By Adriana Villa, on 24 July 2009 – BizChinaUpdate
China is facing “grim” fiscal conditions, according to comments attributed to Premier Wen Jiabao. The situation requires “the unswerving implementation of proactive fiscal policy and relatively easy monetary policy to shore up the economic recovery,” state media reports.
The Chinese economy is “at a critical moment on the road to recovery,” Wen said, and the fiscal conditions remain “grim.” The Premier urged provincial finance authorities to “cut back unnecessary expenditure,” and “put the money into the real economy to promote solid recovery.”
The Premier’s comments come days after a controversial report produced by a Washington-based Asian economic policy unit questioning China’s first-half GDP growth figure. The Heritage Foundation report, entitled China Refuses to Adjust Its Economy, raised questions about how China could “survey the economic progress of 1.3 billion people” in 15 days, concluding the economic results were “manufactured to suit the Communist Party.”
So far for the news flash. People should pay more attention when top leaders come with such announcements. They signal some serious concerns – and I agree. See earlier entries on this blog. We are NOT out of the woods yet. As for the GDP figures, I believe them as much as the top financial analysts and economist of the West. Meaning: wild and meaningless – most have no clue.

“The problem now is not how to withdraw the stimulus packages, it is how to restore growth. To save its economy, the United States has to save more. But if the United States saves more, someone else has got to save less if we are to maintain around a 5 percent growth rate for the global economy. This is an equation that needs to be resolved in the coming 2-3 years. It is going to be an issue of realigning exchange rates globally.”
Youssef Boutros-Ghali, chairman of the International Monetary and Financial Committee (IMFC) of the IMF – interview with China Daily, July 2009
What more can one say! I remain not too optimistic. Too much unemployment in USA and EU. Consumers won’t spend if they have little or no income, need to save and avoid home foreclosure.
In Beijing the oversupply in the office market only can get worse. Just walk around in CBD. Residential sector is doing reasonably well as many Chinese still need to increase and improve their living space. But that’s the low-end market. Some blame rampant government corruption and fat profits from developers for high real estate prices. At least that explains why Lamborghinis are selling well in Beijing. Even in our modest Julong you can see some. This week I saw a bunch of them being unloaded. The money has to come from somewhere.

On 4 July Gilbert was invited by Caijing (probably the most open news medium in China) to join the Summit in China World.

Pictured are among others Li Rongrong (Chairman of SASAC) and Liu Chuanzhi, Chairman of Legend Holdings Ltd (mother company of Lenovo).
Much of the talking was of course on the economy, stimulus plan etc. The usual.
As for the topic “Cooperation and responsibilities of Transnational Companies”, of course the Chinese side requested the MNC (or you prefer here, the TNC) to “invest more in China, not to fire people, to do more R&D, to be involved in CSR”.
We all can agree on that – as long as MNC (and all other foreign companies in China” are protected for their IPR and have fair market access as a “domestic enterprise”. The EUCCC remains positive, see here the latest:
PRESS RELEASE (EUCCC)
European Chamber welcomes Premier Wen’s statement on maintaining an open market environment in China
Beijing, 3rd July, 2009. The President of the European Union Chamber of Commerce in China, Joerg Wuttke, in an address this afternoon to the Main Forum of the Global Think Tank Summit in Beijing, hailed recent comments by Chinese Premier Wen Jiabao that underline China’s commitment to maintaining an open market environment.
Said Mr. Wuttke: “We welcome Premier Wen’s strong statement on the 25th of June that China will not discriminate against foreign enterprises or products. European businesses in China hope to see more concrete measures to ensure this position will be well implemented across the board.”
In his remarks, Mr. Wuttke also noted that European businesses in China are eager to see a quick and comprehensive conclusion of the Doha round of WTO talks.
“We need a signal that the world is moving on, and that a stronger WTO mechanism is being put in place,” he stated.
The inaugural session of the Global Think Tank Summit opened in Beijing on Thursday and will run until Saturday evening. The event, which is organized by the China Center for International Economic Exchanges (CCIEE), brings together political and business leaders from China and around the world to discuss remedies for the global financial crisis and the future development of the world economy.

The comments from the EUCCC for sure made waves. Premier Wen Jiabao tried to convince Ms. Merkel all is well over here (see earlier entry).
Now on 26 June 2009 People’s Daily Online reported:
“Ministries: China to treat domestic, foreign products equally:
Regarding China’s efforts on securing fair implementation of the bidding system in government procurement projects as trade protectionism is a misunderstanding. Actually products made by foreign-funded enterprises in China are treated as China made products. China will continue to keep its commitments on its opening-up policy and will never take any discriminative measures against foreign companies or products.
Those remarks were made by Yao Jian, spokesperson of the Ministry of Commerce, and Li Pumin, spokesperson of the National Development and Reform Commission, in their joint statement on June 26.”
and on 2 July China Daily reported:
“On June 4, nine Chinese ministries jointly clarified their stance on the issue, saying there was no harm in buying domestic products, as the wind power project is part of government procurement, and not part of the 4-trillion-yuan stimulus package.” (note: this is wrong – not a case of government procurement, read the Law!)
“Last Friday, the Ministry of Commerce said on its website that China sticks to the principle of treating foreign and domestic products on equal terms when it comes to stimulus-financed projects, and foreign enterprises have already benefited from the package.
All nice promises but it remains to be seen if except for Mofcom anybody else will actually follow the instructions. Past experience shows – NO. But let’s hope that this time, words will be followed by action.
Otherwise, attracting more foreigners to set up factories here will be more difficult. Initial comments from Mofcom were kinda real dumb:
“Foreign factories here in China should know there are other markets than China”. Oops. So, you mean, we should close our factories in Europe, put them here to export to the EU and other markets and have little access to the Chinese market?. Seems Mofcom understood (?) the faux-pas and tiptoed back. At least in words.
As with the pathetic Green Dam stuff, wait and see.
The proof is in the pudding.
Optimism is not yet guaranteed.