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Recent Publications

Inherent Problems in the Monetary Policy: Abstract: In recent years, with the development of China's financial system, the effect of monetary policy has attracted extensive attention. The public have placed high hopes on the effect of monetary policy, hoping that it will solve multiple problems in areas such as the economic structure, social fairness and asset bubbles. Unlike developed countries, China's monetary policy has its own characteristics, which will be analyzed and discussed thoroughly in this report.
Policies and Prospects for the New Energy Industry: Abstract: As the global climate changes and restraints on the energy resource environment tighten the Chinese government has increased the focus on the development of the new energy industry. It has also formulated strategic plans for the future development of the industry and given proactive policy support. Whether seen from the perspective of the policy environment, resource endowments, or especially the domestic market demand, the prospects for the new energy industry in China remain promising, but it is necessary to guard against potential challenges.
Prospects for the Implementation of the Fiscal Policy: Abstract: China faces many obstacles in effectively implementing its fiscal policy. These obstacles include the high growth in tax revenue, the high macro-tax burden, problems with state-owned capital, the financial expenditure structure, land finance issues, and local financing platforms. Faced with more constraints and pressures, the Chinese government will focus on changing many areas of fiscal policy in order to meet the needs of both the market economy and society.
An Analysis of Real Estate Market Regulation: Abstract: China has recently strengthened regulations in the domestic real estate market, arousing escalating levels of public controversy. The real estate regulations not only affect the country's economic growth prospects and social stability, but have also had a profound impact on the global economy. This report provides an in-depth analysis of the impetus, strategy and prospects for the recent real estate regulations.
RMB Exchange Rate Policies —during the 12th Five-Year Plan Period: Abstract: The RMB exchange rate is currently a major focus for individuals at home and abroad, but many do not fully understand that the formation of China's exchange rate policies depend on several factors which embody the different policy directions of the central government and the monetary authorities. On the basis of a systematic investigation of these factors, prospects for RMB exchange rate reform during the 12th Five-Year Plan period are analyzed and forecast in this report.
Policies for Structural Adjustment in the Iron and Steel Industry —during the 12th Five-Year Plan Period: Abstract: During the Twelfth Five-Year Plan period (2011 to 2015), China's iron and steel industry will focus on structural adjustment and optimizing regional distribution, clean production as well as energy conservation and emission reductions, elimination of outdated production capacity, alliances and restructuring, technical innovation, and the development of an industrial chain with emphasis on strengthening the capability for guaranteed resources. It is expected that the majority of existing industrial policies will continue; however, efforts to implement policies will be strengthened. Meanwhile, it is also expected that some new industrial policies will be launched.
Transformation of Foreign Exchange Reserves Management: Abstract: China's substantial foreign exchange reserves have attracted more and more attention at home and abroad. Foreigners believe that the scale of the reserves reflect China's strong economic strength, while people in China think that they are gradually becoming a problem. Whatever happens, the consensus is that China's foreign exchange reserves system needs reform. This report presents an analysis from several new angles.
Financial Policies for the “Going Global” Strategy: Abstract: It has become commonly accepted that domestic enterprises will expand globally. In the past, it was emphasized that many policies, especially supportive financial policies, were needed for the “going global” strategy, but no substantial progress has been made. During the 12th Five-Year Program for China's Economic and Social Development (2011-2015), it is expected that financial reform will be promoted and supportive financial policies for the “going global” strategy will have greater importance.
An Analysis of Hot Money: Abstract: There are many measurement methods and considerable differences in official and unofficial conceptions of hot money; however, it is generally acknowledged that hot money will have a negative impact on China's economy and financial system, which cannot be ignored. The flow of overseas hot money into China is caused by various factors and it most often happens through illegal channels. Therefore, dealing with this problem will be a focus of the policies related to further opening the financial markets by the Chinese government.
Development of the High-End Equipment Manufacturing Industry: Abstract: In recent years, China's equipment manufacturing industry has maintained an upward development trend with ongoing structural optimization. The high-end equipment manufacturing industry has become one of the seven strategic emerging industries that China will endeavor to cultivate and develop in the future with the intent of transforming and upgrading the entire industry. With the improvement in consumption levels and the adjustment of energy structures, China's equipment manufacturing industry will have good market prospects, and more of the high-end market share will be occupied by relying on technological innovation.
