China’s Government Work Report March 2016

See here a very well done overview, with many thanks to The World Bank office in Beijing that graciously distributed the Bloomberg overview.
No comments needed…

Key Points of China’s Government Work Report: Full Text

By Bloomberg NewsC/O World Bank
The following is the full text of a summary of China’s Report on the Work of the Government distributed 11 March 2016 at the annual meeting of the legislature in Beijing:

  1. China’s Economic and Social Development in 2015
  • The main tasks and targets for the year were fulfilled
  • Progress was achieved and stability ensured in economic and social development
  • GDP reached 67.7 trillion yuan, representing an increase of 6.7% over 2014–a growth rate faster than that of most other major economies
  • Consumer prices grew slowly
  • A total of 13.12 million new urban jobs were created
  • The service sector as a proportion of GDP rose to 50.5%
  • The contribution of consumption toward economic growth reached 66.4%
  • Energy consumption per unit of GDP fell by 5.6%
  • The number of newly registered businesses rose by 21.6%, or an average of 12,000 new businesses per day
  • Personal disposable income per capita increased by 7.4% in real terms
  • The number of rural residents living in poverty was reduced by 14.42 million
  1. Main Targets for 13th Five-Year Plan Period (2016-2020)
  • Double the 2010 GDP and per capita personal income.
  • Annual GDP growth: 6.5% or above.
  • R&D spending: 2.5% of GDP
  • Science and technology’s contribution to economic growth: 60%
  • Permanent urban residents: 60% of the total population.
  • Registered permanent urban residents: 45% of the total population.
  • High-speed railways in service:30,000 km, linking 80% of big cities.
  • Expressways built or upgraded: 30,000 km
  • Full coverage of access to broadband networks
  • Improvements to the environment
  • Water consumption per unit of GDP: Down 23%
  • Energy consumption per unit of GDP: down 15%
  • Carbon dioxide emissions: down 18%
  • Lift all rural residents falling below the poverty line out of poverty
  • New urban jobs: more than 50 million
  • Housing units rebuilt in rundown urban areas: 20 million
  1. Major Areas for Work 2016

3.1 Main development targets

  • GDP growth: 6.5%-7%
  • CPI increase: approx. 3%
  • New urban jobs: more than 10 million
  • Registered urban unemployment rate: within 4.5%
  • Steady increases in imports and exports
  • A basic balance in international payments
  • Increases in personal income basically in step with economic growth
  • Energy consumption per unit of GDP: down more than 3.4%
  • Further reductions in the release of major pollutants

3.2 Macroeconomic policies

  • Implement proactive fiscal policy and prudent monetary policy
  • Deficit: 2.18 trillion yuan
  • Deficit-to-GDP ratio: 3%
  • Special bonds for local governments: 400 billion yuan
  • Continue to issue local government debt-converting bonds
  • Replace business tax with VAT in all sectors
  • M2 money supply growth: approx. 13%
  • Aggregate financing growth: approx. 13%
  • Reform the modern financial regulatory system
  • Keep the RMB exchange rate generally stable at an appropriate and balanced level

3.3 Supply-side structural reform

  • Cancel the requirement of government review for more matters
  • Pilot a negative list for market access
  • Implement the strategy of innovation-driven development
  • Encourage business startups and innovation
  • Strengthen protection of intellectual property rights
  • Address overcapacity in the steel and coal industries
  • Improve SOE performance
  • Diversity types of SOE equity
  • Protect the property rights of entities under all forms of ownership
  • Energize the non-public sector

3.4 Domestic demand

  • Support the growth of consumption in elderly care, health, housekeeping, education, training, cultural, and sports services
  • Strengthen the growth of emerging areas of consumption such as information goods and services, smart homes, and personalized fashion
  • Cut tariffs on some consumer goods
  • Increase the number of duty-free stores
  • Speed up tourism development
  • Invest more than 800 billion yuan in railway construction
  • Invest 1.65 trillion yuan in road construction
  • Start construction on 20 water conservancy projects
  • Develop hydropower, nuclear power, ultra high-voltage power transmission, smart grids, pipelines for oil and gas transmission, and urban rail transit
  • Improve the PPP model to stimulate private investment
  • Advance new urbanization
  • Grant urban residency to more people with rural household registration
  • Reform the household registration system
  • Implement the residence card system

3.5 Opening up

  • Move ahead with the Belt and Road Initiative
  • Promote innovation-driven development of foreign trade
  • Launch trials in the area of trade in services
  • Adopt a more proactive import policy
  • Increase the import of advanced technology and equipment, key spare parts and components, and energy and raw materials in short supply in China
  • Continue to relax market access restrictions on investment
  • Further open up the services sector and the general manufacturing sector
  • Simplify procedures for establishing overseas-funded enterprise
  • Establish more pilot free trade zones
  • Achieve greater industrial-capacity cooperation with other countries
  • Accelerate implementation of the free trade area strategy
  • Negotiate on the RCEP agreement
  • Negotiate on the China-Japan-ROK free trade agreement
  • Negotiate on investment agreements between China and the United States and between China and the European Union

Ghent is new structural partner of the FCCC

As announced on 30 November 2015, the City of Ghent has become a new structural partner of the Flanders-China Chamber of Commerce (FCCC). With its 252,000 inhabitants, Ghent is the second largest city in Flanders.
Over 70,000 students make Ghent the largest student city in Flanders, including Ghent University that ranks 71st on the ‘2015 Academic Ranking of World Universities’. The young heart of the city boosts innovation and creativity. Ghent is a city that combines a strong logistic and industrial complex and hi-tech knowledge activities. The city’s seaport provides over 60,000 jobs and generates a surplus value of €6,7 billion. The city is developing a pro-active approach to attract activities of world-leading companies that strengthen the existing industrial clusters in the cleantech, biotech, materials and ICT sector.

