Last week’s news included the a warning that while policy-induced slowing of the economy continues (not a bad thing), some risks remain. In Caixin, Yi Gang, a deputy governor of the People’s Bank of China (and leader of SAFE) said that “the probability [of a double dip] is small. Nevertheless, he said that the growth rate will inevitably slow down, given the current size of China’s economy as well as environmental restraints”.
Some measures, however have been growing – as yet more statistics have been revised . The China Real Time Report notes that the “National Bureau of Statistics’ on-the-ground efforts discovered additional household spending equivalent to about 0.8% of annual gross domestic product over the years 2004 to 2008… In 2008, for instance, household expenditure was revised up to 11.06 trillion yuan, an increase of 220.23 billion yuan or about $29 billion”. Regional GDP figures have also been called into question. Not for the first time. As ever, take statistics with a grain of salt, focus on the trend, and do primary research.
Slower growth aside, China may have already become the world’s 2nd largest economy – overtaking Japan – after growing 11.1 percent in the first half of the year. Reuters reported that Yi Gang (as above) reported that “China, in fact, is now already the world’s second-largest economy”.
All that growth, slowing or not, has created pressures. We have recently covered some of those affecting factory workers, but this week the focus is on industrial accidents and the environment. According to Reuters “China, the world’s largest polluter, said the number of environmental accidents rose 98 per cent in the first six months of the year, as demand for energy and minerals lead to poisoned rivers and oil spills.” Incidents that leap to mind include Zijin Mining, Dalian port (which seems to be worse than originally thought).
Coming back to the pressure on workers…that is continuing to have an impact (and a lot of mainstream news coverage, including in the Economist). Following up on some of the original headlines on the issue, we are now following Foxconn to central China (to Henan, and away from the Pearl River Delta, labour unrest, and shortages).
Much of the recent labour unrest has been focused on foreign-invested enterprises (FIEs), and the government generally seems happy for workers to vent. But other news served to remind us of the role FIEs also play in China’s economically important exports. The Economist reported: “Of China’s 200 biggest exporters last year, 153 were firms with a foreign stake”.
Another issue we have covered is the state of the China business environment but, interestingly the failure of the largest foreign takeover of a Chinese company to date (a US$1.6 billion deal for Charles River to buy Wuxi PharmaTech) has failed not because of Chinese protectionism, but because of shareholder dissent in the US. Further tests, on both sides, are sure to follow.
China’s outbound investment has also been active, and not entirely uncontroversial. On one hand Chalco has concluded a US$1.3 bn deal with Rio Tinto (remember them?!), while on the other Huawei failed in its attempt to buy US internet software company 2Wire. The FT reported that in that (and a recent Motorola deal) “serious questions over Huawei’s ability to win regulatory approval for the acquisitions played a role in the bidding process, forcing Huawei to offer a higher premium. Both deals would have had to win approval from the Committee on Foreign Investment”. “National security” sensitivity anybody?
Of course the US is not the only place with such security sensitivities. China’s “indigenous innovation” policy has caused serious concerns, and claims of protectionism.These have been looked at in detail by APCO’s James McGregor and a report that puts the policy “in political, economic and historic context and perspective”. It makes for interesting reading. And, anyone with high-tech IP should be interested.
And finally…when wining, dining and otherwise entertaining Chinese guests, give some thought to what is being gifted. As Dan Harris at China Law Blog points out: “…the provision of conspicuous or unusually expensive entertainment… might attract attention” in relation to the Foreign Corrupt Practices Act (FCPA) – especially where “foreign officials” (who can be difficult to define) are concerned.
See the related tweets, and links below.
1. RMB RT @caixinmediafeed: Central Bank Deputy Governor Yi Gang on exchange rate reform and…double dip http://tinyurl.com/276e9v5 )
2. Stats again RT @fonstuinstra: Revisions Show China Consumption Growth – China Real Time Report – WSJ http://ht.ly/2hIyS  (see also: RT @markmackinnon: “Something is fishy in the provinces” – GDP growth in China’s provinces…outpaces national… http://tinyurl.com/2umffac )
3. China rising… RT @fonstuinstra: China overtakes Japan as No.2 economy -FX chief- Forexyard.com http://ht.ly/2iJWc 
4. Pressure of growth RT @AsiaWaterProj: Eco-disasters up by 98% in China: http://bit.ly/cd1ZIj #China #Environment (see also: Disaster in Dalian RT @CDTGreen: US expert: China Oil Spill Far Bigger Than Stated http://twurl.nl/xu1k4r )
5. “The workers are revolting”… RT @fonstuinstra: China’s labour market: The next China | The Economist http://ht.ly/2iFPZ  (See also: Company (& workers) go inland RT @chinaeconreview: Foxconn’s Henan plant begins production http://dlvr.it/3KcvP )
6. FDI & exports (From the Economist – see last tweet): “Of China’s 200 biggest exporters last year, 153 were firms with a foreign stake”. http://ht.ly/2iFPZ 
7. FDI failure (but not protectionism) RT @chinaeconreview: China’s largest-ever foreign takeover collapses… http://dlvr.it/3BTFk (See also: …but some ODI does better RT @chinaeconreview: Beijing gives final approval to Geely acquisition of Volvo http://dlvr.it/3BBwW 
8. Chalco to take 44.65% in Guinea project RT @chinaeconreview: Chinalco to sign for $1.35b stake in Rio Tinto mine http://dlvr.it/385hF  (see also: ODI discomfort RT @danwei: U.S. govt. uncomfortable with Huawei investments… (FT) http://bit.ly/95PaQH )
9. @jamesLmcgregor China’s “indigenous innovation” drive put in political, economic and historic context and perspective. http://tinyurl.com/38lx927  (see also: @niubi China Rejects Technology-Transfer Concerns, defends high speed rail plans-WSJ http://bit.ly/aWu7zB no1 forcing foreign firms 2 participate)
10. RT @DanHarris: RT @selvan_tengy: Giving Gifts In China. Giver Beware. http://bit.ly/cjcv8n (see also: FCPA, UKBA etc. RT @chinahearsay: China Law Blog: Bribery In China. Does Your Home Country Even Care? http://is.gd/dSdOq )