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Rich become richer in China despite of the crisis

Yvonne Dong — Tue, 14 Jul 2009 09:41:34 +0000

Even with the worldwide economic downturn, more people are becoming wealthier in China.

According to a report on private property released by China Merchants Bank and consultancy Bain & Company on March, 30, 2009, there will be 320,000 people who each possess at least 10 million yuan ($1.46 million) of assets by the end of 2009, up 6 percent from 2008.

Including cash, stocks, funds, securities and real estate investments, the total assets covered in the report are expected to surpass 9 trillion yuan ($1.29 trillion) in 2009, up 7 percent from 2008.

The survey investigated 700 interviewees by questionnaires or face-to-face interviews. All the respondents had property of at least 10 million yuan. The investigation started on the mainland in late December in 2008 and lasted three months.

According to the survey, Guangdong province ranked first in the population of rich people, closely followed by Shanghai, Beijing, Jiangsu and Zhejiang. Last year, Guangdong province alone has 46,000, or 15 percent of China’s wealthiest people.

Ma Hua, deputy director of CCTV.com’s R&D center, was not surprised by the results of the survey. Ma counted the rich ones among his friends and observed that they are hardly affected by the current economic downturn because most of them are conservative investors. Ma said his friends made their fortunes by cautious investments in stocks. “Since they make money all by themselves instead of inheriting property, they tend to be conservative in using it,” he said.

It’s generally assumed that the rich would prefer risky investment. However, according to this report, 80 percent of the interviewees prefer investment with medium or low risk.

Liu Zhishuo, who did not unveil his wealth, defines himself as a conservative investor. He is a very cautious investor in high technology. Liu said he’ll invest if a company’s value could increase progressively in one or two decades. “What I care is long-term value. I don’t make short-term investment,” he said. In Liu’s opinion, to seize opportunities needs years of experience instead of good luck. There’s less chance to get quick fortunes nowadays.

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China tends to take actions on educate migrant workers

Yvonne Dong — Mon, 13 Jul 2009 08:35:44 +0000

The leading policy maker said China should take actions at present to strategically and completely reexamine the policies for millions of migrant workers who are unemployed due to the current financial crisis.

Liu He, deputy director of the Office of the Central Leading Group on Finance and Economy, said the need of the hour is to provide vocational training and education for the migrant workers. “This is not only about employment but also something that has severe social implications,” Liu said in an exclusive interview on March 20, 2009. He said if the problems of migrant workers are not solved well, the efforts to speed up economic development may be greatly weakened.

China has lately launched the 4-trillion-yuan stimulus package and 10 other programs to help industrial sectors to cope with the current financial crisis. According to a rough estimate, there have been nearly 20 million jobless workers since the crisis. Liu said China needs millions of skilled workers to translate the programs on paper into reality and hone the competitiveness of the industrial and manufacturing sectors. According to Liu He, the major problem for China has been an acute shortage of skilled workers.

Since many factories were shut down because of the current financial crisis, millions of workers, who used to make their living in the coastal factories which produce export goods, found themselves out of job. The biggest problem for many migrant workers is that they don’t have enough money to set up small businesses or to farm in their hometowns.

Liu warned that severe social problem will occur if we don’t take a serious view of the employment problem. Many migrant workers might find it hard to get their previous job since consumers across the world are spending less and trade protectionism is increasing in the meantime. Liu said the current employment pressure could be eased in the short term if the Chinese government is able to encourage some of the migrant workers to return to their hometown to start farming by providing them with subsidies and professional training.

Many factories in China are also in an embarrassing situation that they produce much more than the consumers’ demand. Liu said this makes it hard to open new factories and create more jobs.

Liu said we ought to find some strategic arrangements if we are to solve the migrant problem in the long run. He said the strategic arrangement should be centered on revising China’s industry and income distribution policy. The government should keep on to assist labor-intensive industries and to increase domestic consumption to create more jobs for migrant workers.

Furthermore, the urbanization rate of China is around 45% and every year about 230 million migrants are moving between cities and their rural homes. Migrant workers should be provided with urban household registration rights and the same social welfare as urban residents.

