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Looking inwards

Foreign direct investment in China will flow to the interior provinces

FOREIGN investors in China will be increasingly drawn to China’s interior provinces in the years ahead, according to a report by the Economist Intelligence Unit, our sister organisation. Rapid urbanisation in these provinces will provide a ready source of labour and contribute to booming retail markets. In the central provinces the average urbanisation rate will leap from around 44% in 2010 to nearly 55% in 2020. This shift is already clear. In 2007 the municipality of Chongqing in western China was ranked 22nd out of China’s 31 provinces in terms of overall FDI. In 2011 it attracted an estimated $10.8 billion in inward investment, more than the capital, Beijing. By 2014 it will be the fourth-largest destination in China, ahead of Shanghai and Tianjin. Within five years, nearly half of FDI will go to areas outside of the eastern seaboard, compared with less than 20% in 2000. View the interactive map below (in Firefox, Safari or Chrome) for 2011-15 forecasts for each province.

Looking inwards

Feb 21st 2012, 03:07

For Chinese Communist Party (CCP), traditionally, the four district: Liaoning, Beijing, Shanghai, Guangdong - are the places where CCP importantly focus on exercising policies as well as cultivating big head from Mao Ze-dong established the regime in 1949’s Beijing. To let these big head be the local leader can lead to accumulating their grade in order to chase Beijing's political position.

This number 11.5% is the very big issue we can discuss for a long time, but I just brief some. You put forward the typical example, Liaoning province. Both Bo Xi-lai and Li Ke-qiang have relied on Liaoning for promotion with this place. In 2000's winter, a very big scandal (Ma Shiang-dong case) happening in Liaoning make the former China's president Jiang Ze-min appoint Bo to be the provincial governor in emergency. The aggressive Bo extemporaneously rally a historically huge business group, about 6800 people, learning the latest business affairs from the interior Guangdong to outside Japan, South Korea, Hong Kong, France. Full of Bo’s vitality, Bo’s policy with Eastern-North Asia incite the rapidly progressive international trade, reflecting on Dailian port which represented the surpass over Germany in 2010’s January.

Then in 2004 when Hu Jing-tao and Wen Jia-bao claimed the plan “rising three provinces of Big Eastern-North”, Hu and Wen appoint Li Ke-qiang, my boss and the same faction as Hu and Wen, as the secretary general in Liaoning, also borrowing Li’s profession in economics of Doctor degree. Depending on the direct relation with Hu and Wen and resource from Beijing, Li does the most brilliant achievement among numerous local leaders during Hu’s first tenure. Li is good at dealing with the “Trust” concerned so, of course, the growth of Foreign Direct Investment (FDI) was higher than other provinces. Therefore, at Li’s age of 52, Li can be the historically-young one in Politburo, also letting Li have ability to compete or say balance Xi Jin-ping who own the massive social network in CCP. Under these two's leadership, Liaoning is also becoming the best holiday's destination in China. Basically, Liaoning is the focus of how CCP may continue to work in Beijing.

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這篇是當年經濟學人雜誌的每日看圖說話欄，有一張互動圖片當滑鼠移至上方便會顯示外商直接投資額的各省數字。筆者是回了一名特別關心天津和重慶等數字較大的網友，對其詢問以這些數字和政治關係連結作回答。這裡再稍事補充。從1949年建政以來，到了1954-55年有廢除聯省局辦公室，設置各省省委書記作中共中央監督各省行政業務的橋樑。比如趙紫陽是廣東省的第一任，也是各省第一任的最年輕的省委書記，而重慶的近年經濟表現暴漲除了延續十多年前開發大西部的措施，及當時任上的薄熙來在大連市長與遼寧省長的經驗。因薄的鎮壓法輪功所致，被逮捕人數達全國之冠，大連的星海廣場建設也很具西方及現代化風格，在「馬向東案」後由江澤民擢升至遼寧省長，也在任上率領商隊約6800人次的訪問日本、韓國、香港和法國。大連港是當時比上海、連雲港和廣州還要現代化而繁忙的港口，就是靠薄任上和日本、韓國建立的關係。之後當薄在重慶上任後，經驗又帶到重慶，除了警政措施嚴厲外，民生社會福利上和政治活動頻繁，曾經被以為是中共第五代，和習近平、李克強同上同下者。但薄並非善類，原因在Heywood會再提到。

另一方面提及胡錦濤任上的主軸，承繼江澤民的「西部開發」，就是「開發大東北」，因此派所信任、同為共青團派出身而有經濟學專長的李克強擔任遼寧省委書記，遼寧的經濟很穩健，各項民生指數比較正向，同期各省僅有上海及天津生活水平較為優質，這裡指貧富不均等落差較小。由於偏理性主義思考，重視國營事業及地方政府事業信用度，遼寧省的外國投資成長量為數年全國之冠，也讓李能以52歲中共史上最年輕受當時中共中央組織部部長李源潮舉薦就當上政治局委員。可惜今天這套在習近平連任後不再受習重視，這圖表因版權和心情，不擺在這提也罷。

China and the World Bank

2030 vision

Feb 28th 2012, 15:46 by J.M. | BEIJING

CHINA’S economic reforms have seen few breakthroughs in the past few years, or so the analysts tend to think. As the country prepares for big changes due in its top leadership after a Communist Party congress late this year, senior officials are becoming even less inclined than usual to take risks that might damage their careers. And with the economy still growing rapidly, despite the rest of the world’s problems, many of them see no urgent need for change.

