[Abstract] China's economic operation made a good start in the first quarter of 2010. We conducted a research on the economic operation of 12 key industries in the national economy and existing problems. We think that China’s key industries will continue to maintain a good momentum in the second quarter and may experience fast growth in the first half of the year and slow growth in the second half, but overcapacity of some industries, strong expectations for raw material price increases, uncertain policy environment and weak capacity for independent innovation remain to be the major problems restricting the economic development of industries.
[Abstract] Although economic operation in the first quarter of 2010 continued to carry a good momentum towards recovery, we must attach great importance to a number of potential systemic risks in economic operation such as inflationary pressure, real estate bubble, and unreasonable pattern of income distribution, local financial risks, trade frictions and pressure on RMB appreciation. To appropriately handle the next phase of the economic work, we shall focus on strengthening and improving macroeconomic control and eliminate potential systemic risks; transform the mode of economic development and adjust and optimize the economic structure; advance various reforms conducive to transformation of the mode of economic development in scope and depth.
[Abstract] Based on the SMIM model, the Peterson Institute for International Economics concluded that RMB is undervalued by 41%. This finding by Peterson has had significant impact on the current Sino-US
[Abstract] In the late 80’s of the 20th century, Japan, Germany and other countries appreciated their exchange rate substantially, nonetheless, the outcomes were very different due to the adoption of different economic policies. The following experiences and lessons should be taken into account when adjusting the exchange rate of RMB: exchange rate should not be appreciated too fast;
[Abstract] At present, the United States accused China of manipulating the RMB exchange rate, however, such accusation lacks of the following legal basis: the standard was not clear defined; the subjective elements is hard to prove; the evidences is rather weak; and the logic of the accusation is defective
[Abstract] China’s urbanization faces severe domestic and international challenges and seriously lags behind economic development, especially the urbanization investment and financing system contains great financial risks. There is an urgent need to solve existing problems through reform. We suggest using equity funds to innovate the organizational form of China's urbanization.
[Abstract] The central government deepened the Reform of Rural Credit Cooperatives in 2003 by promulgating the Pilot Program raised the curtain on reform of rural credit cooperatives and has achieved initial results. But problems such as excessive dispersion of stock ownership and "insider" control in corporate governance structure still exist. The second phase of the reform of rural credit cooperatives is imperative. In this round of reform, the central government shall focus on strengthening the symmetry between local governments' rights and responsibilities to regulate and reform rural credit cooperatives, and at the same time introduce appropriate reward and punishment mechanisms in the process of policy support.
[Abstract] As it is difficult to change the U.S. dollar-based international monetary system in the short term, to get rid of a series of troubles including the pressure on RMB appreciation brought about by large-scale flow of international hot money, we must resort to the method of combining guiding and blocking. On the one hand, we shall take effective preventive measures, monitor all kinds of hot money, strengthen the control of inflows, set up plans for preventing outflows and cooperate closely with Hong Kong; on the other hand, we shall attach importance to the role of guidance, increase the flexibility of exchange rate, manage inflation expectations, inhibit the expansion of bubbles, attract medium and long-term international capital, and prevent and restrict the overflow of short-term capital.
[Abstract] At present, it is very difficult to accurately calculate the scale of hot money, the path of hot money influx is still difficult to verify and the purposes of influx and the ways to make profits are not yet clear, so the scale of hot money may not as big as we have estimated and imagined. For some time to come, so far as the situation of short-term international capital flows faced by China is concerned, there is limited room for hot money speculation in China, conditions are not yet ripe for large-scale continuous inflow in the short term and moderate inflow may become a long-term trend.
[Abstract] Although there is no reliable and generally recognized accurate method for calculating the scale of international hot money flows, the renewed influx of international hot money into China since last year is already an indisputable fact. Considering the international background, the unprecedented global zero interest rate policy has led to unprecedented abundance of liquidity; domestically, China has formed the basic conditions for attracting hot money inflows. Sound economic growth and objective exchange rate differences, interest margins and differences in asset prices are all important factors. International hot money is entering China in a noncompliant manner and through current accounts, capital accounts, underground banking and other channels and may potentially impact China’s real economy and financial sector, so we need to keep a close eye on this.
[Abstract] Accelerating the development of social undertakings is not only an important way to expand consumption and improve people's livelihood, but also the basis and guarantee for building a harmonious society. Due to ideas, institutional mechanisms, government investment and other factors, China’s social undertakings currently are a weak link of economic and social development. In order to implement the scientific outlook on development and promote comprehensive, harmonious and sustainable economic and social development, we shall speed up the development of social undertakings through measures such as bringing forth new ideas, reforming and improving the institutional mechanisms of social undertakings, increasing government investment and improving the structure of fiscal expenditure.