Premier Wen Jiabao said in his work report to the National People’s Congress in early March that the government would take quick measures to provide farmers and migrant workers with training as well as social security benefits.

In Liu’s opinion, the government’s goal of achieving 8% economic growth in 2009 depends largely on three aspects: global trade protectionism, job prospects for migrant workers and the severity of the ﬁnancial crisis. He said these three problems are closely interrelated with each other.

Liu said Free trade is a gospel for the growth of both China and the rest of the world. He said many countries have agreed on free trade since the financial crisis unfolded, but in fact they focus on trade balance and usually encourage protectionism.

Although the worldwide recession has dominated globalization era, Liu said it is not beneficial to strive for a single country-based trade balance or even trade surplus. According to Liu, such a scenario would be retrogressive for global development and also have negative effects in rebuilding a new international ﬁnancial order.

Liu said some countries are far too busy with stimulus packages instead of making efforts to analyze the causes and lessons of the ﬁnancial crisis. He warned that the crisis might be followed by a global inflation of prices, the same as the Great Depression from 1929 to 1933.

Liu said most of the developed countries are lacking in new growth policies often needed to spur the real economy. He said there might be no effective global partnership in the coming decade, and the potential risks of ups and downs also exist. In this case, we should be prepared for the financial crisis to last longer than what we have expected.

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Shandong —– the second most prosperous province in China

Yvonne Dong — Mon, 13 Jul 2009 08:17:43 +0000

Shandong became only the second province to reach a GDP of over 3 trillion yuan in 2008. While most of the economies across the world are suffering from the current financial uncertainties, Shandong, the eastern coastal province, impressed all by a 2008 GDP of 3.11 trillion yuan—a growth of nearly 12.1 percent, achieving an accomplishment previously only matched by China’s traditionally most prosperous province—Guangdong.

According to a more in-depth analysis of the figures, it was also Shandong’s 17th consecutive year of posting a double-digit growth, the province’s per capita GDP also firstly surpassed the 30,000-yuan mark.

Nevertheless, the provincial government is not taking the impressive figures as a mandate for relaxing their drive for economic expansion. On the contrary, it has released ambitious plans to sustain development across the whole province, particularly focusing on boosting the under-performing regions in Yellow River Delta and southern Shandong.

At present, some 72 percent of Shandong’s GDP is contributed by the province’s major cities like Jinan, Qingdao, Yantai and Weihai. Under the local government’s new strategy, growth of 10 major cities in Shandong will continue to be nurtured, though additional resources will be diverted into supporting the economically unsuccessful areas.

Even though they currently make comparatively small contributions to the province’s overall GDP, the local government has identified huge potential for future development among the natural resources and fine ecological balance in both the Yellow River area and the south of the province. Rich Coal reserves have already been identified in southern Shandong, whereas programs are already under way to develop the Yellow River Delta into both the nation’s second largest oilfield and one of most expansive wetland areas in China.

According to Jiang Daming, the governor of Shandong, the new development strategy will place an emphasis on integrating the major cities surrounding the provincial capital Jinan into a closely-linked city cluster, as well as developing a high-end manufacturing industrial zone in the eastern areas. The strategy also includes programs of building an ecologically-friendly economic zone in the Yellow River Delta and stepping up the development of the iron and steel industry in Rizhao, a port city in southern Shandong.

Jiang said a budget of 1.6 trillion yuan had already been earmarked to initiate the scheme with a majority of it being allocated to an infrastructure construction program. In spite of the ongoing uncertainties in global financial markets, the investment aims at ensuring the province maintains an annual GDP growth of at least 10 percent.

The program of urban facility construction, part of the initiative, will be accelerated in the two major cities of Jinan and Qingdao. 335 key construction projects, or a combined investment of 337.4 billion yuan, are expected to start in Qingdao alone in 2009. Another 204 projects, involving a total investment of around 166.1 billion yuan, are planned for Jinan. Furthermore, some 53 billion yuan will be used to improve port facilities in Qingdao, Yantai, Rizhao, Weihai and Jining. Meanwhile, 167.3 billion yuan will be invested in improving road and rail transportation facilities away from the cities, with the total length of railways in Shandong expected to reach 5,500 km by 2015.

