Govt spending regulation well implemented

Date Aug 09 2013 09:43:20
Aug.09,2013(SHMET)--A regulation proposed by Chinese Premier Li Keqiang on major measures to slash government spending has been properly and effectively implemented, the government said on Thursday.

However, violations have not been eliminated, according to the statement, which added that the State Council, or China's cabinet, will work with relevant authorities to intensify supervision and investigate problems related to the implementation of the regulation.

The regulation, announced by Li at his press debut as premier in March, includes a halt to new government building construction and a reduction in spending on both government employees and official receptions, vehicle and overseas trips.

"The regulation is a solemn promise that the new government made to society with concrete measures to advance the building of a clean government," the statement said, adding that spending on government buildings has largely been contained.

Since March, local governments have issued their own regulations to reduce new government building construction, including stopping approvals for the construction, expansion, restoration and purchase of new government offices and training centers.

All new projects approved after the new government was installed must be stopped, while problems with projects approved prior to March should be promptly rectified, it said.

To expose and handle violations swiftly, some local authorities have set up inspection organs and formulated regulations concerning government information transparency, as well as the petitioning and reporting systems.

Moreover, central authorities have strengthened management over funds used by central government departments, as well as carried out strict audits and final accounting in order to rein in spending.

The General Office of the State Council organized an inspection in May and published information concerning the violations uncovered during the inspection in July.

The cost of supporting the employees of government departments and government-funded institutions has been strictly managed, the statement said.

The central government has set caps for the number of government-supported personnel that can be employed by local administrative agencies, the government said, adding that the caps have largely been observed.

In recent months, central and local governments have worked to control their total number of staff and improve the efficiency of their current staff, the statement said.

No new employees will be added to government departments that are already overstaffed and measures have been taken to deal with "freeloaders" in government agencies and government-funded organizations, the statement said.

Both central and local governments have cut their spending on government employees and official receptions, vehicles and overseas trips this year, according to the statement.

Such spending by central government departments has dropped 1.6 percent year on year so far this year, with planned spending on receptions down 4.3 percent from 2012, it said.

Information on official receptions has been digitized for better supervision.

Edited by SHMET

Yards chart new course with State Council policy

Date Aug 06 2013 15:18:49

Moves announced recently by the State Council for upgrading the shipbuilding industry by 2015 will accelerate shipyards' integration and help the sector to navigate its difficulties, said experts.

The measures were released as the industry grapples with an unprecedented mix of challenges: low demand, declining orders, sliding prices and oversupply. The goal is to get Chinese shipbuilders back to sustainable development through restructuring and upgrading, said the State Council

"The new measures look to resolve overcapacity and low demand in the short term and set clear, long-term targets for industrial upgrading," said Yang Xinfa, deputy secretary-general of the China Association of the National Shipbuilding Industry.

The shipbuilding industry is directly related to 113 of the nation's 135 industries, and its health has an impact on key sectors including steel, equipment manufacturing, electronic information and others.

Huang Jin, deputy regional manager of DNV Maritime of China, part of the consultancy DNV Maritime and Oil & Gas Classification, said the council's plan showed the industry's importance. He said that he is looking forward to detailed measures from industry regulators and local governments.

The State Council plan urges local governments to support shipbuilders' innovation, strictly control new capacity, promote high-end products and stabilize the industry's international market share with greater funding support, according to the statement dated July 31.

Besides restricting new shipbuilding capacity, the government is encouraging mergers and acquisitions and pooling of resources in the industry, the statement said.

"Chinese shipbuilders are less competitive than their South Korean peers because they are less creative and less capable in meeting market requirements and client demand. The new measures recognize this weakness," said Huang.

But private-sector shipbuilders complain their financing difficulties persist.

Shipowners will get more favorable financing terms for placing orders for Chinese-made vessels, engines and axles, and some key companies will be allowed to issue bonds, according to the cabinet's announcement.

"Shipowners only have to make a small down payment for ship orders. Shipbuilders have to provide the rest of the financing during construction. Therefore, to my understanding, shipowners have better financing conditions than shipbuilders," said Li Aidong, president of Jiangsu Daoda Marine Heavy Industry Co Ltd.

According to Li, high financing costs have hurt private-sector shipbuilders' profit margins.

"Privately owned shipbuilders' financing costs are more than double those of State-owned companies, but I do not find any favorable policy in the document to help us in financing," said Li.

Su Baoliang, a CITIC Securities Co Ltd analyst, said support policies are less needed during a down market.

"The shipbuilding industry has entered into a low market cycle, and it is impossible to stop uncompetitive companies from going bankrupt. Instead, it is advisable to let the market play its full function and let the fittest survive."

Figures from the Ministry of Industry and Information Technology show only 20.6 million deadweight tons of orders were completed in the first half nationwide, down 36 percent year-on-year.

Chinese shipbuilders' orders in hand dropped 13.4 percent to 108.98 million dwt as of the end of June.

Public information also shows the 80 major shipbuilding companies' core business revenue declined 22.4 percent to 84.1 billion yuan ($13.7 billion) from January to May.

Edited by SHMET

China to float 40b yuan in e-savings bonds

Date Aug 06 2013 08:27:23

BEIJING -- The Ministry of Finance (MOF) announced Monday that it will issue two batches of electronic savings bonds worth up to 40 billion yuan ($6.48 billion).

The two batches will be the seventh and eighth issuances of such bonds this year, according to a ministry statement.

