Re: Why could China have developed a lot faster?

On Sat, 14 Jun 2008 20:26:35 -0700 (PDT), "fyfpoon@xxxxxxxxx"
<fyfpoon@xxxxxxxxx> wrote:

I don't think you understand what I actually meant to say.

I am not suggesting China would speed up an inflationary spiral in
terms of GNP growth rate should its cultural capital be allowed to
accumulate faster. By the way, when you substract inflation and
environmental costs from GNP growth, you get the real growth which may
not be as impressive as what it is now sounding! It is the real
growth and the quality of growth that I am talking about.
That said, given its current development, which is impressive by the
general standard, China could have done better with a freer atmosphere
for expression, as the latter is essential to the growth of cultural
and arts industry. UK in 1996 already witnessed its rock and roll
industry exceeding in production value its steel industry..
China has a rich cultural heritage which up to this moment is still
behind in relation to many other countries in terms of generating
economic values.

Go into this area or the area of cultural and arts industry, papa, and
you will learn to perceive reality from different angles. Don't just
jump on something when it appears to criticize a certain policy or
measure or phenomenon observed of the current government in Beijing.
The government in Beijing is not faultless, and it cannot be; no
government in the world can be faultless. Your attitude of
intolerance bears a certain level of similarity to that of the CCP
authority...No...as a matter of fact, the CCP authority's is even more
tolerant than yours, because I am telling you what I read from the
Chinese books sold in Chinese mainland.

You are damn right. I don't understand what you want to say. Your
reply has only confirmed my original assessment as you being a
muddleheaded person who throwns in grand sentences about national
development, governance, economics without understanding what they
mean and using these grand phrases inappropiately to to address
mundane problems. Your mundane problems still come across as a whiner
who asks why can't your world develop faster and richer and have less
constraints so that you can enjoy life without having to contribute
into it.

It will indeed be ridiculous to claim the any government (eg. Beijing)
is faultless. What you have to take into consideration is what
problems are facing the country and how does the government deal with
it. What are the results. It will never be perfect. But if the
results are on the whole positive, be thankful. Bush says the most
lofty things about freedom, democracy, etc. and committed his nation's
blood and treasure to realize his fundamentally flawed vision. You
are well aware of the global mess he created. Instead of addressing
real problems you invent them and say the (Beijing) government can do
better. You are damn right I find you intolerable. If you think
promoting a rock music industry will improve your life go for it. I
saw a few very imprssive ones at a Beijing Trade Show. The government
doesn't care let alone try to stop you. But don't expect any
freebies.


The article below states clearly

[The PBoC's move delivered a clean and sound message that, in order to
curb inflation, Beijing would continue to tighten monetary policy,
despite the expectation that Beijing might ease the policy after the
Sichuan earthquake.]

[But last week, Beijing showed no sign that it would take any similar
measure to rescue the market. Instead, the Politburo, in a meeting
last Friday chaired by President Hu Jintao, pledged to make greater
efforts to tame inflation, though also saying it would promote the
healthy development of the capital markets. On the same day, the PBoC
reiterated in its annual financial stability report that it would take
"forceful" measures to curb excessive price rises and enhance
monitoring of cross-border capital flows. ]

People who gambled on the stock market and won must also accept that
they cannot get a free ride all the time. A responsible government
must look at the overall picture and not let economic or political
forces get out of hand.


Beijing lets punters sink
By Wu Zhong, China Editor
June 17, 2008
http://www.atimes.com/atimes/China_Business/JF17Cb01.html

HONG KONG - China's stock market last week suffered the largest weekly
plunge in 12 years with the benchmark Shanghai Composite Index
dropping below the 3,000-point mark, which has been widely seen by
investors as a government defense line. Pessimistic sentiment now
prevails as there is no sign that the government will take immediate
measures to "rescue" the market.
Many analysts and investors are now beginning to blame Beijing's
macro-economic control policy and measures to curb price increases for
weakening profitability of heavyweight listed companies and thus
shaking up market fundamentals.

On Friday, June 6, the Shanghai Composite Index, which covers
yuan-denominated A shares and US dollar denominated B shares, closed
at 3,329.67 points, down 21.98 points from the previous close. The
Shenzhen Component Index fell 126.30 points to 11,733.97 points.

During the long holiday weekend of June 7-9, the People's Bank of
China (PBoC), the country's central bank, ordered commercial banks to
raise their deposit reserve ratio by another one percentage point.
This was the fifth such move this year to curb excessive liquidity and
tame inflation. With the latest increase, the deposit reserve
requirement for commercial banks is now 17.5%, a record high.