As part of the national development plan, the proposed development of ecological-friendly economic zone in Yellow River Delta will also receive some 100 billion yuan of investment in 2009.

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More US big corporations going bankrupt

Yvonne Dong — Fri, 10 Jul 2009 10:13:03 +0000

As the US economic slowdown claims more victims, industry data shows that large US cooperate bankruptcies have been accelerated in recent weeks.

The data compiled by Bankruptcy Data.com and reviewed by Reuters indicates that eight public companies with assets of over $1 billion have filed for bankruptcy protection in the last four-week period. It also suggests that it is the largest number of multibillion-dollar public company bankruptcies in a four-week period since the year began.

The BankruptcyData.com website tracks companies that have some form of publicly traded security including stocks or bonds. Brain Hamilton, co-founder and CEO of financial information company Sageworks Inc., said corporate revenue is down in the United States and when topline revenue is down, there’s less money to spread through expenses.

During the past few weeks, long-term lodging facility operator Extended Stay Inc, which had assets of $7.13 billion before its bankruptcy, and theme park operator Six Flags Inc, which had assets of about $3.03 billion both filed for bankruptcy. With assets of more than $91 billion, General Motors Corp filed for creditor protection on June 1, becoming the largest Chapter 11 bankruptcy case so far this year.

The widespread credit crunch and economic slowdown have taken such a toll on corporations and individuals that bankruptcy courts are struggling to manage the load.

Barbara Lynn, chair of the bankruptcy committee if the Judicial Conference of the United States, suggested at a congressional hearing that Congress authorize 13 new permanent bankruptcy judgeships and make 22 temporary bankruptcy judgeships permanent. She said there were almost 1.2 million bankruptcy petitions filed in the one-year period by March 31, 2009, nearly doubled the number of 2006.

Hamilton from Sageworks expects to see more bankruptcies for companies in the auto or real estate industries. He said it is widely known that the automakers are having great difficulty, if anyone is producing parts for them, then he is also having difficulties. According to Hamilton, anything around real estate is probably going to have difficulty for the latter part of 2009.

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To get higher salary in Asia under economic crisis

Yvonne Dong — Tue, 07 Jul 2009 08:12:19 +0000

Under the situation of economic crisis, if you want to work in a foreign country and still get a high salary, you should turn to Asia. According to a research, those expatriates who live in Asia and Middle East get the highest salary among all expatriates.

The HSBC Bank International, the offshore financial services arm of HSBC Holdings, indicated that the percentage of expatriates in Russia is about 30%, which is the highest in the world. The expatriates in Russia earn the most —– up to 250,000 dollars a year, in terms of the income standard, expatriates in Japan and Qatar ranked second and third following Russia.

Between one third and one quarter of expatriates in Hong Kong, the UAE, Thailand and India can get a salary of more than 200,000 dollars a year. In terms of the cost of accommodation, countries like Malaysia, China and India were among the cheapest ones.

The survey explained that Asia is the cradle of those highest paid expatriates because 25% of expatriates in Asia can earn more than 200,000 dollars per year.

The top ten highest paid countries for expatriates were all from Asia and the Middle East, in which Russia ranked the first.

Despite the low percentage in population, expatriates from Britain and United States suffered a lot from the economic crisis. A great number of expatriates in Britain and United States began to take returning home into consideration due to the high cost of living and the relative low income.

Paul Say, head of marketing and communications for HSBC Bank International, said in a statement that the some interesting trends appear in terms of expatriates’ reaction towards the financial crisis, and what was also interesting was the fact that most of them belong to a wealthy group.

According to HSBC, Expat Explorer, the largest survey of expatriates under its 2nd year, surveyed more than 3,100 expatriates with different nationalities from 26 countries.

The economic crisis has changed the lifestyle of more than two-thirds of expatriates worldwide, in which their luxuries and daily spending are most influenced. Nearly 40 percent of expatriates began to save more money for even worse economic situation.

