China to continue to improve a “managed floating” exchange rate system

The Governor of the People’s Bank of China, Zhou Xiaochuan, has drafted a roadmap for China’s financial reform as a guide to building robust and competitive financial institutions, innovative financial business, effective supervision and a favorable macro policy environment.

As for RMB exchange rate reform, Zhou reiterated that China would continue improving a ‘managed floating’ exchange rate system that keeps the value of the yuan basically stable at a reasonable and equilibrium level.

In a speech delivered at a forum in Beijing earlier this month, Zhou compared financial institutions to fish in an aquarium. Only those who are healthy enough are able to survive. He specified that the introduction of private and foreign strategic investors is an important strategy to help financial entities grow stronger. In his article published on Nov. 18 on China’s financial system reform during the 11th Five-year Plan period starting from 2006, foreign and private investors will be allowed to become larger shareholders in Chinese state-owned commercial banks.

Under existing rules, no single foreign partner can own more than 20 percent of a Chinese financial institution and the total foreign investment cannot exceed 25 percent. The Bank of America holds 19.5 percent of CCB’s equity, the HSBC has 19.9 percent of the Communication Bank of China and the Royal Bank of Scotland has 10 percent of the Bank of China.

(more…)

There are 10 newly-invested product lines

High-level steel production encountered repeated investment following the oversupply of primitive steel products in China, Economic Information Daily reported Thursday.

According to the newspaper, the newly-increased capacity of the steel industry reached 40 million tons in the first three quarters, resulting in historical high steel stock in September. Steel stock in September grew 42.9 percent over January.

When domestic steel works invested in high-end installations like 120-ton converters and product lines of hot-tolling and cold-rolling sheets, they were filling up the vacancy of the market. But demand lags far behind after the equipment was put into production.

At present, there are about 10 newly-invested product lines of hot-rolling and cold-rolling steel sheets in the country.

A medium-sized steel plant in Jinan, capital of east China’s Shangdong Province, alone possesses three 120-ton converters and a product line of hot-rolling sheets to be put into production next year, with a working cold-rolling product line.

Inspired by rising price of high-level steel products, many steel works have been enhancing investment in the area since early this year.

China issued a development policy for the steel industry in July to guide the development of the sector, but the implementation of the policy might encounter hindrances from local governments because the benefits of the local officials might be adversely affected, said the newspaper.

- Xinhua

to keep the rapid and healthy economic development

During the 11th Five-Year Program period (2006 to 2010), the Ministry of Finance will go all out to optimize investment and consumption structure, said its minister Jin Renqing in Beijing Saturday at a seminar on China’s finance and taxation.

Against the backdrop of relatively overheated investment and downturn consumption, it is vital to optimize investment and consumption structure and stimulate consumption so as to keep the rapid and healthy economic development, he said.

He called for the rationalization of resources, labor force and land prices, saying income of low-income people should be promoted and the number of middle-income people should be increased.

Work on social security, education, technology and medical services should be enhanced to make people dare to consume, said he, also putting stress on increase of farmers’ income and optimization of industrial structure.

The Ministry of Finance will accelerate reform on value-added tax, and unify the taxation system on domestic and overseas-funded enterprises, so as to spur corporate independent innovation, he said.

The government will use finance and tax policies to support recycled economy and push forward the construction of resource-saving and environment-friendly society, he said.

China’s revenue this year is expected to exceed 3 trillion yuan (370 billion US dollars), according to the ministry.

In 2004, revenue for the whole country accounted for 19.3 percent of gross domestic product (GDP), much higher than the 15 percent in 2000, showing the government has become more capable in economic macro-control.

- Xinhua

Bush visits China for the third time in five years

Cooperation and common prosperity are the mainstream of the relations between China and the United States, said Chinese President Hu Jintao in Beijing Sunday.

“It is inevitable for China and the United States to have different views on some issues as the two countries have different history, culture and domestic situation,” Hu said when meeting the press after talks with visiting US President George W. Bush.

He added the two countries should properly settle the difference through talks in the spirit of mutual respect and seeking common ground while shelving difference, and on the basis of the basic norms of international relations.

Hu said China’s path of peaceful development is “an inevitable choice” based on its national conditions, its historical and cultural traditions and the current development trend in today’s world.

Hu called the country’s development as “peaceful”, “open” and “cooperative”.

Remarkable achievements have been made in the fields of democracy and human rights since the founding of the People’s Republic of China, especially after the launching of the reform and open-up drive, said Hu. The Chinese people have practiced democratic election, management, decision-making and supervision in accordance with law.

“China will continue to build up democracy with its own characteristics and improve its people’s human rights based on the actual situation and the aspiration of the people,” Hu said.

(more…)

Chinese President Hu Jintao said in Beijing Sunday that both China and the United States have agreed to expand bilateral trade and economic cooperation, believing it serves the common interests of the two countries and peoples.

“The two sides have expressed the readiness to gradually realize trade balance through joint efforts,” Hu told the press after his talks with visiting US President George W. Bush.

The Chinese president called for consultations to properly handle the friction and problems emerging in the rapid development of bilateral trade and economic cooperation, saying China and the United States will stick to the principle of mutual benefit and common development and continue to expand the sphere of cooperation for mutual benefit and a win-win situation.

“I’ve told President Bush that the Chinese side will intensify the efforts to protect intellectual property rights and crack down on infringement. We are ready to strengthen cooperation with the United States in this regard,” Hu said.

China will “unswervingly” boost the reform of the exchange rate formation mechanism in the principle of benefiting both China and the world at large, he said.

China and the United States have also agreed to increase cooperation in fighting terrorism on the basis of mutual benefit, and have signed a memorandum of understanding on a mega-port plan.

The two countries also agreed to expand exchanges and cooperation in culture, education, science and technology, as well as among the youths, said Hu.

- Xinhua