CER April 2014 by Seana Liu

Q&A: CBRE pinpoints China’s commercial property glut

APRIL 2014 VOL. 25, NO. 4

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APRIL 2014 VOL. 25, NO. 4

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THE HOUSE VIEW Published monthly since 1990 Publisher China Economic Review Publishing Editor Oliver Pearce Staff Writer Don Weinland Chinese Editor Liu Chen Associate Editor Brenda Yang Interns Greg Isaacson, Skye Sun, Sunny Oh, Sean Lee Art Director Jason Wong Editor at Large Graham Earnshaw Associate Publisher Gareth Powell Director of Sales and Marketing Pierre Zolghardi Account Managers Ralph Wang, Jerry Cheng CHINA ECONOMIC REVIEW (ISSN: 1350-6390) is published by China Economic Review Publishing Enquiries cer@ChinaEconomicReview.com Subscriptions subscriptions@ChinaEconomicReview.com Addresses The Plaza Building, 102 Lee High Road London, SE13 5PT, England Room 1801, 18F Public Bank Centre 120 Des Voeux Road Central, Hong Kong Hong Kong printer 01 Printing Limited Suite M, 3/F, Tower 3, Kwun Tong Industrial Centre, 448 Kwun Tong Road, Kowloon CHINA ECONOMIC REVIEW welcomes letters. Please write to the editor at: letters@ChinaEconomicReview.com

05 RUBBERBANDS AND RMB | The People’s Bank widened the daily RMB trading band in March but that’s no surprise

06 TIME FOR VAT | China is expanding its value-added tax this year but it has to work out the finer details first

MONTH IN REVIEW 08 NEWS BRIEF | The biggest China news stories in March

Q&A AND COLUMNS 10 CDB BLUES | China’s commercial property sector is suffering from a major spell of oversupply, says Frank Chen at CBRE

12 REACHING FOR THE RED | Red wine continues to roll through China, changing drinking habits for traders and imbibers

14 LEADERSHIP AND REFORM | A top China pundits talks about the country's new leaders and their economic reform ambitions

16 MORE THAN JUST GDP | China still set to outperform

COVER STORY 18 STUCK IN THE SMOG | Pollution is hurting Shanghai’s shot at becoming a global finance hub

ECONOMICS & POLICY 24 TACKLING THE TOXIC | China’s provinces are calling in specialist asset managers to clean up years of over-investment

27 EXPORT MYSTERY | What does the data really tell you? 28 CHINA-STYLE REFORM | It’s marketization, not privatization

BUSINESS 30 GETTING A CAB | Smartphone apps have created a shortage of taxis in big Chinese cities and ignited a debate about public transport

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32 THE STATE FIGHTS BACK | Moving money online just got harder for internet banking and finance innovators

MARKETS & FINANCE HKABC membership membership approved approved and and certiﬁ certiﬁed ed HKABC

34 THEY FINALLY FALL | Corporate defaults steal Beijing's show 35 MORE BAD NEWS FOR SHADOW BANKS | Off-the-books lending looks riskier than ever in China’s shadow-banking universe

THE HOUSE VIE W

Rubber bands and RMB No one was taken off guard when China widened the yuan trading band in March, but it left everyone also wondering what Beijing wants to happen to the currency – up or down?

tarting March 17, the value of the renminbi was allowed to fluctuate 2% above or below a daily reference rate set by the People’s Bank of China. Widening the band, which had a 1% range in both directions since April 2012, was a long-expected move – and largely a ceremonial one. A wider daily trading range won’t make the yuan a more flexible currency. Despite the flexibility to move by 1% from the daily reference rate during the past two years, the biggest day-to-day change in the rate last year was just 0.21%, according to a note from London-based Capital Economics. “In 2013, for example, the renminbi moved by close to the full extent of the 1% band almost every day. But the reference rate barely changed and, as a result, movement from one day to the next was far more constrained,” the note said. As long as the central bank still determines the rate at which the currency begins trading each day, it will remain strictly under PBOC control. The downward movement of the yuan since the beginning of the year shows just how easy the yuan is to manipulate. Since January, the bank has been buying up US dollars in order to let the renminbi depreciate then setting the reference rate lower each day. The goal is to show traders who were bringing large stacks of redbacks into the country that

SAW IT COMING: PBOC’s move will add volatility to the yuan but it didn’t surprise the market

the yuan can fall in value too. A wider trading band won’t stop the PBOC from engineering the direction of the currency in the future. Some analysts have argued that the baby step toward liberalization isn’t even necessary. The move will, however, introduce a new level of intraday volatility into the foreign exchange market, making the yuan look more like a freely traded currency. When PBOC widened the band from 0.5% to 1% nearly two years ago, the yuan rallied during a major political meeting between

Anatomy of China’s first real estate developer default A quick glance at the numbers shows exactly why Chinese developer Zhejiang Xingrun Real Estate went belly up at the end of March. Of the more than US$562 million (RMB3.5 billion) that it owed to debtors, US$112 million was borrowed from 98 private parties with annual interest rates of up to 36%, according to recent revelations from Chinese media. Under that kind of pressure, the only surprise is that the default didn’t happen sooner. The company struggled to ﬁnd capital for years; the chairman is suspected of borrowing

China Economic Review | April 2014

up to US$38.6 million with “fake mortgages.” But before Xingrun gets branded as China’s worst small, private homebuilder, it’s important to understand how it ended up in the mess in the first place, and what specific factors brought the operation down, or at least to the brink of collapse (as of the final week of March, local government officials insisted it hasn’t officially defaulted yet). Xingrun’s business in Fenghua, a county-level city that is part of Ningbo, ran into trouble through a renova-

tion project starting in 2007, Chinese media pointed out. The company attempted, after securing government support and taking over for another distressed local property company, to build high-rise apartment blocks in a village called Changting. The project required the company to build homes for the original residents before the existing village could be torn down and the new buildings built. Construction was slated to start in the ﬁrst half of 2012. Xingrun projected that it could pay off its debts within three years. The project never got to the con-

THE HOUSE VIE W

A wider trading band won’t stop PBOC from engineering the direction of the currency. Some analysts have argued that the baby step toward liberalization isn’t even necessary

the US and China then weakened as the eurozone deteriorated – a reaction to events that currencies such as the dollar experience. What’s different today is that the yuan is not greatly undervalued. Two years ago, most analysts agreed that China was holding down the value of the currency to promote exports. Such accusations, most notably from the US government, have quieted since party boss Xi Jinping took full command of the government. Many

struction phase. In fact, the small village homes are still standing. Xingrun built the replacement homes for the villagers but there’s no sign of its main housing product, high-rises. Nothing has happened because the residents of the village have tangled the project and the company in a lawsuit that has stretched for years. That explains why Xingrun was unable to pay back its loans. But why has it come so close to keeling over now? Its troubles with the Changting project persisted for years but the company simply rolled over loans and borrowed

investment banks still place their bet on a strong yuan at the end of 2014. More important than the shortterm ups and downs is the central bank’s resolve to follow through with the reforms it has promised. Widening the trading band is part of that. PBOC has a full agenda for the next five years which includes making the yuan a freely traded currency and scrapping a cap on deposit rates. To make a real impact, the central bank will need to let the market decide the

at high rates from private lenders. One problem for capital-strapped developers in the Ningbo area is that private lenders no longer want to lend to highly risky companies. In fact, they are calling in their loans. This is just one of the problems afﬂicting Xingrun. The value of property in some areas of Fenghua is decreasing and that trend has lowered conﬁdence in developers’ ability to pay dizzyingly high interest rates. Banks aren’t hot on lending to this kind of developer either. In the past, a developer such as Xingrun could ask the local branch

daily reference rate that the currency trades at. Bank of America Merrill Lynch analysts noted Singapore’s success with the so-called BBC, or “basket, band and crawl,” that pegs the Singapore dollar to a basket of currencies weighted by the importance of the trading partner. “In this regime, the compositions and weights of the basket is not disclosed, and the width of the band is undisclosed [too],” according to BAML. “Both the basket and band are revised periodically to take into account changes in trade patterns and economic changes. The exchange rate floats within a set band with a pre-set policy on the direction of ‘crawl’ (up, flat or down). The purpose of such a band is to prevent sharp fluctuations.” No one expects the Chinese central bank to give up that much control in 2014.

of a commercial bank for more credit. The local branch would take that risk because loan ofﬁcers there knew that, somewhere much higher up the chain, ofﬁcials promoted the lending. That support exists no longer. Now, when small developers beg local banks for credit, they will likely be turned away. Local bank managers are reportedly being told that they may lend to risky borrowers if they wish, but they will be held accountable. High risk is something no one seems willing to stomach these days – in stark contrast to just a year ago.

China Economic Review | April 2014

THE HOUSE VIE W

Time for VAT Wringing the value added out of every last bit of China’s tax is one of Beijing's biggest priorities in 2014, but it shouldn't cripple local governments in the process

ax talk can make people squirm uncomfortably like a trip to the dentist. Chinese leaders, on the other hand, have a knack for tackling profoundly insipid topics, tax reform being one of them. The country’s national tax regulator, the State Administration of Taxation, is knee-deep in pushing through the biggest change to the tax books in 20 years: Expanding value-added tax, or VAT. What happens next will greatly impact the solvency of financially troubled local governments. VAT taxes the value a company adds to the original cost of materials, thereby preventing a double tax on the materials. It’s generally viewed as less burdensome than business tax, which until recently covered most of the service sector. State-run Xin-

hua News Agency estimated that the reform last year saved the included companies roughly US$15 billion. It hasn’t always been clear which sectors are included, although regulators are making progress. Last month, the annual National People’s Congress said it would expand VAT to the telecommunications sector in April. In December, the rail transportation and postal services were asked to pay VAT instead of the more burdensome business tax. These announcements are building on a limited VAT pilot launched in 2012. The regulator took it national last August but many taxpayers found it difficult to figure out which kind of tax they needed to pay or how they would calculate it. “It was really an experiment on

WHO GETS WHAT: A new VAT is welcome but Beijing needs to ensure that the revenues are distributed fairly between central and local governments

China Economic Review | April 2014

a national level,” Xu Yan at the Chinese University of Hong Kong said of the trial. The incremental additions have helped clarify who’s in and who’s out. Many sectors in the service industry have been left off the list for now, including real estate, construction, financial services and insurance. In time, tax authorities will try to incorporate these into the VAT system but calculating the tax on sectors such as finance is difficult and will take time. The Chinese government could be applauded for pushing along so swiftly with this onerous – and monotonous – reform. But before officials get too carried away with the scale of VAT, they’ll need to make sure new tax policy doesn’t impoverish struggling local governments. China adopted VAT in 1994, when the country last drastically shook up the way its economy worked. That year, China levied VAT on most goods but stopped there. The economy was focused on exporting and VAT was a break to the manufacturers that were fueling economic growth. Meanwhile, China’s services industry was infantile and regulators lacked the technical capabilities to include it. Local governments largely lost out that year. The new law gave the central government 75% of revenues from VAT just as provincial and municipal governments were thrown new responsibilities such as pensions yet lost the ability to borrow directly from banks. The balance sheets of local governments have deteriorated since then, particularly in the past three years. The central government must re-negotiate the amount of VAT that local governments keep before the tax reform can be completed. Otherwise, local officials will have even less on their balance sheets.

NEWS ROUNDUP

MONTH IN REVIEW ECONOMY

Several key economic indicators for the first two months of 2014 came in much weaker than expected, heightening fears of a slowdown in China, Reuters reported. Industrial output rose 8.6% from a year earlier, the National Bureau of Statistics said, missing market expectations for a 9.5% rise and the worst performance in more than two years. Growth in retail sales was the slowest in three years, up 11.8% in January and February compared to the year-ago period. Analysts had expected a rise of 13.5%. Fixed-asset investment fared even worse. It was up 17.9% in the first two months from the same period last year, a low level unseen in 11 years.

2012. The central bank determines the rate each day, and then allows the currency to trade as much as 1% higher or lower. A sharp drop in China’s exports in February swung the country’s trade balance into a deficit and fueled fears of an economic slowdown, Reuters reported, citing a statement by the General Administration of Customs last month Exports in February fell 18.1% from a year earlier, following a 10.6% jump in January. A series of factory surveys since the start of 2014 indicate weakness in economic activity as demand falters at home and abroad. Analysts cautioned that the long Lunar New Year holiday may be distorting the single-month figures for January or February.

Credit: David Dennis

FINANCE

China let the daily reference rate of the yuan drop to its lowest point against the dollar in a year. As sluggish economic news sent jitters through the market, the People’s Bank of China set the daily reference rate at levels not seen since July

Shanghai Chaori Solar Energy Science & Technology failed to pay interest on a bond, leading to China’s first domestic corporate bond default, according to a statement from the company’s board secretary Liu Tielong. The heavily indebted solar equipment-maker had warned that it wouldn’t be able to meet interest payments totaling US$14.7 million (RMB 89.8 million), citing a credit squeeze and its inability to raise enough funds to make the interest payments. So far, the Chinese government and state-owned banks have largely kept risky borrowers afloat. China has launched a trial program to establish five private banks owned

NO PAYBACK Chaori Solar became the ﬁrst onshore corporate bond defaulter in China

by companies such as Alibaba Group and Tencent Holdings, Financial Times reported, citing a briefing given by the chairman of the China Banking Regulatory Commission, Shang Fulin. The banks, owned by ten companies, would be set up in the cities of Shanghai and Tianjin and in the provinces of Guangdong and Zhejiang. Though subject to the same regulations as China’s large, state-owned lenders, they will be encouraged to focus on lending to small and medium-sized enterprises, in a step toward further liberalization of the financial sector. Chinese real estate developer Zhejiang Xingrun defaulted on its debt of US$566.6 million (RMB3.5 billion). The company’s collapse has precipitated fears that other real estate developers will also renege on their debts, amid concerns of strains in the nation’s real estate sector. Prices on the dollar bonds sold by Chinese real estate developers fell following news of Zhejiang Xingrun’s default. With liquidity tightening and an oversupply of

CHINA BY NUMBERS Companies surveyed by AmCham said executives unwilling to come to China because of air pollution

48% 08

China Economic Review | April 2014

US$1.6 billion Amount Macau casino operator Galaxy will spend on a resort on Hengqin Island

Number of years it took for China Mobile to record proﬁt drop

60% Percentage of population China wants in cities by 2020

real estate in smaller Chinese cities, banks and investors are reassessing credit risks after the Chinese government allowed Chaori Solar to collapse.

vision and prohibited from leaving the country. Some academics estimate that more than 1 million mainland bureaucrats are moving assets offshore. Some US$1.65 billion in "dirty money" and property was recovered from corruption suspects last year. This move marks the latest government attempt to deal with so-called “naked officials,” the term for government workers who remain at home while their families reside overseas. China said it would increase the defense budget by 12.2% this year to US$131.57 billion (RMB808.23 billion), its biggest rise in military spending in three years. The 2014 military budget, the first for President Xi Jinping, reflects China’s interest in developing more hightech weapons and beefing up coastal and air defenses. The spending jump is the biggest since a rise of 12.7% in 2011, signaling that the government is not about to back away from its growing assertiveness in Asia, especially in disputed waters.

Credit: G Steel

BUSINESS

POLITICS & SOCIETY

China will escalate a crackdown on corrupt officials who have fled abroad with their “ill-gotten gains,” Reuters reported, citing a statement from the People’s Supreme Procuratorate. Those suspected of corruption will now be put under super-

11 Provinces where anticorruption inspectors have been dispatched

Alibaba has chosen to list in the US, in what could be a US$15 billion deal, Reuters reported, citing a company statement. Alibaba’s listing dealt a blow to the Hong Kong Stock Exchange, which was originally the preferred destination for its IPO. Alibaba was unwilling to compromise on its partnership structure to meet listing requirements in Hong Kong and any regulatory changes in the territory would have taken several months to push through.

More than 1,000 workers at an IBM factory in southern China have protested against a proposed ownership change due to the US company’s US$2.3 billion sale of its low-end server business to Chinese computer maker Lenovo, Reuters reported. The workers want higher pay if they choose to transfer to Lenovo or higher severance packages if they choose to leave. Workers at Chinese factories are increasingly turning to protests and factory shutdowns when they feel the terms of international takeovers are not good enough or labor conditions have worsened.

Chinese nationals who died on Malaysian Airlines ﬂight MH370

Credit: Hua Lin

Credit: Matthijs Koster

NEWS ROUNDUP

China’s smog is turning top executives from foreign firms away from the country, Reuters reported, citing a survey from the American Chamber of Commerce. Some 48% of the 365 foreign companies replying to the survey said that executives were unwilling to relocate due to China’s poor air quality. Expats are also leaving China for the same reason. The survey follows news of Panasonic offering hardship pay to Japanese expatriates who had moved to China. Yet, US businesses said their largest concern still remained the country’s economic slowdown, which has continued to hurt their margins.

US$490bn

159

Amount China has asked developed nations to provide in climate ﬁght

Number of people killed in railway station stabbings in Kunming

29 China Economic Review | April 2014

Q & A : CO M M E R C I A L R E A L E S TATE

CBD blues China seems to have too many central business districts, and not enough business to ﬁll them

hinese commercial real estate developers don’t ttake kindly to the goveernment stepping in on ttheir business. That’s why developeers were taken aback iin mid-February when llocal officials in Suzhou FRANK CHEN iissued a limit on the aamount of floor space they could sell before projects were finished. Commercial developers often sell property long before completion but, given the great oversupply of commercial property in Suzhou, the local government is afraid developers could grab the cash and run if the market goes south. So far, the commercial property control is unique to Suzhou. But oversupply in China’s secondtier markets is widespread. Ambitious local governments looking to take a regional – even international – lead in business or finance have welcomed commercial developers en masse, hoping projects will boost employment and tax revenues. But demand for the new floor space has fallen short and vacancy rates in many cities are rising sharply. The average vacancy rate in second-tier cities in China is about 21%, double the healthy rate, says Frank Chen, executive director for China at CBRE, a global commercial real estate services firm. In the southwestern city of Chengdu, vacancy rates have hit 44%. Chen spoke with China Economic Review about the pressure commercial real estate developers are facing in 2014 and the kind of smart urban planning that’s needed to improve the market.

ers struggling in commercial real estate. What’s the story behind their difficulties? For the sector as whole, it’s kind of a two-tier market. The commercial property market in tier-one cities, generally, is still healthy. But for tier-two cities, we do find ourselves at increasing risk of oversupply. For example, Chengdu is at risk of oversupply in the office sector. And Shenyang is at risk in the retail sector. In tier-one cities, the property market is still quite healthy. In tierone cities, on average, the vacancy rate is roughly about 8%. In tiertwo cities, the current vacancy rate is 21%.