Over half of the expatriates in Japan started to refrain from extra spending such as traveling on holidays, etc. Almost 50 percent of expatriates in Thailand and Hong Kong were also doing so.

However, two-thirds of expatriates in Qatar and half of those in Bahrain said that the economic crisis has no impact on their way of spending at all. HSBC pointed out that those Gulf Arab countries have not been hit that hard by the crisis due to their abundant oil resources.

The survey also showed that expatriates in Saudi Arabia, Brazil and Russia are also intended to keeping spending their money on luxuries.
The expatriates who were surveyed should meet four criteria: annual income of more than 200,000 dollars; a monthly income of more than 3,000 dollars which is free to spend; an increase in saving after working abroad and at least two luxury items in their home country.

The survey was carried out between February and April 2009.

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HSBC raising new capital and cutting jobs

Yvonne Dong — Fri, 03 Jul 2009 03:44:02 +0000

HSBC Holdings said on March 2, 2009 that it would raise a total of $17.7 billion in new capital from shareholders in a rights issue to strengthen its financial structure after reporting a more than 50% fall in 2008 earnings and, as expected, a surge in bad debts in the US.

The largest bank in Europe is in the process of offering 5.1 billion new shares at 254 pence apiece, or a 48% discount on Friday’s closing price, for subscription by its current shareholders. In Hong Kong, the issue price per new share is HK$28, or a 50.2% discount on its Friday close of HK$56.95.

Stephen Green, the Group Chairman, disagreed that the rights issue had appeared too late. He said it was the right time when they got the information about their performance in 2008.

Douglas Flint, the HSBC finance director, said: “We want to position ourselves both defensively for turbulent years and opportunistically for the options that will appear.”

Patrick Shum, Karl Thomson Securities’ chief portfolio strategist, said HSBC had lost the golden time for issuing new shares—when the Hang Seng Index was above the 150000-mark. He said that the management might think that they could deal with the problems by themselves. According to Patrick Shum, individual shareholders have no option but to buy the new shares. Otherwise, their shareholding will be diluted and they will lose money, since many of them have been holding the shares for long.

The rights issue is subject to shareholder approval on March 19. This will add 150 basis points to HSBC’s capital ratios, strengthening the core tier 1 ratio to 8.5 percent.

HSBC Holdings also said that after it was hit by a goodwill impairment charge of $10.6 billion in the US, the pretax profit of 2008 fell 62% to $9.3 billion from $24.2 billion of 2007. Excluding the charge, pretax proﬁt fell by 18% to $19.9 billion, slightly ahead of the $19 billion predicted by the analysts.

HSBC cut its dividend for the full year by 29% to 64 cents per share and said it would close its troubled US consumer loans business. The bank maintained a dividend growth of 10% or more per year up to 2007.

HSBC’s losses in North America in 2008 was $15.5 billion in total, including the $10.6 billion goodwill impairment charge, due to its troublesome acquisition of Household, the US consumer lending business it bought six years ago for $14 billion.

“With the benefit of hindsight, this is an acquisition we wish we had not undertaken,” Stephen Green said, admitting for the ﬁrst time that HSBC had made a wrong decision in the acquisition of Household. He also said the credit environment has experienced fundamental changes over the past year. “It’s a painful decision to close the business,” he said, “We don’t want to make people redundant as well.”

HSBC said it would close most of its HFC and Beneficial-branded US branch network, leading to a loss of 6,100 jobs and that, with the exception of credit cards, the US divisions would write no further consumer ﬁnance business.

Group-wide, the bank said that losses on bad loans jumped 44% versus 2007 to $24.9 billion.

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Upper class growing in China

Yvonne Dong — Mon, 29 Jun 2009 09:50:17 +0000

Over half of almost 800 wealthy Chinese who have been surveyed hold the opinion that the growing financial disparity between the rich and the poor also leads to the appearance of an upper class in the country.

Best Life, a life style magazine, carried out the survey, interviewing 792 wealthy Chinese in 62 cities from 27 provinces with the help of local chambers of commerce. The interviewed people were private entrepreneurs possessing property of over 10 million Yuan, i.e. 1.4 million dollars. The magazine said in June, over four fifths of the interviewed also remarked that in the country the financial disparity between rich and poor was too large.

