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Tuesday, 5 March 2013

Crunch time!

Very contrasting news and images coming out of China at the moment.  While Wen Jiabao was singing his final swansong at the Party Congress this week amidst the formal handover of power, property owners were fleeing to government offices to process property sales before the hastily announced 20% capital gains tax commences.  It is intended to slow down rising property prices.  It may have burst the bubble instead.

Express filing, Shanghai style

He did it his way
Wen's China was on display for all American's midweek when longtime China Watcher Gillem Tulloch, of ForensicAsia (with the assistance of others behind the scenes like Patrick Chovanec), took CBS' 60 minutes team for a walk through China's ghost cities.  The empty shopping centres, half started office blocks and empty landscape is one of Wen's legacies.

Another legacy is the opening up of reporting on social issues, along with professed policies by the leadership to do something about it.  Reports have circulated of polluted "cancer villages" and the below from a Daily Mail piece captures the mood at the moment:
The Chinese government has promised to tackle 'cancer villages' - areas where pollution is so bad it has lead to a huge rise in diseases like stomach cancer - after a huge social media backlash from both ordinary Chinese people and global campaigners.There has been an explosion of outrage about cancer villages on China's social media sites and blogs, which are used by increasingly powerful activists to raise awareness.
But problems run deep.  As in the case of Dalahai, a village in Inner Mongolia profiled by Caixin magazine which has suffered from a nearby radioactive tailings dam, the villagers must drill to increasing depths to tap water which is safe to drink.  It is a moot point anyway as many villagers have fallen ill, moved away or given up hoping for promised though inadequate compensation.

Going green
The Green agenda was supposed to be one of the highlights for Wen's legacy with the push for renewables and various environmental policies which have also failed.  Instead the policy failure so evident in the Beijing smog has been upstaged by tycoon and philanthropist Chen Guangbiao, who made headlines for a number of radical stunts, including  selling cans of fresh air, recommending Chinese people eat less, and attending this week's Congress by bike, in a green suit.  While refreshing it is uncertain how likely any of his recommendations will be to advance the agenda.

The wrong type of green (c) Reuters

The dead hand of the State
One of the big obstacles to reform is the vested interests of state enterprises.  Caixin had an excellent piece on the failures at the top of State shipping company Cosco which took up the completely wrong strategy and is now hemorrhaging cash.  The FT mentioned the role that the head of M&A champion Sinopec had, in weakening regulation to restrict the sulphur content of its refineries near Beijing which have caused much of the smog.  And on the green side, Caixin has just reported details of the termination of the head of Suntech, the failed solar company which officials were saying should have been consollidated with all the other failing solar companies by now.

Most worringly in a market where risks are dire and State Owned Enterprises have lavished shareholder funds - the property sector (which is now tanking), one key sensible measure - that the SOEs withdraw from the market, has been ignored.  This and everything else does not bode well.

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