When I scan the news, there seem to be a lot of stories about develop-

In a city like Chengdu, with so many property projects in the pipe-

China Economic Review | April 2014

What is generally considered a healthy vacancy rate for the commercial property sector? Anything below 10% is quite healthy, because you need some space available for new expansion and for new tenants to move in and change locations. Below 5%, it would be quite tight. For example, the market in Beijing is quite tight. The market has been below 5% for a long time. Beijing is quite unique in that perspective. Besides these current vacancy pressures, second-tier cities also face pressure from new properties in the pipeline. Looking at the future supply, the situation for these developers is quite daunting. For example, Chengdu’s vacancy rate for offices is 44%, but they still have over 1.5 million square meters scheduled for completion in 2014. Of course, the actual amount that is completed will be less than 1.5 million. We can expect the high vacancy rate is not going to decrease any time soon.

line and a vacancy rate of 44%, what will we see happening in this market in the medium term? We have seen the rents declining for the last few quarters. We think the office rents in Chengdu will be under pressure, especially for those developments in the so-called “new CBD [central business district].” That is where most of the supply will come online. This is the submarket that has the highest vacancy rate at the moment. Some kinds of premium assets in prime locations we think will do certainly better in the market. What accounts for this change in the market? Are there certain factors that you could point to which has led to this current situation? Definitely these kinds of trends started especially after the financial crisis. These changes occurred because of the [2009 US$585 billion] stimulation measure, and the sudden loosening of the credit environment. A lot of local, national and international developers believed that second-tier cities had more upside potential. At the time, they thought growth in first-tier cities have slowed down. But actually, from an economic point of view, for most of the tier-one cities, GDP growth has slowed down to 7-8%. Their growth rates, most of the time, are lagging behind the national average. The commercial property sector growth is way above the GDP growth in the second-tier cities. The other thing is, most of China’s major cities are trying to develop new CBDs, sometimes two new CBDs, and even three new CBDs. So, with all these new CBDs, they are trying to build a new town. They are willing to provide more than enough land for commercial developments. The reason is because,

Q & A : CO M M E R C I A L R E A L E S TATE

doesn’t have an impact on people’s daily lives. From this standpoint, we can understand why the central government doesn’t seem to have a tight hand on the commercial property market. We have seen the latest measure targeting the commercial property market in Suzhou.

TO LET: Chen cautions that a commercial property boom in lower-tier cities is leading to a dangerous oversupply of ofﬁces

from the local government’s perspective, if you sell residential land property, you can only receive the revenue once. But if you can develop successful commercial properties, this kind of property development will help from an employment and tax-revenue perspective. In theory, if they are run successfully, they can attract more business to settle down in their cities. Then they can generate more strong tax revenues from these developments. So, local governments have been quite welcoming of these developments then? The root of the current situation is a lack of well-designed city planning. What about beyond the second tier? What does the commercial real estate look like in the tier-three and tier-four markets? Office development in lower tier cites is still very low. Office demand for these lower tier cities is very low. Not a lot of large companies would like to set up their headquarters in lower tier cities. If the local company gets to a certain status, they want to move to a bigger city, either for their

brand image, or for exposure. So the office demand in lower tier cities is very limited. So far, we don’t see a significant scale of office property development there. For retail, they don’t have a lot of modern shopping malls. Most of these low tier cities might rely on the department store and street front model. How has the government reacted to all these problems in the second-tier market? In 2013, the government gave a lighter touch to residential real estate controls. Historically, how has the government reacted to oversupply in the commercial real estate market? And how do you think it will react this year? So far, compared to residential market, the commercial property market is unregulated. Most of the policy measures introduced so far were targeting the residential sector. If you look at real estate investments, almost 70-80% is targeting the residential sector, which affects the daily lives of the common people. For commercial property, it’s more of a business decision, even if there is some oversupply risk. So it

Do you think there could be a heavier policy hand in other cities in the commercial sector, following Suzhou? We hope that the local governments could be more sensible for their investors for the overall development of the commercial property sector. But so far, we haven’t seen any similar measures in any other cities. We also hope local governments can be more sensible in terms of the city planning. When you’re talking about more responsible city planning, what does that entail? Take office development, for example. In office development, you need to have some idea on what kind of businesses you can attract. There are a whole lot of cities in China that want to be the financial center for its region or the country or even the world. But in the United States, they have two global financial centers, one is New York, to a lesser extent you can argue Chicago. In China, Shanghai is the obvious candidate to be developed into the global financial center. But given our economy size and stage of development, how can it be possible that we can have two or three global financial hubs. We hope that the local governments can be more realistic in their demands. This will guide their city planning. But of course we understand that they might face dilemmas, as well. So many local governments rely on land revenue. It’s the chicken and the egg problem. It’s related to local government debts. All these issues are sort of intertwined. But purely from a property perspective, we believe they need to be more sensible on commercial land supply. China Economic Review | April 2014

Q&A : WINE IN CHINA

Reaching for the red Red wine continues to roll through China, changing drinking habits and altering lifestyles for traders and imbibers alike

ine is now a firm fixture on the diniing table of middle class Chinese consumers. C T This has excited wine producers the world p oover. Yet brands trying tto sell into the market aare struggling with the Guillaume Deglise rreality that volume lags vvariety. More than 80% of the wine bought in China is produced locally and most of the wine sold is red, as a first generation of drinkers makes conservative choices. This is a characteristic trait seen in previous emerging markets like Japan that eventually opened up their palates to other varieties, notes Guilllame Delglise, CEO of Vinexpo, a global wines and spirits exhibition, but it will take time for the same to happen in China. In an interview during a recent visit to Shanghai, Delglise, who was previously Asia Pacific director for Laurent-Perrier, also told China Economic Review that officials in Beijing are not inclined to serve champagne to their guests, and explained why that might be good for marketers of bubbly as they chase urban youngsters at fancy nightclubs. China is the world’s largest red-wine consuming nation, but what types of red wines are most popular, and from which regions? China is the world’s largest red wine consuming nation. It’s true it was in a way a shock for the industry to know that China has already become the number one market for red wine. But 82% of the red wine consumed is Chinese. Imported wine in China only represents 18% of the market. Chinese consumers have sought out wines from traditional sources 12

China Economic Review | April 2014

such as France. Do you see growing acceptance of New World wines? It’s growing very much. For many new markets, France is usually the destination. France has the image of a country producing good quality wine. But when there is a wine boom, as we can talk about a wine boom in China for the last few years, there are more wines coming from elsewhere. Chinese wine consumers often drink for show rather than for taste, which is why expensive wines have proven popular. But a truly healthy market needs consumers at all levels. What signs are there that this is emerging in China? Wine in general, not just expensive wines, has been considered by the Chinese as a new way to entertain people. Another way of enjoying wine is with food. They entertain and buy wine, as before they used to buy cognac or hard liquors or spirits. This image is prevalent in China. This will probably change in the future, but it’s difficult to know exactly when. Most of the players are trying to educate the Chinese palate and to watch how the food palate works. What can wine brands do to encourage the wider middle class population to drink wine? 20 years ago, Japan was in the same situation as China. Now, Japan is one of the most sophisticated wine markets in earth. I’m not sure if China will come to that, but at least there will be a lot of education, for sure. I know a lot of wine organizations are doing a lot of tastings and a lot of master classes. Plus another important thing to note is that the Chinese people are traveling more and more and they are getting to know the food and wine pairings when they go abroad. This may have some consequence on local wine habits.

Are white wines becoming more popular in China, after being overshadowed by reds for so long? Red wine, by far, will be number one in China, and for a long time. But white wine will be coming as China improves knowledge about wine in general. This is what we see in all emerging countries. China will go to it, as well. For China in the very beginning, red wines were very popular because the color red is so symbolic in China, so red wine has been very popular. But white wine will come also. I think it’s linked with the temperature: People in China are not used to drinking wine with a low temperature. It’s also a question of acidity: The Chinese are not used to drinking such acidic wines. White wines are usually more acidic. It’s a lack of knowledge, basically. White wine producers have to work a lot. How can brands such as Lafite tackle the problem of fake products that arises from such huge demand? That happens. These producers are already taking measures to fight against this. There are already some companies that work on this subject with the Chinese government. The Chinese government is cooperating and enacting stricter laws against this. Now, it’s easier to tell a fake wine label from a real one. In the future, as the market matures, this problem will be solved but it will probably take some time. It’s true, I know the main importer for Lafite in China very well. They are extremely concerned, and they trace where all bottles come from. They have the whole sales force looking at this problem. They actually have made a specific sign on the label to guarantee the Lafite wine is real. This should be a kind of alert to potential consumers.

Q&A: WINE IN CHINA

The central government is clamping down on expensive government dinners. Is this having an impact? Yes, of course. I think there are two things here. First, there have been in China a lot of new importers which were not extremely relevant and who considered the wine business as a hobby. These people were not serious enough because they had no idea of how to distribute wines. They imported a large number of famous wines because they were famous and “parkerized”, if I can use that word. And this proves to be a bad situation, because these companies were overstocked. And now they have to get rid of the remaining stock. And at the same time as you said there were these anti-corruption laws from the government and this had an impact on the entertainment thing. This is why there is a lot of leftover stock in China and we will need a few years before we return back to a normal situation. But we don’t believe this will affect the development of the

wine business because this will happen anyway. Champagne is often served at big diplomatic events in the West. Is this also the same case in China? I believe it is not served at these events in China, not yet. In China, champagne is mostly consumed at clubs and bars. It is still very much a category of alcohol that is used in the nightlife. I’ve been to lavish parties at nightclubs in Shanghai where whole private rooms are stacked with champagne. What are your views on this? It’s pretty amazing. Not even in Europe you can see such things. But there again this has been encouraged by these great brands. They have targeted Chinese women. They have targeted the clubs. They want to promote champagne as the ultimate, glamorous drink. And they’ve been pretty successful. But these are a lot of investments.

What is the thinking behind that? You target younger consumers, but how does it develop? I think it’s much more simple. The champagne brand, they want to associate champagne with glamor, success, stars, Hollywood. That is exactly the image they want to give. Basically, you go to a club and you drink champagne, it means you’re successful, famous and a potential star. Or you’re already a star. They want to promote it this way because they rather show the glamorous side of champagne as opposed to champagne being served at the government parties in Beijing because if the Chinese government drinks champagne, the younger generation of Chinese will not be interested. But if they see Brad Pitt and Angelina Jolie enjoying a glass of champagne, yeah, that means something. So they are very much attracted to this Western style environment and that’s what the champagne brands want to promote.

China Economic Review | April 2014

Q&A : CHINA’S LEADERSHIP

Leadership and reform One of the world’s top China pundits talks about China’s current leaders and the way in which plans for economic reform are likely to play out

Credit: Ralph Alswang

resident Xi Jinping is often called the most powerful Chinese leader l since iconic r reformer Deng Xiaoping. But most people i o outside Beijing’s inner circle c have no way of o knowing just how CHENG LI much m power Xi and his team wield, and how t their stated agenda for economic reform will actually play out. In this interview with China Economic Review, Cheng Li, recently named director of the John L Thornton China Center at the Brookings Institution, a Washington-based think tank, takes a cautiously optimistic view of the nation’s leadership. Li grew up in Shanghai during the Cultural Revolution and joined Brookings in 2006, where he studies China’s development and the inner workings of elite Communist politics. Li defends his optimism on the reform of the Chinese economy and discusses how Xi has surrounded himself with people with backgrounds in arts and humanities and the sciences, whereas previous leaders promoted mainly engineers. China is at a crucial juncture right now, with President Xi Jinping and his team starting on a new phase of economic reform. Why are you optimistic about the Chinese leadership’s ability to successfully navigate this and rebalance the economy, while avoiding a major crisis? Well, my optimism is not based on the political naivete or the wishful thinking, but rather I am fully aware of the challenges the leadership faces. Because of these challenges, they should do something big, bold and broad before it’s too late. Xi Jinping is particularly good at the economic 14

China Economic Review | April 2014

policy changes, and particularly market reform, based on his previous experience, and his work in Fujian, Zhejiang, and Shanghai. And also that he has been widely seen as economically liberal, politically conservative. Many of his senior colleagues are also pretty good, well-tested in terms of economic policies. If you look at the Politburo Standing Committee, and especially those people who are close with him, they all have the very solid leadership experience in coastal regions – these are the economically well-developed regions. And also, they are further surrounded by a group of very talented financial or economic technocrats. If they cannot present a sophisticated economic policy, you probably cannot expect anyone else can. Most importantly, we should look at the political reason behind these economic policies. The reform agenda not only has the specific policy or objective, but also has a clear timetable. For example, Shanghai Free-Trade Zone experiment – three years. Interest liberalization – three years. And some of the 300 policies are already implemented. And many of them will be delivered within a three-year time frame. Why 3 years? Because in three years, China will have another important political succession. The current seven members of Politburo, including five of Xi Jinping’s political allies in the Politburo Standing Committee, will retire. Only Xi Jinping and Premier Li Keqiang will stay for a second term. So he needs to show he’s delivered his new economic policy and with a certain degree of achievement or success. He can really start his second term with a consolidation of power, appoint more political allies to important leadership positions. So that’s the timetable. That’s the political incentive to do so.

Now, the bottom line is the previous model of economic growth, which is export-led, with heavy negative environmental consequences, and especially with so-called cheap labor – that development model is coming to an end. So you need to promote so-called innovation-driven economy, but with innovation-driven economy, you need to promote the market, because the monopoly, if the Chinese economy continues to go with the previous model, there’s no inventive for innovation. So that’s coming to end. So you need to really promote the market force. Promote the service sector. More emphasize on rule of law. So this is exactly what Xi Jinping has been doing. So with all these reasons, I’m optimistic. People are talking about how Xi already has amassed a lot more power than his two predecessors. Do you think that’s the case? And if so, what implications does that have for economic reform, and what are the possible risks? I want to avoid a simplistic approach. On the surface, you do see Xi Jinping consolidating his power very quickly. He holds five top positions, especially the party, the army, the government. But on the other hand, if you’re really a strong man, you don’t need these positions. For example, Deng Xiaoping, in the final years of his tenure, he did not have any leadership positions. He only held one position which is Honorable Chair of the Bridge Association. Now also, you can argue that Xi Jinping’s power comes mainly from six versus one majority in the Politburo Standing Committee. This is the view I share. So in that regard, we need to be a little bit cautious to jump to the conclusion that Xi Jinping is already a very strongman leadership. What is clear is that his leadership style, his personality, already

Q&A: CHINA’S LEADERSHIP

make a huge difference. He’s bold, spontaneous, and no-nonsense, and quite popular. So in that regard he differs from Jiang Zemin and Hu Jintao. He certainly is more popular than Jiang Zemin, but he is more spontaneous, bolder than Hu Jintao. Regarding technocratic leadership, Xi is surrounding himself with economic and financial experts. And six of the seven current members of the Politburo Standing Committee have backgrounds in social sciences and humanities, rather than engineering. What are the implications of that? Usually when we define technocrats, we should define three things. One is that the person has an engineering degree, and the practice as an engineer, and serves on the leadership position. So in that regard, it’s true, there’s only one person, Yu Zhengsheng [Chairman of the CPPCC National Committee], meets that criteria. But 10 years ago it’s a different story. All nine members of the Politburo Standing Committee are technocrats. So that’s a dramatic change within one generation. I think that there’s a linkage or correlation between what kind of

leaders run the country and what kind of main policy agenda that the country pursues. In many democracies, I think those trained in law become elite. The norm is that if you have a leadership [with] legal training, by and large that’s a good thing, not a bad thing, particularly in China. In that regard, I think you can expect they will more emphasize on rule of law or even, eventually, constitutionalism. Now, this also contrasts to the past two or three decades and the rule of technocrats. China [was] really in the construction fever. That era is coming to end. This is what Xi Jinping said, we should have quality growth, more balanced development, more emphasis on equality, social cohesion. So, if that’s the case, this reflects [that] the technocratic mentality also coming to end. One of the biggest challenges that China faces right now in terms of economic reform is reining in the state-owned enterprise sector. Do you think the Chinese leadership has a credible plan? Xi Jinping and Wang Qishan [Secretary of the Central Commission for Discipline Inspection] are in a better position [than their predecessors] to

XI'S GANG: Xi Jinping has surrounded himself with ﬁnancial and economic experts and people with a background in the humanities, a departure from the engineers who once held sway in Beijing

persuade the state-owned enterprises to surrender some of their power. For example, they should pay 30% of their revenue to the state. Probably 80% or 90% of the business the state-owned companies [currently] monopolize will gradually open to competition. These are all important changes. You see the heads of SOEs in jail, the ministry of railroad already dismantled. You see this very comprehensive investigation going on in state-monopolized industries, such as oil, telecommunication and electricity. Change is on the way, changes are happening. Now, of course there’s some danger. I would say the real obstacles probably won't come from stateowned enterprises, but from local government. The tax reform between central and local government [is a] very difficult issue. That’s why you need to establish the economic reform or comprehensive reform leading group to negotiate, to monitor, to promote these changes. That’s why you also establish the similar leading group in the local levels. So that I think is probably the most important. But on the other hand, for example financial liberalization, you don’t need to go though the local government. The interest rate liberalization, the RMB internationalization or convertibility, you do not need the local government approval. What reforms or changes could happen in the Chinese economy that would be positive for foreign businesses? Well I think in some areas you should not expect China’s current wave of reform or liberalization will be similar to 1990s. In certain area, the competition will become very, very intense. But at the same time, in certain other areas, I think that the investment opportunity, collaboration, just start to emerge. This is including financial sector, including public health, education, tourism and logistics and all kinds of service sector. And finally what the Chinese talk about the green consumption, with the terrible situation of pollution and the environmental degradation. China Economic Review | April 2014

COLU M N : G R O W T H I N 2 0 1 4

More than just GDP China is facing problems but it is still good for business, say Nicolas Musy, cofounder of China Integrated, a ﬁrm that helps foreign companies set up in China

uch has been made of the restructuring oof the Chinese econom my at the cost of fast eeconomic growth. This has created fears in the h iinternational business ccommunity that comp panies are likely to see Nicolas Musy a slowdown in what has become a hugely h important market. But while it is true that China’s real GDP growth is not any more in the double digit range and that it is likely to decrease from 7.7% in 2013 to 7.5% in 2014 and 7% in 2015, GDP growth, as a macro-economic measure, does not actually capture China’s business potential for foreign enterprises. Indeed, what matters to companies doing or intending to do business in

China, is the amount of GDP the economy will be adding in the coming years in terms of euros or dollars. To understand China’s business potential better and how it is changing, one must first compare how much GDP the Chinese economy is projected to add in the future with the amount it has added in the past. To get a global picture, it is also useful to compare this absolute increase with the amount of GDP growth generated by other countries in home currency values. As with every other country, China’s real GDP is reported as the added growth in economic value in the yuan, minus local inflation. This growth rate makes complete sense, in as much as it captures the real economic progress (with inflation deducted) that the country is making with respect to its previous year’s

performance. This said, because companies throughout the world account for their growth in their local currencies, without deducting inflation from their performance results, they measure a country’s market potential in absolute volumes and not in growth percentage. To illustrate this, take the case of Mongolia. With a 2013 real GDP growth rate of 12.5%, Mongolia is considered by the IMF to be “one of the fastest growing economies of the world.” This growth, however, is based on a 2012 GDP of about US$10 billion. Taking inflation (approximately 10%) and currency devaluation (approximately 27%) into consideration, in 2013, Mongolia only added slightly more than US$1 billion to its economy. In comparison, the US, which only grew by 1.9% in

China US Dollar GDP and Real Growth Evolution Annual GDP (US$ trillion)

2010-2015, 5 years GDP Increase: US$ 5.2 tn 2001-2010, 10 years GDP Increase: US$ 4.7 tn

Real GDP Growth %

0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Wikipedia: 2001 - 2013. UBS forecast: 2014-2015. China Integrated estimates: 2016-2020.