On June 17th, Li Wei, director of the social development at the Chinese Academy of Social Sciences (CASS), told China Daily, “In the last few years, the great disparity between rich and poor in China has become self-evident.” He said, “We have noticed this phenomenon in research time and again, so it is understandable that the rich also feel this way.”

The interviewed in the latest survey had different definitions for the upper class. Some of them believed the yuppie group were included, while others commented that the term of upper class means connection with the high society, expensive lifestyles, and even more social responsibility, according to the report of the magazine. The CASS reported in its 2009 Blue Book on Chinese Society, the growing income gap in China is thought of as one of the country’s most urgent social problems.

The country’s fast economic development is a reason for the swift growing of the number of the rich. At the end of 2007, there were 415,000 rich people in China, 20.3 percent more than in 2006, according to the third annual Asia Pacific Wealth Report released by Merrill Lynch and Capgemini.

The rich people in the report referred to those with assets of over $1 million, not including their own residence. According to the report, rich Chinese on average own $5 million.

Still, in Li’s view, China’s upper class does not merely refer to the rich. “I agree that China has such a group of elites,” he remarked, “As long as there is equal opportunity for everyone to become rich, it can stimulate social development.” Some entrepreneurs admit that a wealthy class exists.

“I think an upper class exists in China but I don’t belong to it.” Kevin Zhou, a 31-year-old private entrepreneur in a large general motor manufacturer in Chongqing, told China Daily yesterday.

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China should play a great role in IMF’s reform

Yvonne Dong — Mon, 29 Jun 2009 09:42:10 +0000

The meeting of the finance ministers and central bank chiefs of G20 countries in March drew great attention. That’s because of the great influence of the global financial crisis.

The most important thing discussed at the meeting was how to deal with the financial crisis, rebuild the present financial system and reform the international financial organs.

Although the leaders have different opinions on many important decisions, the financial and central bank chiefs decided to increase the funding of the IMF and speed its reform.

The financial ministers of the four countries, Brazil, Russia, India and China called that the IMF has to take unprecedented reforms to cope with the ever-increasing global financial situation and the IMF should take effective measures to meet their needs in the world monetary body, too.

At the beginning the IMF was founded to reconstruct the international monetary order and the financial market which was destroyed during the 2nd world war. It was also aimed to balance international exchange rates and provide workable solutions to problems of global income and payment.

While the serious defects of the IMF caused the US-and-Britain-manipulated Bretton Woods institutions (the World Bank also belongs to it) to collapse slowly in spite of that it still makes great contribution to global economic stability and development. However, even after the destruction of the world financial system, international financial trade and negotiations went ahead under the IMF framework.

The world economy has changed a lot since the collapse of the Bretton Woods institutions and the end of the Cold War, and the present global financial crisis has increased the defects of the IMF. All these along with some important emerging economies have made the reform of the IMF necessary.

Naturally, those who presented at the weekend G20 meeting all thought that only reconstructing financial system can cope with the ongoing crisis better and avoid similar problems. While reconstructing or reforming the IMF not only means changing its purposes, functions, and operation and management system thoroughly, but also changing its US-and Britain-led power structure. For example, the Americans have had the final decision on the World Bank president’s selection and Europeans have chosen the IMF chief for years. This unreasonable practice also should be changed.

That means the already delayed reforms should give emerging developing economies more and proper say in IMF’s legislation work. In return, the renovation can help increase the IMF’s legitimacy.

An approved reform plan at an IMF board meeting last April, developed countries’ share of votes will decrease while those of developing nations will increase. However, the overall status of the developed countries remains more or less the same in the world monetary body which is not the exact reform the IMF should undergo if no changes be applied in the future.

It is a must to give developing countries more rights at the moment and China is a case in point which should gain its due place in the monetary body as the world’s third largest economy and the largest foreign reserves holder. Before that, China ought to play a more active role to reform the IMF. It should be involved to formulate the new rules for the world body. At the same time, it should make some reform to its own schemes. All countries involved have to make sure of the appropriate solution of the complex IMF reforms, with all parties’ interests in mind.