Excess Currency Issuance and Inflation: Abstract: In China, the monetization ratio (ratio of money to GDP) has been high for quite a number of years but price increases have been relatively mild. The price rise for food products is the major factor for this round of inflation; another factor is the price fluctuations for international resources; and a more profound cause is the imperfect and stagnating domestic market reforms. Therefore, to some degree, the fundamental cure for inflation will be determined by the size and speed of the transformation of the domestic resource market from the planned economy to the market economy.
Systemic Risks in the Bond Market: Abstract: In 2011, the central bank of China will switch its monetary policy from “moderately easy” to “prudent”, returning to the normal situation. In this context, and supposing that the economic and financial reality is coupled with other deflationary policies introduced by the central bank, the corresponding outcome will be a decline in market liquidity and a potential rise in systemic risks in the bond market. Currently, as a major part of the Chinese capital market, the bond market has a wide sphere of influence and significant importance for financial stability.
The “Going Global” Strategy for Large Banks: Abstract: Since China has continued to deepen the reform and opening up, leading to an increase in its economic stature which has allowed enterprises to accelerate their pace of going global. These conditions have created a good environment for the large Chinese banks to follow in turn with their own international expansion. In this report, by taking the large banks as a sample, and based on a study of their current overseas location choices, the reasons for their placement decisions are analyzed, and then the regional strategies for future international expansion of the Chinese banking sector are examined.
The Progress in Developing the Oil Reserve System: Abstract: At present, China has built a two-level oil reserve system with the national strategic oil reserves as the main component and commercial reserves held by state-owned oil enterprises as the supplementary part, with a total oil reserve capacity of more than 30 days. By 2020, China will establish a four-level oil reserve system with national strategic oil reserves, local oil reserves, commercial oil reserves held by state-owned oil enterprises like PetroChina and commercial oil reserves held by small and medium-sized companies. The goal is to guarantee a 90 day supply of oil.
The Future Trend of the Wind Power Industry: Abstract: In the next five years, it is very likely that the development of China's wind power industry will exhibit the following trends: 1. Installed wind power capacity will grow quickly. 2. Excess production capacity will consolidate. 3. Greater efforts will be made to strengthen the development of the international market. 4. Diversified production and marketing will become the mainstream pattern for industrial development. 5. Wind power development will be transformed to the dual development model of sea-land wind power from strictly land-based.
The Financial Regulatory System and Orientation Reforms: Abstract: The reform of the financial regulatory system is not only a hot topic for discussion in developed countries, but also a focus in China and it is the emphasis of financial reform during the 12th Five-Year Plan period. At present, various issues have emerged in China's financial regulatory system and domestic disputes have led to uncertainties about the orientation of reform. However, it is anticipated that there will be changes in regulatory legislation, bodies, methods and policies in the future.
Main Paths for Promoting Internationalization of the Renminbi: Abstract: Chinese authorities have shown their determination to promote the internationalization of the Renminbi. Although the Chinese government has not established clear goals and measures for planning and developing this process, as it did for many of the other reforms in China, it is still possible to explore the main paths leading to the eventual internationalization of the Renminbi.
The Current Situation and Existing Problems for Private Capital: Abstract: In the future private capital will have even broader development prospects and it will be necessary for the government to employ private capital to complete many of their policy goals. The significance of and the factors influencing private capital are increasingly complicated and hard to define, which increases the difficulty in implementing policy and conducting empirical analysis. While deeply affecting China's development, private capital will also increase uncertainties in the economic society.
Development Policies for the Strategic Emerging Industries: Abstract: China already has favorable resource conditions and an adequate industrial foundation for developing certain strategic emerging industries. The government will promote the development of these industries through planning, guiding, funding, encouraging innovation, cultivating markets, and international cooperation.
Development Prospects for the Coal Chemical Industry: Abstract: As international oil prices fluctuate, the demand for alternative chemical raw materials and alternative energy is becoming more and more urgent, and energy conservation and emission reduction have become a priority. Therefore, the utilization of clean coal has been included in China's development plan for its emerging energy industry. However, the coal chemical industry is also facing issues such as over-development and excess capacity in some traditional fields, and the future development prospects for the new-type of coal chemical industry are receiving the most attention.
