China Economic News

[greengiraffe]

• China do have levers but will the more affluence middle/upper class help re-ignite the fertility rates or will be be dependent on the country areas...
  
• Oct 21 2015 at 5:00 PM 
  

China prepares to abandon unpopular one-child policy

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[img=620x0]http://www.afr.com/content/dam/images/g/k/e/u/x/7/image.related.afrArticleLead.620x350.gken9q.png/1445407342890.jpg[/img]When the government partly reformed the one-child policy the effect was only small. Most people want one child onlyl, so they can better afford services such as education. Qilai Shen
[Image: 1426320227568.png]

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by Lisa Murray
China's controversial one-child policy is set to be abandoned 35 years after it was introduced, as the government is under increasing pressure to address problems arising from a rapidly aging population and looming labour shortage.
A new two-child policy is expected to be unveiled as part of the Communist Party's five-year plan setting out the economic and social goals for 2016 to 2020, which will be reviewed next week at a key meeting of policymakers.
Li Daokui, a professor at Tsinghua University and a former adviser to the People's Bank of China, told local media the new plan would focus on reforms to population, environmental protection and urbanisation policies.
It is the Party's 13th five-year blueprint and the first to be released under Chinese President Xi Jinping. The government is expected to shift its focus from fertility controls to encouraging population growth through pension reform, social welfare spending and a new rule allowing all couples to have two children.

"It has to happen," says Gu Baochang, a professor of demography at Renmin University in Beijing. "It has been delayed for too long."
The government did revise the one-child policy in late 2013, allowing couples to have two children if either parent was an only child. However, the impact was underwhelming, with only 1.6 million couples, out of the 11 million who were eligible, applying to have a second child by July this year.
"People are making their decision to have one child not because of the family planning policy but because the costs involved are now higher and there is a huge amount of focus on education, requiring special attention," said Zuo Xuejin, a demographics researcher at the Shanghai Academy of Social Sciences.
He expects a new two-child policy to come into force from next year and says within five years all controls will likely be removed.


FERTILITY RATE
China's fertility rate sits at around 1.5, well below the replacement level of 2.1 and one of the lowest in the world. In the bigger cities, it is closer to 1.
Meanwhile, its working-age population is shrinking and its dependency ratio is increasing. The number of people aged 65 and over was 137 million last year, just over 10 per cent of the population and that's expected to jump to 30 per cent by 2050, according to the United Nations.
All of these statistics mean that China is losing the demographic dividend that helped fire its economy on double-digit growth rates for three decades. The Chinese government argues the controversial policy lifted hundreds of millions of people out of poverty.

But critics say it also resulted in tragedy with an increase in female infanticide and cases of horrific forced abortions.
In recent years, even government-related think tanks have lobbied for a change and in the lead up to the formation of the latest five-year plan a group of researchers, including those from the Chinese Academy of Social Sciences and Renmin University, submitted a report to authorities calling for an immediate relaxation.
"We have to make some changes so that China is prepared for a rapidly aging population," said Mr Zuo. "We need to make the pension system more sustainable and expand its coverage so that it covers migrant workers. We need to make the population healthier and encourage people to have more children with supporting policies."
Policymakers will gather in Beijing next week for the Communist Party's so-called "Fifth Plenum" and some time after that the new five-year plan will be released. It will also include guidance on economic growth and a suite of new proposals to address air, water and land pollution.

[greengiraffe]

