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China in 2011

The People's Bank of China Yongkang

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MILITARY
Defence Budget up by 12.7 per cent

China’s defence spending is set to increase by 12.7 percent to 601.1 billion Yuan (US$ 91.5 billion) in 2011, up from last year’s budget of 532.1 billion Yuan. Majority of the spending would be aimed at improving armament, military training, human resource development, infrastructure of grassroots units and the living standards of the servicemen. Li Zhaoxing, the parliamentary spokesman, justified the increase by commenting that China’s defence spending is relatively lower when compared to the world standards. Stating that the defence expenditure was “transparent and defensive” in nature, Li emphasised that the military was solely aimed at safeguarding its national interest and did not pose a threat to any country. The defence allocation for 2011 accounts for 6 percent of the country’s total budget.
Source: China Daily, BBC News, March 04, 2011

ECONOMY
Huawei acquisition stalled

Chinese Telecom company, Huawei dropped the acquisition of an insolvent American firm 3Leaf Systems, after the Committee on Foreign Investment in the United States (CFIUS) prompted “national security concerns” against the acquisition. Huawei has been accused of being backed by the Chinese government. This accusation has had negative effects on the company’s acquisition of foreign firms. Earlier in 2008 and in 2010, similar concerns had prevented Huawei’s buying of 3Com, and a network business of Motorola. On March 3, 2011, Huawei issued an open letter saying that it welcomes investigations from the U.S. government, if that can help in dispelling misconceptions about the company.
Source: China Daily, February 26, 2011.

$78b Shenhua investment in 2011- 2015

Shenhua Group, the country’s largest coal producer, announced that it would invest an additional 200 million tones in coal production capacity. This will raise the annual output to over 600 million tonnes in 2015. It also plans to add 1500 kms of railway lines to reach 3,300 km of lines in operation and to increase port cargo handling capacity by 100 million tonnes to 230 million tonnes; Shenhua also plans to add 30 million kw of power generation capacity, to have a total capacity of 70 million kw. It will also build four large chemical bases in the provinces of Inner Mongolia, Shaanxi, Shanxi and Xinjiang.
Source: China Daily, March 3, 2011.

Sharp rise in foreign exchange purchase

China has been facing pressures to prevent hot money inflows due to international liquidity, and the expectations of the Yuan’s appreciation. China’s trade surplus stands at US$ 6.45 billion. At the end of January 2011, the funds outstanding for foreign exchange (FOFE) rose to 23.08 trillion Yuan (US$ 3.51 trillion), up 24.39 per cent or 501.65 billion Yuan from December 2010, as stated by the People’s Bank of China (PBOC) on March 2, 2011.This rise in foreign exchange purchases was triggered by high global liquidity after a second round of quantitative easing measures announced at the end of 2010 by the U.S. According to experts, China is attractive to international capital because of its economic performance and the anticipated appreciation of the Yuan.
Source: China Daily, March 3, 2011.

Expansion of Sino- Israeli economic ties

Israel is one of China’s most important economic and trade partners in West Asia. Chen Deming, the Commerce Minister said on March 2, 2011 that China sees great opportunities in cooperating with Israel. He made the statement while wrapping up his four day visit to the region. Sino- Israeli trade volume reached US$ 7.65 billion in 2010, which is about 150 times that of the volume in 1992, when diplomatic relations were established between the two. Fields of cooperation include agriculture, renewable energy, bio medicine, electronics, communications and desalination. Chen also said that there is a promising future for the two given China’s market and manufacturing capacities and Israel’s high- tech background. The cooperation is expected to expand to green industry, water processing and information technology.

Cooperation between China and Palestinians have also been developing fast in more recent years, and Chen said that he discussed with his Palestinian counterpart the ways to enhance economic and trade partnership.
Source: China Daily, March 3, 2011.

Sustainable Use ff Rare Earth Metals

The Ministry of Land and Resources announced the establishment of 11 state-planned rare earth mining zones in Ganzhou Prefecture of the Jiangxi Province. The zones have a combined area of 2,500 sq. kms, and rare earth reserves are estimated to be 7,60,000 tons. However, mining of rare earth metals is destructive to the environment, woods, soil and farmland. The current mining and supplies are unsustainable. Thus the decision to set up the first group of rare earth mining zones with state planning is aimed at protecting resources as well as the environment, as stated by the Ministry of Land and Resources on February 10, 2011.
Source: China Daily, February 10, 2011