Local Financing Platforms and the Capital Adequacy Ratio of Banks in China: Abstract: Among a series of supervision policies aiming at cleaning up and standardizing loans from local government financing platforms in the last two years, increasing the platform loan risk weight has had a direct effect on the capital adequacy ratios of banks. This report evaluates the influence of the increase on the capital adequacy ratios of China’s major commercial banks and analyzes the possible countermeasures that they could take.
The Adjustment Policies for China’s Rare Earth Industry: Abstract: China is a country with the richest rare earth deposits, one of the important non-renewable strategic resources. But there are problems with the development of this resource, leading to environmental pollution and other issues. The State Council of China held special executive meetings to discuss and plan polices and measures to encourage the sustainable and healthy development of the industry. The emphasis is on having a sustainable and healthy rare earth industry with rational development, orderly production, efficient utilization, technological advances and an intensive development pattern in approximately five years.
Future Prospects for Capital Account Control in China: Abstract: The internationalization of the RMB and the opening of the capital account complement and promote each other. This report intends to analyze and summarize the current situation regarding foreign exchange control in four areas: management of foreign debt, direct investment, securities transactions, and liquidity of individual foreign exchange assets under China’s capital account. In addition, by examining the background for promoting the internationalization of the RMB, future prospects for opening the capital account will be examined.
Financing Difficulties for China’s Small and Medium-sized Enterprises: Abstract: The financing difficulties for small and medium-sized enterprises have received attention from both the public and the government, which has stressed that the problem should be a key concern for policy makers. In spite of this, these difficulties have not been solved; in fact, to some extent, they have intensified. The reasons for these problems are analyzed in this report, and the thoughts on corresponding policy decisions are also offered, from the view of the government as well as from the banks.
Probing into China’s Rural Social Security System Reform: Abstract: Establishing and improving a social security system covering urban and rural residents is not only an important task aiming at protecting and improving livelihood, and enhancing social construction during the period of the Twelfth Five-Year Plan, but also an important systemic construction enabling the sharing of development results among the people. In this process, it is of particular importance to complete the reform of the rural social security system. This report comprehensively takes into account the background, current status and problems of the development of the rural social security system, and proposes ideas and concepts for a follow-up to the reform.
Positioning and Prospect Analysis of “CIC II”: Abstract: Recently, the State-owned Assets Supervision and Administration Commission (SASAC) formally established the China Reform Holdings Corporation Ltd., or “CIC (China Investment Corporation) II” which implemented the recent major reform of state-owned asset management. Although SASAC kept a low profile when carrying out this pilot reform, it still caused widespread concern in the market. Disagreements about the positioning and prospects of China Reform Holdings Corporation Ltd. arose from all parties. The background and expectations of the China Reform Holdings Corporation Ltd. will be objectively analyzed and discussed in this report.
Analysis on China’s Direct Investment in Europe: Abstract: China’s direct investment in Europe has been speeding up during the recent two years, and attracted wide attention of countries around the world. This report makes a systematic description of China’s direct investment in Europe in recent years and resorts to official internal sampling survey data to lay out how Chinese companies should deal with and understand direct investment in Europe and looks forward to the related prospects.
China’s Strategy to Promote the Construction of an Overseas RMB Market: Abstract: Since the 1970s, the development of offshore financial markets has changed the international financial system and also brought about far-reaching impacts in relevant countries. At present, China has a new proposition for building RMB offshore markets and offshore centers. The background of this major challenge and the major theoretical disputes at home are analyzed and relevant ideas and suggestions are also put forward in this article.
Banking Operating Strategies in the Case of Tightening Monetary Policy: Abstract: Since the beginning of 2011, the credit quota for China’s banking industry has been controlled more stringently, so the original business model of compensating for reduced interest rates by increasing the number of loans is no longer sustainable. As a result, related banking operating strategies have been gradually transformed. Banks have started tilting the limited credit quota toward the high-yield areas through increased competition for deposits, and making use of financial products to increase intermediary business income in order to consolidate the scale of their earnings and achieve steady growth.
The Impact of Renminbi Appreciation on Financial Markets: Abstract: Through an analysis of the background of Renminbi appreciation and its impact on the international and domestic financial markets, this text argues that China must draw on the experience of Japan when formulating Renminbi exchange rate policies and advancing Renminbi internationalization, and then goes on to present several countermeasures.