China cuts interest rates, lifts caps on deposit rates

• THE AUSTRALIAN
  
• OCTOBER 26, 2015 12:00AM
  

0

Scott Murdoch
[Image: scott_murdoch.png]
China Correspondent
Beijing

[Image: 825583-ed3bec2c-7af7-11e5-8a65-6b39ea9ff19d.jpg]
China cuts rates Source: TheAustralian
[b]China has launched a major ­financial system reform by removing the cap that banks set on deposits rates, an important move to free up the nation’s interest rates, while cutting the official ­interest rate for the sixth time in a year.[/b]
The People’s Bank of China over the weekend outlined plans to spur growth in China’s economy by cutting one-year lending rates by 25 basis points from to 4.35 per cent for businesses and commercial purposes, while the one-year bank deposit rate would be sliced from 1.75 per cent to 1.5 per cent.
The reduction in the official lending rate did not apply to mortgages, which economists said was a calculated move by the central bank to stop the potential of a housing bubble worsening in China’s major cities.
And in a significant step, the Chinese central bank said it would remove the “deposit ceiling”, which meant the banks could set their own deposit rates.
Economists said it was a major step for the central government in its promise to implement financial market liberalisation. Chinese banks have historically had to be in line with the PBoC and the announcement is a major change.
The PBoC said the Reserve Requirement Ratios — the levels of capital that banks must hold — would be cut by 50 basis points but some provincial banks would be given extra dispensations to help boost lending in lower tier areas.
The rate cut by China late on Friday night lifted European and US sharemarkets, and futures markets pointed to a 50- point lift to the S&P/ASX 200 Index. Wall Street’s Dow Jones industrial ­average rose 0.9 per cent, to 17,646.70 points.
The surprise rate cut by Australia’s biggest trading partner comes ahead of the start of the Fifth Plenum of the 18th Central Committee where 200 hundred of China’s most powerful policy makers will meet today.
The meeting will outline China’s economic, social and political objectives for the next few years and financial markets are expected to closely watch the outcome, although most Chinese political analysts believe the ­result has already been decided.
ANZ’s global head of financial markets research Richard Yetsenga said the recent fluctuations in the yuan, started by the PBoC’s devaluations in August, had made economic management more difficult for China before the most recent rate cut.
“The policy environment has been more complex and the ­depreciation in the currency has added extra instability,” Mr Yetsenga told The Australian.
However, he said the PBoC’s move to remove the deposit rate cap was a major step towards ­financial market reform.
“It’s very important step towards liberalising the financial system,” he said.
Mr Yetsenga said China’s move towards greater financial liberalisation was a positive sign for Australia, given the two ­nations’ close training relationship.
“The broad picture for Australia is that China is in a long-form growth projection and the reforms that they have undertaken are in line with the economy’s long-term evolution,” he said.
The PBoC said the official benchmark interest rate cut was aimed at helping the Chinese economy adjust to the structural changes to move from being ­export to consumption reliant.
The economy grew by 6.9 per cent in the third quarter, the slowest pace in six years, and short of Beijing’s target of 7 per cent.
In a statement the central bank said: “The internal and external situation remains complex and economic growth is still suffering downward pressure.
“A flexible monetary policy is needed … to create a favourable monetary and financial ­environment for structural adjustment and economic stability and health.”
PBoC chief economist Ma Jun said the rates decision was made to help stabilise the Chinese ­economy.
“The rate cut reflects the requirements of the recent macro-economic changes to monetary policy,” he said.
“The real economy is still facing huge downward pressure but wholesale inflation is still expanding. ... It is necessary to appropriately adjust the benchmark interest rate and the RRR.”
A number of economists expected the official rate cut to occur but the majority said the removal of the deposit cap was the most important step that the PBoC had made in recent times.
HSBC China economist John Zhu forecast more interest rate cuts and said lifting the cap on ­deposit rates was an important step in China’s promised financial market liberalisation.
“The biggest move is the deposit rate changes. They are easing monetary policy but they are liberalising the financial system,” Mr Zhu said.
“They said in the past few years that it would happen and now it’s happening. There is never a perfect time to do it, but the central bank has made the call to do it now and I don’t think it will be problem for the banks in terms of competition for deposits.”
Mr Zhu said he believed the ­decision was made in a bid to tighten the lending criteria for Chinese companies rather than rewarding the nation’s retail customers who have one of the highest saving rates in the world.
“I think it’s more about lending efficiency. It will change the way that banks might lend to state-owned enterprises; it’s made it a more efficient, more of a market- based system,” he said.
“It will make banks think more where they lend.”
Additional reporting: Wang Yuanyuan

[greengiraffe]