The World Bank thinks differently. In a 468-page report, “China 2030”, it has set out a huge range of policy measures it says are needed in order to prevent the country from eventually falling into a “middle-income trap” of much slower growth. Its suggestions range from weakening the grip of state-owned enterprises to letting the market play a bigger role in the setting of interest rates. Such ideas have been aired by others before, but World Bank officials suggest there is a chance their report could help nudge China into action. 

It will certainly be widely noted in China. Unlike the bank’s last report of this kind (“China 2020”, published in 1997), this one was co-authored with a government think-tank, the Development Research Centre (DRC) of the State Council. The DRC is an influential organisation which supplies the government with policy advice. The finance ministry was also involved. A deputy prime minister, Li Keqiang, who is expected to take over as prime minister from Wen Jiabao next year, is thought to have played an active role in arranging this co-operation between officialdom and the bank.

Having the DRC’s name on the document gives China’s reformers cover. The World Bank is viewed with suspicion by hardliners, who see it as a meddler in the affairs of developing countries and a purveyor of ideas that could undermine party rule in China. With a semi-official stamp of approval on it, the report will be less easy for conservatives to dismiss as part of a Western plot. In turn, it’s believed, the DRC used the World Bank as cover in its discussions with foot-dragging bureaucrats (“Don’t blame us for these proposals, blame the bank”). At times, behind closed doors, the DRC argued for even bolder reforms than the bank itself was suggesting.

The bank, however, should be prepared for disappointment. In the buildup to the party congress, a bit of reformist posturing is only to be expected. Different factions in the party want to air their agendas in order to influence the policy choices of the new leaders. A hint of this emerged in a commentary in the People’s Daily(in Chinese) on February 23rd. It said some officials wanted to keep things as they were in order to avoid criticism, but that this would eventually result in an even greater crisis. “No matter how thorough plans are, or how intelligently crafted they are, reforms will always be attacked,” it said, giving warning that mere “tinkering” with reform had been the downfall of great nations and parties.

Also on February 23rd, details emerged of a proposal by the People’s Bank of China (long an outlier among Chinese bureaucracies for its reformist hue) for accelerating reform of capital controls with the aim of making the yuan a global reserve currency. The plan was published in theChina Securities Journal(in Chinese). But despite the World Bank’s efforts to persuade the Chinese government that reform is relatively easy to manage in good times, prospects for quicker action still look dim, at least in the near term.

China’s new leaders will likely take at least a few months to consolidate their power and settle in before they feel confident enough to tackle economic reforms that affect powerful vested interests, such as the bureaucracy that controls state enterprises or the ministry of commerce. (Nicholas Lardy of the Peterson Institute for International Economics in Washington, DC, describes the influence of these groups in a detailed chapter in his new book, “Sustaining China’s Economic Growth After the Global Financial Crisis”). Even then, it is very unlikely that those who take over leadership of the party in a few months’ time will be any stronger than their predecessors when it comes to taking on the conservatives.

Credit cards in China

Citi building

Is China’s financial liberalisation accelerating?

Feb 11th 2012 | Hong Kong | from the print edition

LAST year your correspondent visited one of Citibank’s few branches in mainland China, hoping, among other things, to get a local credit card. The reply was unexpected. “Sorry, sir, but we are not very good in China. I recommend you go to another bank.”

Assuming such honesty has not already cost him his job, the teller has a better story now. This week Citibank became the first Western bank to receive regulatory approval to issue credit cards in its own name; previously, foreign banks (Hong Kong’s Bank of East Asia was the exception) could offer cards only through local partners. Citi has been expanding its retail network in China, including in novel places like airports and tube stations. In January it also announced it would set up a joint venture with China’s Orient Securities Company.

Is good news for Citi also manna for others? Some note that China’s official policy is to encourage consumption and wonder if the announcement suggests a desire to expand the domestic credit-card market in a big way. Others point out that China stands accused at the World Trade Organisation (WTO) of illegally boosting UnionPay, a domestic payment system backed by big local banks, and ask if this signals opportunity for the likes of MasterCard and Visa.

Do not hold your breath. It is true that the country’s credit-card market is growing (local banks had issued nearly 270m cards by the end of the third quarter last year, up by 20% on a year earlier) but from a low base. Officials would much rather see future consumption growth come via lower household savings than through splurges on credit cards, argues Tom Quarmby of Barclays Capital. And even if the WTO case results in a formal change in regulation, says Liu Jing of the Cheung Kong Graduate School of Business in Beijing, such are the advantages of incumbency and local backing that UnionPay is likely to remain dominant.

As for the notion that Citi’s recent advances suggest a speedier opening of China’s financial system to foreigners, that hope also seems misplaced. This is a year of leadership transition in China, when officials typically take few chances. Some reforms may move forward, but probably as pilot schemes. Foreign firms have invested heavily in order to capitalise on any Chinese bonanza, but the waiting game is far from over.

from the print edition | Finance and economics