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Chinese Economist: Easy Monetary Policy Has Little Effect on Economic Growth

At a China Entrepreneurs Forum held at Yabuli, Heilongjiang Province from February 16 to 18, Wang Xiaolu, an economist at the National Economic Research Institute under the China Reform Foundation, commented on the effectiveness of China’s monetary policy.

Wang recalled the history from 2000 to 2018, with an observation that China’s real GDP increased by 3.8 times, but M2, a key measure of money supply, grew by 12.6 times. “China’s easy monetary policy didn’t start from 2008, but has been there for a long time. The growth of money is much higher than the growth of GDP.”

“The long-term monetary easing has brought about the series of structural problems that the Chinese economy now faces.” Wang said that one of the serious problems is the ever-rising debts. In addition, due to excessive investment, including the government’s investment in urban expansion and infrastructure construction, many projects are economically inefficient. Wang is concerned that a considerable part of the investment is ineffective. “It is a waste.”

Although the officially published GDP growth rate is 6.6 percent, Wang believes “the real situation is much worse.” “The easy monetary policy has become less and less effective in stimulating economic growth. It is almost nonexistent now, but the negative effect is very obvious. The money oversupply will rush into real estate, causing a housing bubble and introducing other problems”.

Source:, February 17, 2019

RFI: The China-U.S. Trade War Caused Widespread Slide of the Chinese Economy

Radio France Internationale (RFI) recently reported, based on statistics quoted in Hong Kong media, that the Chinese economy is seeing a nation-wide decline due to the China-U.S. trade war. According to research data that Renmin University of China (which was the first University founded by the Chinese Communist Party) released, new job positions declined by 36 percent year-over-year in large cities in the eastern coastal areas. This is where companies make a significant contribution to China’s exports. The western inland regions suffered more – new job positions declined by 77 percent. In the meantime, the National Bureau of Statistics redefined the “mid-income” class as a monthly income between RMB 2,000 to 5,000 (around US$295 to US$738). The new definition received widespread criticism. A Beijing resident commented that a recipient of RMB 2,000 could not even afford a low-end apartment rental. He asked, “What kind of middle-class is that?”

Source: RFI, February 16, 2019

China’s High Speed Rail System Faces Heavy Debt Risk

China tops the world with its advanced high speed rail system. As of the end of 2018, China’s high-speed railway operating mileage reached 29,000 kilometers (18,019 miles). The statistics, however, suggest that China has also paid a huge price which may take a number of generations to pay back. Radio Free Asia published an article that Caixin initially reported. It describes the financial risk that China’s high speed rail system faces. The data shows that China’s high speed rail is facing a huge debt and financial losses. The risks can be summarized in the following five areas:

First, China’s high speed rail relies mainly on debt financing. The debt that China Railway General (formerly the Ministry of Railways) had has since soared from 476.8 billion yuan (US$70.39 billion) in 2005 to 4.72 trillion yuan (US$700 billion) in 2016. China Railway has always kept the financial data of the high speed rail strictly confidential, but from its published debt and revenue data, it can be concluded that, even if the operating cost of the high speed rail is not considered, the total transportation revenue of the high-speed rail is not enough to pay the interest on the loan for the construction of the high speed rail.

Second, most of the high speed rail is losing money. Other than the rail between Beijing Shanghai and Beijing Guangzhou, most of the other rails are way below capacity. There are only four rails running between Lanzhou to Xinjiang compared to a daily capacity of 160. The ticket revenue can’t even cover the cost of electricity. Even for the busy route from Beijing to Shanghai, the capacity utilization rate of number of passengers per kilometer is only half of that in Japan.

Third, since the high speed rail has a weight limit, the transportation of goods had to be shifted from railway to ground. The market share of China’s railway freight volume (excluding ocean shipping) has dropped rapidly from 50 percent in 2005 at 3 percentage points per year to only 17.1 percent in 2016.

Fourth, the high speed rail drove up the cost of freight. China Railway has relied on a continuous increase in the price of railway freight to make up for the serious losses of the high speed rail, thus driving the cargo owners to use ground transportation. Hence the increase in the ground transportation cost.

Fifth, freight transportation is heavily dependent on roads which aggravate air pollution. The rapid decline in the market share of railway freight transport has led to a large amount of basic raw materials that rely on ground transport, which has increased air pollution. This problem is more prominent in densely populated areas such as the Beijing-Tianjin-Hebei region and the Yangtze River Delta.