To better safeguard its and developing countries’ interests, China has to talk with US-led developed countries, and work together with other rising economies to play its due role. This will protect China’s interest and help reconstruct a fresh global financial market order.
Despite the global financial crisis, China’s economy has been operating well due to the government’s series of timely and practical macroeconomic policies. This has won China a favorable environment promising to lead the rescue role in the struggling world economy.

Earnestly, China is indispensable in any reconstructed global financial order. With the impending reconstruction of the IMF and the World Bank, China is wished to obtain just rights in proportion to its economic strength and contributions.

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China is suffering from trade protectionism

Yvonne Dong — Thu, 07 May 2009 09:49:46 +0000

A top government think-tank warned that China is likely to suffer from the rising trade protectionism against the backdrop of the worsening financial crisis.

In accordance with the report by the Development Research Center of the State Council, China will become the main objective of trade protectionism, and this behavior will make the exporting environment worse in China.

The nation’s export sector saw a rapid growth since China joined WTO in 2001. The surplus trade helped the country gather $1.95 trillion in foreign exchange reserves, which ranked the first in the world. In 2008, the surplus trade reached 295.46 billion Yuan, due to this situation, many foreign countries started to adopt their trade protectionism measures.

A six-month ban on toy imports from China has been carried out by the Indian government on Jan 23. Meanwhile, Chinese government claimed that China would file a case at WTO against the ban to import Chinese fowls.

The Ministry of Commerce reported that China is still one of the countries that are under anti-dumping probes since 1995.

This report also said that US government’s ‘Buy America’ clause caused a rise of trade protectionism all around the world.

A study released on March 17th by the World Bank showed that 17 of the G20 group have launched trade-restricting measures since last November.

At the G20 summit that was held on November 15th, Leaders of G20 group countries agreed to avoid setting trade barriers, but, in contrast, up to 47 measures which restrict trade have been taken in those countries since the end of the meeting.

China’s commerce minister, Chen Deming, said that China would definitely say no to protectionism and would give some useful suggestions in trade talks held in Doha.

The report suggested that China still need to support the labor-intensive export sector because it could provide about 40 million job chances every year.

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Large companies continue their employment in China

Yvonne Dong — Tue, 05 May 2009 09:45:04 +0000

Recently, many multinational firms are cutting their jobs and reducing the costs as a result of global financial crisis, however, many industry giants like General Motors China, McDonald’s, Johnson&Johnson Medical China and Wal-Mart have confirmed that they will not stop their recruitment in China.

During the 2009 Hewitt Best Employers in China session on March 26th, 10 companies said that they have plans for recruitment this year.

The CEO of McDonald’s China, Jeffrey Schwartz said that McDonald’s was ambitious on the Chinese market. Meanwhile, 175 new restaurants will be opened in China, which will create around 10,000 hob opportunities this year.

Xie Wenjian, CEO of Johnson&Johnson Medical China, said that it was good to use talent in this hard time, and he also added that the current situation made them easier to have good staff with an affordable price.

Xie also said that they thought that it was a great chance for those companies to grow in China because of the government’s medical welfare policy. In the first 2 months, Johnson&Johnson Medical has employed about 100 university students and it will continue this plan throughout this year.

US car giant General Motors (GM) claimed that it would expand the staff number in China while it is cutting jobs in the other part of the world now. “Without accurate new job numbers, GE will hire more people in China especially in research sector.” said Kevin E Wale, president, GM China.

In the report Hewitt Associates said that good staff can enhance human resource cultures which can be helpful for the productivity.

The elements for an employee to work harder are regarded as the most important change in the 2009 report. While 2 years age, in 2007, the top three elements were: career development, salary and performance management. But this year, they have been replaced by career ideal, salary and career opportunity.

The deputy managing director of Hewitt, Xu Feng, said that this kind of change reflects that the employees are paying more attention on whether their own values can be fulfilled in the company instead of focusing on the promotion or salary.

Human resource directors at the meeting expressed that cutting costs in non-human capital areas such as travel and other expenses should be advocated rather than cutting salaries.

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