China Economic Review | April 2014

CO LU M N : G R O W T H I N 2 0 1 4

the same year, added about US$500 billion to its GDP. Ultimately, when managing a company, the absolute growth of a market is the useful figure to evaluate how much more business can be generated in the future. Most important, between 2011 and 2015, China is projected to add more than US$5 trillion to its GDP, compared with US$4.7 trillion in the whole decade of 2001 to 2010. In terms of business opportunities and in dollar terms, this means that China is growing on average twice as fast today as it did in the previous decade. When compared to other countries, China, which is adding approximately US$1 trillion more per year to its GDP, represents by far the greatest business growth opportunity in the world. In 2013 alone, the business opportunities offered by China were twice as large as the US, which is the second-biggest growing market in absolute terms. If we are to apply the same GDP calculations to other countries such as India, Brazil or Russia, it becomes clear that China’s economy is the largest business opportunity in today’s globalised world. Ultimately, the Chinese economy keeps accelerating in absolute GDP terms and this is what actually matters to businesses. This business acceleration has been confirmed by the initial results of a new survey of foreign companies: Sales, profits, and worldwide share of sales for foreign companies in China grew faster in 2013 than in 2012 and are generally expected to grow even higher in 2014. Now what are the implications for businesses and how can they benefit from these trends? International companies may not be ambitious enough in China. If accounted for in dollar terms, business in China should have grown by 13.4% only to keep up with market growth, without gaining any market share. (This figure is obtained by taking 7.7% growth, plus 2.7% inflation, plus 3% currency appreciation). By comparison, business in the US would have had to grow by only 3.4%, or 1.9% growth plus 1.5% inflation to keep up with the market

INTO THE FOLD: Musy says a real valuation of the Chinese economy requires looking at how much GDP the country will add in terms of euros and dollars

growth in the US. For those measuring China’s GDP in euros, there is a 2 to 3% difference that must be accounted for due to the appreciation of the euro, which would bring the average market growth of China to 11%. In 2014, the minimum rate of business growth necessary to keep up with China’s expanding market will stand at approximately 10.5% in dollar terms. (Growth will still differ across industries and that is just a general average.) This figure takes into account a 7.5% economic growth, an expected inflation rate of 3% and a 6.2 dollar-yuan exchange rate. Another important point to keep in mind is that the expected growth will come more from the private than the state-owned sector. Indeed, the Chinese government will be providing incentives to the private sector, as a measure to increase domestic consumption and productivity. While an increasingly privatized Chinese market with greater domestic consumption will be a welcome development for the world economy, it also means that competition in China will intensify. Local market players will therefore become more efficient and resourceful. In fact, initial results from the survey already point to the fact that international companies in China perceive local players as their greatest competitors. This is a marked shift

from the past years where such companies reported international companies as posing the greatest competition. In other words, opportunities will increase considerably, as will competition. Under these circumstances, managers have two paths to follow: Improve operational efficiency to deliver more with the same resources and move up the local value chain to improve products and technologies to command better margins. Harnessing the productive potential of technology will be a crucial step towards achieving these goals. Indeed, for companies to improve internal efficiency, it will be essential for them to implement greater automation. Moreover, in this very competitive environment, improving or adjusting products and services to sell with higher margins will also require, more often than not, the use of technology. However, in the context of such a competitive Chinese environment, being successful will also mean having the right mix of imported and locally developed products, equipment and IT. China’s economic growth is slowing in terms of the relative measure that economists track. Of that there is no doubt. But that should not blind businesses to the huge opportunities the country offers and will continue to offer. In terms of absolute dollar GDP, China is growing more every year than it ever did before. China Economic Review | April 2014

HARD TO BREATHE: Shanghai, China’s ﬁnancial center, experienced high levels of pollution at the end of 2013

Stuck in the smog POLLUTION IS HURTING SHANGHAI’S SHOT AT BECOMING A GLOBAL FINANCE HUB

COVER STORY: POLLUTION IN SHANGHAI

eavy industry is so ingrained in the spirit of Shanghai that the city recently started promoting what it calls “industrial travels” – not just your average stroll through the industrial park. The municipal government has set up an office called the Shanghai Industrial Tours Promotion Center that schedules trips to some of the metropolis’s biggest factories, as well as to long-idle industrial sites in the surrounding Yangtze river delta region, some of which are the earliest footprints of the industrial revolution on the continent. “Industry is a very important part of the city’s history and we want to promote that,” says Yang Peiming, a manager at the center. She notes that Shanghai is also planning to establish an industrial museum to recognize more than a century of dense and enduring smoke stacks, most of which are on the outskirts of the city. One needn’t visit a museum to grasp the presence of heavy industry in the delta, which has a population of more than 100 million. In early December, residents in Shanghai and several nearby cities found themselves breathing in record levels of air pollution. China uses an air quality index, or AQI, to measure particulate matter smaller than 2.5 millimeters in diameter. This so-called PM2.5 is small enough to penetrate deep into the lungs; health organizations have warned about the dangerous effects of prolonged exposure to this smog. On December 6, the AQI reading in Shanghai was above 500, the highest reading possible and about 20 times the World Health Organization’s recommended level. Pollution above 300 persisted for days. China Economic Review | April 2014

COVER STORY: POLLUTION IN SHANGHAI

450

Air pollution in Shanghai (AQI)

400 350

AQI

300 250 200 150 100 50 0 Nov 2013 Dec 2013 Source: Shanghai Government

A population in white surgical masks appeared on the streets while the tops of the city’s iconic skyscrapers disappeared into a gray haze. The palpable pollution no doubt made city leaders uncomfortable. While industry is a cornerstone of the Yangtze river delta’s economy, those officials hope to transform Shanghai into a world-class financial center by 2020. Shanghai can’t do it all, that is, remain an industrial powerhouse and at the same time foster a thriving financial hub. Bad pollution threatens to keep much-needed international financial talent away from the city and stymie investment from within, experts say. Factories will need to be moved and the urban sprawl that has emerged over the past 20 years better managed if it hopes to realize its goals. “What’s the role you want to play? Financial center? City center? Industrial center?” Yang Fuqiang, senior advisor on energy, environment and climate change at the Natural Resources Defense Council in Beijing, asks rhetorically of Shanghai’s future. “You’ll have to give up something. Don’t think you can enjoy all the advantages.” The smokestack in the room Shanghai’s industrial advantages are vast. The Yangtze river delta has more than 80 industrial zones where

China Economic Review | April 2014

Jan 2014

Feb 2014

Mar 2014

“What’s the role you want to play? Financial center? City center? Industrial center? ... You’ll have to give up something. Don’t think you can enjoy all the advantages.” - Yang Fuqiang, Natural Resourses Defense Council factories have clustered to reap tax benefits and other subsidies. Within the city limits of Shanghai there are 16 major industrial areas. Baoshan district in northern Shanghai is home to one of the country’s biggest steel companies, Shanghai Baosteel Group. Industrial parks with similar tax treatment are spread across the country but political favoritism dating back decades has made the region particularly welcoming of heavy industry. So has access to the world’s biggest shipping port, and the raw materials that enter through it. When pollution levels soared in December, attention turned not

just to Shanghai’s industrial legacy, but to the region’s reliance on coal burning for energy, to its expansive urban sprawl and the number of cars that commute on its highways daily. Pinpointing the exact cause of the record-breaking smoke has been difficult, however. “This is a hard question to answer; no one can answer directly,” says Qiang Ning, a professor at the College of Environmental Science and Engineering at Shanghai’s Tongji University. Qiang listed a number of predictable causes such as factory production but said the sudden jump in pollution levels in December was largely related to meteorological factors, namely a dead spell in wind. “It’s mainly due to the drop of average wind velocity,” he said. Sun Xi, a Singapore-based analyst at environment and governance consultancy Sustainalytics, said that along with meteorological factors, coal burning and emissions from heavy industry and automobiles were the primary sources of the smog. Between 2000 and 2012, the value of Shanghai’s heavy industrial output has increased more than sixfold from about RMB4.1 billion to RMB25.68 billion. Beijing’s output was lower at about RMB24 billion in 2012. The city of Beijing has gone to great lengths to identify the sources of its pollution. A government report issued at the end of February showed that about 75% of the capital’s pollution was created within the city limits. Among the haze, 22% came from auto emissions, 16% from coal burning, 16% from heavy industry and 15% from dust thrown up into the air, likely at construction sites, Chinese media reported in March. The remaining 25% is thought to be blown in from industry such as steel mills and coal-fired plants in surrounding Hebei province. As far as the eye can’t see Shanghai’s battle against smog has been lost in the headlines about Beijing’s reoccurring “airpocalypse,” or

COVER STORY: POLLUTION IN SHANGHAI

sudden spells of hazardous pollution that often hang around for days. In Late February, the capital experienced its longest-ever period of dense smog, with dangerously high levels persisting for more than 150 hours. That was also the first time Beijing used its new system for smog warnings, issuing the second-highest alert for 132 hours. Unlike pollution in many other global industrial centers, this kind of smoke in China’s conurbations isn’t bound by city limits. On a hazy day, traveling inland from Shanghai will give no respite from pollution but only reveal hundreds of kilometers of smoky scenery. “If you say that Los Angeles air quality is bad, you can also see that outside of the city it’s okay,” Yang at the NRDC said. “That means this is a local problem. The smog is not spread out, covering many regions. But for China, this kind of smog covers much of the country.”

In places such as Shanghai, it’s hard to determine where one city ends and another begins. The Yangtze river delta comprises 15 cities and 35 county-level towns in what elicits a feeling of endless urban space. The sprawl itself is a challenge for Shanghai’s municipal government because of the increasing amount of time that cars spend on the road while commuting from one area to another. High property prices have pushed many white-collar workers out of the city center and into distant suburbs. Driving time has soared for those who own cars. For a city that will try to join the ranks of London and New York, better urban planning is desperately needed and will also play a large role in reducing pollution. Pan Qisheng, department chair of urban planning and environmental policy at Texas Southern University, said there is a major gap between research on how Chinese cities should be designed

and how officials execute that design. China has an abundance of urban research centers but their connection with policymakers can be fragmented. “There’s lots of very good analysis but planners don’t pay attention to that analysis,” Pan said. “There’s a kind of disconnect between research and practical government planning in China.” Research can often reveal poorly planned points on a transportation grid. Those points, where a high concentration of cars may end up waiting for long periods of time during peak hours, cause excess amounts of exhaust fumes to be emitted. They also lead to congestion in other places. “It’s a ripple effect,” Pan said. Such problems can be rooted out and avoided in future urban design as long as analysis is applied to planning, he said. Shanghai style The central government has an

China Economic Review | April 2014

COVER STORY: POLLUTION IN SHANGHAI

THE AIR AROUND HERE: Leaders in Shanghai have built the framework for a global ﬁnancial hub; capital markets reform is following in step. However, experts say heavy pollution could stymie its ﬁnancial aspirations

ambitious plan of attack for some of these ailments. In fact, during the annual National People’s Congress in Beijing in early March, Premier Li Keqiang said China would “declare war on pollution.” The comments are a follow-up to lofty plans published last year. In September, the central government pledged to cut the concentration of fine particulate matter in the Yangtze river delta by 20% by 2017. In Beijing and surrounding Hebei province, as well as in south China’s Pearl river delta, the government will aim to reduce the lung-penetrating pollutants by 25% and 15%, respectively. The Shanghai government’s response to severe pollution in December was muddled and directed residents to cope as best they could. School was cancelled for children and the elderly were advised to stay inside. Treading carefully behind central policy, Shanghai has issued its own contingency plans for heavy smog including a warning system similar to Beijing’s. Qiang at Tongji University, who said he has attended municipal gov22

China Economic Review | April 2014

ernment meetings on pollution, pointed out that the government is in the process of drafting a law on air pollution but final approval has been delayed. “Maybe it’s because of the work style of the Shanghai government: They have to be 100% confident before they promulgate the law,” he said. Local officials will want to expedite the process as they plan to transition the city to a global financial hub by 2020. Last year, the central government announced it would open a free trade zone in Shanghai’s Pudong district. The zone will lift restrictions on local and foreign businesses and partially liberalize exchange and interest rates – highlighting Shanghai’s stillstrong intention to lead the country forward in economic openness. Local officials led by reform-minded municipal party chief Han Zheng promote the city as first and foremost a banking and finance hub, not an industrial center. Shanghai 2020 or bust Clinging to the reputation of an industrial hub will only hinder the

city’s grand financial plans. Experts have pointed out that, as much as Shanghai would like to retain both its financial and industrial prowess, it can’t. The city should not try to compete with other regions on heavy industry. “Shanghai may have the intention to ‘do it all,’ but it is definitely not sustainable,” Sun at Sustainalytics said. A report released in mid-March by the American Chamber of Commerce in China shows the kind of effect heavy pollution can have on a business center. The report said that 48% of the 365 foreign companies surveyed were unwilling to send executives to China because of the high level of pollution; the air problem was also prompting foreign business people to pack up and leave the country. It’s not only foreign participation the Chinese government needs to worry about, a report from Beijing’s Foreign Economic and Trade University pointed out in March. The author, professor Xiao Xinrong, claims that hazardous pollution is lowering what he called the domestic

COVER STORY: POLLUTION IN SHANGHAI

population’s “survival rate,” which will also lower the amount of investment into private businesses. That in turn hurts overall economic development. Xiao’s hypothesis is that increased investment into pollution reduction will ultimately result in more private investment and faster economic growth. The clearest solution for relieving this kind of pressure may also be the most difficult. Too many cities burn coal as a source of energy, Yang said. Central policy, such as changing the tax on coal from volume-based to price-based, could encourage a slower consumption rate of the fuel. On a more local level, cities should build central steam-generating facilities that would replace the small, often inefficient coal-fired boilers that companies use to generate power, Yang said. That’s a slow process. And Yang pointed out that the rate at which the country burns coal is only speed-

“There’s lots of very good analysis but planners don’t pay attention ... There’s a kind of disconnect between research and ... planning in China.” - Pan Qisheng, Texas Southern University ing up. Another method is to relocate factories to other areas. In 2008, the central-level Ministry of Commerce said it would promote moving heavy industry from coastal areas to central and western regions. Shanghai has been doing that, albeit lethargically. In 2012, Baosteel Group, which reportedly produced 6% of Shanghai’s industrial output

that year, said it would begin to transfer some factories to underdeveloped areas of the country with the hope of cutting local emissions. Reformers in Shanghai should leverage the influential free trade zone to upgrade factories or move more of them out of the city, Sun said. Powerful planners will need to turn their attention to the research coming out of Chinese institutions. Just as China’s central government has recently emphasized the market’s role in financial services, it must learn to recognize the role the market plays in building cities, Pan said. Shanghai will also need to coordinate with surrounding cities to lessen urban sprawl, Yang noted. There’s a lot riding on the city’s transformation. As banks and financial towers continue to rise in Shanghai, local officials will need to make sure pollution levels are ever falling.

