China’s ruling State Council on Tuesday released sweeping policy reforms towards its income distribution mechanisms, reported Xinhua, in the hopes of narrowing the nation’s widening wealth gap, amid growing public discontent.
China’s central bank pumped a record 450 billion yuan ($72 billion) into money markets on Tuesday after the benchmark borrowing rate climbed to a three-week high as the demand for cash spiked ahead of the weeklong Lunar New Year festivities.
The short-term liquidity injection was carried out via regular open market operations using a 14-day reverse bond repurchase agreement, which means the money will drain out of the system in two weeks.
Chinese banks have extended at least three-quarters of loans made to local governments at the height of the global economic crisis. According to data compiled by the Financial Times, the repayments – worth at least 3 trillion yuan ($482 billion) – were due at the end of last year and the rollover is aimed at averting a wave of defaults that could have dealt a harsh blow to the world’s second largest economy.
A Chinese entrepreneur has begun selling fresh air compressed in soft drink cans to fellow residents in Northern China, reported Fairfax Media on Tuesday, claiming that he wanted to make a point on China’s worsening air pollution, which rose to “hazardous” levels again this week – according to the latest readings.
Economic history suggests that most countries fail in the reform and adjustment process precisely because the sectors of the economy, not to mention individuals, that have benefitted from the distortions are powerful enough to block any attempt to eliminate those distortions. But it is certain that not everyone in China is confident that Beijing will be able to force through the reforms, as reports suggest that nearly 6 trillion dollars left the economy illicitly over the last decade.
Oil and natural gas travelling from the Middle East to China may begin to bypass the traditional Strait of Malacca shipping route as soon as the end of May, reported state-owned Xinhua News Agency on Tuesday, following the projected completion of a 1,100km Sino-Myanmar pipeline that will transport energy imports to China’s Yunnan province via Myanmar’s Indian Ocean coast.
China will spend nearly $250 billion a year on educating tens of millions of youth moving from rural to urban areas, claimed a report by the New York Times on Wednesday, underlying the nation’s need to develop a multifaceted labour force in order to support further economic growth.
China’s food safety watchdog, the State Food and Drug Administration (SFDA), has offered cash rewards of up to 300,000 yuan ($48,200) to any individual willing to report on health safety violations, reported Xinhua News on Tuesday, following the revelation of yet another food-related scandal last month – adding to the nation’s already abysmal food safety record.
China, the world’s largest energy consumer, intends to add an additional 10 gigawatts (GW) of installed solar power capacity to its present energy supply by the end of 2013, said a statement on the National Energy Administration on Tuesday, providing a much needed boost for domestic solar manufacturers, who have suffered heavy losses over the last year due to sliding foreign demand.
According to an IMF study released late last year, there is now strong evidence that China has been over-investing significantly over the last decade – leading to sustained economic growth rates at the expense of a suppressed consumption base. But even as China embarks on a new era of economic rebalancing, any attempt to reduce its reliance on investment-led growth may cause severe economic repercussion, while doing nothing may also lead to further financial fragility.