China: ordinary folk struggling in the smaller cities

• THE AUSTRALIAN
  
• OCTOBER 26, 2015 12:00AM
  

0

Scott Murdoch
[Image: scott_murdoch.png]
China Correspondent
Beijing

[Image: 825873-05e6061c-7aef-11e5-80ed-95011193132b.jpg]
In China’s smaller cities people are struggling Source: AFP
[b]In Wuhan, a sprawling third-tier city in the Hubei province in central China, the economy is struggling despite the hype that surrounds the nation’s major centres.[/b]
Outside of Beijing, Shanghai and Guangzhou, which dominate the national GDP figures, the economic conditions paint a different picture.
China’s National Bureau of Statistics last week said China’s economy expanded by 6.9 per cent, marginally above the market’s expectation of 6.8 per cent but below the government’s official forecast of 7 per cent.
However, in the smaller cities people are struggling.
The People’s Bank of China cut official interest rates for the sixth time in a year on Friday night, but it did not include mortgage rates, prompting economists to speculate that the central government authorities are concerned about the prospect of the property bubble popping.
A number of Chinese cities, top tier and below, have experienced double-digit growth, but as apartments are built the values are dropping.
In Wuhan, though, there are more grassroot concerns.
Wu Huiyuan, 34, is worried about raising the money to send her child to school shortly.
“My son is going to primary school this year and we need to pay a large ‘donation’,” she told The Australian.
“I am desperately trying to prepare it. I know there is an economic downturn but I have tried to save money in case there is an emergency.”
Ms Wu said if the PBoC removed the deposit rate cap her family could save more, but living conditions would remain restrained. “The average wage in Wuhan is just 4000 yuan ($870) a month, which is quite low, and living cost are high,” she said.
“Removing the rate deposit cap is good news and if the rates rise I will try to save more.”
In a supermarket in Wuhan, Mr Zhang said it would be good news if higher saving rates were offered in China, but he feared that older people would not benefit from the changes.
“For people like me who do not have many deposits, it does not make much difference,” he said.
“But if the rates go higher then I think I will save more. Other investments like stocks and funds have performed badly but everyone says bank deposits are better.”
A driver, Mr Ding, who has taken on two jobs, said he was concerned whether he could afford his mortgage repayments.
Additional reporting: Wang Yuanyuan

[greengiraffe]

Now Li says its ok to be below 7%

China’s leaders meet to map out economic reform plan

• JEREMY PAGE, MARK MAGNIER
  
• THE WALL STREET JOURNAL
  
• OCTOBER 26, 2015 10:12AM
  

[Image: 356284-51451afe-7b70-11e5-80ed-95011193132b.jpg]
Beijing is facing a dilemma over China's ailing state-owned metals trader Sinosteel — let market forces operate or step in to save jobs and keep it afloat. Source: Reuters
[b]China’s Communist Party this week is expected to approve an economic blueprint for scaling back the role of the state over the next five years, while offering clues about the leadership’s appetite for bold reform in the face of slowing growth.[/b]
The four-day meeting of the Central Committee — the party’s top 300 or so leaders — is a test of whether the political power President Xi Jinping has amassed since coming to power three years ago has enabled him to overcome resistance to the reform program he unveiled in 2013.
As China’s leaders struggle to steer the economy onto a different growth path, a central question around the meeting, which begins today, will be whether much-used reform mantras, some of which date back to a similar plenum in 1993, will translate into decisive action.
“The next five years will be very important for restructuring the economy,” said Jia Qingguo, associate dean at Peking University. “The traditional way of managing the economy is meeting more and more obstacles.”