China Economic Review | April 2014

E CO N O M I C S & P O L I C Y: M A N AG I N G LOC A L A S S E TS

ITS DEEP: Local debt has been likened to a gaping hole, much like this sink hole that suddenly opened on a street in the eastern coastal city of Nanjing in 2012, swallowing a city bus

Tackling the toxic China’s provinces are calling in specialist asset managers to try to clean up the mess left by years of over-investment in unproﬁtable projects

ocal government officials are parsing their balance sheets and pacing in their offices, waiting for a sign from above – or from Beijing, rather. When top leaders give the word, provincial governments will officially unveil companies specifically designed to choke down bad loans from a pool of about US$3 trillion on local government balance sheets. These so-called local asset management companies (AMCs), when established, will mirror the kind of work their central-level equivalents did 10 years ago when China’s biggest banks were struggling with bad debt: Take on tens of billions of dollars worth of toxic assets and shift the 24

China Economic Review | April 2014

onus of responsibility from the banks that made the loans to the state that told them who to lend to. Local AMCs will have a lot of work on their hands. A nationwide audit showed publicly in December that local governments had borrowed US$1.17 trillion since 2010. At the county level, debt increased by 77% over the three-year period. Economists have pointed out that poorer areas of China remain at risk of default. Guizhou, one of China’s poorest provinces, had a debtto-GDP ratio of about 79%. Inner Mongolia province has been late on more than one in four of its loan payments. The asset quality of local govern-

ment loans and the relatively high rate of unpaid loans could be the biggest worry – and potentially the rallying call for a new class of asset management firms to sweep the provinces. No final decision has yet been made on the AMCs, however. In May 2012, long before China’s local debt problem came to the forefront, China Banking Regulatory Commission (CBRC) and the Ministry of Finance issued a notice to provincial governments that told them to set up AMCs. At the end of last year, CBRC set a minimum capital requirement of US$605 million (RMB1 billion) for individual AMCs and now several provinces are preparing the cash, Caixin Online, an

E CO N O M I C S & P O L I C Y: M A N AG I N G LO C A L A S S E TS

Roll over, play dead China isn’t engulfed in a local debt crisis – at least not yet. But local governments must continue spending on old and new projects while servicing their debt. So far, Beijing has only scratched the surface in dealing with outstanding liabilities and the debt that is still to come. AMCs could quickly become a necessity. China’s provinces are a powerhouse for growth. The large-scale public works projects that local governments build help usher rural dwellers into cities and make a crucial contribution to the country’s overall GDP figures. At the same time, local governments struggle to finance this growth. Since 1994, a budget law has barred them from borrowing directly from banks. So they have struck it out on their own, forging often-creative means of funding, but mostly with land sales and off-balance-sheet borrowing through local government financing vehicles (LGFVs). By some counts, up to 60% of non-performing loans at the local level are connected to land transactions and LGFVs; the two are closely connected. Beijing can’t simply step on the borrowing breaks in the provinces. While central leaders have reduced their expectation for provincial growth, and governors have posted lower targets for this year than in the past, the spending must continue regardless of an emerging debt crisis. “For most of these projects, because they have already started con-

struction, there’s no option to slow it down or completely stop it. In most cases they have to continue attracting investment. That’s the first part,” said Li Yan, a senior sub-sovereign ratings analyst at CCXI, one of China’s biggest rating agencies. “The second part is finding financing to pay off old loans.” The central government allowed local governments to start rolling over loans earlier this year. Total local overdue debt at the end of June last year was US$187 billion (RMB1.15 trillion), or an overdue ratio of 10.7%, according to figures reported by the National Audit Office in late December. As local governments roll over these loans, borrowing will not noticeably slow down, Li said, even in the face of a higher cost of lending. China’s interbank rates have risen sharply since June last year. That has increased the financial pressure on local governments that will pay higher rates to roll over loans than they did on the original loans. LGFVs “continue to operate under soft budget constraints and thus are not very sensitive to interest rates changes,” Wang Tao, China economist at UBS, said in a report in February. Toxic mop-up Introducing asset management companies at the provincial level is bound

to raise eyebrows among those familiar with China’s central-level AMCs, one of which listed in Hong Kong late last year. In 1999, the central government set up four asset management companies to take over a wave of debt at some of the country’s biggest banks. In the first years of operation, the companies answered directly to the ministry of commerce and the banking regulator, earning them a reputation as powerful “policy companies,” as opposed to policy banks such as China Development Bank. The companies issue bonds and use the proceeds to buy bad debt from banks. Once in control of the assets, they restructure them, often efficiently. The AMCs break apart some of the assets, usually struggling state firms, and sell the pieces to other companies. They also liquidate the assets if they can’t be salvaged. The central government’s plan was to dismantle the four AMCs – Cinda, Huarong, Great Wall and Orient – 10 years after taking on the original wave of bad assets. That didn’t happen. Instead, the big four have been commercialized. Their tight connections to policymakers have earned them licenses to conduct business across the board in insurance, wealth management and financial leasing, as well as broking of trusts, futures and real estate. In December, Cinda went pub-

GET MOVING: Not every local government project is a failure, and many are proﬁtable

China Economic Review | April 2014

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independent Chinese news website, reported in January. These instructions to regional leaders have not been made public. Rumors of an AMC in Zhejiang province, one of the most heavily indebted areas, circulated last year then fell out of sight. Some insiders that spoke to China Economic Review said all provincial-level governments are in the process of establishing the companies now, but are waiting for the final cue from Beijing. Liao Qiang, a bank analyst at Standard & Poor’s in Beijing, said local AMCs were “not a rumor.”

E CO N O M I C S & P O L I C Y: M A N AG I N G LOC A L A S S E TS

lic in Hong Kong with an IPO worth US$2.5 billion, the second biggest on the Hong Kong Stock Exchange in 2013. The listing received orders worth US$65 billion, perhaps demonstrating investors’ willingness to bet against the financial soundness of China’s state banks. The longevity of the central government’s AMCs is likely one of the factors holding back an official announcement on the local ones. That is to say, local government debt is big business for anyone that deals in bad assets, and the influential big four would prefer to do the work themselves. “I think the existing four asset management companies did not like the idea, because they think [local governments] are taking their business,” said Oliver Rui, a professor of finance at China European International Business School (CEIBS) in Shanghai. “So that’s why even though the original notice was issued in 2012, to my knowledge there hasn’t been any establishment of local AMCs yet.”

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Precarious signal Provincial authorities might make a good case for having control of their own AMCs instead of handing the business over to the big boys. After 10 years, companies such as Cinda know this niche but lucrative industry well. Yet their experi-

“Only once they give the green light, it kind of encourages local commercial banks to be less responsible" - Oliver Rui, a ﬁnance professor at CEIBS in Shanghai ence has been with big banks and the central-level assets to which those institutions lent. Although provincial leaders may not have that same expertise, they have a better understanding of operations on the ground in their region, Rui said. That understanding will be valuable to local AMCs when taking over assets and trying to restructure them in the local economy. Granting provincial cadres control over AMCs is one way to commit local governments to solving their debt woes, Li Yan at CCXI said. “If they establish asset management companies to specifically address local debt, they should be able to de-package and clarify the nature of the debt, the source of insolvency and how to recover the debt, as well as better controlling the risks,” Li said.

RAPID RISE: Cities like Wenzhou (pictured) have fuelled their growth with debt

China Economic Review | April 2014

But that comes with its own risks, too. For one, markets could view the move as a sign that the local debt problem is worse than it was reported by the National Audit Office. “Sentimentally, I suspect it will not be good as the market will view this as a recognition that [non-performing loans] are indeed much greater than reported publicly,” said Junheng Li, head of research at New Yorkbased JL Warren Capital. Junheng Li pointed out that the first objective of local AMCs wouldn’t necessarily be to solve the debt problem but rather to recapitalize local banks – just as the central AMCs did with China’s major lenders to prepare them for public listings. Perhaps another reason the central government has thus far refrained from giving the final public nod to local AMCs is the dangerous message it will send to local banks. When AMCs take over bad assets from state-backed banks, the responsibility for those assets is transferred onto government shoulders. Provincial authorities are already culpable for the balance sheets of the state lenders in their regions. After all, for years leaders have pressured banks to open up lines of credit for projects that the financial institutions would likely deem unprofitable if they were able to make a purely commercial evaluation. Bringing in AMCs to clean things up is implicit recognition that governments got the banks into the mess in the first place. But it would also send a precarious signal that, after years of risky lending, local state banks still won’t be held responsible for their practices. If the government takes the blame this time around, there’s little reason to trust that lending practices will improve and that China can avoid local debt crises in the future. “Once they give the green light, it kind of encourages local commercial banks to be less responsible for their decisions,” said Rui at CEIBS. “They’ll think ‘the government will take care of me even if I make bad decisions.’ I don’t think the central government wants to send this kind of signal.”

E CO N O M I C S & P O L I C Y: E X P O R T D ATA

Export mystery It’s futile to use trade data from the ﬁrst two months to forecast the economy in 2014

UP THEN DOWN: Export data for January and February led to general confusion

es to bring additional capital into China to take advantage of higher interest rates. Outbound shipments in January and February 2013 rocketed 25% and 21.8% from a year earlier, respectively. With those figures so high, it is no surprise that this year’s data look so unfavorable. This year, over-invoicing has eased off. The difference between onshore and offshore yuan interest rates has narrowed, curbing enthusiasm for arbitrage. Investors who have been making a one-way bet on yuan appreciation have been shaken by the Chinese central bank’s recent aggressive moves to introduce volatility to the currency. Combined, those reasons give some hope that export figures are not all bad. “Surely we recognize that some of these February trade data appear no good, but we believe the real situation is not that bad, and could be quite normal, by analyzing two distortions, namely the Lunar New Year and fabricated trades last year,” Bank of America Merrill Lynch economist Lu Ting wrote. One common way of ironing out seasonal factors is to take the data for January and February together. In this way, based on the official data from China customs, real growth in exports for the two months was a negative 1.7%. Already an improve-

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week of ambitious planning for the Chinese economy in early March was followed by a weekend of reality as key economic data were released. Journalists in Beijing flocked around a beleaguered spokesman whilst analysts elsewhere were cursing the interruption to their Saturday rest. But the state of the economy as portrayed by export data, a vital reading in what is now the world’s largest trading nation, left observers asking if anything is real. Outbound shipments in February plunged 18.1% from a year earlier after gaining 10.1% in January. That was the sharpest monthly contraction since August 2009, the lowest export growth since August 2008 and not at all what the market was expecting. Fears of a major slowdown in exports that could hurt the economy need to be kept in check – for now. Trade data for this year are so far volatile and uncertain; economists are more divided than usual on their interpretations. Moreover, there is evidence that the true numbers, when stripped of distortions, indicate export growth is continuing, albeit slowly. There is some agreement over why the data are so unpredictable. Seasonal factors, a reference to significant events that happen each year, as well as the lingering effects of fake data that messed up numbers this time last year have gotten a lot of attention. The Chinese Lunar New Year landed across the two months, resulting in tainted readings for both January and February. Although the festival only lasts for seven days officially, in reality it causes three weeks of disruptions to work schedules. Factory bosses therefore rushed out February orders a few weeks early. Economists were also quick to acknowledge the effect of distorted data. In the first four months of 2013 export figures were heavily inflated as traders faked the value of their invoic-

ment, the underlying numbers look far stronger when seasonal factors and over-invoicing are scrutinized. Economists’ calculations vary, but the trend is the same. Standard Chartered calculates that growth was 5%, as does UBS. Louis Kuijs at RBS in Hong Kong goes lower with 3.1% while Lu Ting estimated 7-8%. “Looking at the January and February data together … suggests that exports remain broadly unchanged on a year ago,” Singapore-based Julian EvansPritchard, China economist with Capital Economics, said in a note. A much better picture emerges. Even so, demand for Chinese goods does appear to be weakening slightly. Most estimates for January and February show export growth below the 7.5% recorded in the fourth quarter. HSBC noted in a report that growth in shipments to the big three economic regions of Japan, Europe and the US eased in February; exports to emerging markets have already begun to ease. Given the importance many observers attach to exports when feeling for the health of the economy, trade data in the early part of 2014 will not be very helpful. Last year’s export figures were visibly distorted until May. Wait a bit longer to get a clearer view of what’s going on. China Economic Review | April 2014

ECONOMICS & POLICY: REFORM AT THE NPC

WAITING FOR ACTION: Continuing the reforms outlined at last year’s Third Plenum was a major theme at the annual sitting of China’s parliament in early March

Chinese-style reform SOEs are being reformed, but be careful not to confuse marketization with privatization

n February 20, China Petroleum and Chemical Corporation, known as Sinopec, said it would open its distribution chain to 30% outside investment, a landmark change to the state’s monopoly on the oil sector. On the same day, Gree Group, an appliance maker owned by the city government of Zhuhai, followed suit, saying it would establish a new company and sell 49% of that to strategic investors. This isn’t just talk. The moves by these two powerful state-owned firms – particularly Sinopec – are significant steps in the long and tired process of state enterprise reform. Chinese media have pointed to the announcements as signs that new, concrete reforms to central and local 28

China Economic Review | April 2014

state assets would be announced at the second annual session of the 12th National People’s Congress, which convened on March 8 and ran through the middle of the month. More often than not, NPC sessions are extravagant and meticulously organized events where government plans are rubber-stamped by officials. Leaders issue long-winded work reports, stress stability and unity and, most importantly, praise the Communist Party. That was true of last year’s congress too, except that session completed a once-in-a-decade leadership change that officially crowned Xi Jinping president of China and head of the People’s Liberation Army. The transition started a few months before that when Xi

was ushered in as party chief at the Communist Party’s congress. ‘Quality assets’ What’s drawing attention to this year’s NPC is all that has happened since Xi took over. Even before he became president, Xi launched a campaign to tackle inner-party corruption. The major purges that followed have cleared the way for reform at state firms such as Sinopec, where a pantheon of senior officials have been disposed on graft charges. The new leader’s consolidation of power was evident at the party’s Third Plenum summit in November, which issued a 60-point to-do list of social and financial reforms. Experts called the document the most substantial

ECONOMICS & POLICY: REFORM AT THE NPC

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push for change in China in nearly 20 years, one that only a leader with a staunch power base could make. This month, the NPC is a chance for Xi, and Premier Li Keqiang, to jumpstart their second year at the helm and put reforms into place. Given the sudden opening to outside investment at two major state firms, the sights might be set on trophy bucks such as state-owned enterprises (SOEs). The State-owned Assets Supervision & Administration Commission (SASAC), which oversees China’s SOEs, has been hard at work since November drafting a set of guidelines for reform. Midway through last year, SASAC head and Sinopec don Jiang Jiemin was removed from his post and saddled with corruption charges. That was likely a necessary move to press ahead with real reform for some of the assets that SASAC oversees either directly at a central level or indirectly at the local level. The deputy director of SASAC recently told state media that the new guidelines are a two-pronged strategy that will give private players a chance to take equity ownership in SOEs and promote modern corporate governance in the mammoth firms.

That Sinopec is a guinea pig for the overhaul shows that leaders won’t just toss worthless assets into the fray. “The current wave of SOE reform is being started with both quality companies and quality assets,” Barclays Research said in a report. Like it’s 1997 In 2014, it might be hard to remember that state-asset reform isn’t new. One can’t be blamed for forgetting this following a decade under former president Hu Jintao when struggling government-backed companies saw their share of the economy surge after years of decline. Millions of Chinese were laid off in the late 1990s as Beijing pushed the failing state companies they worked out of the market. Big SOEs that survived the cull grew stronger as sectors become less crowded. Avoiding dismantlement became an incentive for the firms to boost efficiency. But in 2003, under the direction of the new leader Hu, SASAC effectively ended the reform. The government closed the door for exiting the market. Since then SOEs have grown bloated with no real threat of failure. The state-asset reforms at hand today are a continuation of the works

that were put in place in 1997. SASACs leadership since the sacking of Jiang Jiemin has stressed its commitment to shuttering bad state assets. The Third Plenum’s to-do list mentioned mixed ownership for SOEs, as well as establishing a “market exit mechanism,” Andrew Batson, researcher at GavKal Dragonomics, noted in a recent report. But it stopped short of specifically mentioning the exit of SOEs, a step that will be crucial for re-starting the reform – and for it to have a meaningful result. “For this kind of threat to have credibility and bite, there need to be consequences for firms that fail to deliver,” Batson said in the report. “So the government should also restore a credible threat of closure and market exit for the worst performing SOEs.” Analysts are conflicted on whether the NPC will yield a robust plan for clearing inefficient players from the market. London-based Capital Economics said in a note that detailed plans could be elusive but the NPC may shed some light on the dividend payments SOEs are supposed to make to government coffers. State firms have been reluctant to split their profits with the state itself but the Third Plenum list asked SOEs to contribute 30%. The NPC could solidify the decision. While Chinese media were hopeful on a strong follow-up to the Third Plenum, weekly newspaper The Economic Observer warned against confusing marketization with privatization of SOEs. The high-level meeting in November showed real commitment to reform in the state sector but it also defined the future role of SOEs, calling the firms a “foundation” of China’s unique system. “The debate within China is not about whether there should be stateowned enterprises,” Batson wrote, “but rather what kinds of companies these should be and how they should be managed.” With that in mind, it’s clear that SOEs will remain important market players in China for years to come, even if outside investment begins to trickle in. China Economic Review | April 2014

B U S I N E S S : TAX I A P P S

TAKE ME HOME: Mobile apps that allow mobile users to order, and sometimes bid for taxis, have seen electric growth in Chinese cities

Getting a cab Popular smartphone apps have created a shortage of taxis in big Chinese cities and ignited a debate about whether they should be considered a form of public transport

t’s 3am on the first day of 2014. Shanghai’s Hengshan Road, an area popular for restaurants and nightclubs, is lit up with what seems like hundreds of bright green taxi lights, inviting the rowdy New Year’s crowd to hop in. But the drivers are waving people off. They roll slowly down the road, only occasionally accepting passengers and creating a traffic jam that at times brings the long row of mostly empty compact sedans to a standstill. Amid a cacophony of car horns, it’s clear that this is not the scene of some cheery holiday celebration. When waved off, some would-be customers kick the sides of cabs. Drivers

China Economic Review | April 2014

scream hysterically when unwanted passengers climb into their back seats. In a fit of frustration, one impatient partier opens a cab door and punches the driver in the face before his friends can pull him back. Now and then, someone approaches a cab shaking their cell phone at the driver. The driver squints at his phone and waves them in – only to be stuck in the melee for another 10 minutes. Smartphone applications that Chinese use to reserve cabs are spawning this madness on the streets of Shanghai. Customers input their location, destinations and often promise a tip to drivers who then rush to pick

them up. Chinese internet companies designed dozens of the apps last year and white-collared workers in cities around China have downloaded them en masse. So have many drivers hoping to score an extra US$1.60-2.4 (RMB10-15) on each ride. In January, two of China’s biggest internet firms, Tencent and Alibaba, invested in two of the most popular taxi apps. Tencent backs “Didi Dache” and Alibaba has funneled money into “Kuaidi.” The companies have added rocket fuel to the trend by paying out rewards to drivers and passengers. By connecting an online bank account to their respective apps, Tencent and Alibaba pay RMB10

B U S I N E S S : TAX I A P P S

to passengers for each ride. Tencent pays RMB10 to drivers too; Alibaba offers RMB15. It sounds like a loss-making operation for the internet firms but the giants are playing an online banking long game. To use the apps and get a rebate, customers must connect to the companies’ mobile payment platforms. This then boosts each firm’s share of this growing market. Once the generous payments stop, which they will once the market is saturated, Alibaba and Tencent hope users will spend digital cash on e-commerce platforms paying for other goods and services. In the meantime, in a city of more than 20 million people and a shortage of cabs at peak hours, the payouts and tips can add up to a tidy sum. One person who claimed to be a driver said on a Chinese social media service Sina Weibo that he made US$374 (RMB2,300) in tips in a single day. Understandably, the apps have become a point of contention among everyone involved: Policymakers, drivers and their companies, academics and ordinary urban Chinese. Supporters have argued that the new technology will push the taxi industry to innovate. Opponents say the cab industry is part of governmentcontrolled public transport and that the apps are preventing many potential passengers, such as the elderly, from gaining access. Some have even pointed their fingers at the support from the major tech firms for making the problem worse. “If it wasn’t Alibaba and Tencent, if there wasn’t so much money involved, the apps wouldn’t have such an effect,” said Gu Jun, a sociology professor at Shanghai University and a frequent commentator on public transport in China. “The app companies originally had a bit of money. Then Alibaba and Tencent came in and it really changed things.” Disorder stirred by the apps has been common. Chinese media have written about accidents caused by drivers preoccupied by their smartphones. Drivers have reportedly stopped midway through rides and forced their passengers to the curb

