Highlights from the EO print edition, No. 608, Feb 25, 2013
Real Estate Regulation in First-Tier Cities to be Tightened
News, cover
~ Data obtained by Economic Observer shows that in January, second-hand housing prices in Beijing's major districts increased by 18.8 percent. Housing prices in Shenzhen, Guangzhou and Shanghai also all increased by over 12 percent.
~ A report by UBS Securities said that if the government doesn't launch measures to control housing demand in major cities, the speed of housing price increases could accelerate.
~ Through interviews with the Ministry of Housing and Urban-Rural Development, China Real Estate Industry Association, banks and other relevant departments, the EO found that housing restrictions in first tier cities are likely to continue to tighten, though the specific policies of each local government won't be announced until after the "Two Sessions" meetings in March.
~ Policies are likely to be tightened in two areas. The first is an increase in transaction taxes. The second will be related to restricting credit, for instance, there's been discussion about lifting the down payment required on a second home from 60 to 70 percent of the total cost. It's also possible that interest rates will be increased. A property tax is unlikely to be introduced on a large-scale in the near future.
Original article: [Chinese]
Executives at SOEs to have Salaries Capped
News, cover
~ The Economic Observer learned that two new policies regarding state-owned enterprises (SOEs) have been formed and are expected to be introduced this year. The first is to standardize the salary of high executives at SOEs and the second is to increase the proportion of dividends that centrally-administered state-owned enterprises (COEs) are required to hand over to central government.
~ According to the policy, COEs will be made to lift the proportion of their profits that they are required to transfer to the Ministry of Finance by about 5 percent.
~ The increase is part of broader reforms aimed at shifting industrial profits on to the government's books in order to help fund an expansion of China's social services.
~ Centrally-administered SOE began to pay dividends to the central government in 2007. Before then, they were only required to pay regular taxes like most other businesses.
~ Currently, resource-orientated COEs must hand over 15 percent of profits as dividends. General COEs must pay 10 percent and those related to military, industry or research pay 5 percent. Currently, only China National Tobacco Corporation needs to pay over 20 percent in dividends. China Grain Reserves Corporation and China National Cotton Reserves Corporation are not required to pay any dividends.
~ Regarding salary caps, the policy will take into consideration executive performance and the company's on-going development.
~ A source from the Ministry of Human Resources and Social Security who is familiar with the issue said that the most important reform point in the new salary cap policy is that it will introduce an Economic Value Added (EVA) assessment.
~ In other words, when evaluating performance of executives at SOEs, the company's profit and how much state funding it has received will be considered. In the past, when the State-Owned Assets Supervision and Administration Commission (SASAC) assessed SOEs, it ignored the fact that they enjoyed favorable bank loan policies, which led to extremely high salaries among their high executives.
Original article: [Chinese]
Energy Target Puts Pressure on Bid to Double Incomes by 2020
News, page 5
~ This year China's resource industry will be focused on three main reforms. The first is institutional reform, the second is the establishment of eight measures to support the photovoltaic (PV) industry and the third is a plan to develop China's shale gas industry.
~ On Jan 30 this year, the State Council passed a new plan put together by the National Development and Reform Commission that aims to limit China's total annual energy consumption to less than 4 billion tonnes of standard coal equivalent by 2015.
~ However, given that in the first 20 years after China's "reform and opening up" policies were introduced the economy tripled in size and total energy consumption doubled.
During the first 10 years of this millenium, total energy consumption doubled again and this led to the economy growing by 140 percent. If we assume the same correlation between energy growth and economic growth, it seems that China will need to burn more than 5.5 billion tonnes of standard coal equivalent a year in order to achieve its stated goal of doubling the average real income of urban and rural residents by 2020 from the 2010 level.
~ The final version of the plan to reduce overall energy consumption was actually a little more rigorous than the initial draft put out for public comment. The word "reasonably" was removed from the title of the plan and the target was lowered to to less than 4 billion tonnes of standard coal equivalent by 2015 from the original 4.1 billion tonnes of coal equivalent.
~ The EO has learned that the National Energy Administration (NEA) will release a set of 8 big new policies aimed at reviving the local PV industry some time this year.
~ The eight measures include setting on-Grid benchmark prices and financial subsidies, testing that products meet standards, industry consolidation and managemen of construction of any new solar power plants or facilities.
~ One official from the NEA told the EO that from 2013, every year they would add 10 gigawatts (GW) of new installed solar capacity and that China now planned to have 35 GW of installed photovoltaic (PV) capacity by the end of the 12th Five-Year Plan.
Original article: [Chinese]
Special Feature: How High-speed Rail is Changing China
Nation, page 9-15
~ This week's Nation section contains a feature devoted to how the boom in new high-speed rail lines has changed the economic prospects of six cities located along some of the new lines.
~ China already has close to 10,000 kilometer of high speed rail line in operation. In 2012, 11 major new high-speed rail lines opened in China, including one that connects Beijing and the southern city of Guangzhou and a Harbin-Dalian line that joins two provincial capitals in the Northeast of China.
~ Zhao Jian (趙堅), a professor at Beijing's Communications University told the EO that for travellers who need to go less than 500km, taking a high-speed train is a more attractive option than flying. Business people who have to travel a lot for their work told the EO that the convenience of travelling on high-speed rail means that they'll often choose to travel to a city on a high-speed rail line if they have the choice.
~ Some regional airports have also been able to benefit from being located on high-speed rail lines. The city of Shijiazhuang in Hebei province is on the Beijing-Guangzhou line and some passengers take the train to Shijiazhuang in order to fly from the airport.
Original article: [Chinese]