The seventh batch is worth 24 billion yuan and carries a term of three years with a fixed annual interest rate of 5 percent. The eighth issuance of five-year bonds is worth 16 billion yuan at a fixed annual interest rate of 5.41 percent, the MOF said.

The bonds will be issued from August 10 to 19. Interest will be calculated from August 10 and paid annually, the statement said.

The bonds will be available to individual investors at counters of the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and China Guangfa Bank, it said.

Electronic savings bonds are considered more convenient than other types, as interest can be paid directly into the investor's account.

Edited by SHMET

Regulator tells banks to focus on risk, credit structure

Date Aug 05 2013 14:49:16

The China Banking Regulatory Commission on Wednesday urged financial institutions to strengthen their risk management and optimize their credit structures amid slowing growth in the world's second-largest economy.

Chinese commercial banks' non-performing loan ratio was 0.96 percent as of June 30, with a balance of 539.5 billion yuan ($88 billion), flat compared with the end of the first quarter, according to a circular posted on the regulator's website.

Banks must prevent a large rebound in bad loans in the remainder of the year, amid slowing growth in China, said Shang Fulin, head of the CBRC, during a meeting on Wednesday. Shang said lenders must strictly avert risks associated with wealth management products.

Chinese banks had 9.08 trillion yuan in outstanding WMPs, a high-risk, high-yield alternative to bank deposits, as of June 30, the CBRC said.

The CBRC introduced rules governing WMPs at the end of March, which capped the size of so-called non-standard WMPs invested outside the interbank bond market or stock exchanges.

Shang said that the outstanding amount of such WMPs was 2.78 trillion yuan at the end of June, down 7 percent from before the new rules were introduced.


These figures constitute the first official data from the CBRC on Chinese banks' non-standard WMPs.

The CBRC will introduce more detailed rules covering outstanding WMPs to avoid mounting systemic risks, according to the banking regulator.

Tightened liquidity in June and a resurgence in interbank lending rates at the end of July have forced lenders to reconsider their strategies for the second half of 2013, and increasingly liberalized interest rates leave very lean margins for lenders, Shang said.

According to Citibank (China) Co Ltd, the liquidity crunch and tightening funding conditions amid slowed growth in the second half of 2013 may affect lenders' off-balance-sheet businesses, especially those of small and mid-sized lenders.

Outstanding loans to local government financing vehicles rose 6.2 percent year-on-year to 9.7 trillion yuan as of June 30, according to the circular.

A report by Moody's Investors Service said the National Audit Office's move to audit local goverment debt will result in the central government imposing additional restraints on borrowing by local government financing vehicles.

"This may introduce some short-term volatility in the debt markets and trigger related liquidity pressures, thereby increasing LGFVs' refinancing risk.

"Moreover, balance sheet adjustments by local governments would mean a curtailment of investment and add further downward pressure on the slowing pace of China's economic growth," said Katie Chen, an analyst in the sub-sovereign group at Moody's Investors Service Beijing Ltd in a note.

Shang said banks must prioritize loans that support the growth of the real economy. That category includes loans for ongoing construction, the transformation and upgrading of traditional industries and the elimination of overcapacity.

It also includes financing for small and micro businesses, the rural economy and development and consumption.

Lending for the construction of government-subsidized housing surged 26.6 percent year-on-year as of June 30, far more than other loan categories.

Edited by SHMET

Prudent monetary policy to stay

Date Jul 02 2013 10:44:26

Central bank to speed up opening of capital account, global use of yuan

China's will continue to implement prudent monetary policies, but will conduct preemptive adjustments and fine-tuning in an appropriate way when necessary, according to Zhou Xiaochuan, the governor of the People's Bank of China.

The head of the country's central bank said that it will work with other departments to guide financial institutions to maintain reasonable lending levels, and will use multiple tools to adjust liquidity and keep the market stable.

Speaking at the Lujiazui Forum in Shanghai on Friday, in his first public comments on the issue, Zhou said: "The PBOC will use all sorts of instruments and measures to adjust the overall liquidity level, so as to ensure the overall stability of the market."

He added the bank would ensure the "normal operation" of the economy.

There has been anxiety in the market that tightening credit conditions could spread into the broader economy, with some Chinese companies reportedly running short of cash to settle suppliers' bills.

Zhou said the central bank would guide financial institutions on maintaining reasonable credit growth while arranging their debts and maturity structures properly, to support the structural adjustment and upgrading of the real economy.

He said that the PBOC would continue actively pushing the opening up of the renminbi market, and that China plans more currency swap deals with other central banks, in the pursuit of more commercial banks starting to operate offshore yuan clearing businesses.

China will also speed up the opening of its capital account, though the process will be flexible, he added.

China's 12th Five-Year Plan (2011-15) calls for a gradual opening of the nation's capital account, which covers investment. The yuan is already convertible on the current account, which covers trade.

Shanghai is pushing hard to become a major financial hub, and its mayor, Yang Xiong said the city will strive to become a global renminbi center by the end of 2015.

In 2012, the country's yuan-denominated cross-border settlements totaled 500 billion yuan ($81 billion), a 50 percent year-on-year growth, added Yang.

Li Lihui, president of the Bank of China, said that simplified benchmark interest rates for deposits and lending and a more significant role for the Shanghai Interbank Offered Rate, or Shibor, in the global market will also help the currency's internationalization.

Current cross-border renminbi-denominated settlements are usually used in trade between China and neighboring countries, and Li added that it may take another 15 years for the renminbi to become one of world's major currencies.

Report by SHMET