its public policy and currency regulation.

China’s rising trade surplus with the United States has produced growing pressure in Congress in recent weeks, and the latest announcement is likely to feed the debate. Lawmakers have proposed steep duties on Chinese exports unless China takes immediate action to end government subsidies to industries and to allow its currency to rise faster against the dollar.

 Analysts are contributing this increasing trade surplus to the soar in Chinese exports and a decline in its imports. It is simply cheaper to for China to manufacture and export than for the US. For this reason, the much debated outsourcing issue lies in that China has the comparative advantage to produce at the lowest labor cost, while it is more expensive in more industrialized nations such as the US. As the US imports much more than it exports to China, its trade deficit continues to grow. The US is thus being hurt by a trade deficit while China enjoys a trade surplus. At the moment, China’s economy seems to be growing stronger, while the US economy is being debilitated by the high impact of China’s growing exports. China thus has the capacity to influence and hurt foreign markets.

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China buying foreign markets

Source:  http://www.nytimes.com/2007/03/13/business/13sinoeuro.html

China has recently bought the well known MG, a British sports car brand. With this acquisition, China’s influence is reaching foreign markets.

The rebirth of MG is the latest and most splashy example of how China’s growing economic might is reaching carefully into foreign markets, buying up troubled companies with established brands and using them to build bridgeheads for some of the hundreds of billions of dollars that the country has to invest overseas.

China’s economy seems to be bound to keep growing. The central government will keep having enough to continue increasing its influence over other foreign markets. Greater influence means more power to the government.

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China wants to strengthen ties with Japan

Source: http://www.nytimes.com/2007/03/07/world/asia/07china.html

 

It has only been 35 years since China and Japan have resumed relations since WWII. While interaction between the two had always been strained by resentment for crimes committed during WWII,  (one being using Chinese women as “comfort women”) China is stressing to expand ties with Japan. Today, China’s foreign minister Li Zhaoxing is highly stressing relations with Japan.

 

We should take in hand this important opportunity to develop China-Japan relations,” Mr. Li said of the anniversary. He said China would welcome an amicable settlement of its dispute with Japan over oil and gas rights in the East China Sea.

 

China’s increasing ties with Japan may indeed be an “important opportunity” to benefit the central government’s economic expansion.

 

The two countries have extensive economic ties but otherwise relations have been tense, in large time legacy, of which sex slaves are one chapter.

 

Not criticizing Japan for the issue of sex slavery over economic expansion may be more beneficial for China in order to get the best expansion rate as possible. China’s rapid economic and military buildup needs as many natural resources as it can lay its hands on. Settling an agreement over the oil and gas rights in the East China Sea with Japan may result advantageous if China will receive greater control over whatever section it may have dominion over. With a settlement, China will not have to deal with Japan on the issue.  China may concentrate that portion of its time to expanding its foreign relations with other trade allies, most of which seem to come from Africa.

 

By creating an image of a good ally willing to negotiate peacefully over disputes, such as what it is trying to do with Japan, China may be trying to use this good guy influence in Africa to increase prosperity in the area. Just as China is looking for prosperity in Africa, Japan has been doing this for a while now. By appearing as the most professional and centered competitor of the East Asian section of the globe, China may be able to gain more trade alliances than Japan in Africa.

 

Hence, China’s aim is not to favor the Japanese or the Africans over agreements, but rather to continue expanding economically. With greater global economic influence, China will become more powerful and prosperous in global interactions.

 

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China’s Stock Market Recovering from drop yesterday

Source:

http://www.nytimes.com/2007/02/28/business/worldbusiness/28shanghai.html?pagewanted=1&n=Top%2fNews%2fWorld%2fCountries%20and%20Territories%2fChina&_r=1

After China’s stock market took a deep plunge of a 1,100 point drop in the Dow Jones industrial average on Tuesday, it has slightly recovered today.

Analysts are spreading the rumor that the anti-corruption program that the government is implementing may be responsible for the the drop yesterday.

But the Chinese stock market was rife with rumors that the government was considering new measures to tame the world’s hottest stock market before a bubble developed.

Other investors believe that the blind rushing in of investors into the market is what has damaged China’s stock market.

Perhaps the most remarkable sign of the recent irrational exuberance underpinning China’s stock markets was that during the last year, when a company announced bad news, its stock price shot through the roof.

Based on this incidence, it can be inferred that investors often know little of who or in what they are investing their money in. Many are hence, fooled into investing in fraudulent companies. As a result of the anti-corruption program that the Communist Party is undertaking which closes in on these fraudulent companies, stock prices drop once the companies themselves are closed in by the government. Investors then loose big.

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