The news triggered a dark week for the stock market, with a continued
plunge for four trading days of last week taking shares to a 15-month
low. The Shanghai Composite shed 461 points, or 13.84% to 2,868.8. The
Shenzhen index lost 1,797 points or 15.32% to close at 9,936.73.

The PBoC's move delivered a clean and sound message that, in order to
curb inflation, Beijing would continue to tighten monetary policy,
despite the expectation that Beijing might ease the policy after the
Sichuan earthquake.

Last Thursday, the National Bureau of Statistics said China's consumer
price index (CPI) dropped to 7.7% year-on-year in May, from 8.5% in
April. Even so, the inflation indicator rose 8.1% in the first five
months over the same period last year, still much higher than the 4.8%
target for the whole of this year set by Premier Wen Jiabao in March.

Officials and economists are still worried that multiple factors, such
as ample liquidity, may push up prices again in the coming months. In
May, the country's money supply growth accelerated to 18.07%
year-on-year from 16.94% in April. Now it is widely expected that the
central bank may raise interest rates by at least 75 basis points and
the deposit reserve ratio to 18.5% this year.

Bad for banks
Raising the deposit reserve requirement is bad news for banks' shares,
as they have to put aside more funds received from depositors as
reserves rather than lending them out. Of the top 20 heavyweight
stocks in the Shanghai Composite, 12 are of financial companies whose
capitalization accounts for more than 25% of the Shanghai bourse.

Last week, shares of Industrial and Commercial Bank of China shed
13.46% to close at 5.08 yuan, China Construction Bank lost 10.62% to
6.23 yuan and Bank of China dropped 10.85% to 4.19 yuan. These three
are the largest of the "Big Four" state-owned commercial banks. The
fourth, Agricultural Bank of China has yet to go public.

The A shares of Shenzhen-based China Merchants Bank, which is listed
in Shanghai and Hong Kong, lost 17.07% in Shanghai to close at 23.32
yuan.

Beijing's control over energy prices has also increased fears that the
profitability of leading energy enterprises such as PetroChina,
Sinopec and China Shenhua, will be hit hard this year as the price of
crude rises.

Last week, international crude oil prices exceeded US$130 per barrel
with no sign that the government will soon allow oil companies to
increase oil products' prices. As such losses at the refinery
businesses of listed oil companies will deepen.

At the same time, the Sichuan earthquake last month has worsened
China's electricity shortage. An electricity exporter before the
earthquake, thanks to its numerous hydropower stations, Sichuan now
has to import electricity from other regions due to damage to various
parts of the province's power-supply network.

The nation faces a power shortage in June, July and August of up to 10
billion kilowatt-hours, according to the State Electricity Regulatory
Commission, with the reversal of supply in Sichuan aggravating an
already dire power crisis, brought about by an apparent shortage of
thermal coal, the main fuel in China for electricity generation. The
price of thermal coal is set by the market but the government controls
the electricity price. With costs increasing, coal producers tend to
increase coal prices, which increases pressure for power generators to
seek higher electricity prices.

The Chinese government has resisted this, apparently in fear of
further stimulating inflation and stirring public discontent,
particularly in the aftermath of the Sichuan earthquake and ahead of
the Olympics in August. Instead, it has intervened in the market.

Early this month, the State Council issued a circular demanding that
all regions ensure sufficient supply of thermal coal so that there
will be adequate power supply during the Olympics. Seeing this as a
political task, at least at least three provinces - Shandong, Shaanxi
and Hunan - have taken administrative measures to restrict thermal
coal price increases.

Bad for power firms
No doubt, such intervention will hurt listed coal producers such as
China Shenhua. Price control on electricity also hurts profitability
of power companies.

Only three energy companies are among the top 20 companies in the
Shanghai Composite - PetroChina, Sinopec and China Shenhua - although
their capitalization accounts for more than 30% of the Shanghai
bourse.

Last week, A shares of PetroChina shed 12.7% to close at 14.99 yuan,
Sinopec lost 16.41% to 11.26 yuan. China Shenhua dropped only 6.98% to
39.43 yuan, but that was enough to bring its total decline over the
past four weeks to 19.75%.