Source: Radio Free Asia, January 29, 2019

CNA: Xi Jinping stated that China will not follow the path of Western Constitutionalism

There have been constant discussions on the relationship between the party and the law and which one is more powerful. In a list of internal speeches that Xi Jinping made, Xi has repeatedly stated that China will not follow the path of Western Constitutionalism. The Central News Agency published an article which contains those speeches. Below is the summary of Xi’s statements:

1. In August 2018, during the first meeting of party’s Central Committee, Xi said that the party’s policy is the forerunner and guide on national law. (China) will never take the Western constitutional path. To promote the rule of law comprehensively, China must take the right path. It must proceed from China’s national conditions and actual conditions and follow the path of the rule of law that suits us; it will not copy the models and practices of other countries. It will not follow the Western “constitutionalism,” “separation of powers,” and “judicial independence.”

2. In January 2014 during the Political Work Conference of the Central Committee, Xi said that, “The relationship between the party’s policies and national laws should be handled correctly.” The party’s policies and the national laws are “essentially consistent” and are the reflection of the fundamental will of the people. However, “the party’s policy is the guide concerning national law; it is the basis of legislation and an important guide for law enforcement and justice.” Xi also said that “it is necessary to be capable of seeing that the party’s will shall also be the will of the state; it will form the law through legal procedures,” it will ensure the effective implementation of party policies through the law,” and will ensure that the party plays the overall role of the overall leadership and the parties to the agreement.”

3. In February 2014, Xi told a group of provincial level officials that the “Chinese people’s democracy” is essentially different from Western constitutionalism. “The leadership of the party is the most essential feature of socialism with Chinese characteristics.” Xi stressed that, “We say that governing the country according to law means that, under the leadership of the party, the general public manages state affairs through various channels and forms in accordance with the constitution and the laws.” As for “ruling the country according to the constitution and governing according to the constitution, it is not to negate and abandon the party’s leadership, but to emphasize that the party leads the people to formulate the Constitution and the laws, and the party leads the people to implement the Constitution and the laws.”

4. In February 2015, Xi told another group of provincial level officials that the relationship between the party and the law is a political trap, a false proposition. To the party and the government organizations and leading cadres at all levels, which side has the power is the true issue.

Source: Central News Agency, February 16, 2019

A Chinese Local Government Shames a Fugitive by Spray-painting His House

A local government in Guangdong Province of China was reported to have spray-painted the characters, “telemarketing fraud fugitive” on the front door of a telemarketing fraud fugitive’s house. It also publicized a letter to family members of the fugitive, including a threat to freeze the identity cards and financial cards of the fugitive’s direct family members.

According to Beijing Youth Daily, a Chinese newspaper based in Beijing, a recent message that the government of Shuzai Township of Dianbai District in Maoming City of Guangdong Province released has drawn widespread attention on the Internet. The Chinese Communist Party’s Shuzai Township Committee and the Shuzai Township People’s Government signed a “letter to the families of fugitives,” dated February 3. The letter stated that, if the telemarketing fraud fugitives do not submit themselves before February 10, the township government will cut the water and electricity supply of their homes, spray-paint the words “telemarketing fraud fugitive” on the suspects’ houses, and freeze the identity cards and financial cards of the fugitives’ direct family members.

On February 13, some netizens released videos and photos showing that the local officials have spray-painted the house of a fugitive. Netizens have expressed that the government’s action was too arbitrary and questioned the act of implicating innocent family members.

Source: Central News Agency, February 15, 2019

The Number of New-Born Babies Declined Rapidly in Shandong Province

The fertility situation in Shandong is a barometer for China’s national child birth rate. However, the province is going through a significant change in its population structure.

Since the implementation of the two-child policy, Shandong Province, which was once called, “China’s most productive province for child birth,” has been losing its position in fertility willingness. Recently, several prefecture-level city health planning committees or municipal governments in Shandong province published the number of births for some months in 2018. The reporter noted that the number of births has declined in different degrees.

Take Qingdao as an example. According to data that the Qingdao Municipal Government released, the indications are that, in 2018, around 90,000 babies were born among the registered population of Qingdao, which is a significant decline. Figures show that the population born from January through November fell by 21.1 percent and the number of second child births fell by 29 percent. In Yantai, Liaocheng, Dezhou, and other large cities with a permanent population of more than 5 million, the number of newborns also declined in 2018.

Source: National Business Daily, January 9, 2019