Some party insiders say President Xi has neglected the economy in favour of pursuing his domestic political agenda, especially his anticorruption campaign.
The president’s supporters say he still faces fierce resistance to reforms from powerful business and political figures with vested interests in the status quo, including some retired leaders. Personnel changes at the meeting will likely indicate whether Mr Xi is able to promote key allies ahead of the next big leadership shuffle in 2017.
The meeting, known as a plenum, could also be an indicator of whether the Chinese leadership, shaken by a stockmarket crash over the summer, is shying away from bolder reforms and focusing instead on stemming a steeper-than-expected economic slowdown.
Once largely ignored by outsiders, the labyrinthine workings of the Communist Party have taken on more meaning for the global economy, in which China accounts for a third of growth. Markets tumbled this northern summer because of concerns over China’s slowdown, as well as Beijing’s interventions to prop up the stock market and its surprise currency depreciation.
The meeting starts a week after China posted third-quarter growth of 6.9 per cent and as officials are signalling that the full-year growth target of about 7 per cent may not be met.
On Friday, China cut interest rates for the sixth time in less than a year and reduced banks’ reserve requirements, the latest in a series of measures to put a floor under a slowdown that has proved more persistent than leaders had expected.
In a speech at the Central Party School, Premier Li Keqiang emphasised that the 7 per cent growth benchmark is approximate, according to official reports.
“We never said we must defend any target to the death, but that the economy should operate within a reasonable range,” Mr Li said, according to paraphrased comments on the central government’s website.
Economists have called on Beijing to set a five-year growth benchmark of 6.5 per cent or less so it can focus on structural reform rather than scrambling to meet a too-high target. However, the party has pledged to double the size of the economy and personal income in the decade leading up to 2021, its 100th anniversary. That would require growth of close to 7 per cent; trying to get there would likely worsen China’s debt and overcapacity problems.
On Saturday, a top central-bank official said China should be able to maintain growth in the 6 per cent to 7 per cent range over the next three to five years.
The closed-door meeting, held in a heavily guarded hotel in Beijing, will likely be followed by an official account of the proceedings, but details about the five-year plan aren’t likely to be released until March, when China’s rubberstamp parliament meets.
Even as Beijing says it wants to reduce the state’s clout, some experts say plenums and five-year plans still have their place by giving government-owned banks, companies and bureaucrats a blueprint to move ahead.
“The five-year plans provide a useful organising framework for the government’s reform agenda, despite the plans’ rather paternalistic approach,” said Cornell University professor Eswar Prasad, a former China head for the International Monetary Fund.
While China is aiming to shift toward an economy driven by consumption, a big focus of the plan is likely to be megaprojects such as the One Belt, One Road plan, one of the most ambitious infrastructure projects in history.
Its aim is to better connect the Chinese economy with the rest of Asia, Africa, the Middle East and Europe, but its form is more reminiscent of old-style investment-led growth than reform.
The president has made it clear he is pressing on with the anticorruption campaign: Last week, the agency in charge of it announced that it would expand inspections to major state firms, the central bank, financial regulators and China’s two stock exchanges.
Mr Xi could also enhance his control of the military at the plenum if he succeeds in engineering the promotion of General Liu Yuan — a personal friend who is the son of former Chinese President Liu Shaoqi — to the Central Military Commission, which controls the armed forces.
Wall Street Journal