Problems in China’s New Energy Industry: Abstract: The new energy industry is one of the seven strategic new industries that have been selected for quick cultivation and development by the Chinese government. In recent years, the new energy industry, typified by wind energy, solar energy and bioenergy, has developed rapidly in China. But there are problems such as the unbalanced and uncoordinated development of upstream and downstream industrial chains, the low level of core technology, and disorder in the energy market.
The International Operations of China’s Key Iron and Steel Enterprises: Abstract: Stimulated by many factors including the changing domestic and international market environment and changes in industrial policy guidance, in recent years China’s key iron and steel enterprises have intensified their international operations and displayed new characteristics such as paying equal attention to obtaining overseas iron ore resources and investing to establish overseas factories, and picking increasingly diverse investment objectives and more flexible investment methods. In the next three to five years, the international operations of these enterprises will enter a new stage of expanding their investment scale, widening their investment areas, developing more varied investment methods and selecting more diversified investment objectives.
China’s Fiscal Sustainability and Financial Stability: Abstract: The method of analysis of fiscal sustainability and potential financial risks are discussed in this paper, and a comprehensive analysis of China’s fiscal sustainability is also conducted from the perspective of levels of indebtedness, financial revenues, and expenditure and assets. On this basis, an in-depth analysis of the factors affecting China’s financial stability is conducted, such as the implicit liabilities of the central and local governments, coordination difficulties existing in fiscal and monetary policies, and financial paternalism.
The Control Policies of China’s Aluminum Industry: Abstract:Along with the expansion of the size of the domestic market and the rapid development of its aluminum industry, China has become one of the major powers in industrial aluminum production worldwide. However, at present, the aluminum industry in China is confronted with several serious problems, such as overcapacity, an irrational industrial structure, high dependence on foreign raw materials, a lack of independent innovation capacity, international trade frictions, etc. During the period of the Twelfth Five-Year Plan, taking into account both the domestic and international conditions regarding energy, resources, environment, etc., the Chinese government will stress the capability to meet domestic market demand, the utilization of both domestic and foreign mineral resources, the development of a circular economy, controlling the unlimited expansion of smelting capacity, reducing environmental pollution, reinforcing independent innovation capacity, and promoting industrial restructuring and upgrading.
The Income Distribution Problems of Chinese Residents: Abstract: In recent years, there have been two major problems with residential income distribution in China. First, the proportion of resident income in national income has declined noticeably. Second, the gap in income distribution has widened considerably. The biggest negative impact of these two facts is that they may cause a serious shortage in consumption demand and a serious imbalance between the growth of investment and consumption, possibly causing the Chinese economy to slip into the “middle-income trap”. There are three major approaches to solve the problems with income distribution in China. First, the existing development model must be changed in order to increase employment and income and narrow the income gap. Second, the reform of the income distribution system must be accelerated, a process which mainly requires reducing the rate of individual income tax and collecting property tax. Third, the public expenditure burden for residents should be relieved and tax reductions for SMEs, especially those in the service industry, should be introduced.
The Interest Spreads for Large, Small, and Medium Sized Chinese Banks: Abstract: In recent years, the deposit-loan interest rate spreads for China’s commercial banks have been gradually narrowing, posing an unavoidable challenge regarding the development and operation of these institutions. According to the data, the deposit and loan interest spreads are more desirable for large banks compared with small and medium banks, mainly due to their greater power in terms of setting lending rates and their relatively broad customer base. Thus the narrowing spreads imply a greater challenge for small and medium banks.
The Development of Strategic Emerging Industries in China: Abstract: During the 12th Five-Year Plan period, China has proposed developing seven strategic emerging industries after the plan for adjusting and reinvigorating ten major industries has been completed. This is an important move for continuing to promote the adjustment of the industrial structure. Developing strategic emerging industries will benefit the country by helping it to recover from the impact of the international financial crisis while keeping focus on the level of long-term development. This report will thoroughly analyze the relevant conditions related to the development of strategic emerging industries in China.
Building a RMB Offshore Center in Hong Kong: Abstract: At present, the issue of building a RMB offshore center in Hong Kong has attracted wide attention at home and abroad, which not only affects the future economic and social prosperity and vitality in Hong Kong, but also plays a key role in realizing successful internationalization of RMB. It is believed that Hong Kong not only needs to further introduce a wide variety of RMB financial products, but also needs to conduct effective control on relevant risks in order to become a really sound RMB offshore center.