“There will always be disadvantaged groups when new technology appears ... But that will change.” - Zhang Youde, China Urban Development Research Association after getting a “big deal,” likely a sizable tip from another customer. Police have been called in during rush hour simply to help hail cabs that refuse to stop for passengers not using the app. Now the central government is promising to step in and sort out the disruptive technology before it turns the state-controlled market for cabs on its head. Gu portrayed the apps as creating a highly irregular market, one where a baseline price is set by the government yet with a market-oriented bidding function built on top of it. Furthermore, the internet companies are subsidizing every ride that is processed through their apps, further distorting the actual demand for transportation. In one month, Tencent paid out US$60 million to drivers and passengers, according to McKinsey, a consultancy. The company booked 2.6 million rides at its peak on February 7. “This behavior isn’t competitive market behavior,” Gu said. The market itself is divided down the middle. In an online poll conducted by popular web platform Sina in February, 47% of respondents approved of the apps. They were likely the users who found rides quickly at peak hours or on busy thoroughfares. Some among the 45% that disapproved may have walked for blocks during a recent winter rainstorm in Shanghai while cabbies sped past, looking for booked customers. As long as people keep downloading them, the government faces a severe dilemma in regulating the apps. From Gu’s perspective, officials must step in and exert control

over the cab industry, which has been monopolized by the state for decades. However, in the same breath, the government’s current regulation model is no match for the newest mobile technology. Local regulators will have to move delicately on the taxi apps and slowly apply limited regulations to the most problematic areas, such as the extreme cab shortage during rush hour, he said. The biggest city governments are trying just that. In Late February, Shanghai’s municipal leaders said drivers mustn’t book customers during the busiest hours in the morning and evening. Beijing officials are more worried about safety. They’ve put a ban on cabbies using more than one application in the hope that they won’t be too distracted at the wheel. In Shenzhen, the birthplace of the free market in China, the government has given the green light to the app without exception but neighboring Guangzhou has made Didi and Kuaidi illegal regardless of the time of day. The central government even weighed in on the topic last week at the National People’s Congress. In an unprecedented sign of approval for the technology, transport minister Yang Chuantang said the government would “support and help to develop the taxi apps. Instructional policy will be issued,” suggesting that the technology had a role to play in the government-controlled market. “This was the wrong answer,” says Sun Xiaomin, a professor of law at Tongji University in Shanghai. “He didn’t make a distinction between what is market regulated and what is government regulated.” Taxis are an extension of the public transportation system, Sun says. Cab companies are state-owned and take instructions from local governments, not the market, making the service in principle the same as public buses. Cab drivers do not have the authority to choose their customers or change the price of the service. Also, Chinese regulation requires that public services such as buses, metro lines and taxis must be accessible to at least 90% of the population in order to not be deemed discriminatory. China Economic Review | April 2014

B U S I N E S S : TAX I A P P S

“These are the rules in this industry,” Sun said. “Every customer enjoys the equal right to get a taxi. It’s not fair to old people who can’t use the apps.” Some estimates say just 40% of ordinary passengers have smartphones today. The government can either ban the apps altogether or change the nature of the taxi industry itself, effectively renouncing its purview over prices, Sun says. But it’s one or the other, not both. More likely than not, the apps will end up changing the market for cabs whether officials like it or not. On the regulatory level, city governments have limited methods of trying to stop the apps. Police in Shanghai have reportedly resorted to stopping cabs at rush hour and looking at drivers’ phones. Forcing companies to

shut off the apps could work temporarily but new software is bound to emerge from the ether of the Chinese internet, especially given the current demand for the apps. Even without backing from major internet companies, the apps have unlocked hidden demand for quicker access to cabs and showed many passengers are willing to pay more for better service. Didi and Kuaidi have already joined a growing list of disruptive technologies that have pressured the Chinese government to concede space to the market. Alibaba and Tencent are also leading the way with internet finance, which is pushing the central bank to liberalize interest rates. Some cab companies are reportedly trying to integrate the taxi apps into their own operations systems, a step that would normalize the service.

The government will need to give new technology room to develop in markets that it has long monopolized, says Zhang Youde, the director of the China Urban Development Research Association and a professor at Shanghai University of Political Science and Law. The distortions the apps have caused will subside as services improve and all parties involved become more familiar with it them. “There will always be disadvantaged groups when new technology appears,” Zhang said “But that will change and the government can work to reduce that group … This is still developing and it hasn’t had its full explosive effect on the market. Now is not a good time for [them] to try to control it.” For the time being, fairness might have to take a backseat to the vitality of the market.

The state fights back Moving money online just got harder for internet banking and ﬁnance newcomers Alibaba and Tencent, and a state-owned rival is suspected of being behind it all

he companies, particularly Alibaba, pioneered e-commerce and mobile payments in China while officials and state firms sat idly. More recently, the companies’ internet finance products have applied pressure on China’s central bank and the low fixed rate of interest banks pay on deposits. The pace at which the two companies have developed new banking and financial products have taken the state-controlled financial services industry by storm. But conservative regulators that tend to back government firms are waking to the trend and could come down hard on Alibaba and Tencent. In mid-March, the People’s Bank of China reportedly issued an urgent notice to the private internet giants asking them to temporarily halt QR code payments via their third party payment platforms, Alibaba’s Alipay and Tencent’s Tenpay. The notice also told the companies to delay the

China Economic Review | April 2014

virtual credit cards that they planned to launch soon. The central bank says more research must be carried out on user identification before QR codes, the two-dimensional barcodes that can be scanned to make payments, and online credit cards can proliferate. The security claim is valid but the official crackdown on third party payment methods is strikingly similar to disputes Alibaba has run into before. Inconvenient delay Last August, China UnionPay, a state-backed credit card monopoly, said all third party payments must be routed through its system and cleared by its clearing house by June 1 2014. Alibaba responded by shutting down its offline point-of-sales payment processor “for obvious reasons,” the company said. The UnionPay-set deadline is fast approaching, and the state-owned

company is hungry for the profits it stands to earn if all third party payments are processed in its system, up to 0.55% on each transaction. UnionPay may have applied pressure to the central bank to crack down on QR payments, which still dodges UnionPay’s reach. At least that’s what CICC, a Chinese investment bank, thinks. A private report circulated by the bank said PBOC’s move was likely aimed at protecting UnionPay. Killing QR payments for now won’t cause too much distress at Alibaba or Tencent in the short run. At Tencent, the majority of users connect their bank accounts or Tenpay accounts to WeChat but don’t necessarily scan QR codes to make payments, Barclays Research said in a report. “Nevertheless, if the temporary ban extends to a prolonged period, this would no doubt affect the monetization ramping up of WeChat payments,” according to

BUSINESS: ONLINE BANKING

the report. Delaying the issuance of online credit cards could do damage, however. China’s credit card sector is greatly underserved. While many young, urban consumers have the financial wherewithal to make payments on credit cards, the application process can be difficult and services are limited. Issuing virtual credit cards could have been yet another breakthrough for China’s top internet firms in the country’s undeveloped financial space. Depending on how long PBOC bans the services for, Alibaba and Tencent could lose the first-mover advantage. “It’s too early to tell right now [if they lost that advantage],” said one analyst at a Chinese securities firm who asked not to be named. “We’ll have to wait and see how other players react and if anyone moves to fill this space.” Normal treatment Perhaps regulators imagined online credit cards exploding onto China’s financial scene in the same way Yu’ebao, Alibaba’s online moneymarket fund, did last year. To many ordinary Chinese the fund, which began taking investments in June, has become an alternative to putting deposits into lowreturn bank accounts. The higher interest rate, more than 6% during its first eight months of operation, had attracted more than 80 million users and nearly RMB80 billion by the end of February. Alibaba partners with Tianhong Asset Management, and bought a majority stake in the company in October, to offer the money-market fund. In January, Tencent rolled out Licaitong, a similar investment fund, partnering with China Asset Management. Regulators gave online finance an approving nod at the National People’s Congress in early March but the placidity belies the government’s and the state-backed banking industry’s trepidation over the funds, which they view as lacking oversight and encroaching on their business.

COVERT WAR: State-run China UnionPay is likely trying to slam the brakes on rivals

In late February, the China Banking Association, an industry body, met to discuss what it called “selfregulation of bank deposits.” The real question on the agenda, however, according to Chinese media, was how to deal with online finance, which some traditional bankers have accused of raising the cost of lending at bricks and mortar banks. The association will reportedly push the China Banking Regulatory Commission to start treating online funds such as Yu’ebao like normal deposits. That means Yu’ebao and Licaitong would have to start setting aside deposit reserves from the funds, 20% on the investment that would not accumulate interest at a high rate. Such a move has the potential to significantly tame the funds. “Enforcing reserve deposits [on money market funds] would have a huge effect on returns,” Xue Hexiang, an analyst at Guotai Junan Securities, said on Monday. “It would be like losing a full 20% of the investment.” Degrees of pressure It’s unclear if CBRC will heed the banking association’s suggestion. Yet, while Alibaba and Tencent wait for that regulator and PBOC to formulate their stance on the online

bank and finance business, the return that the companies can offer on Yu’ebao and Licaitong is decreasing as the cost of financing falls. Just a week after Yu’ebao came online last year, interbank rates soared as PBOC refused to pump liquidity into the market. The money market funds thrived off the high cost of borrowing that remained much higher than before through the beginning of 2014, at times giving investors a return above 7%. The rates have come down, though, and so have the returns from the funds. At the beginning of March, the annual interest rate on Yu’ebao products fell below 6% for the first time and the return has continued to fall as the central bank eases its monetary policy. The falling rate of return is just another challenge Alibaba and Tencent face as they come up against an increasingly hostile regulatory environment. This year will be decisive in marking the role the companies are allowed to play in banking and finance. If legacy players such as UnionPay and state-backed banks apply a greater degree of pressure on PBOC and the CSRC, the internet giants could find themselves relegated to a much smaller space in the financial world. China Economic Review | April 2014

M A R K E TS & F I N A N C E : CO R P O R AT E D E FAULT

They finally fall How a corporate default stole the show from Beijing’s big annual event

t’s hard to outdo Beijing’s extravagant National People’s Congress (NPC), the annual meeting of parliament. But a small solar company managed to do just that by defaulting last month. The company, Shanghai Chaori Solar Energy Science and Technology, said in a statement to the Shenzhen Stock Exchange that it could pay a trifling US$653,462 (RMB4 million) on a US$14.54 million bond-interest payment. The local government in Fengxian, a district of Shanghai, didn’t come to the rescue, and China witnessed its first onshore corporate default during the NPC. Such a development crowded out some of the long policy statements China’s top leadership delivered at the congress in Beijing in the second week of March. Ironically, China’s new administration was expected to focus on the risks associated with corporate and local government debt, among many other topics, at the meet. Senior leaders no doubt would have preferred to discuss this on their own terms. Chaori issued a five-year US$163 million bond in March 2011 but ran into financial problems in December 2012. The company made a full payment last year but trading of the bond was suspended in June. At that time both the banking and the securities regulators said they would help restructure it. The bond’s underwriter, China Securities, has deep pockets. So does the jurisdiction it hails from. That makes a quick and quiet bailout all the more feasible and Wednesday’s announcement even more surprising. A Bank of America Merrill Lynch report called the potential default China’s “Bear Stearns moment,” that sudden realization that all might not be well with the assets that many are heavily invested in. The country’s

China Economic Review | April 2014

“Lehman stage,” or severe panic in the markets, is still a way off, though Bank of America thinks “that it may take less time in China as the market here is less transparent.” Chaori is part of a much larger ecosystem of corporate distress. Corporations in China this year will have to pay back more than US$425 billion in principal and interest. Refinancing the debt is growing increasingly expensive amid higher borrowing costs and rising interest rates on bonds. “Unfortunately, most of the corporates with a negative credit outlook already have high debt-asset ratios and may also face the problem of overcapacity, which has negative effect on profit and solvency improving,” Zhang Yingjie, a senior researcher at Chinese rating agency CCXI, said in an interview. The description fits Chaori well, given that it’s part of China’s glutted solar industry. When China Securities, a joint venture between Huijin Investments and the Beijing arm of the national state-asset regulator, didn’t jump in and save face during the congress event, it showed a major change in attitude toward how China will deal with emerging risk in corporate debt. Many retail investors bought the

bond, Fitch Ratings noted, meaning that average Chinese people would lose money in a default, not just wealthy investor consortiums. The ownership of debt has been a sticky subject for Beijing, which is still nervous about letting the small guy take losses. At the end of January, China Credit Trust was set to default on a US$500 million trust product due to mature. The government showed disinterest in bailing the company out, likely because the bust would not put the wealthy investors in the product out on the street. Still, before January 31, an unidentified buyer swooped in and bought the products, reinforcing an implicit government guarantee on the highly risky products and delivering a shot of morphine to the market with the hope of temporarily easing the pain. Suntech Solar defaulted on a US$541 million bond last year but that company was incorporated in the Cayman Islands and the investors were all offshore. By allowing the much-smaller Chaori to default last month, Beijing removed that implicit guarantee and has cut off the supply of painkillers, at least to the smallest players that don’t pose any systemic risk. This is what economists mean when they talk about short-term pain for long-term gain in China’s economic reforms. Corporate, trust or even small local-government defaults will hurt all involved but they will reduce risky lending practices and help prevent future – potentially bigger – defaults. In the corporate bond market, a default would better price risk into bonds. The leaders in Beijing might be able to steal the show back if they come out with a strong message on what kind of financial pangs they are willing to tolerate, and which kind they consider altogether too risky to let pass.

M A R K E TS & F I N A N C E : S H A D O W B A N K I N G

More bad news for China’s shadow bankers Off-the-books lending looks riskier than ever in China’s shadow-banking universe

o far, 2014 has been a bad year for off-balance-sheet lending in China. It began with a mild cash crunch that targeted the shortterm lending rates shadow banks thrive on. Before the end of January, a trust product came to the edge of default, sending a chill through the risk-laden market. Interbank rates have since subsided, hitting a 20-month low last week. The moribund trust product issued by China Credit Trust got a mysterious bailout facilitated through Industrial and Commercial Bank of China, the same bank that sold the product, narrowly avoiding a default. Still, the turbulence at the beginning of the year was enough to significantly reduce new lending in February. Total Social Financing, or TSF, China’s broadest measure of credit, fell to RMB939 billion in February from RMB1.7 trillion a year ago, according to figures released by the People’s Bank of China. After a huge

surge in lending in January amounting to RMB2.58 trillion, analysts had projected RMB1.31 trillion in new loans in February. The drop came as a surprise, accompanying poor trade data for February. Unlike the export numbers, the falling TSF data isn’t disappointing. In fact, it could be encouraging. Much has changed during the first two months of the year. In January, seasonal factors partially led to the high TSF numbers. But off-balancesheet lending was the driving force in the surge, worrying regulators that their attempts to crack down on the shadow sector were failing. In contrast, weak off-balance-sheet lending pushed the numbers to the floor in February. Non-bank finance constituted just 17% of TSF last month, a remarkable decline from a year ago, when it accounted for more than 42%. In January, off-balancesheet credit hit 43% of TSF, a share that grew from the month before.

INTO THE LIGHT: Several forms of off-balance-sheet loans are becoming less popular

This is a promising trend. And it shows that a new sense of risk is taking hold in China’s thriving shadow lending sector. In January, the near default of China Credit Trust knocked confidence and pushed down volumes in trust loans, one of the three primary types of non-bank finance. But much of that lending reappeared in the other two areas – entrusted loans and banker acceptances. They both surged in January, showing a stillstrong demand for shadow banking products. The February data show all three types of non-bank credit are in retreat. At the start of the year, when interest rates were much higher, corporations may have used banker acceptances as a channel for finance. Now that those rates have fallen thanks to an easing policy stance at the central bank, some corporates have gone back to bank loans. The market for trust products looks gloomy. Big banks are trying to distance themselves from those, and at the same time investors have likely wised up to the risks, Societe Generale, a French bank, said in a report in March. “Whichever the case, the near-term prospect for trust financing is not beautiful.” But with the central bank continuing to intervene in currency markets, pushing interbank rates down, don’t expect shadow banking to stay tame forever. The lower the cost of borrowing, the more likely shadow financing is to pick up. “If the People’s Bank keeps this up, then looser monetary conditions are likely to support a rebound in credit growth in the shadow banking sector,” London-based Capital Economics noted in a report. China Economic Review | April 2014

SPECIAL RESERVES: Canada has an excess of natural gas reserves but it doesn’t have the funds to get it out of the ground. The country is looking to investors in Asia, especially deep-pocketed China, for investment

Chinese yuan paying for Canadian gas Canada is open for business and wants Chinese investment in its vast oil resources

sk somebody on the streets of Shanghai what they envisage when they think about Canada and you’ll likely hear “mountains” or “beautiful scenery.” These are the features that have made the country one of the most popular tourism and immigration destinations among Chinese. Speak to a dark-suited executive inside his office at one of the cavernous complexes that house China’s state-owned oil giants in Beijing, and you’ll hear an equally enthusiastic response to Canada’s physical assets. But he’ll more likely have drilling in

China Economic Review | April 2014

mind that skiing. That is because the North American nation is now one of the biggest energy producers in the world. These contrasting images of Canada collide in a part of the country that is home to the Western Canadian Sedimentary Basin. The basin stretches across an area of western and northern Canada larger in size than South Africa and is one of the world’s most valuable deposits of natural resources. Stretching over part of the basin are the Rocky Mountains, a skier’s paradise. Developing and exporting the

hydrocarbons in this area, and across the rest of Canada, is vital to the country’s economic future, a growing legion of economists, politicians and oil executives say. They argue that the energy industry is an integral source of growth as well as a major employer and creator of new jobs. Yet exploiting the full potential of energy is not easy. Canada’s traditional oil and gas reserves are running out. Now, energy firms and the government are focused on pulling oil sands and shale gas out of the ground; these are referred to as “unconventional” assets because

Suncor Energy Inc

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Buried wealth Canada has a proud seat at the top table of the current global order. It is among the G8 group of major economies and a long-term member of bodies such as the Organization for Economic Cooperation and Development and the International Monetary Fund. But unlike its developed world peers, energy accounts for an outsized share of GDP. Unbeknownst to many outsiders until recently, Canada is an energy player on par with Russia and Saudi Arabia. It holds the world’s thirdlargest proven reserves of crude oil and has massive amounts of natural gas. This journey started in 1947 when the Leduc No. 1 well struck oil in the Western Canadian Sedimentary Basin situated underneath Alberta province. For the past six decades conventional oil and gas have been the main source of energy production. Those resources are slowly coming to the end of their commercial life. Government and industry are looking to unconventional assets to take on their role in powering the economy. Of the 173 billion barrels of oil reserves in Canada, 168 billion are oil sands; these are mined in huge opensurface pits or drilled from beneath; the complexity in extracting them typifies unconventional energy. By around 2030, oil sands production could more than quadruple from 1.3 million barrels a day to 5.4 million, says a statement on the website of

Imperial Oil, the second-largest integrated oil company in Canada and a leading developer of oil sands. Oil sands already account for more than half of total Canadian oil output. The Canadian Energy Research Institute (CERI) claims that almost every community in Canada has been “touched” by the economic benefits of the oil sands. The institute, which has close ties to energy companies, forecasts that over the next 25 years oil sands will provide almost half of the one million jobs in the domestic oil industry and contribute an aggregate US$1.5 trillion to the economy. Although Canada does not rank in the world’s top 10 nations by proven natural gas reserves, it is the secondlargest producer of shale gas after the US. Shale gas, which is trapped in pockets between deeply buried rocks, is the most significant development in global energy in decades; it accounted for approximately 15% of total Canadian natural gas output in 2012. Yet despite their undoubted economic value, these new energy sources have their critics. Oil sands production pollutes the air while fracking, as the process

through which shale gas is extracted is known, is considered harmful to the environment. The energy industry, government and environmental groups are locked in a bitter battle of words over how much harm is caused. Step up, China What troubles the Canadian government more than environmental activists, however, is a lack of money to develop these new energy resources. Often found in remote and harsh locations, they are technologically difficult and more costly to extract than traditional deposits. Getting this oil and gas to the surface is also only a part of the wider picture. In order for Canada to fully realize its energy potential, industry advocates note, it must be able to ship that output to a range of overseas markets and not just the US. Almost all Canadian oil and gas exports are pumped by pipeline southwards to its North American neighbor. “One of the challenges we [Canada] face, however, is the need to get our crude oil and gas to tidewater in order to export it, otherwise we risk a stranded asset and a huge loss of

GAS LEAK: Environmentalists fear oil production will hurt the environment

China Economic Review | April 2014

Credit: Francisco Diez

they require new and advanced drilling techniques to extract. But they are often found in remote locations and are hugely expensive to develop. Ottawa lacks the funds to pay for everything that is needed. Step in China. The world’s biggest and fastest-growing consumer of energy has set its sights firmly on Canadian assets. Its state oil companies have the cash to throw at wells, pipelines, ports and refining facilities. Even so, there is no guarantee that everything will work out. Regulatory obstacles are slowing progress and low global energy prices could scare away investment.