[greengiraffe]

And its black vs Green Cats under Li...

China growth rate may fall below 7%, says Premier Li ahead of key meeting


China's GDP grew at just 6.9 per cent in the third quarter, its slowest rate in six years.PHOTO: REUTERS
PUBLISHED
OCT 25, 2015, 2:42 PM SGT
   [url=http://www.straitstimes.com/asia/east-asia/china-growth-rate-may-fall-below-7-says-premier-li-ahead-of-key-meeting?xtor=CS3-17#][/url]
BEIJING (AFP) - China's economy does not need to grow 7 per cent this year, Chinese Premier Li Keqiang said late on Saturday, two days before the country's leaders gather to hash out a new Five Year Plan to battle slowing growth.
China can still overcome economic problems, Li said in a speech at the Central Party School, which trains cadres, according to a notice on the cental government's website.
Gross domestic product (GDP) in the world's second-largest economy grew at just 6.9 per cent in the third quarter, its slowest rate in six years - although independent analysts believe the true figure could be significantly lower.

In March, Li forecast 2015 economic growth would be about 7.0 per cent, as the country shifts to a "new normal" driven by domestic consumption instead of exports and government investment.
"First, 6.9 per cent is about 7 per cent, which is in a reasonable range," Li said, according to a report of the meeting by the People's Daily, the official Communist Party mouthpiece. "We never said we must defend any target to the death."
He attempted to strike an optimistic tone about the future.
"The joint efforts of the whole country and the great potential of China's economy, strengthens our confidence in overcoming difficulties," according to paraphrased remarks posted on the central government's website.
The country's decades-long boom, fuelled by infrastructure investment, exports and debt, made it a key driver of the global economy.
Even though growth has eased in recent years its GDP more than doubled in real terms between 2006 and 2014, according to World Bank figures.
Now it is looking to transition to a "new normal" of slower and more sustainable expansion driven by domestic consumer demand, but the change is proving bumpy and stock exchanges around the world have been pummelled in recent weeks by concerns over its future.
Analysts say China's leaders must choose between chasing a traditional GDP target and embracing reforms such as to the "one child policy" to help the country develop its full potential.
After a decades-long boom, experts say China needs to embrace further liberalisation to avoid the "middle income trap" when developing countries fail to transform their growth model to maintain their competitive edge.
Implementing reforms that are necessary to ensure long-term sustainability come at a cost for current growth - a dilemma for the ruling Communist Party, whose projected aura of competence underpins its claim to legitimacy.
Julian Evans-Pritchard of Capital Economics expected the growth target to be set at or only slightly below the current goal of around 7 per cent.
"Policymakers will struggle to meet such a high target without undermining progress on rebalancing," he said.
Five Year Plans are a holdover from the planned economy days of the past, but still provide a broad blueprint for the country, a key driver of global growth whose performance affects companies from Australia to Zimbabwe.
China's embrace of market economics and opening up to the rest of the world from the late 1970s transformed the livelihoods of hundreds of millions of people and propelled the country to global prominence, but growth has been slowing for several years.
Beijing has repeatedly said it wants to transition to a "new normal" of slower, more reliable growth led by domestic consumer demand, rather than the overheated exports and state investment of the past.
But in recent months questions have been raised over its ability to manage the process by stumbles such as clumsy interventions in falling stock markets.
- Black cat, green cat -
The Communist conclave, known as the Fifth Plenum and typically held at a Beijing hotel, brings together the ruling party's 205-strong Central Committee and around 170 reserve members for four days from Monday to burnish the plan, although it will not be finally approved until China's legislature meets next year.
Economic reformer Deng Xiaoping argued against ideological objections to change with the metaphor that it did not matter whether a cat was black or white, as long as it caught mice.
But now the colour is critical, says Hu Angang, an economics professor at Tsinghua University who served on an experts committee that helped guide the planning process.
China has become the world's biggest polluter and its major cities are regularly blanketed by choking smog, causing widespread public anger.
"China needs to transform from the world's largest 'black cat' into the world's largest 'green cat'," Hu said in an email, urging a more environmentally efficient economy.
"Chasing mice in the form of GDP is still important, but making the cat 'green' is even more important." Leaders will also seek to address social restrictions that obstruct growth, such as residency rules and the "one child policy", which limits most couples to a single offspring.
It was introduced in the late 1970s over fears that the skyrocketing population was economically unsustainable.
After years of strict, sometimes brutal enforcement, by a dedicated government commission China's population - the world's largest - is now ageing rapidly, gender imbalances are severe, and its workforce is shrinking.
The concerns led to limited reforms in 2013, including allowing a second child for some couples in urban areas, but relatively few have taken up the opportunity.
Several Chinese media reports in recent weeks have cited researchers urging a two-child policy for all and Bank of America Merrill Lynch said: "We expect the one-child policy to be significantly loosened and baby-product makers should benefit." But even a dramatic announcement does not guarantee change.
China has a mixed record when it comes to achieving its planning goals, according to Anne Stevenson-Yang, co-founder of China analysis firm J-Capital Research, and slowing growth will make it more difficult to overcome longstanding bureaucratic resistance.
The failure to reform the one-child policy was a "significant emblem of paralysis in this government", she said.
"There's no desire to have it anymore, there's no need for it anymore. There's a lot of loosening around the edges, but they have this bureaucracy they don't seem to be able to get rid of."

[greengiraffe]