[Abstract] Urbanization has begun to show its strategic importantance since the outbreak of the financial crisis, hopefully, it can become a breakthrough for expanding domestic demand, adjusting structure and leading to a stale and quick growth. Nonetheless, the inadequate comprehensive capability of cities has restrained urbanization development. To cope with this problem, we need to enhance the resources and environment capacity, economic capacity and social bearing capacity with multi-pronged approach, improve the cities’ “software” and “hardware”. By doing so, we will be able to break through the bottleneck of urbanization and let urbanization play its strategic role effectively.
[Abstract] The internet of things is expected to become a new growth point driving economic development. But currently it faces obstacles such as immature technology standards, difficulties in industrial application of technologies and potential hazards. Development of China’s internet of things also faces inadequate investment in research and development by enterprises, basic reliance on the export of key components, low degree of industrial application of technologies and other problems. Regarding this, we shall promote rapid development of China’s internet of things industry by focusing on improving the capacity for independent innovation, step up the research and development of key technologies, expand the breadth of industrial application of internet of things technologies and accelerate the speed of independent innovation and industrialization.
[Abstract]Since the outbreak of the global financial crisis triggered by “sub-prime” and mainly affecting private financial institutions, governments around the world have been borrowing to relieve the crisis, leading to a surge in global sovereign debt, which will hit 49 trillion U.S. dollars by the end of 2010. 80% of the new debts are attributed to developed countries. Currently we shall be particularly vigilant about the evolution of the debt crisis of private institutions around the world into a government debt crisis mainly involving developed countries after 2010. The three main ways in which sovereign debt crisis is caused: 1. a country defaults on its debt due to insolvency and the consequences are felt worldwide through the chain of debt, as in the case of Dubai debt crisis; 2. a large country’s debt rating is downgraded; 3. the debt burden is offset through currency devaluation. China is the largest holder of U.S. sovereign debt and has every reason to fear the occurrence of a debt crisis. We shall be very vigilant and respond actively in this regard.
[Abstract] While promoting rapid global economic growth, industrial civilization also has created a series of serious resource and environmental problems. As a big developing country, China has encountered serious resource and environmental bottlenecks while experiencing high-speed growth over 30 years of reform and opening up. Transforming the mode of economic development and vigorously developing a green economy is an inevitable choice for breaking resource and environmental bottlenecks. Therefore, we shall change our notion of finance and establish and improve a green financial and taxation policy system to ensure sustainable economic and social development in China.
[Abstract] China’s economy currently is encountered from both sides by inflation and RMB appreciation with monetary policy in a predicament. Properly addressing the issue of RMB appreciation can help make China’s economy restructuring successful. To cope with the converging attack from inflation and RMB appreciation, firstly, we shall stick to the principles of “activeness, controllability and gradualness” in appreciation of the RMB exchange rate and accelerate the reform of factor prices; secondly, we shall bring into play the role of market mechanism to appropriately increase the flexibility of RMB exchange rate; thirdly, we shall capitalize on opportunities occasioned by excess liquidity to expand and strengthen China’s capital market by actively “absorbing” excess liquidity; last but not least, we shall bring into play the role of Shanghai and Hong Kong as international financial centers.
[Abstract]The United Nations Conference on Trade and Development (UNCTAD) pointed out that foreign direct investment (FDI) fell by 39% in 2009, from 1.7 trillion U.S. dollars in 2008 to 1.04 trillion U.S. dollars. Almost all developed, developing and transition economies have experienced significant decline in FDI inflow. Although the world economy bottomed out in the third quarter of 2009, global FDI didn’t rebound in the second half of the year as expected. It is predicted that global FDI will see moderate recovery in 2010.
[Abstract] Over the past 30 years, the world steel industry has been accelerating the process of globalization and the domestic steel industry in China has also seen significant changes in its development. But the concept of China's steel industry hasn't yet kept pace with the times and the bottleneck restricting sustainable development is becoming more and more apparent. There is an urgent need to reshape the development path of the steel industry in future and earnestly step up efforts on reform and opening up on the road toward marketization.
[Abstract] Although the price index has just gone positive, inflation expectations have been rising. Strengthening the management of inflation expectations is an important task in this year’s macroeconomic control. To manage inflation expectations appropriately, we shall accurately grasp the policy orientation and continue to maintain the overall tone of moderate looseness; put into practice the principle of “encouraging the growth of some sectors while discouraging the expansion of others” and seek balance between adjustment of the credit scale and optimization of the credit structure; consider the adoption of an exit strategy in due course and implement policy adjustment and shift step by step; strengthen the guidance of public opinion to avoid "herd behavior" caused by non-rational inflation expectations; resolve the pressure alleviate the pressure from rising prices and asset price inflation through comprehensive use of other economic policies.
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