China sets economic reform priorities for 2015

[Edison Chen]

China sets economic reform priorities for 2015[1]- Chinadaily.com.cn

BEIJING -- China's State Council, the cabinet, on Monday unveiled this year's priorities for economic reforms.

The reforms -- to streamline administration and deregulate power to lower levels, promote the yuan's convertibility under the capital account, and launch a trial scheme to connect the Shenzhen and Hong Kong stock exchanges -- aim to add new impetus to the country's development, the State Council said in a statement on the government website.

The central government promised to implement existed reform policies and roll out new pro-growth measures this year to stimulate the market and seek new growth potential.

China's economic growth in the first quarter of this year slowed to 7 percent, the lowest level since the financial crisis, which prompted policy makers to accelerate an economic overhaul.

In the statement, the government vowed to cut red tape, loosen control on market access and investment, and improve pricing mechanisms for public services including medicine and natural gas.

Specifically, the government said that it will promote public-private partnerships to attract private capital into infrastructure construction and public enterprises.

The government will push reforms of state-owned enterprises in key industries including electricity by reorganizing and consolidating them to improve efficiency, and it will support private firms to make the market less monopolistic.

In terms of budget and taxation, the central government plans to step up the establishment of a normative mechanism for local authorities to raise funds and a system to assess risks in their debts and sound early warnings.

It also pledged to continue to implement taxation reform, expanding value-added tax to the construction, property and finance sectors and adjusting resource tax, personal income tax and environmental protection tax.

In the financial sector, China will speed up the development of private banks and small financial institutions, and issue a guideline to ensure healthy development of Internet finance.

The country will also open up its financial sector and build a financial mechanism that better benefits the real economy, according to the statement.

The state council said the government will further liberalize interest rates, make the yuan more flexible against other currencies and promote the use of renminbi in cross-border settlement.

Reforms on urbanization, widening funding channels for city construction, improving the current rigid household registration system, and accelerating reforms on rural land to boost agriculture were all also identified as priorities.

The government promised more opening up measures, including transforming trade structures, better management of foreign investment, encouraging industrial capacity cooperation, replicating successful free trade zones elsewhere and promoting the Belt and Road Initiative.

In addition, China will make more effort to protect the environment through energy conservation, emission cuts and stricter regulation, the statement said.

 

[cnleio]

Big news inside China, at least affect future 10 years ... it seems encourage more private companies in key industries

 

[Place Of Space]

" improve pricing mechanisms for public services including medicine and natural gas. "
---
This policy is related to my daily life, good news.

 

[jkroo]

How do you assess the effects about financial sector including stock market, Edison.

 

[Economic superpower]

These reforms have been talked about year after year for the past few years but not much progress has been made. Only minor progress here and there.

It's time to stop putting out a new plan every few months and actually implement the plans already set.

Prices of oil, natural gas, coal, electricity, water, medicine, etc should be 100% determined by the market. Government should have no role in setting prices for these items. Price reform is critical for any market economy. If prices are set by the government, it will favour either consumers (thus hurting producers) or producers (thus hurting consumers). This is why prices must be set fully by the market.

Interest rates should be fully liberalised since the deposit insurance system became operational in May. Time to get rid of the deposit ceiling.

Exchange rate band should be more increased.

Capital account need to be opened by much faster.

Must accelerate the development of more financial products such as crude oil futures, and other derivatives (options, swaps) in various sectors.

Further red tape must be cut at all levels, it should be fully canceled instead of being delegated to lower levels. Delegating to lower levels, means the red tape just gets transferred instead of being 100% eliminated.

All local governments should be told to only raise new funding through the direct sale of local government bonds. Only through long term funding can infrastructure projects be carried out as they don't generate cashflow for many years and will relieve the pressure on land sales and the banking system,

Must develop the bond market for corporations to raise financing instead of relying so much on the the selective lending of the big banks. More private banks must be given the license to operate so that they can loan to micro and small companies.

 

[jkroo]

These reforms have been talked about year after year for the past few years but not much progress has been made. Only minor progress here and there.

Friend, these reforms start in early 1990s. Actually, there are HUGE progress have made during recent 25 years. I would like listed some things I can still remember.
1. 1989-1990, social insurence reform, mainly concentrate on those SOEs. Shanghai Stock Exchange has been set up then. Followed by Shenzhen Stock Exchange.
2. 1992-1993, salary reform. You can ask your parents that their salaries increased fast at that time from dozens to hundreds. POEs are advocated
3. 1994, SOE structural reform. A bunch of SOE closed and many SOEs and POEs boom.

......

Too many progress.