China’s leaders meet to map out economic reform plan

• JEREMY PAGE, MARK MAGNIER
  
• THE WALL STREET JOURNAL
  
• OCTOBER 26, 2015 10:12AM
  

[Image: 356284-51451afe-7b70-11e5-80ed-95011193132b.jpg]
Beijing is facing a dilemma over China's ailing state-owned metals trader Sinosteel — let market forces operate or step in to save jobs and keep it afloat. Source: Reuters
[b]China’s Communist Party this week is expected to approve an economic blueprint for scaling back the role of the state over the next five years, while offering clues about the leadership’s appetite for bold reform in the face of slowing growth.[/b]
The four-day meeting of the Central Committee — the party’s top 300 or so leaders — is a test of whether the political power President Xi Jinping has amassed since coming to power three years ago has enabled him to overcome resistance to the reform program he unveiled in 2013.
As China’s leaders struggle to steer the economy onto a different growth path, a central question around the meeting, which begins today, will be whether much-used reform mantras, some of which date back to a similar plenum in 1993, will translate into decisive action.
“The next five years will be very important for restructuring the economy,” said Jia Qingguo, associate dean at Peking University. “The traditional way of managing the economy is meeting more and more obstacles.”
Some party insiders say President Xi has neglected the economy in favour of pursuing his domestic political agenda, especially his anticorruption campaign.
The president’s supporters say he still faces fierce resistance to reforms from powerful business and political figures with vested interests in the status quo, including some retired leaders. Personnel changes at the meeting will likely indicate whether Mr Xi is able to promote key allies ahead of the next big leadership shuffle in 2017.
The meeting, known as a plenum, could also be an indicator of whether the Chinese leadership, shaken by a stockmarket crash over the summer, is shying away from bolder reforms and focusing instead on stemming a steeper-than-expected economic slowdown.
Once largely ignored by outsiders, the labyrinthine workings of the Communist Party have taken on more meaning for the global economy, in which China accounts for a third of growth. Markets tumbled this northern summer because of concerns over China’s slowdown, as well as Beijing’s interventions to prop up the stock market and its surprise currency depreciation.
The meeting starts a week after China posted third-quarter growth of 6.9 per cent and as officials are signalling that the full-year growth target of about 7 per cent may not be met.
On Friday, China cut interest rates for the sixth time in less than a year and reduced banks’ reserve requirements, the latest in a series of measures to put a floor under a slowdown that has proved more persistent than leaders had expected.
In a speech at the Central Party School, Premier Li Keqiang emphasised that the 7 per cent growth benchmark is approximate, according to official reports.
“We never said we must defend any target to the death, but that the economy should operate within a reasonable range,” Mr Li said, according to paraphrased comments on the central government’s website.
Economists have called on Beijing to set a five-year growth benchmark of 6.5 per cent or less so it can focus on structural reform rather than scrambling to meet a too-high target. However, the party has pledged to double the size of the economy and personal income in the decade leading up to 2021, its 100th anniversary. That would require growth of close to 7 per cent; trying to get there would likely worsen China’s debt and overcapacity problems.
On Saturday, a top central-bank official said China should be able to maintain growth in the 6 per cent to 7 per cent range over the next three to five years.
The closed-door meeting, held in a heavily guarded hotel in Beijing, will likely be followed by an official account of the proceedings, but details about the five-year plan aren’t likely to be released until March, when China’s rubberstamp parliament meets.
Even as Beijing says it wants to reduce the state’s clout, some experts say plenums and five-year plans still have their place by giving government-owned banks, companies and bureaucrats a blueprint to move ahead.
“The five-year plans provide a useful organising framework for the government’s reform agenda, despite the plans’ rather paternalistic approach,” said Cornell University professor Eswar Prasad, a former China head for the International Monetary Fund.
While China is aiming to shift toward an economy driven by consumption, a big focus of the plan is likely to be megaprojects such as the One Belt, One Road plan, one of the most ambitious infrastructure projects in history.
Its aim is to better connect the Chinese economy with the rest of Asia, Africa, the Middle East and Europe, but its form is more reminiscent of old-style investment-led growth than reform.
The president has made it clear he is pressing on with the anticorruption campaign: Last week, the agency in charge of it announced that it would expand inspections to major state firms, the central bank, financial regulators and China’s two stock exchanges.
Mr Xi could also enhance his control of the military at the plenum if he succeeds in engineering the promotion of General Liu Yuan — a personal friend who is the son of former Chinese President Liu Shaoqi — to the Central Military Commission, which controls the armed forces.
Wall Street Journal

[CityFarmer]

The consumption in China, still mostly online, and gov driven, but I reckon, there are still substantial successful brick-and-mortar retailer in well-managed malls. I tent to believe online, and offline market are both substantial, even in China...

A China twist: why are malls closing if consumption is rising?
26 Oct 2015 07:13
[SHANGHA] The Di Mei shopping centre in downtown Shanghai is a surprisingly depressing place to shop.

The underground mall is located in one of the most shopping-mad cities in China, and yet it is run down and starved of customers. "Sometimes I cannot sell even one dress in a day," said dress shop owner Ms Xu, who rents a space in Di Mei.

Rising vacancy rates and plummeting rents are increasingly common in Chinese malls and department stores, despite official data showing a sharp rebound in retail sales that helped the world's second-largest economy beat expectations in the third quarter.

The answer to that apparent contradiction lies in the rising competition from online shopping and government purchases possibly boosting retail statistics. Add poorly managed properties into the equation and the empty malls aren't much of a surprise.