At a crude price of $130 a barrel, refineries would lose up to 3,000
yuan in producing one tonne of refined oil product, according to one
estimate, giving total losses of the two oil giants, Sinopec (the
country's largest refiner) and PetroChina of 220 billion yuan. So,
unless the government sharply increases its subsidies to their
refinery business from last year's 77 billion yuan, the duo's
profitability will inevitably be hurt this year. And given their
weight in the Shanghai Composite, their weak share prices would
suppress the market - encouraging local punters to call them the "two
big bears".

The two bourses in Shanghai and Shenzhen together have lost more than
12 trillion yuan in capitalization since last November, according to
research by Lin Yixiang, board chairman and chief executive of
Beijing-based TX Investment Consulting Co. PetroChina alone lost 4.3
trillion yuan, accounting for 35% of the total.

Power-consuming enterprises are feeling the crunch from the
electricity shortage. China Aluminum, the country's largest aluminum
producer, has had to suspend production of its factories in some
regions such as southwest Guizhou province. The company's A shares
dropped 20.83% last week to 14.48 yuan.

The decline in the stock market in neighboring Vietnam also had a
psychological impact on investors in China on worry that the financial
meltdown in Vietnam might trigger another Asian financial crisis
similar to the one of 1997, according to some analysts. Economists on
the mainland and in Hong Kong generally thought this was unlikely. The
Vietnam stock market last week was down 63% over the same period last
year.

Mainland China stocks have declined since October, when the Shanghai
Composite hit a high just above 6,000. The latest slide comes after a
recovery last month after the government in late April cut the stamp
duty on stock transactions to 0.1% from 0.3% and placed restrictions
to limit stock sales by a single shareholder. This helped to boost the
Shanghai Composite from near 3,000 to above 3,500 in the following
couple of weeks.

Bad for bears
But last week, Beijing showed no sign that it would take any similar
measure to rescue the market. Instead, the Politburo, in a meeting
last Friday chaired by President Hu Jintao, pledged to make greater
efforts to tame inflation, though also saying it would promote the
healthy development of the capital markets. On the same day, the PBoC
reiterated in its annual financial stability report that it would take
"forceful" measures to curb excessive price rises and enhance
monitoring of cross-border capital flows.

To that point, small investors become totally disillusioned. According
to a survey by Securities Times, over 70% of small investors say the
market now is really dominated by the bear. More than 70% of
respondents did not think the government would take immediate measures
to rescue the market and thus they plan to sell their holdings despite
losses.

Saturday editorials of major business newspapers in China were split
over whether the government should rescue the market. A commentary on
Shanghai Securities News said the government should take "disaster
relief" measures to help the stock market. Others said that with the
recent adjustment, the value of the market had became more reasonable.

The price-earnings ratio (based on 2007 results) is now 21.61 in
Shanghai and 26.4 in Shenzhen, according to figures from the two
exchanges. At their peaks last October, Shanghai's P/E ratio was 69.58
and Shenzhen's 73.51.

An editorial in the International Finance News, a sister publication
of the Communist Party's flagship newspaper, the People's Daily said,
"In fact, in a rational view of the current market, its value now
comes to a reasonable level ... Even if our national economy slows
down a bit, it would be a self-correction in the road of progress.
This by no means the coming of an economic crisis. Our economy will
sustain its growth at a relatively high speed of 7-8%. The long-term
outlook is no doubt good."

Some fund managers, such as Harfor Funds, China Nature Asset
Management and AIG-Huatai Fund, also said that after recent drops
Chinese shares have become more reasonable in their values.

Many analysts now believe there is not much the government can do to
rescue the market unless it wants to ease its price controls or
directly intervene to buy shares with public funds. The possibility of
either event transpiring seems almost zero at this stage.

"What the government could do is to suspend initial public offerings
and refinancing plans by listed companies, and/or allow more funds
from banks or insurance companies to enter the market,'' A
Shenzhen-based stock analyst with Nanfang Securities said. "That's
almost all. But such measures may not be as effective as before to
restore investors' confidence under the current circumstances, as they
now believe the fundamentals of the stock market are being shaken up
by Beijing's intensified macro-economic controls.

"Apparently, the stock market seems to be truly becoming a barometer
of the country's macro economy. So why should anyone complain?"

In fact, it would be abnormal if the stock market went up while the
economy is expected to slow as Beijing strengthens credit tightening
and price controls.

As the government is unlikely to give up its price controls on energy
and food this year, the stock market is also unlikely to take a sharp
upturn. It is now generally believed that the market will have an
initial support at 2,800, with its bottom likely to be at 2,660.

.

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