Weekly Wrap Up Jan. 22 – Feb. 5

1) The Ministry of Industry and Information Technology said that for the next 14 months it will move against Chinese firms providing unauthorized Internet connections, including VPNs. According to data from the China Internet Network Information Center, the country’s online population grew by 6.2% in 2016 rising from 688 million at the end of 2015 [to 731 million]. E-commerce was a key driver of growth in usage. So too was access via mobile devices.
2) (Related) Authorities will start strengthening control over companies in the areas of Content Delivery Networks (CDN), Internet Data Centers (IDC) and Internet Service Providers (ISP), and that it will “put an end to illegal business activities,” which entails the unauthorized use of VPNs.…Companies will be able to apply for approval to set up or rent special internet connections for ‘cross-border operations’, but those without official approval will be barred from using VPNs.


3) The growth of smartphone sales may be declining, but now half of China’s population now uses a mobile device to access the internet.


4) “China sets up 100-billion-yuan state fund to invest in the internet
Established a state fund to invest in the country’s technological innovations and economic transformation into the so-called “Internet Plus” era…. setting a goal to raise the e-commerce trading volume to 40 trillion yuan by 2020 employing 50 million people… The Xinhua report didn’t say if the state-run internet investment fund plans to invest in non-state technology companies including Baidu Inc, Alibaba Group Holdings or Tencent Holdings.


5) Births increased by 7.9% in 2016 to 17.86 million, according to China’s National Health and Family Planning Commission. About 45% of babies were born to families that already had one child…but the increase of 1.31 million newborns falls far short of earlier government estimates that China would add 3 million babies annually for the next five years.


6) (Related)China Now Has 33,5 Million More Men Than Women
Looking at the gender proportionality, China’s male population is currently 708.15 million, with a female population of 674.56 million. …Over 16% (230.8 million) of China’s population is now aged 60 or older. The working age population (16-60 years) is 907.47 million, accounting for 65.6% of the total population.


7) 2016 Economic Snapshot of China

  • Using the output approach, annual GDP growth [6.7%] was driven mainly by higher output from the electricity, gas, and water industry (+5.5% vs. +4.3% previous) and the wholesale and retail trade industry (+7.2% vs. +7.0% previous), as well as the jump in output from the other services industry (+10.6% vs. +8.8% previous).
  • These gains was were partially offset by weaker growth from manufacturing (+6.8% vs. +6.9% previous), the financial services industry (+3.8% vs. +5.6% previous), real estate (+7.7% vs. +8.8% previous), and the agriculture, forestry, and fishery industry (+3.1% vs. +4.1% previous).
  • Exports have been in negative territory 10 months out of 12 in 2016.
  • For the entire year exports fell by 7.7%, which marks the second year of slumping exports.
  • Imports, meanwhile, 3.1% year-on-year in December.
  • Imports have been in negative territory 9 months out of 12 in 2016, which counterbalanced the contraction in exports and allowed China to print in print a surplus throughout the year.
  • For the whole year, imports fell by 5.5%, thanks primarily to cheaper commodities.http://www.babypips.com/blogs/piponomics/forex-economy-china-20170122.html


8) China’s [Foreign Exchange] reserves have shrunk by almost a $1 trillion since June 2014 as the central bank has sought to prevent a large fall in the yuan against the U.S. ­dollar…. If the central bank had carried out these actions it was because it was pinning its hopes on the dollar finally weakening, Zhang Ming said….[but] the risks of the yuan further depreciating against the U.S. dollar and capital flowing out of China remain high, given the prospect of higher interest rates on U.S. dollar assets and uncertainties over China-U.S. trade conflicts under a hardline new U.S. administration… the daily mid-price was set at [RMB to USD] 6.8693 in trading in China on Friday.
// Basically foreign exchange reserves are used to supplement a countries losses in times of finical crisis, this is one of many tools that allowed China to survive the U.S.’s 2008 financial meltdown, by China selling off U.S. debt, China is betting that the global economy will be smooth in years to come, or else it will be in trouble.


9) (Related) ” The Finical Risks of China’s ‘Credit Gap’ ” The Bank for International Settlements (BIS) defines the “credit gap” as the difference between actual credit growth and trendcredit growth usually runs well ahead of actualy credit trend for a few years. In China’s case, the BIS calculates a credit gap of about 30 percentage points of GDP; that is, the actual build-up of the outstanding credit stock is about 30 percentage points of GDP higher than would have been predicted by trend...non-bank institutions (shadow banking) has played a big role in credit expansion. If investments fail to provide sufficient returns to [pay off] the loans, bad loans will manifest themselves both in banking and in bond defaults, and ultimately a financial crisis…as bad loans start to build up, banks are unsure about which clients will fail and tend to restrict lending, even to potentially good clients. As some of the wealth management products backing shadow lending start to fail, it is possible that households will withdraw significant amounts from these products and that the non-bank lending will contract. https://www.brookings.edu/blog/order-from-chaos/2017/01/26/china-is-struggling-to-keep-its-currency-high-not-low/


10) (Related) “Billionaire with finical ties to Xi Jinping and CCP, Xiao Jianhua, abducted from hotel in Hong Kong”

“Xiao controls Tomorrow Group, with stakes in real-estate, insurance, coal and cement firms, worth ~$5.8 billion, according to wealth tracker Hurun ReportIn 2014 Xiao Jianhua admitted to the New York Times he helped the family of president Xi dispose of assets.

He has also been accused of manipulating stocks and supposedly has a history of shadow lending to various high level Party members.  https://sinosphere.blogs.nytimes.com/2014/06/05/billionaire-issues-statement-about-times-article/
11) China has launched a renewed crackdown on golf, closing 111 courses in an effort to conserve water and land, and telling members of the ruling Communist Party to stay off the links….Golf has also come under scrutiny by way of the sweeping anti-corruption campaign 

//There was another article that I now cannot find, where XI stressed the importance of preserving land/water resources “like we did the panda”. Anyway, it is well known that China struggles with arable land and water supplies, but there seems to be some concern in particular to have instigated this new push.                   http://www.usatoday.com/story/sports/golf/2017/01/23/china-swings-back-at-golf-shutting-down-111-courses/96938240/
12) SHIJIAZHUANG, Jan. 23 (Xinhua) — President Xi Jinping ordered relevant departments and local governments to carry out high-quality preparatory work for Beijing 2022 Winter Olympic Games and make the Games a “remarkable, extraordinary, excellent” event.

13) (Related) China’s Xi says Winter Games must have no ‘grandiose’ projects

The budget for the Games has been pegged at around $3 billion, far less than the $51 billion Russia spent on Sochi in 2014.

14) “China’s Energy Security Strategies – Analysis”


15) “China’s three naval fleets have new commanders”

Vice Admiral Shen Jinlong, [now] commander of PLAN…Vice Admiral Yuan Yubai…[now] promoted commander of the Southern Theater Command…Vice Admiral Su Zhiqian, [now] promoted deputy commander of the PLAN…This reshuffle also reflected that high-level leaders are transferred at shorter intervals.  http://english.chinamil.com.cn/view/2017-01/23/content_7464479.htm


16) China tests ICBM with MIRV (10) capability 

The 10-warhead missile test comes amid heightened tensions between the United States and China. State-run media in recent weeks has carried reports calling for China to expand its nuclear forces. A broadcast report showed that new long-range mobile missiles could strike the entire United States.

//This is an upgrade from previous MIRVs that held only 6-8 warheads per missile. http://freebeacon.com/national-security/china-tests-missile-10-warheads/


(Creative Commons Photo Credit)


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