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revenue,” says a note on the Canadian website of consultancy PwC. The country lacks transport networks to move oil and gas from fields to the west coast from where it would be exported; there is also a huge shortage of facilities that liquify gas to load on to ships. Diversifying into new markets, particularly in Asia, is an urgent task as the US switches from being the world’s largest importer of energy to a potential exporter, thanks to its own unconventional energy boom. Exports to there are projected to decline in the coming decades. Asian governments are already knocking at the door. Indian and Malaysian state energy companies have invested in production assets in Canada, while Japan and South Korea are desperate to open up their import channels. This is good for Canada as Asian consumers pay some of the highest prices for natural gas anywhere in the world. Beijing has established a strong foot on the ground in Canada. In late 2012, state-owned China National Offshore Oil Corporation bought Toronto-listed Nexen in a US$15.1 billion deal. There have been other transactions: Chinese companies have sunk more than US$33 billion into Canadian energy assets since 2009, according to Dealogic. In the 20072013 period, 28% of all overseas Top 5 nations by proven natural gas reserves (2012) Trillion cubic feet 1800 1500 1200 900 600 300 0

Russia

Iran

Qatar

United States

Saudi Arabia

Canada*

Source: US Energy Information Agency *Canada Ranking 19

Top 5 nations by proven oil reserves (2012) Billions of barrels 300 250 200 150 100 50 0

Saudi Venezuela Canada Arabia Source: US Energy Information Agency

Iran

China Economic Review | April 2014

Iraq

investment into Canadian hydrocarbons and 38% into oil sands came from Beijing. “China is an important source of funding just as much as Canada is an important source of necessary natural resources for China,” Arlene Kish, senior Canada economist at IHS Global Insight, told China Economic Review. “China has already invested in Canada’s oil sands so further investment would be welcome as well.” Both Ottawa and Beijing are hoping for quick progress. “China would like that [energy exports from Canada] to become a possibility as soon as possible. But the question is how can that become possible?” said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University. “One opportunity is to invite Chinese companies to build infrastructure. Why not? That will speed up the process a bit.” Benefits spill over Politicians in distant capitals are not the only ones waiting for action. Fastgrowing communities in Canada’s energy provinces are hoping the good times can continue. In this country of 35 million people, energy accounted for up to 18% of nominal GDP in 2012 and is responsible for up to 1.8 million jobs, according to Natural Resources Canada, a government department. Domestic energy production has doubled since 1980. Many of the benefits have been reaped by western provinces such as Alberta and Saskatchewan that sit atop of the Western Canadian Sedimentary Basin. Local government data show Alberta has been the fastest growing Canadian province for 20 years; it had the highest per capita GDP of any region in North America in 2012 and some of the lowest levels of unemployment nationwide. “While the current state of affairs is impressive, we believe that the best has yet to come [for Alberta],” Robert Hogue, senior economist with Royal Bank of Canada, wrote in a research report at the end of last year, noting that natural gas will be an important

factor in this. Neighboring Saskatchewan has mostly seen its emergence connected to mining, but also has energy deposits thanks to the basin. Oil production there is second only to Alberta. These two regions are expected to see more than 76,000 new jobs in oil and gas by 2022 and 78,000 mining jobs by 2021, Natural Resources Canada projected in a report last August. At the right price Nobody can say for sure when Canada will open up its energy export channels. Public comments from economists and industry executives put the earliest figure at 5-7 years. That could be realistic after the National Energy Board approved liquid natural gas export permits for four planned projects on the Pacific coast to facilitate shipments to Asia last December. Still, pipelines have to be built to move oil and gas to port – a regulatory battle surely awaits. Factors outside of the control of bureaucrats in Ottawa could also hold things back. Unconventional energy development is expensive anywhere, even more so in Canada where labor and general business costs are high. If global energy prices decline slighly from their current levels developing Canadian energy might no longer be commercially viable for investors. “Declines in energy prices is the biggest threat to investment,” noted Kish at IHS. “When energy prices declined during the recession investments in the oil sands were put on hold for at least a year or longer.” Xiamen University’s Lin cautioned that Chinese energy companies would have to factor in price risks when assessing their infrastructure investments in Canada. Yet considering the huge and growing energy needs of emerging markets, the chances of a collapse in global energy prices are slim. Canada is also an attractive business destination that understands it must court foreign capital. So while middle class Chinese think of skiing trips to the Rocky Mountains, energy executives will prefer to think about what lies beneath.

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加拿大油气业现华企投资潮

Credit: Shannonpatrick17

中国已入住加国多个油砂项目，而后者亦希望能获得进一步投资

加

拿大已在当前的世界排名中身居前列。除了此前加入的八国集团，该国还是经济合作与发展组织、国际货币基金等团体的长期成员。与其他发达国家不同的是，加拿大的能源收入在国内生产总值中占比庞大。直至今日，外界才了解到加拿大的能源储备与俄罗斯、沙特阿拉伯不相上下。该国已探明储量的原油储备在全球位居第三，天然气资源亦十分丰富。事实上，对加拿大的能源探索之旅早在1947年就已展开，阿尔伯塔省沉积盆地下勒杜克1号油井的开钻正是这段历史的源头。在过去的60年间，能源开采主要集中于常规油气，然而这类资源的商业命运已逐渐走向尽头。目前各国政府和行业组织都在寻求非常规资源，以期利用这类储备振兴国家经济。加拿大高达1730亿桶油当量的石油储备，其中有1680亿桶油当量属于油砂，后者通常是由大型露天矿开采以及地下钻探的方式获得。然而这种开采方式相对复杂，恰恰适用于非常规能源的勘探。根据 Imperial Oil官网的一则声明，到2030年左右，加拿大油砂生产规模将从现有的 130万桶油当量/天翻两番至540万桶油当量/天。Imperial Oil是加拿大第二大综合

China Economic Review | April 2014

石油公司，也是油砂领域领先的开发商。尽管在已探明天然气储量的指标上，加拿大并未挤进全球前十，但该国确实是紧随美国之后的世界第二大页岩气开发地。作为蕴藏于页岩层中的天然气，页岩气是近数十年来全球能源界最具价值的发现，而这部分能源的储量在2012年中占到加拿大天然气总产量的约15%。加拿大政府目前面临的最大挑战在于如何筹得能源项目开发所需的资金，同时为向新市场出口油气提供亟需的基建支持。加拿大的能源出口现阶段基本仅针对美国，但由于近年来美国页岩气革命的爆发，导致对能源进口的需求日趋疲弱。而另一方面，中资企业已大举进驻加拿大油气市场。2012年末，中国国企—中国海洋石油总公司斥资151亿美元收购了在多伦多证交所上市的尼克森（Nexen）。当然类似的交易不胜枚举：据Dealogic 的报道，自2009年起，有多家中资企业先后收购了加拿大能源资产，交易总规模逾330亿美元。另据加拿大自然资源部的数据统计，在2007年到2009 年期间，针对加拿大碳氢化合物的海外投资中有28%来自中国，而针对油砂系列的海外投资中有38%来自中国。 IHS Global Insight专注加拿大市场

的资深经济学家Arlene Kish表示：“中方所能提供的资金支持对加拿大至为关键，正如加拿大的能源供给对中国也十分重要。”事实上，中国已入住加国多个油砂项目，而后者亦希望能获得进一步投资。加拿大各能源大省社区规模不断扩大。据Natural Resources Canada网站披露，在这个拥有3500万人口的国家，2012年能源收入已占到当年名义国内生产总值的18%，同时创造了多达180万个工作岗位。自1980年至今，加拿大的国内能源生产规模已增长了一倍。阿尔伯塔省、萨斯喀彻温省等地处加拿大西部沉积盆地的省份已从中获得巨大利益。当地政府公布的数据显示，阿尔伯塔省已连续20年成为加国发展最为迅速的省份，2012年在北美各地区的人均GDP排名中更是拨得头筹，失业率亦在全国范围处于最低水平。而邻近的萨斯喀彻温省则在采矿业大放异彩，并因其特殊的盆地地形拥有充裕的能源储备，在石油生产方面也仅次于阿尔伯塔省。Natural Resources Canada 在去年8月发布的一则报告中预测称，上述两个能源大省2022年前将在油气领域创造超过76000个工作岗位，2021年前将在采矿领域创造78000个工作岗位。

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Safety and value Darwin Forer, Asia vice president at REDEV Properties (Canada) talks about the attributes of investing in Canada’s property sector Why should investors consider Canada over the US when thinking about where to invest? DF: The USA has an extreme oversupply of retail space compared to Canada which makes Western Canada a safer, low risk place to invest. USA occupancy rates and therefore net rental income is low and will continue to be that way for a long time whereas Western Canada continues to grow. The USA has low growth compared to the opposite situation in Western Canada which continued to grow even through the recession. Because of this negative situation in the USA it will take many years to absorb all the existing excess space. Many brand retailers in the USA are now expanding into Western Canada because there is approximately twice the income per square foot for them compared to the USA, which in turn creates great income for the owners of retail shopping plazas in Western Canada. Within Canada, Alberta and Saskatchewan are the fastest-growing provincial economies. What are the

What has been the pattern of property investment from Chinese investors in Alberta and Saskatchewan? DF: As more and more Chinese investors realize the safety and value in Western Canada retail space they are moving some of their wealth from Asia to investing in retail shopping plazas which produce immediate and steadily rising income for them combined with the long-term security and capital gain of real estate in a steadily growing economy. 问：投资者在考察地产投资目标时为何需优先考虑加拿大项目，而非美国？

real estate investment opportunities that are being created? DF: As there are more new jobs created in Alberta and Saskatchewan than all of the rest of Canada combined this equates to significant population increases, hence more money spent on retail shopping in a controlled amount of retail space. This situation will continue to force prices and profit up, which is good news for holders of retail shopping plazas.

答：美国的零售物业市场已经饱和，相比之下加拿大（尤其是西部地区）是更为稳健安全的投资地。美国零售物业项目的出租率和租金净收入相对较低，并在未来很长一段时间内都将维持原状，而加拿大西部的同类市场则持续增长。即使在经济萧条时期，加拿大西部的零售地产市场增长速度都比美国更快。由于吸收过剩的零售地产项目需要耗时数年，目前诸多开发商已转战加拿大西部市场，原因是在后者市场上每平方米的净收入要高出一倍。当然这一兴盛局面亦为加拿大西部的购物广场业主带来了丰厚收入。

问：在加拿大境内，阿尔伯塔省和萨斯喀彻温省是不是发展最为迅速的省份？当地的地产投资机遇有哪些？答：阿尔伯塔、萨斯喀彻温两省所创造的工作岗位要比加拿大其他省份的总和还要多，所以随着当地人口基数的增长，零售购物需求也将水涨船高。这一局面将进一步助推当地商铺的价格和利润，而这对购物广场商铺的持有者无疑是利好消息。

Credit: Mack Male

问：中国投资者一贯采用何种方式在这两个省进行地产投资？

PRIME TIME: Edmonton is the provincial captial of Alberta

China Economic Review | April 2014

答：愈来愈多的中国投资者意识到在加拿大西部地区投资零售类商业地产物有所值，所以纷纷将部分资金从亚洲转向加国，以在当地寻觅可供投资的零售物业。必须了解的是，投资者可从这些项目中获得即时收益，租金回报稳步增长，加之加拿大国民经济持续发展，资本收益长期看涨，外部的投资环境亦十分安全。