More importantly, the struggles of Chinese brick-and-mortar retailers amplify a policy conundrum; these malls, built to reap gains from rising consumption, are instead adding to China's corporate debt problem, currently at 160 per cent of GDP - twice as high as the United States.
...
REUTERS

Source: Business Times Breaking News

[LionFlyer]

The shopkeeper's dilemma is her reliance on walk-ins as her primary source of customers.

As the cost of delivery is low in China, online shopping tend to be more popular, offering wider choices. She would do better to complement it with a online presence on Taobao. Then her shop is a microcosm of the O2O phenomenon sweeping China's retail and startup scene.

[Bibi]

Could be also pp scared of escalators will just gobble them up

[greengiraffe]

China cuts interest rates, lifts caps on deposit rates

• THE AUSTRALIAN
  
• OCTOBER 26, 2015 12:00AM
  

0

Scott Murdoch
[Image: scott_murdoch.png]
China Correspondent
Beijing

[Image: 825583-ed3bec2c-7af7-11e5-8a65-6b39ea9ff19d.jpg]
China cuts rates Source: TheAustralian
[b]China has launched a major ­financial system reform by removing the cap that banks set on deposits rates, an important move to free up the nation’s interest rates, while cutting the official ­interest rate for the sixth time in a year.[/b]
The People’s Bank of China over the weekend outlined plans to spur growth in China’s economy by cutting one-year lending rates by 25 basis points from to 4.35 per cent for businesses and commercial purposes, while the one-year bank deposit rate would be sliced from 1.75 per cent to 1.5 per cent.
The reduction in the official lending rate did not apply to mortgages, which economists said was a calculated move by the central bank to stop the potential of a housing bubble worsening in China’s major cities.
And in a significant step, the Chinese central bank said it would remove the “deposit ceiling”, which meant the banks could set their own deposit rates.
Economists said it was a major step for the central government in its promise to implement financial market liberalisation. Chinese banks have historically had to be in line with the PBoC and the announcement is a major change.
The PBoC said the Reserve Requirement Ratios — the levels of capital that banks must hold — would be cut by 50 basis points but some provincial banks would be given extra dispensations to help boost lending in lower tier areas.
The rate cut by China late on Friday night lifted European and US sharemarkets, and futures markets pointed to a 50- point lift to the S&P/ASX 200 Index. Wall Street’s Dow Jones industrial ­average rose 0.9 per cent, to 17,646.70 points.
The surprise rate cut by Australia’s biggest trading partner comes ahead of the start of the Fifth Plenum of the 18th Central Committee where 200 hundred of China’s most powerful policy makers will meet today.
The meeting will outline China’s economic, social and political objectives for the next few years and financial markets are expected to closely watch the outcome, although most Chinese political analysts believe the ­result has already been decided.
ANZ’s global head of financial markets research Richard Yetsenga said the recent fluctuations in the yuan, started by the PBoC’s devaluations in August, had made economic management more difficult for China before the most recent rate cut.
“The policy environment has been more complex and the ­depreciation in the currency has added extra instability,” Mr Yetsenga told The Australian.
However, he said the PBoC’s move to remove the deposit rate cap was a major step towards ­financial market reform.
“It’s very important step towards liberalising the financial system,” he said.
Mr Yetsenga said China’s move towards greater financial liberalisation was a positive sign for Australia, given the two ­nations’ close training relationship.
“The broad picture for Australia is that China is in a long-form growth projection and the reforms that they have undertaken are in line with the economy’s long-term evolution,” he said.
The PBoC said the official benchmark interest rate cut was aimed at helping the Chinese economy adjust to the structural changes to move from being ­export to consumption reliant.
The economy grew by 6.9 per cent in the third quarter, the slowest pace in six years, and short of Beijing’s target of 7 per cent.
In a statement the central bank said: “The internal and external situation remains complex and economic growth is still suffering downward pressure.
“A flexible monetary policy is needed … to create a favourable monetary and financial ­environment for structural adjustment and economic stability and health.”
PBoC chief economist Ma Jun said the rates decision was made to help stabilise the Chinese ­economy.
“The rate cut reflects the requirements of the recent macro-economic changes to monetary policy,” he said.
“The real economy is still facing huge downward pressure but wholesale inflation is still expanding. ... It is necessary to appropriately adjust the benchmark interest rate and the RRR.”
A number of economists expected the official rate cut to occur but the majority said the removal of the deposit cap was the most important step that the PBoC had made in recent times.
HSBC China economist John Zhu forecast more interest rate cuts and said lifting the cap on ­deposit rates was an important step in China’s promised financial market liberalisation.
“The biggest move is the deposit rate changes. They are easing monetary policy but they are liberalising the financial system,” Mr Zhu said.
“They said in the past few years that it would happen and now it’s happening. There is never a perfect time to do it, but the central bank has made the call to do it now and I don’t think it will be problem for the banks in terms of competition for deposits.”
Mr Zhu said he believed the ­decision was made in a bid to tighten the lending criteria for Chinese companies rather than rewarding the nation’s retail customers who have one of the highest saving rates in the world.
“I think it’s more about lending efficiency. It will change the way that banks might lend to state-owned enterprises; it’s made it a more efficient, more of a market- based system,” he said.
“It will make banks think more where they lend.”
Additional reporting: Wang Yuanyuan

