TRANSCRIPT: Special report on the
work of the new National People's Congress with
a look at new government shake up, China's 2008
government budget, some interesting deputies and
their proposals, investment news, a look at the
gloomy Chinese stock markets...
Sinomania! Volume II Webisode 51, March 12, 2008
Beijing Plays Musical Chairs:
My Report on the National People’s Congress.
And Chinese Markets Tank!
The first session of the 11th National
People’s Congress – the Chinese parliament – is
underway at the Great Hall of the People in Beijing
and in conferences, sessions, and pressers all
over the city.
Gone are the celebrity sightings
and photo ops of the 10th Congress – movie stars
Gong Li and Zhao Benshan for example were not
reelected. What’s in – grass roots issues, environmentalism,
restructure and reform.
The NPC opened with Premier or Prime
Minister Wen Jiabao emphasizing the challenges
ahead for China in dealing with inflation.
China's monthly consumer price inflation
hit an 11-year high of 8.7 per cent last month
with consumer prices rising by 9.2 per cent in
the countryside and 8.5 per cent in the city.
The biggest impact and worry was a 23 percent
spike in food prices.
The NPC says it will now pursue
a “tight monetary policy” an important signal
with differing impacts on various sectors of the
Chinese economy that I will discuss in next week’s
The 2008 draft budget was presented.
China’s central government budget is just under
five and half trillion Yuan or close to three-quarters
of a trillion US dollars based on market exchange
rates. In actuality that figure is much higher.
And the government continues to run a deficit,
although quite small by global standards, estimated
for 2008 at around 180 billion Yuan.
As exports are slowing Beijing will
channel excess cash into more state investment
which already accounts for over 45% of China’s
Gross Domestic Product. State directed investment
targets are health care and social security programs
based on United States models and housing and
safe drinking water for China ’s impoverished
BEIJING'S BUDGET APPROVED
Here’s how China ’s 2008 budget
pie slices up:
The biggest piece goes to national
defense at 410 billion Yuan, a priority Beijing
shares with Washington as both governments richly
reward their military-industrial complexes, although
Chinese expenditures are less than one tenth those
of the USA.
Next, as in the United States, is
welfare at over 276 billion Yuan, and the Chinese
also prefer to use the euphemisms social security
and employment programs.
Education is third at just over
156 billion Yuan, followed by environmental programs
for agriculture, forestry and water conservation
at 145 billion, science and technology at around
114 billion, and lastly medical and health care
– always under funded by Beijing – at just over
83 billion Yuan.
By week’s end, the NPC will vote
on the candidates already selected last October
by the Communist Party for top government positions.
Hu Jintao will no doubt be elected for a second
and final 5-year term as President. Zhou Xiaochuan,
governor of the Chinese central bank, is expected
to keep his job for another term.
The biggest news so far is a major
restructuring of the State Council, the day-to-day
government of Beijing and the Chinese President’s
New “super ministries” will be set
up to prevent bureaucratic turf wars and bring
central control down to at least the provincial
The increasingly powerful National
Development and Reform Commission or NDRC will
gain a new ministerial authority for energy security
macro level economic control.
All told 15 central government departments
are involved the most important reshuffle in Beijing
for close to a generation. The Sinomania! blog
will have full
details on the reshuffle.
MANDARINS AT WORK
The National People’s Congress is
one of the largest parliamentary bodies in the
world with almost 3,000 members or deputies. Each
deputy must present proposed legislation based
on petitions from the people they represent, an
ancient tradition that predates the Chinese republic.
In this great airing of gripes and views are clues
to the aspirations and desires of the Chinese
Some deputies and proposals of note
this year are:
ZhangYin, China’s richest woman
is proposing tax cuts for the rich and an easing
of regulations against her polluting paper mills.
Wu Xiaoling, former Vice Governor
of China’s central bank, a deputy on the finance
and economic affairs committee is arguing against
immediate convertability China’s currency.
Tian Chengping, current Labor and
Social Security minister warned of a “very severe”
employment picture in China this year with about
20 million new workers looking for jobs.
Chen Fei, a grass roots environmental
activist representing a district in coastal Zhejiang
Province, passed out squares of cloth to fellow
deputies in Beijing to use as handkerchiefs. Chen
is leading a campaign to eliminate paper waste
and paper bags from China’s rivers and countryside.
New NPC deputy Mao Xinyu is a 38-year-old
grandson of Chairman Mao. His agenda is not known
but he is something of a hit with the press.
Sidney Shapiro is on his sixth term
as a member of the Chinese People’s Political
Consultative Committee, the advisory board to
the NPC. Mr. Shapiro is 93 years old, was born
in the USA and became a Chinese citizen in 1963
after moving to China in 1947.
Liang Xiaohong, a member of the
Chinese People’s Political Consultative Conference,
and the Vice President of the China Academy of
Launch Vehicle Technology, announced a five-year
plan to corporatize China’s military-industrial
complex. Plans are to be revealed sometime
this year and the reform will begin with the rocket
sector and run through the China Aerospace Science
and Technology Corporation conglomerate. There
is talk of raising up to 69 billion Yuan or over
$8 billion US dollars by 2010. The new rocket
company will have a production base in Tianjin
and contain all related assets from rocket research,
production, and testing.
So here’s a potential opportunity
to invest directly in Chinese space technology.
Briefly – Chinese markets are down
down down! News is the same or worse for all indicators.
The Shanghai Composite Index closed March
11 at 4,165.88 after falling on Monday to its
lowest level since July 2007. The index is now
down 16% since the start of the year not technically
a bear market but a way out of the woods is needed
I’ll see you next week on Sinomania!
for more on how the NPC will affect business and
markets and the Alpha Bet!