Ghent is linked with China in various ways:

  • In November 2013 Ghent and the Chinese city of Weihai signed an agreement within the context of the China-EU Partnership on Sustainable Urbanization.
  • Various companies in Ghent do business with China. Volvo Car Gent is one of the biggest employers of the Ghent region. The factory is part of the Volvo Car, owned since 2010 by China’s Geely Holding Group.
  • Ghent is an attractive city for Chinese tourists to visit.
  • The City of Ghent, together with Ghent University, the Flanders-China Chamber of Commerce and Port of Ghent form the China Platform, a central point of contact for all matters relating to China. It directs, coordinates and supports initiatives in education, research and business.

I am from Ghent where I also attended the university to study engineering.
See the text here: City of Ghent and FCCC
Beijing has a special representative of the University,

Full report “Outlook 2016”: fasten seat belts

As many people have requested the full version, here it is (click to download the PDF!):

Since my newsletter came out, I only get the confirmation of the trend we are witnessing. Still, many people are naïve and belief all is well. Even China Daily continuous to mention how difficult the economic situation is. Those people with rosy glasses better read a bit more China Daily, SCMP and other.
The clampdown on the media, and the Internet, is worse. During the “Two Meetings” many people became desperate as their VPN stopped working (I survived it very well, thank you). TV, newspapers, Internet: are systematically cleaned up. Even artists have to serve the Party and its goals first. Never mind art. Call it all now Propaganda.
Social unrest is starting to get worse. As the NYT and other media reported, there were “2,700 strikes and protests last year (related to labor issues), more than double the number of 2014. In January 2016 alone: 500. Closing down the zombie SOE, cutting wages, not paying salaries are all having their impact. Sadly to say, workers’ rights are a joke (Please call Marx to do something in China?). The workers who are not paid for month and protest: the police “cleans them up”.
Imports and especially exports are going further down. Real estate: as I always mentioned, different bubbles depending on what segment of the market you are looking at. But one aspect many overlook: while new housing sells sometimes very well, the existing stock does not disappear as hoped. Seems only Shanghai can justify the increasing price levels.
So, as I said, fasten seat belts. But don’t just run away yet.

Gilbert and Chinese qipao

Yes, as some of my friends say, I get involved in “many things”.
One is the official setup of the World Qipao Association. It is connected to my role in the International Gongfu Committee. (don’t try to understand!)
On 13 October 2015 in Changbaishan International Hotel (Beijing) an event was held showing the traditional culture of qipao.
To illustrate a little the event see here my short speech before handing over the registration certificate to the qipao ladies:

” Ladies and gentlemen, dear friends, good morning!
Today we convey our congratulations to the World Qipao Association to become a subsidiary of the International Gongfu Committee. We hope Chinese qipao culture can be promoted in the world. Already many foreigners are familiar with qipao but more can be done because the dress is really charming and elegant, a famous fashion statement for Chinese ladies.
Gongfu shows men’s beauty and strength, qipao shows ladies’ soft beauty.
We today celebrate the start of the NGO program for “China No Cancer”. We wish both undertakings a big success!”

The event was really charming. I think never so many ladies have been taking pictures with me!

Talking to University of New Hampshire: no sugar coating

On 14 March another talk to around 30 delegates from the MBA group of the University of New Hampshire, a regular in Beijing.
As usual in Novotel Peace.

I felt the Professor was a bit surprised or even uneasy with my rather dark view on the situation today in China. They had another presentation earlier by the vice president of a large and very well know foreign company, with extensive operations in China. His views were pretty upbeat, contrary to mine.
Later I got feedback on the comments from Chinese participants who were not offended at all and agreed with my views. Confirms to me that quite a number of people are too worried that certain things are being said: call it being too cautious, without reason. Of course all depends on the audience.
As I mention in the beginning of the presentation, the idea is to give a different view on China. Actually my views are very accurate and are based on solid information, in line with well-know economists. The same day I was reading China Daily: it said much the same: “the situation is grim”. My “Outlook 2016” gives a more complete and balanced view, more on that in another post.
Other speakers often tend to sugarcoat the situation, giving a rosy picture of a bad situation. They do this to please officials. Because they work for a major company (selling to China) they are worried their “frank views” might damage their relation with the government,. They also have bosses and are thus careful. So, I do not really criticize them that much. But some can also completely ignore reality, like wondering if they ever lived and worked in China.
Having speakers from the financial/economics area would result in a different view as they don’t have this limitation. Same like me and on top of that I don’t have a boss to micro-manage me.
Exactly this week the media were full of rather dark announcements on curtailing any “divergent views” – and on the growing amount on cases of social unrest in the country.
As I always explain, the students must be able to listen to different points of view to make up their mind. In this respect I also encourage organizers to let them listen to officials, even if their talks are boring, contain little of relevant information and normally never answer a serious question. It is part of the learning curve!