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ቤ਋‫ފ‬ 44 生于忧患

45 ௡ୡ ॖෂ৺ူ 46 互联网冲击波

જᄌ 48 解读改革宏图 50 移动创业潮 52 网络危机 53 房企之惑

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54 光明来自何方

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ఘᒦਪ 55 也谈阶层

生于忧患

新观察

应对危机的最佳方法还是增强防范意识和防卫能力文 | 海客

这

是一个暖意融融的早春。全国两

人民币，共牵涉到15家银行。这一违约事

昆明恐怖袭击案暴露出城市治安防

会是每年3月的焦点。今年政府工

件凸显了金融系统的脆弱，引发人们对地

控存在的诸多漏洞。一些本就打算移居国

作报告中一共77次提到“改革”，传达出

方偿债能力的担忧。而鲜有普通民众关注

外的人，不安全感陡增，想要尽快离开。

改革已迫在眉睫的信号。而涉及的事项皆

此事，他们向来认为银行是最值得信赖的

然而，放眼世界，乌克兰、克里米亚……

是原则性的，如“消除雾霾”就不是一朝

金融机构：政府为了维护社会稳定，不会

很多地方其实更为纷乱。忧惧不安、行为

一夕所能达成的。至于“深化改革、反腐

放任银行破产；而且迄今中国大陆也没有

失措者只是极少数。大多数人生活一切照

倡廉、简政放权”早已是老生常谈，关键

商业银行破产的先例。该公司老板已锒铛

常，看看周围，饮食男女，安逸如常：逛

是如何落实。两会前后，各种猜测甚多，

入狱，即便未涉其他罪名，仅拖欠银行巨

街、购物、约会、聚餐、泡吧、旅游—

如“大老虎”何时现出真身？与切身利益

额贷款一条就够其“喝一壶”。该事件也

近期去马来西亚的游客势必大减。

相关的则是：A股会不会暴跌？人民币兑

印证了房地产与银行之间的关系是一损俱

亡羊补牢为时未晚，各大城市安防

美元汇率会继续贬值么？一线城市房价是

损，一荣俱荣。业内人士相信房地产不会

措施明显加强。有识之士则在反思：“居

否会下降？

轻易崩盘，地方政府还指望着它来收税，

安思危，思则有备，有备无患。”（《左

长三角部分城市楼盘刮起降价风。房

银行也将无法承受其后果。时至今日，银

传》）而应对危机的最佳方法还是增强防

价涨跌本是市场常态，但由于背后利益关

行破产法虽迟迟没有出台，但从趋势看，

范意识和防卫能力。须防患于未然的何止

系盘根错节，实际情况却远为复杂。浙江

也只在旦夕之间。对于早已千疮百孔的金

于此。如果不具备忧患意识，又何来改革

一家房地产公司拖欠银行债务高达24亿元

融系统，越早改革对中国经济越有利。

的紧迫性。

China Economic Review | April 2014

聚焦

外资房地产基金多集中于一线大城市

产业发展趋势

投资者会将目光扩展至门户城市的边缘地

段，一些互联网购物平台和拥有线下丰富

外资地产基金热投中国

带，例如东伦敦及曼哈顿的市区，这些地

资源的传统企业正在进入这一市场。在线

清科研究中心发布的地产基金报告显示，

方的楼价比传统核心区域更具吸引力。

租车市场规模去年达55亿元，未来几年仍将快速发展。汽车资讯类网站是消费者

去年中国市场上外资机构房地产私募基金的募集基金支数及总募集金额呈现一定增

美日欧大力发展电动汽车

获取汽车信息的主要来源，未来这一类网

长。清科研究中心分析师苗旺春认为，目

罗兰贝格管理咨询公司与德国亚琛汽车工

站很可能成为市场先导者。汽车电商的消

前进入中国市场的外资房地产私募机构及

程技术有限公司共同发布的电动汽车指数

费模式仍有待培养，消费者购买新车和二

相应的基金都在国际资本市场上经历了较

报告指出，日本在新型车销量以及技术发

手车，直接在网上完成的非常少。多元化

长发展时间，譬如铁狮门和黑石等国际知

展与功能方面走在前列。与美国类似，德

和精细化的细分市场开始出现。汽车后市

名的大型投资机构，在国际和中国市场拥

国在逐渐增加电动汽车市场高端领域的比

场消费庞大，包括汽车金融、汽车维护保

有较好的声誉，募资能力和大型项目运营

重，法国在车型种类方面几乎没有发展，

养等一系列服务。而服务电商化是最困难

能力更为业界称道。中国本土房企开始积

而中国与意大利则没有任何技术进步。

的，要能够抓住用户的细分需求，精耕细

极探索国际化道路，外资房地产私募基金

美国与日本仍是电动汽车最重要的生产

作将会越来越重要。

则拥有较好的国际市场经营经验，两者可

基地，而日本主要从其电池生产实力中获

以通过合作实现共赢。

益，2016年将占据全球电池生产60%份

资产全球配置乃大势所趋

额。电动汽车最重要的生产基地仍是美

中国资产的全球配置已经是非常重要的趋

亚洲房产投资者走出国门

国，2016年将生产超过46万辆电动汽车。

势，这是诺亚（中国）控股有限公司董事

高力国际近日发布白皮书称，亚洲地产投

美国在电动以及插电式汽车领域仍保持领

局主席兼CEO汪静波近期发表的观点。

资者正在把投资范围扩大到美国、澳洲及

先市场地位，去年共销售近9.6万辆电动

她还表示，按照欧美、日本过去三十年间

欧洲，并从本国市场抽出愈来愈多的资金

汽车。

财富管理行业的发展历史，中国财富管理行业未来发展潜力巨大，会呈现出持续增

转战海外市场。尽管亚洲投资者的重心历来放在本国或本地区，近年来他们在世界

汽车电子商务良机莫失

长。产业结构的转型和新经济的发展会成

其他地方的投资总额却持续攀升，由本世

汽车电商各个产业链机遇极大，未来走势

为新的增长引擎，投资者应重点关注互联

纪初约10亿美元急升至去年的逾300亿美

看好，这是首届上海汽车电子商务发展论

网、养老、医疗、教育、文化等产业的投

元。对于亚洲以外的房地产，中国内地、

坛传达出的信息。艾瑞咨询集团联合总裁

资机会。投资人能不能把钱投到这些地方

香港和新加坡投资者是主要买家，预料未

邹蕾在演讲中表示，汽车领域还有大量服

去，决定了他在下一个经济繁荣周期到来

来几年仍将如此。预期在下一个热潮中，

务没有互联网化。汽车电商尚处早期阶

时拥有的财富。

China Economic Review | April 2014

封面故事

互联网冲击波互联网领域的新变革将对传统行业构成更大的挑战

供

职于银行的曹女士最近尝试着使用

以人人贷替代传统存贷款业务，以众筹融

式上谋变，实现传统物理营销渠道和互联

手机购买了余额宝，而这是一种让

资替代传统证券业务。

网营销渠道的有机结合；从业务体系上谋

国内银行业感到恐慌的互联网金融理财产

清科研究中心分析师金恩廷表示，

变，实现聚集各类商业品种的金融超市式

品。她觉得，余额宝的收益率虽然与银行

尽管互联网从事复杂的金融业务仍较为困

的服务模式；从战略导向上谋变，实现商

理财产品接近，但门槛要低很多，1元就能

难，但从事一些简单的金融业务，如保险

业银行与其他金融机构以有益合作代替恶

购买，而且操作相当方便。事实上，不仅

中车险、意外险、券商中传统经纪业务

性竞争的关系。

普通银行职员，就连银行界高层也在使用

等，很可能利用其更大的平台占据较大市

互联网金融，前中国工商银行行长杨凯生

场份额。他认为，互联网金融尚存在一些

近期就公开承认，他和夫人经常使用支付

本质问题：缺乏专业人才，难以从事复杂

百度、阿里巴巴、腾讯三大巨头对移

宝。而余额宝正是由这个网络支付平台为

的金融业务；缺乏产品开发能力，只能销

动互联网企业的一系列收购举措，也引发

个人用户打造的一项余额增值服务。

售其他公司的产品。未来发展依然面临瓶

业界对于移动互联网并购的思考。去年中

颈，尚无法巅覆传统金融企业。

国智能设备预计已经超过美国，成为全球

互联网金融、电子商务、即时通讯、

移动应用层出不穷

社交网络等领域的迅猛发展，促使以互联

在互联网金融冲击下，银行业传统模

最大的单一智能机设备市场。业内预测，

网为引领的信息消费成为中国扩大内需的

式面临改革，传统商业银行须制定出一系

移动互联网在未来两三年将呈现3倍以上

新引擎。国家工信部研究报告指出，信息

列对策。金恩廷建议，商业银行要由产品

的增长趋势。随着智能手机的普及、移动

消费已经成为引领消费、扩大内需、提振

中心主义向客户中心主义转变；从经营方

互联网崛起、生活节奏加快的背后消费者

经济的新动力，预计2015年中国最终信息消费规模将超过2万亿元人民币，年均增长 25%以上。信息消费预计将拉动国内生产总值0.7个百分点，带动行业新增产出超过 1万亿元人民币。

在线金融持续升温去年被业界称为互联网金融元年，今年则是互联网金融爆发年。天弘基金数据显示，截至今年2月28日，余额宝规模已突破5000亿元，成为市场上规模最大的公墓基金；用户数超过8100万，比A股股民还多。今年1月9日人人贷获得挚信资本领投的风险资金1.3亿美元，夺得全球范围内互联网金融企业的最大单笔融资；平安在今年1月推出集理财、生活服务管理与一体软件“壹钱包”，这些事件都集中在金融改革与利率市场化政策出台前，具有关键意义，预示了互联网金融未来巨大的发展空间。清科研究中心的分析报告指出，全球互联网金融的发展呈现出三大趋势：以第三方支付、移动支付替代传统支付业务，

China Economic Review | April 2014

余额宝已是市场上最大公募基金移动互联营销的爆发式增长推动消费者的行为方式发生嬗变

互联网冲击波

碎片化时间增多，移动互联网改变了媒体

遇。移动互联网新的应用层出不穷，细分

一数字已上升至8%。预计到2015年，电

接触习惯和接触方式，智能手机上网平均

领域的市场机会模糊不清，于是传统互联

商交易在社零总额占比将达12%。2012

时长已达4.7小时，同时诸如WiFi的无线

网企业都选择广撒网的布局方式，花千万

年B2C和C2C的交易规模就已突破1万亿

布局也在紧锣密鼓的进行，也涌现出了如

或亿级美元来投资或收购，以寻找未来成

大关，整体收入1.3万亿元。预计到2015

掌上世纪等一系列专业平台，同电信运营

功的可能性。

年，电商交易总额或将接近4万亿元。

商相互借力。传统互联网与移动互联网两

清科研究中心分析师曹紫婷相信，随

越来越多的传统民营企业意识到产业

股新旧势力的交互，加剧了移动互联网行

着宽带中国战略的推进及4G移动通信的完

转型升级迫在眉睫，纷纷将目光转向电子

业的竞争。传统行业受到移动互联网的冲

善，移动互联网的投资并购仍将继续，以

商务，试图从中抢占一席之地。如苏宁电

击，在用户与业务策略上有所调整；同

移动硬件普及、网络基础设施提升带来的

器成功转型，从传统专业电器大卖场变身

时，新兴移动互联网企业以终端生产和应

市场容量的扩张将为移动互联网市场的持

为现代综合性购物中心。可以预见的是，

用开发为主，均涌现出非常优秀的企业。

续增长提供内源动力，而行业参与者的增

互联网产业与传统产业的融合渗透，是产

加也将为市场竞争注入鲜活的力量。

业经济转型升级的一个方向。曹紫婷预

移动互联网的飞速发展是推动互联网

计，今年，移动电商、电商金融、移动支

并购潮的主要因素。在PC互联网的浏览器时代，每个用户都会需要一个入口。互

电子商务飞速扩张

付、O2O、大数据、多平台运营、电商服

联网企业的巨头们纷纷将PC时代的入口优

在过去10多年里，中国电子商务从

务商、阿里独大的格局被打破等将成为电

势复制到移动端，但面对移动互联网的飞

萌芽状态快速进入蓬勃发展时期，市场规

子商务领域的主流方向，也加速了该领域

速发展，对于PC互联网与移动互联网的不

模已跃居全球第二。罗兰贝格管理咨询公

并购规模的发展。

同基因，互联网企业很难完全掌握移动互

司在近期一份报告中指出，中国电子商务

罗兰贝格上述报告认为，在电商飞

联网的主导权。移动互联网发展已进入关

交易规模及电商购物在社会零售总额中的

速崛起的市场环境下，传统线下企业在供

键转折点，传统互联网公司如果没有最大

占比近年来呈快速上升的趋势。在2008

应链效率、运营管理和业务整合等方面都

力度地布局移动互联网，就将错过发展机

年，电商占比还仅为1%，短短5年后，这

受到了相当的压力。对于传统线下企业来说，其销量预期风险高，从而使得设计、生产和库存安排难免误差。而电商平台即时、多区域的消费者购买信息和偏好反馈能够带来精准的销量预测，甚至可以做到提前明确消费者需求，加快市场反应速度。同时，传统线下企业重供应链、轻终端运营，秉承以渠道为王的运营思路。而电商则必须通过平台前端的精细化运营和多元化服务还提高客户黏性，这正是传统线下企业所不擅长的。此外，传统线下企业固化的体系难以迎合多变的消费需求，无法形成电商开放性、合作性平台所带来的更贴近客户的生态系统。 “在这些压力下，许多品牌制造企业对电商的态度又爱又恨。” 罗兰贝格管理咨询公司合伙人陈涛表示，“品牌商首先需要做的是根据其自身产品特性和投资意愿，理清电子商务在自身业务体系中的定位，即到底要‘触电’到多深的程度，才能决定接下来怎么办。” 可以预见的是，互联网领域的新变革预示着这个新兴行业将迎来新一轮的洗

以互联网引领的信息消费已成为扩大内需的新引擎

牌，并将对传统行业构成更大的挑战。

China Economic Review | April 2014

话题

解读改革宏图剖析今年政府工作报告中的重点改革举措文 | 博猷

一年一度的全国人大会议现场

第

十二届全国人民代表大会第二次会

也不会主动放出货币进行刺激，整体经济

汇率双向浮动区间”。人民币双向波动将

议已落下帷幕。在今年政府工作报

将保持在合理区间内。在财政支出端，军

成为成常态，且有可能进一步扩大波动幅

告中“改革”一词出现了77次。报告中涉

事国防体制的改革有望持续推进，并注重

度。人民币单边升值的趋势可能会改变，

及的改革包括行政体制改革、财税体制改

战略性发展。

投资者需要更加关注单一币种风险。

革、股票注册制改革、利率市场化改革、

在信贷层面预计将保持平稳增长。由

投融资体制改革，推进投资主体多

汇率体制改革、投融资体制改革。报告指

于大幅扩张的货币可能会对经济产生一定

元化，使民间资本发挥更大能量。将民间

出，经济增长是调整结构的前提，改革是

的泡沫并阻碍经济转型，当前中国将保持

资本引入国资改革，探索混合所有制。两

调整结构的手段。

平稳的政策定力。今年13%的M2增速基

会之后，国资改革将会成为改革的重点领

本与去年持平，而关注点将着力于疏通货

域，相关股票也会成为热点。诺亚财富建

币在实体经济中的流动。

议关注国资改革相关的板块，以及净资产

从经济增速看，7.5%的GDP增速定调与去年相同，反映了这一水平是政府判

收益率比同行业民企低的国有企业。

定的合理水平或底线。从投资、消费、进出口情况来看，未来将重点遏制房地产投

利率市场化

政府工作报告中提及房地产的次数非

机行为以及对地方政府借贷机制的监督，

今年政府工作报告有哪些重点举措值

常少，关于调控只提到针对不同城市分类

整体固定资产投资增速或进一步下滑。体

得关注？诺亚财富宏观研究小组认为，应

调控、增加供应、抑制投资性需求等老调

现了政府将经济逐步从外需和投资拉动转

该重点关注最后几项：推进利率市场化改

重弹，诺亚财富预计今年两会之后出新调

化为内需拉动的意图。能否成功刺激和拉

革，可能意味着继贷款利率市场化之后，

控政策的可能性比较低，更多提到的是公

动消费，将决定增长目标能否达成。

存款利率市场化将会择机推出。而此前监

租房和廉租房并轨。诺亚财富认为：房地

在政策上秉承稳健的货币政策及积极

管部门已经为放开存款利率做出了一系列

产仍然是拉动投资和经济的重要支柱，如

的财政政策，既不会放任经济大幅下滑，

的铺垫。汇率体制改革明确提出“扩大

果进一步调控，今年7.5%的经济增速可能

China Economic Review | April 2014

话题

不保；现有调控政策不会轻易松动，而是等待长效机制的建立。

农业多样化发展政府工作报告指出：农业是扩内需调结构的重要领域，解决好“三农”问题是全部工作的重中之重。今年将以保障国家粮食安全和促进农民增收为核心，推进农业现代化进程。去年中国粮食产量超过 1.2万亿斤，实现“十连增”。农村居民人均纯收入实际增长9.3%，贫困人口减少 1650万人，基本药物制度覆盖达到80%以上村卫生室。农民的生活越来越好。针对去年提出的“支持发展多种形式适度规模经营”，今年将在结合农业新

县级公立医院的改革试点可能是较有意义的突破

增补贴向新型农业经营主体、主产区倾斜中，再次得到发展。专业大户、家庭农

大县的奖励补助，扶持牛羊肉生产。发挥

基本医保财政补助标准的提高，能整体提

场、农民合作社、农业企业等新型农业经

深松整地对增产的促进作用，统筹整合涉

升基本医疗保障水平，但目前并不能缓解

营主体将得到获得更多的优惠补贴。而农

农资金，确保农业投入只增不减。同时，

更为紧迫的医疗服务供需矛盾。县级公立

业补贴向主产区倾斜，也会激励农业生产

引导社会力量参与扶贫事业。再减少农村

医院改革试点可能是比较有意义的突破。

大户抱团成区，有利于形成新的农业园区

贫困人口1000万人以上。要继续向贫困宣

据观察，目前公立医院改革仍然形式大于

性市场。可发展的还有托管经营、联户经

战，决不让贫困代代相传。

内容，难度太大，已经取得成效的无不是当地政府赌上政治前途来推动，如宿迁医

营等经营形式。农户把承包地托给专业组织经营，每亩地交一定的托管费用，由经

细化年度医改目标

改。公立医院改革，涉及利益相关方太

营组织负责标准化经营，收获归农户所

政府工作报告对医疗改革提出如下要

多，属牵一发动全身的系统性难题。而今

有。这样不仅解决了农户不愿转租土地的

求：推动医改向纵深发展。巩固全民基本

年提出的1000个县级公立医院改革试点，

麻烦，经营组织也避免了承担生产风险。

医保，通过改革整合城乡居民基本医疗保

在有相对具体数字指标前提下，有可能取

清科研究中心分析师吴晗瑄表示，农

险制度。完善政府、单位和个人合理分担

得一定范围的突破。

业经营主体的多样化也应结合农业保险一

的基本医疗保险筹资机制，城乡居民基本

其他部分属宏观方向性目标。从“巩

起积极发展。农业保险不应仅仅针对自然

医保财政补助标准提高到人均320元。在

固完善基本药物制度和基层医疗卫生机构

灾害而设计，由于土地流转经营风险相对

全国推行城乡居民大病保险。加强城乡医

运行新机制。健全分级诊疗体系，加强全

较大，承租者既要承担租地费、投入经营

疗救助、疾病应急救助。县级公立医院综

科医生培养，推进医师多点执业，让群众

成本，又要应对市场风险、自然风险。农

合改革试点扩大到1000个县，覆盖农村

能够就近享受优质医疗服务。”可以看到

业保险可通过引入金融行业的良好准则，

5亿人口。扩大城市公立医院综合改革试

基层医疗服务的机会。

更好的帮助农户和经营主体规避风险，规

点。破除以药补医，理顺医药价格，创新

短期内，除高端医疗和部分医保外

范双方的行为，保护农户乃至经营者的权

社会资本办医机制。巩固完善基本药物制

专科外，对社会资本而言，公立医院改革

益。而土地流转信托之类的金融产品，则

度和基层医疗卫生机构运行新机制。健全

难度大风险高，可能存在的机会则是在基

可让金融资本更彻底的进入农业市场，加

分级诊疗体系，加强全科医生培养，推进

层医疗服务市场。徐志鹏分析认为，一方

快盘活农业用地承包经营权的有序流转。

医师多点执业，让群众能够就近享受优质

面，国家高层对医疗改革的一个重要方向

让金融行业能够更好地为小微企业、“三

医疗服务。

就是满足基层医疗卫生服务，另一方面，

农”等实体经济服务。

相对而言，除了“城乡居民基本医

医师多点执业能够为社会资本构建基层医

今年针对农业领域还提出：要提高小

保财政补助标准提高到人均320元”，清

疗服务体系提供了可能性。如以社区医疗

麦、稻谷最低收购价格，继续执行玉米、

科研究中心分析师徐志鹏认为，最值得关

为基础构建的基层医疗服务体系，同时结

油菜籽、食糖临时收储政策。探索建立农

注的是“县级公立医院综合改革试点扩

合大数据等相关技术搭建医疗信息平台，

产品目标价格制度，增加对粮油猪等生产

大到1000个县，覆盖农村5亿人口”。

未来有很大的发展空间。

China Economic Review | April 2014

话题

移动创业潮无线互联4G时代的启幕必将掀起新一波的创业巨浪

去

年底4G牌照在经历一年多的千呼万唤后终于发放，此举标志着中国

移动互联网迈入4G高速时代，并将推动移动互联网实现跨越式发展。对于中国创业者而言，如何搭乘4G快车为创业加速，将是关乎成败得失的重大问题。与之相呼应的是，今年第二届中国创业节将主题定为“无线推新中国服务”，即用无线技术，增加更多互联网思维的元素，开启一种全新的创业生态对接模式，让更多创业者得到鼓舞和实际的帮助，获得各自需要的信息和资源。

新机遇在哪里移动互联正在深刻影响人们的日常生活。艾瑞咨询数据显示，去年中国移动网购整体交易规模1676亿元，预计到2017

第二届中国创业节现场

年规模将近万亿。移动网民规模去年底已达5亿，预计到2017年移动端将超越PC成

关系。什么是人与人之间的新关系？就是

网领域成功创业？携程旅行网副董事长兼

为最主要的上网渠道。

移动的本地化、碎片化等。关键是如何利

总裁范敏认为，创业选择怎样的平台非常

用移动互联网创业。

重要，绝大部分成功的互联网企业或在海

移动用户快速增加，手机上网比例已经超过台式电脑上网比例，宽带普及提速

零点研究咨询集团董事长袁岳在主题

工程启动，宽带价格进一步下降，为应用

演讲中提出，无线互联时代服务业有三个

的繁荣打下坚实的基础。移动互联网和宽

方向：第一是云地一体化。即线上的用户

中国移动互联网产业联盟秘书长李易

带网络因而双双成为互联网产业发展的新

资源与流量资源和线下的服务进行对接，

说道：“中国移动集团刚发财报，这么多

引擎。在无线互联4G时代，应如何加速创

就像腾讯和京东的合作。第二是内外一体

年来也不过才7亿多用户。腾讯马化腾的微

业、捕捉更多创业机会？在本届创业节主

化。无线互联时代，有效信息很难获得，

信花了两年时间就做到6亿用户。”他相信

题演中和圆桌论坛上，一批企业家和创业

因此，需要提供的不光是产品，更重要的

App一定有很大的创业前景，而且对于创

者就此展开了交流和探讨。

是解决方案。因此，智能制造根本不是制

业者是起步门槛最低的。

着非常不凡的表现。

磐石投资董事长王立群表示，移动

造，这是新的一体化服务模式。未来的产

目前微信公众账号已经超过300万，

互联网对人们生活的改变，对社会的改变

品将会成为服务一体化中的一环。第三是

微信服务开发市场也获得了高速发展。腾

才刚刚开始。移动互联网的障碍是电池寿

企业消费者的关系改变。无线互联填平了

讯云平台部总经理纪顺友介绍，微信云致

命没有突破，芯片容量还不够。但软件技

企业与消费者的缝隙，缔造出了新的生活

力于将成熟的安全防卫机制和技术引入开

术已经不成问题，再加上云计算技术的推

方式和生态。

发商服务体系，消除企业和用户的担忧；

广，移动互联为未来行业发展提供了足够大的空间。 PPTV网络电视CEO陶闯提出，移动互联网是革命，建立了人与人之间的关系，而PC互联网时代，还是机器与机器的

外能代表中国概念的企业，都在O2O上有

China Economic Review | April 2014

“移动互联网的思维是不一样的。”