The stock markets are reformed much and now they are totally differrent from when they have been in 2007.

 

[Economic superpower]

Friend, these reforms start in early 1990s. Actually, there are HUGE progress have made during recent 25 years. I would like listed some things I can still remember.
1. 1989-1990, social insurence reform, mainly concentrate on those SOEs. Shanghai Stock Exchange has been set up then. Followed by Shenzhen Stock Exchange.
2. 1992-1993, salary reform. You can ask your parents that their salaries increased fast at that time from dozens to hundreds. POEs are advocated
3. 1994, SOE structural reform. A bunch of SOE closed and many SOEs and POEs boom.

......

Too many progress.

The stock markets are reformed much and now they are totally differrent from when they have been in 2007.

The reforms I talked about haven't been done yet. These are the reforms that have been talked about but haven't been achieved.

 

[jkroo]

The reforms I talked about haven't been done yet. These are the reforms that have been talked about but haven't been achieved.

That depend what result you want to see. Don't be too hurry, my friend.
As far as I can see, many achievements have been done. Still, gradual reform is what I welcomed.

 

[TaiShang]

"Made in China 2025" plan unveiled
(Xinhua) , May 19, 2015

(Photo/Weibo)
BEIJING, May 19 -- China's State Council has unveiled a national plan, dubbed "Made inChina 2025," focusing on promoting manufacturing, a notice said on Tuesday.

The plan was authorized by Premier Li Keqiang, according to the notice.

"Made in China 2025" is the first 10-year action plan designed to transform China from a manufacturing giant into a world manufacturing power.

The 10-year plan will be followed by another two plans in order to transform China into a leading manufacturing power by the year 2049, which will be the 100th anniversary of the founding of the People's Republic of China.

Nine tasks have been identified as priorities: improving manufacturing innovation, integrating information technology and industry, strengthening the industrial base, fostering Chinese brands, enforcing green manufacturing, promoting breakthroughs in 10 key sectors, advancing restructuring of the manufacturing sector, promoting service-oriented manufacturing and manufacturing-related service industries, and internationalizing manufacturing.

The 10 key sectors are new information technology, numerical control tools and robotics, aerospace equipment, ocean engineering equipment and high-tech ships, railway equipment, energy saving and new energy vehicles, power equipment, new materials, biological medicine and medical devices, and agricultural machinery.

To fulfill the tasks, "Made in China 2025" will focus on five major projects, including establishing a manufacturing innovation center, said the notice.

To shore up the plan, China will introduce a slew of policies to deepen institutional reforms and strengthen financial support.

The implementation of the "Made in China 2025" plan will be market-oriented, though guided by the government, according to the notice.

 

[Economic superpower]

"Made in China 2025" plan unveiled
(Xinhua) , May 19, 2015

(Photo/Weibo)
BEIJING, May 19 -- China's State Council has unveiled a national plan, dubbed "Made inChina 2025," focusing on promoting manufacturing, a notice said on Tuesday.

The plan was authorized by Premier Li Keqiang, according to the notice.

"Made in China 2025" is the first 10-year action plan designed to transform China from a manufacturing giant into a world manufacturing power.

The 10-year plan will be followed by another two plans in order to transform China into a leading manufacturing power by the year 2049, which will be the 100th anniversary of the founding of the People's Republic of China.

Nine tasks have been identified as priorities: improving manufacturing innovation, integrating information technology and industry, strengthening the industrial base, fostering Chinese brands, enforcing green manufacturing, promoting breakthroughs in 10 key sectors, advancing restructuring of the manufacturing sector, promoting service-oriented manufacturing and manufacturing-related service industries, and internationalizing manufacturing.

The 10 key sectors are new information technology, numerical control tools and robotics, aerospace equipment, ocean engineering equipment and high-tech ships, railway equipment, energy saving and new energy vehicles, power equipment, new materials, biological medicine and medical devices, and agricultural machinery.

To fulfill the tasks, "Made in China 2025" will focus on five major projects, including establishing a manufacturing innovation center, said the notice.

To shore up the plan, China will introduce a slew of policies to deepen institutional reforms and strengthen financial support.

The implementation of the "Made in China 2025" plan will be market-oriented, though guided by the government, according to the notice.

This important article calls for a thread of its own.

 

[Edison Chen]

How do you assess the effects about financial sector including stock market, Edison.

These reforms are being carried out for reasons.