China’s exercise in futility

• THE AUSTRALIAN
  
• OCTOBER 26, 2015 7:50AM
  

0

Alan Kohler
[Image: alan_kohler.png]
Editor-at-large, ABR
Melbourne

[b]China’s official interest rate cut over the weekend will probably have little or no effect, and even if it did, it would be the opposite of what was needed.[/b]
What’s more, the cut in the reserve requirement ratio will only go some way towards offsetting the financial tightening that has been caused by capital outflows.
The People’s Bank of China has lowered the official deposits and lending rates by 25 basis points to 1.5 and 4.35 per cent respectively, and cut the RRR by 50 basis points to 17.5 per cent, in an attempt to boost the economy and fend off deflation.
But at the same time, the PBoC has announced that it is liberalising deposit rates, saying the banks can pay whatever interest they want. It’s part of China’s campaign to have the yuan included in the IMF’s special drawing rights basket later this year.
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ANZ’s China economist Li-Gang Liu says this means the average deposit rate is likely to rise, not fall. This means, in turn, that lending rates won’t fall either.
“Small and medium banks will compete fiercely for deposits, thus pushing up the overall deposit rate level. As banks’ funding costs are rising, it will be difficult for banks to lower the lending rate. Thus, we do not think the interest cuts will have much impact on the real economy.”
In any case, even if it did have an impact, it would be the wrong one.
China’s economic problems are mainly due to too much lending. Overcapacity in almost everything is causing prices to fall and too much debt is weighing on both demand and business investment — not that China needs more investment.
China’s debt-to-GDP ratio is now among the highest in the world, having increased from 153 per cent of GDP to more than 235 per cent since 2007.
Most of that increase has been to fund investment by the corporate sector, which has kept the economy growing during and after the GFC, but debt-fuelled growth leading to over-investment simply sows the seeds of problems later on.
More of the same as a result of official rate cuts — if they worked — would make things worse, not better.
The other way that China eases monetary policy is by cutting the RRR, which is the mandatory deposit that banks must hold at the central bank.
But at the moment, the PBoC is drawing down on its foreign exchange reserves to stabilise the currency in the face of very big capital outflows.
This involves selling dollars and buying renminbi, which sucks cash from the banking system.
The cut in the RRR is expected to inject about 700 million renminbi into the system, which would be more than enough to offset the September decline in official FX reserves. But according to some analysts, if the decline in all banks’ reserves is taken into account, it will fall short.
So China’s leadership is in a bind. The economy is slowing and Premier Li Keqiang acknowledged yesterday that 7 per cent GDP growth is not some kind of hard target and probably won’t be met.
But there’s nothing the government can do to prevent it from happening. Monetary stimulus doesn’t work and would only make things worse if it did, and likewise more government investment.
China needs domestic consumption to rise, which is happening to some extent, except the statistics can’t be trusted.
Some unofficial estimates put unemployment at 10 per cent, not 4 per cent, which the government statisticians say it’s been, consistently, with barely any change, for 12 years.
And in a blog post last week, analyst Chris Balding said the official data that shows the economy is transitioning from heavy manufacturing to services is manipulated by overweighting future expectations.
Capital outflow, prompted in part by a lack of faith in China’s economic statistics and in part by the lack of economic reform, is actually tightening financial conditions.
To encourage long-term growth and to be accepted as an international currency and included in the SDR, China needs to continue and deepen reforms, but that means further opening up the capital account and deregulating banking.