同时微信云本身也是很好的创业平台。

陶闯的的建议是，一定要进入生活服务领域；不能只做线上，还是要做O2O；在做软件的同时必须涉及硬件。 4G时代已然来临，怎样在移动互联

怎样才能成功对于中国极为活跃的创业氛围，纪顺友深有感触，在硅谷工作了十几年的他甚

话题

至认为，从创业配套、生态链、门槛等角度看，中国大有超越硅谷之势。梁启超说过“少年强中国强”，而在范敏看来，中国早已不是那个时代的国家了，现在是“创业强中国才会更强”。他希望这样的创业者能让中国更上一层楼。王立群遇到过不少很不专注的创业者。“现在年轻人想法很多，说我拿这个可以做一百样东西，但我只要你一样东西。”他说道。唯众传媒创始人杨晖表示，每个创业者都觉得自己是未来的亿万富翁，但还是要从点点滴滴做起。爱因斯坦讲成功是1% 的天才加上99%的勤奋，所以都认为勤奋最重要，但是如果没有1%的天分，恐怕 99%也是无用的。因此她强调“选择比努力更重要”。中国大陆企业家可分为三代人，亚商集团董事长陈琦伟分析了他们各自的特点。第一代企业家，现在幸存下来耳熟能详的企业界大佬，回顾他们当初的创业历程，社会对创业几乎没有什么支持，成功概率很低。第二代创业者处于中国经济快速增长过程中，抓住机会后就比较容易取得成功，主要看他们的胆魄、眼光和能力。今天，中国经济开始步入困难期，创业活动却处于很特别的幸运期：社会和政府对创业活动给予了更多支持。在经济转

移动互联网迈入4G高速时代

型过程中，第三代企业家需要凭智慧和能力来抓住机会。他的忠告是“保持快乐健

业者、投资人、政府搭建全面而直接的对

主导等以往任何园区运作的模式，而是从

康的心态和生活方式非常重要”。

接平台，为创业者提供所需的信息和资

产业出发的逆袭，是特殊的存在，这种模

源。”e3131总经理江晓隽说道。

式的建立更具产业生命力和可复制性。

生态对接模式

产业园区不同于写字楼简单的租赁，

艾瑞咨询数据显示，去年中国电子商

第二届中国创业节由飞马旅聚合多

除了园区的物理空间属性，产业特色才是

务市场交易规模9.9万亿元，预计2017年

个创业业态，联合众多机构共同发起，

产生质变的关键因子。2009年创建的该

电子商务市场规模将达21.6万亿元，是去

在上海e3131电子商务创新园举行。在

电子商务创新园，是当时上海乃至全国最

年的2倍多。

该创新园内，可以看到飞马企业的成果展

早的一批以电子商务为核心定位的产业园

今年政府工作报告提出：要促进信息

示。e3131电子商务创新联盟主席杨振宇

区。江晓隽表示，不是简单地将电子商务

消费，实施“宽带中国”战略，加快发展

表示，过去一年里，飞马旅有十几家飞马

企业安置在园区里就是电子商务园区了，

第四代移动通信，推进城市百兆光纤工程

星驹企业获得VC的一轮、二轮投资，一些

关键是能为这些企业提供哪些增值服务，

和宽带乡村工程，大幅提高互联网网速，

优秀企业已跻身所在领域的全国前列。

帮助创业者解决实际困难，从而产生集聚

在全国推行“三网融合”，鼓励电子商务创新发展。维护网络安全。

除创业节外，该团队每年还主办或参

效应，带动区域产业经济发展。据她介

与承办电子商务产业峰会和企业领袖峰会

绍，整合运作的集团资源使园区功能得以

人们有理由期待互联网和电子商务产

等大型行业峰会等活动，目的只有一个，

全面提升，产业服务更具落地性和行业号

业的美好未来，而无线互联4G时代的启幕

即“开启一种创业生态对接的模式，为创

召力。该园区完全不同于地产开发、政府

也必将掀起新一波的创业巨浪。

China Economic Review | April 2014

话题

网络危机信息安全隐患对国家安全造成了极为严重的威胁

国明镜周刊近期报道称，美国国家

德

决策者、企业经营者、网络安全人员和网

验室召集国内顶级专家，专门做过信息安

安全局（NSA）曾入侵中国华为总

民，就政策走向、网络发展、个人网络安

全的内部讨论。中国称信息安全，美国叫

部服务器，还曾监控中国几位前任领导人

全等方面找到合理的应对之策。

网络安全，两词含义不同，但具体指向相

和政府部门及银行。美国前总统卡特也表

张笑容认为，中国信息安全关注的

类似。会议讨论了网络主导权的概念，还

示怀疑自己的电子邮件遭到NSA监控。去

重点是网络攻防与内容合法性，对于因通

据此将互联网版图划分为三个世界，即互

年的棱镜门事件可谓震惊全球，并且持续

信设备而引起的网络社会安全视而不见。

联网上的国家分为网络“殖民”国家、网

发酵，至今余波未平。

由于全球电信设备和技术的发展及应用严

络主权国家和网络霸权国家。从互联网基

若干年前，当人们开始网络冲浪的时

重失衡，美国则处于绝对主导地位，掌控

础设施、互联网产业竞争力和网络战实力

候，曾流传着一句名言：“在互联网上没

着全球核心信息技术、关键基础设施以及

三个角度来看，全球只有美国一马当先，

有人知道你是一条狗。”时至今日，人们

国际互联网的技术标准和运行管理。而美

是唯一的网络霸权国家。而英、法、日、

才发现，这是谎言。美国情报机构对互联

国政府一直认为，维护国家安全首先必须

韩等美国盟友国家，有明确的网络发展计

网的掌控超出了人们的想象，他们可以对

考虑维护信息供应链安全。如果用美国人

划和网络安全战略，可以部分地掌握自己

网民在网上的一切行动和资料调查得一清

的标准反过来看看中国，人们就会大吃一

网络的主导权，具有一定网络主权。包括

二楚。互联网在他们眼里简直是透明的。

惊。中国的网络也需要跟美国同等的安全

中国在内的相当一部分国家，受制于技术

曾长期从事互联网产业研究和实践的

防护。对于中国，作为关键基础设施的通

实力和发展状况，不具备足够的互联网力

张笑容在其编著的《第五空间战略：大国

信设备安全是信息安全的核心内容和关键

量和竞争力，已经悄无声息地沦为互联网

间的网络博弈》一书序言中提出：全球网

要素，也具有高度的战略意义。

上受制于人的网络“殖民”国家。从棱镜门事件来看，互联网对美国几乎是透明

络面临重大危机。棱镜门事件将沉甸甸的

“每一个国家，尤其是中国，也应该

问题抛给了中国：网络社会安全问题，中

高度重视分布在本国骨干网络上的美国电

国暴露了盲区。

信设备带来的信息安全问题。这些设备客

“无论如何，各国网络发展军备大赛

观上存在着重大信息安全隐患，对国家安

已经拉开帷幕。任何一个国家都要有自己

全造成了极为严重的威胁。”他写道。

的长远发展战略，绝不能在自身的命门上

作为阅网多年的网虫，他希望把观察发现的一些网络秘密揭示出来，再结合业界多年工作的实践和思考，呈现给政府

去年年底，张笑容任总裁的互联网实

的，最终的主导权都牢牢地捏在其手中。

留下安全隐患。”他如是写道。张笑容认为，领土、领海、领空、太空、网络可视为一个国家的五大疆域。 “网络社会面临史无前例的重大危机。棱镜门事件拉响全球网络警报，应该如何保护个人隐私，保护企业利益，保卫国家安全？”他发问道。张笑容呼吁：“今天，经过了20多年自主创新，产业呈现出崭新的面貌，我们应当用新的眼光来审视，用新的思维来解决这个迫在眉睫的危机。” 诚如爱因斯坦所言，怎样使用科学这一强有力的工具，究竟是给人类带来幸福还是灾难，取决于人类自身而不取决于工具。互联网何尝不是如此，在将世界联结成地球村的同时还潜藏着多少鲜为人知的

互联网还潜藏着多少鲜为人知的安全隐患

China Economic Review | April 2014

黑洞？

话题

房企之惑房地产投资短期受阻但中长期仍然向好

他认为，经济增长稳定在这个区间是和市场需求面的变化密切相关的，尤其是房地产投资的需求。针对近日杭州、常州等地楼盘降价，张立群分析，由于城市化进程的推进，房地产仍有需求在支撑，市场崩盘的可能性是不存在的。因为一线城市居住型买房占比高，购买改善性住房潜力大，人口偏年轻化等原因，所以住房需求是刚性的。房地产市场发生恐慌的多半是三四线城市。唯一的障碍是购买的限制，如北京第二套住房首付达到70%。但总体来看，房地产市场不至于崩盘。

短期投资面临困境目前的市场行情下，房地产投资面临着一些困难。“一线城市好卖房不好拿

长三角部分城市房产出现降价风

地，开发成本迅速提高；三四线城市好拿准备去参加房地产形势讨论会的韩

正

性不大，但投资者需警惕个别城市风险；

地不好卖房，占压资金无法周转，同时政

先生接听了一个手机来电，对方热

个别银行惜贷行为属正常调整，银行业普

府在稳房价。这种情况导致总体看来房地

情地推销位于江苏昆山的一处住宅楼盘。

遍缩减房地产类贷款的可能性不大。

产行业是在往收紧的方向发展，但是不会

类似的房产推销电话，很多人一天就会接

诺亚财富首席研究与发展官邓伟岩表

崩溃，因为在既有的空间下还是有潜力

到好几个。而让韩先生哭笑不得的是，该

示：“考虑到目前中国经济下行，中央多

的。”张立群表示，“目前在人口集中比

楼盘正是他供职的房产开发公司的项目。

次强调不能发生系统性风险，而房地产行

较多、卖方压力比较大的城市，在土地潜

对于房地产开发商而言，近期传来的

业上下关联多个行业，仍是中国经济的强

力的挖掘方面都有不同空间。今年政治局

消息好坏搀杂，令他们忧喜交加。有迹象

有力支撑，系统性崩盘不利于中国经济的

会议更多强调的是从供给方面来稳房价，

显示，长三角部分城市房产出现降价风，

长远发展；加之地方政府对土地出让金的

因此房地产投资增长对比去年会略有下

一线城市房价有所松动。如浙江杭州爆出

依赖暂时难以改变、新型城镇化所释放的

降，但是不会明显下降。”

一楼盘“楼王”降价跳水，紧接着江苏常

制度红利等因素支撑，房地产行业彻底崩

州一楼盘也传来大幅降价的消息。楼盘滞

盘的可能性稀微。”

“中国有13亿人口，如果每年有1% 实现城镇化，每年就会有1300万到1500

销和房价下跌导致一些房地产业企业资金

“房地产市场预计今年的房价还是会

万人会从农村转向城市，这种需求是刚性

链断裂。浙江奉化一家大型房企出现24亿

升，但不会像去年那么疯，成交量会降。

的，对房地产业存在支撑。”诺亚财富集

元大规模银行债务，共牵涉到了15家银

在中国找到新的增长点之前，房地产这个

团董事局主席兼CEO汪静波分析道，“城

行。在这个早春时节，房地产领域可谓山

引擎对中国这个飞机保持滑行状态是很重

镇化还有一个趋势，就是地产行业集中度

雨欲来风满楼。

要的。”瑞信董事总经理、亚洲区首席经

越来越高，行业并购会常态化，最终大鱼

济分析师陶冬如是认为。

吃小鱼，这种行业并购趋势，我们比较看

崩盘可能微乎其微

“中国经济已经从一个10%以上的高

好。”市场化改革和长效机制的建立不会

楼盘降价销售，银行收紧房贷，引发

增长区间迈向初步稳定在7%-8%的中高

一蹴而就，短期内应抱以谨慎态度；但从

新一波房地产看空潮。财富管理机构诺亚

增长区间。”国务院发展研究中心宏观经

中长期来看，房地产业有望获得更理性和

财富调研认为，今年房地产彻底崩盘可能

济研究部研究员张立群近期表示。

更健康的发展。

China Economic Review | April 2014

专栏

光明来自何方东西融合将人类文化提升到前所未有的高度文 | 海风

季

羡林先生看到东西方文化出现融合的趋势，而且将来还会更加融

合。但他认为，即便是两者融合也有主次之分。“东方文化必为主，西方文化必为次。只有东方文化才能济西方文化之穷。”他相信“到了21世纪，应该是东方文化重现辉煌的时候了”。这个论断不算新鲜，可能是近代以来“中体西用”的老调重谈。张之洞在 1898年发表的《劝学篇》中提出了“旧学为体，新学为用”的原则。体与用，含有主与辅、本与末的意义。因而，季先生所谓“东方文化必为主，西方文化必为次” 的观点似乎是“中体西用”的现代版。再看新儒家学派，所以名为“新”就是因其“返宗儒家，融合中西哲学”（方东美）。台湾东海大学荣誉教授蔡仁厚曾

现代建筑风格与中国古典园林的有机结合

列出当代新儒家五条学术贡献，其中第四和第五条是“消纳西方哲学：译注三大批

季先生解释并不是要铲除或消灭西方

或中西合璧是一个方向，谁主谁次其实并

判融摄康德哲学；会通中西哲学：疏导中

文明，而是要以“东方文化的综合思想济

不重要。如果心胸足够宽广，何须纠结于

西哲学会通的道路”，而前三条分别是

西方文化分析思维之穷”，进而“在西方

此？但身为东方人，将东方文化作为自己

“表述心性义理：使三教智慧系统焕然复

文化已经达到的基础上，更上一层楼，把

立身之根基是完全可以理解的。

明于世；发挥外王大义：解答中国文化中

人类文化提到一个前所未有的高度”。但是，季先生还提出“从人类几千年

山，他将自己的住宅设计成中西合璧式

中国哲学史演进发展的关节”，新儒家的

的历史上来看，东西方文化的相互关系是

样。这位“两脚踏东西文化，一心评宇宙

着力点在于此。

三十年河东、三十年河西”的看法，因为

文章”（梁启超）的学者，就安居其中，编撰英汉词典，继续着会通中西的事业。

池田大作也相信“光明来自东方”，

世界历史上从来没有哪一个文化可以永远

认为“东方睿智的曙光照亮世界的时代一

居于主导地位。他甚至相信“从21世纪开

“东海西海，心理攸同；南学北学，

定会到来”。但他提醒，这种设想如走错

始，东方文化将取代西方文化，并将逐渐

道术未裂”是钱钟书的名言。文化不论东

一步，就有可能陷入到自我中心的“亚洲

主宰世界”。而池田也提出过“21世纪将

方还是西方，从本质上看是相通的，因为

主义”。一旦如此，则后果令人担忧。所

一定是亚洲太平洋的世纪”。

人性是相同的。

谓“亚洲主义”是指日本和其他国家携手

如果21世纪真是亚洲太平洋世纪，是

对于光明来自何方这样的问题，仅回

对抗西方霸权的思想和运动，曾被日本军

否就意味着东方文化将逐渐主宰世界？季

答“来自东方”是失之偏颇的。笔者更愿

国主义当成宣传手段，以建立所谓“大东

先生既认为东西方文化会更融合，又相信

意相信，东西融合能将人类文化提升到前

亚共荣圈”的名义来发动侵略战争，给亚

“东方文化将取代西方文化”，甚至“将

所未有的高度。（本期及前几期专栏文章

洲特别是中国造成了巨大的灾难。

逐渐主宰世界”，是否有些自相矛盾？

中季羡林与池田大作的观点，均引自《畅

池田尖锐地指出：“这一事实表明它不过是一种极其自以为是的幻想。”

学贯中西的林语堂晚年居台湾阳明

政道与事功的问题；疏导中国哲学：畅通

China Economic Review | April 2014

东方与西方文化之间的关系不应该是东风压倒西风或西风压倒东风，东西融合

谈东方智慧—季羡林、池田大作、蒋忠新对谈录》）

看中国

也谈阶层阶层和谐是社会健康发展的命脉文 | 晏格文 (Graham Earnshaw)

任

何社会皆有等级之分，从贫民到富豪，或由市井至贵胄，背

景或地域的差异造就了不同的阶层。在我看来这再正常不过，鼓吹人人平等反倒是十分愚蠢的行为。也许1950 年到1980年间的中国在阶级色彩上较任何其他国家都更淡薄。但若称黄金时代的中国与当时社会一样强调平等则荒唐至极。事实上，相当部分的国

晏格文

人持有这一论调，其中包括许多与我闲聊过的出租车司机。大思想家马克思以及马列主义一直以来强调的社会发展目标就是：逐渐铲除与阶级相关的意识形态差异，仅仅保留以个人贡献为基础的分化。简言之就是各尽所能，各取所需。在马克思笔下的理想社会，社会给予个人的回报与后者所做的贡献紧密相联。然而就其中的“贡献”而言，我想马克思并未提及人脉所能带来的优势。那么如今的中国又在多大程度被定义为阶级社会呢？在我看来，任何一个到过北京别墅区、上海豪华公寓，还有湖北西部村庄的人都会和我一样对中国存在多个阶层深信不疑。事实上，只需看看同一条大街上穿梭往来的豪华轿车和破旧的摩托车便可知一二。无论如何，社会存在多个阶层并非坏事，相反却是社会健康和谐发展的必然产物。正是有了这种差异，国民才有动力奋发向上，进而跨越自己所属等级。中国的现有阶层在过去约十年间历经重组，所以很难洞悉它们各自代表的精神、存在的意义，以及在新阶层体制下的社会运作方式。总而言之，我对于阶层还是和以前一样持乐观态度。就拿李嘉诚来说，从在香港沿街推销起家，如今已然成为亚洲第一大富豪。正是因为有了这样活生生的例子，无数后来人才有了力争上游的动力。任何合理的社会都能为像李嘉诚这样的才俊走向成功提供土壤。中国大陆要想创造类似的环境，亦需赋予每个人足够多的机会来发挥才智。事实上，只要他们足够聪明，并能坚持不懈，同样也会取得骄人的坚持不懈奋发向上

成绩。

China Economic Review | April 2014

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China Economic Review | April 2014

Q&A: A state-owned hospitality giant turns to the middle class

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FEBRUARY 2014 VOL. 25, NO. 2

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