1, Many signs have predicted a big difficulty for traditional finance or commercial banks because of the overall recession of our economy, they are experiencing a rising non-performing loan ratio（NPLR）, the quality of bank's assets (loan) is continually being weakened. (Please note that the sudden drop of NPLR in March 2009 is due to strip bad assets off four state-owned banks who were planing IPOs, although the bank's bad assets were disappeared from their financial statements, they are still there inside our financial system). We can see since September 2013, the NPLR is rising, now in 2015 the tendency is even more obvious. All the stimulus policy is to release liquidity, to reduce the financing cost of SME, since their average profit margin is only 5%, many of them are going bankruptcy, the financial instituation will only get better if the real economy is going strong.

2, The gap of borrowing and lending interest rate is being more close. The floor of lending rate is free, the next step would be deposit rate cap, most probably in the end of 2015, at that time the interest rate liberalization is basically finished on the preliminary stage. The day when banks mak money by just sitting there is forever gone, since more than 70% of banks profits is interest rate differential, now they have to resort to income of intermediate businesses (中收)，现在各家商业银行资产端，负债端压力都很大，由于净息差收入逐步缩窄而且所占用成本过高，各家银行利润增幅都有所回落。之前的几次降息和扩大浮动区间也实际上压缩了银行利润空间，现在存款市场供需严重不平衡，银行负债难度前所未有地增加，所以大部分银行除了四大行都会上调存款利率，部分城商行（如南京银行，重庆农商行）已经按照1.5倍区间一浮到顶，所以这样以来，存款利率上调，但贷款利率下降。所以利率市场化以后，银行盈利模式受到很大考验。

About the stock market, I'm not professional, I think you can still invest. Because from the volumes of the funds into the stock market, the trend is still constantly flowing in. The reason I think is the PBOC has lowered the interest many times, it will do this again in the near future, this is a stimulus policy. The local government's debt is allowed to be the collateral of our central treasury, SLF, MFL and PSL, this policy will encourage banks to buy local debts, to relieve the pressure and risks of local governments. All these policies is aiming at releasing liquidity as I said before. Besides this, "one belt one road" is coming out, but no real actions we can see now, sometimes the concept will also push the market, but it won't last long. You should be cautious that why our economy is on a temporary recession, but the stock market is as bullish as crazy.

Capital account need to be opened by much faster.

Yes, once the capital account is opened, it will hedge the bad effects of the outflow of foreign capital.

Further red tape must be cut at all levels, it should be fully canceled instead of being delegated to lower levels. Delegating to lower levels, means the red tape just gets transferred instead of being 100% eliminated.

I hope so, but the process need time for each party to accept. The less intermediate link, the less chance to corruption.

Must develop the bond market for corporations to raise financing instead of relying so much on the the selective lending of the big banks. More private banks must be given the license to operate so that they can loan to micro and small companies.

Yes bro, I can't agree more. Indirect financing (people deposit to the bank, and then bank lend their money out ) is making too much cost for our companies, it's also killing the banks ability to make profits. Issuing stocks and bonds is a better solution.

 

[jkroo]

These reforms are being carried out for reasons.

1, Many signs have predicted a big difficulty for traditional finance or commercial banks because of the overall recession of our economy, they are experiencing a rising non-performing loan ratio（NPLR）, the quality of bank's assets (loan) is continually being weakened. (Please note that the sudden drop of NPLR in March 2009 is due to strip bad assets off four state-owned banks who were planing IPOs, although the bank's bad assets were disappeared from their financial statements, they are still there inside our financial system). We can see since September 2013, the NPLR is rising, now in 2015 the tendency is even more obvious. All the stimulus policy is to release liquidity, to reduce the financing cost of SME, since their average profit margin is only 5%, many of them are going bankruptcy, the financial instituation will only get better if the real economy is going strong.

View attachment 223264

2, The gap of borrowing and lending interest rate is being more close. The floor of lending rate is free, the next step would be deposit rate cap, most probably in the end of 2015, at that time the interest rate liberalization is basically finished on the preliminary stage. The day when banks mak money by just sitting there is forever gone, since more than 70% of banks profits is interest rate differential, now they have to resort to income of intermediate businesses (中收)，现在各家商业银行资产端，负债端压力都很大，由于净息差收入逐步缩窄而且所占用成本过高，各家银行利润增幅都有所回落。之前的几次降息和扩大浮动区间也实际上压缩了银行利润空间，现在存款市场供需严重不平衡，银行负债难度前所未有地增加，所以大部分银行除了四大行都会上调存款利率，部分城商行（如南京银行，重庆农商行）已经按照1.5倍区间一浮到顶，所以这样以来，存款利率上调，但贷款利率下降。所以利率市场化以后，银行盈利模式受到很大考验。

About the stock market, I'm not professional, I think you can still invest. Because from the volumes of the funds into the stock market, the trend is still constantly flowing in. The reason I think is the PBOC has lowered the interest many times, it will do this again in the near future, this is a stimulus policy. The local government's debt is allowed to be the collateral of our central treasury, SLF, MFL and PSL, this policy will encourage banks to buy local debts, to relieve the pressure and risks of local governments. All these policies is aiming at releasing liquidity as I said before. Besides this, "one belt one road" is coming out, but no real actions we can see now, sometimes the concept will also push the market, but it won't last long. You should be cautious that why our economy is on a temporary recession, but the stock market is as bullish as crazy.



Yes, once the capital account is opened, it will hedge the bad effects of the outflow of foreign capital.



I hope so, but the process need time for each party to accept. The less intermediate link, the less chance to corruption.



Yes bro, I can't agree more. Indirect financing (people deposit to the bank, and then bank lend their money out ) is making too much cost for our companies, it's also killing the banks ability to make profits. Issuing stocks and bonds is a better solution.

Good analysis.

I think that's why deposit insurance system will be effective this year. Banks will be more efficient in forseeable future and don't forget China has biggest banks in the world.

I reckon that there's an opportunity for you that China is now founding many multilateral foundations. Don't you ever think apply a postion in AIIB? It's your age and take your chance, I'd like to see a new banker emerging.

Good luck, Edison

For what I know you served in a Bank for sometime. As a professional HR I think you need 2 more years to strenthen your capability in a stable environment (don't change your company frequently) and try to develop yourself to a upper level(business ability and knowledge scale), I mean the position. But I do think you need to take the chance.

Try hard, boy.

 

[Edison Chen]

I think that's why deposit insurance system will be effective this year. Banks will be more efficient in forseeable future and don't forget China has biggest banks in the world.

It's good for small banks who eagerly need to replenish their liability, the max claim amount of deposit loss is 50w, which means, for those customers who have more than 50w rmb in any bank will consider to disperse extra amount of money to other banks, to dilute the risk of asset loss as much as possible. It also means government no longer responsible for the bankruptcy of banks, government guarantee is replaced by bank's guarantee. Government will focus more on supervision and regulation rather than directly intervention into the market affairs. So yes they will be more efficient.

I reckon that there's an opportunity for you that China is now founding many multilateral foundations. Don't you ever think apply a postion in AIIB? It's your age and take your chance, I'd like to see a new banker emerging.

Good luck, Edison

For what I know you served in a Bank for sometime. As a professional HR I think you need 2 more years to strenthen your capability in a stable environment (don't change your company frequently) and try to develop yourself to a upper level(business ability and knowledge scale), I mean the position. But I do think you need to take the chance.

Thank you very much my friend!! Although I've been here for some time, I find it still many things to learn. I wish a position rotation, to work at each department in this company, and then apply for higher management position of the headquarter or come down to the president of a sub-branch. It takes time, I will strengthen my capabilities in a stable environment as much as possible. Glad and very happy to talk to a HR! Maybe need your guide in the future.

 

[jkroo]

It's good for small banks who eagerly need to replenish their liability, the max claim amount of deposit loss is 50w, which means, for those customers who have more than 50w rmb in any bank will consider to disperse extra amount of money to other banks, to dilute the risk of asset loss as much as possible. It also means government no longer responsible for the bankruptcy of banks, government guarantee is replaced by bank's guarantee. Government will focus more on supervision and regulation rather than directly intervention into the market affairs. So yes they will be more efficient.



Thank you very much my friend!! Although I've been here for some time, I find it still many things to learn. I wish a position rotation, to work at each department in this company, and then apply for higher management position of the headquarter or come down to the president of a sub-branch. It takes time, I will strengthen my capabilities in a stable environment as much as possible. Glad and very happy to talk to a HR! Maybe need your guide in the future.

Try hard to be a banker.

Glad to know you have this kind of plan. I think you could come down to a sub-branch to be a head/manager first(usally a acting head/manager for at least 1 year and one of my friend have the same development plan which is arranged by the company) that will enhance your capability most. Then to be promoted as a director/senior manager in the headquarter.

I also think you will have a very good career.

I would like to share you my theories if possible. My own theory that is published in an automobile company's own paper.

 

[S10]

The primary focus for the next 10 years should not be GDP growth, but rather stabilization. As long as growth rate over 5% is maintained, it's all good. The most pressing issues that need to be resolved first:

- Corruption
- Pollution
- Excessive production
- Property bubble

If they can manage those 4 issues, then it's smooth sailing from that point on.