Controlling Inflation
China adopted moderately relaxed monetary policies in 2008 to combat the fall out of the global financial crisis. However, China is currently faced with the problem of excess liquidity, leading to a high rate of inflation. The Consumer Price Index (CPI) was 5.1 per cent in November 2010, the highest in eight months. The People’s Bank of China (PBOC) vowed to strengthen control over total financing quantity in 2011 to keep inflation at a stable level. Also, the PBOC is planning to use an indicator measuring total financing quantity and broader measures of monetary supply to better monitor liquidity conditions and to curb inflation. The new indicators will widen the current M2, a broad measure of monetary supply that covers cash in circulation and all deposits, to total social financing, including Yuan and foreign currency loans, entrusted loans, bank acceptances, corporate bonds, equity financing, FDI and debts.
Source: China Daily, February 11, 2011

ENERGY
Clean energy plans for next five years

China on Saturday announced goals of building 235 million kilowatts of power generation capacity from clean energy forms in the next five years, in an effort to trim the country’s heavy reliance on fossil fuels.

From 2011 to 2015, China plans to launch nuclear energy projects with a combined generation capacity of 40 million kW. In addition to boosting the construction of nuclear power plants in the coastal areas, new plants will be planned in central regions, according to the government’s draft 12th Five-Year Plan.

The country also plans to build hydropower stations along major rivers such as the Jinsha River, Yalong River and Dadu River with an installed capacity of 120 million kW.

At least 70 million kW of wind power capacity and five million kW of solar power capacity will be created in the next five years, according to the draft plan.

On fossil fuels, the draft said China will raise energy efficiency in using coal, maintain the current volume of domestic oil production, and facilitate a rapid increase in the production of natural gases.

Moreover, China will construct oil and gas pipelines of about 150,000 kilometers in the next five years. The pipelines include a gas pipeline to central Asia and oil pipelines to Kazakhstan and Myanmar.

Zhang Guobao, former chief of the National Energy Administration, said that China aimed to increase the proportion of non-fossil fuels in overall primary energy use to 11.4 percent from the current 8 percent by 2015.
Source: China Daily, March 04, 2011

Energy Major Goes for Public Listing

China Huadian Corp, one of China’s five major power utilities, said it would speed up the public listing of its new energy unit this year to expand the corporation’s presence in the renewable resources sector. Huadian’s rival, China Datang Corp, raised US $6 43 million in a Hong Kong initial public offering in December last year. Huaneng Renewable Corp., another major market player in the new energy sector, is also seeking to go public this year. China wants at least 15 per cent of its energy to come from renewable sources, including wind, by 2020.
Source: China Daily, February 06, 2011.

FOREIGN POLICY
Beijing, Tokyo for stronger ties in 2011

In a bid to smoothen ties after the maritime dispute last year, China and Japan agreed on 2011 being the defining year for bilateral relations. The agreement was reached at the 11th China-Japan strategic dialogue in Tokyo, between Vice-Foreign Minister Zhang Zhijun and his Japanese counterpart Kenichiro Sasae.

These were the first ministerial-level talks since bilateral ties soured following a series of diplomatic rows sparked by the fishing boat collision last year near the Senkaku (Diaoyu) Islands. This meeting precedes the annual meeting of Japanese, Chinese and Republic of Korea’s (ROK) foreign ministers later in March this year. Also, the Chinese Premier Wen Jiabao would be attending the Japanese, Chinese and ROK leaders’ meeting to be held on May 21 and 22 in Tokyo.

Analysts said East Asia had entered a phase of “transition”, where Japan was worried about China’s impressive economic performance. Frequent military drills and a stalemate on the Korean Peninsula had further complicated the situation in the region.
Source: China Daily, March 02, 2011.

Ties with Pacific island nations

Foreign Minister Yang Jiechi said that the further development of friendly cooperation between China and Pacific island countries was the common will of the two sides. The statement also said that “this friendly cooperation has not only brought solid benefits to the two sides, but is also contributing to regional stability, development and prosperity,”.

The statement came after United States Secretary of State Hilary Clinton tried to persuade Congress not to cut the US diplomatic budget, warning of losing “a competition for influence with China”.

Trade between China and Pacific island countries has boomed over the past decade, rising from $180 million in 2001 to $1.5 billion in 2010, according to a report from Australia’s ANZ Bank, while investment in areas including infrastructure, technology and agriculture also increased.
Source: China Daily, March 04, 2011.

Africa Visit

Foreign Minister Yang Jiechi will visit Africa this week .Yang will arrive in Zimbabwe to deepen ties between Beijing and the southern African nation that China had backed in its fight for independence. The week-long tour will later take the minister to Gabon, Chad, Guinea and Togo, as well as the United Arab Emirates (UAE). The visit comes weeks after Zimbabwean Investment Promotion Minister Tapiwa Mashakada announced plans by China Development Bank to fund investments worth US $10 billion in Zimbabwe’s mining, agriculture and infrastructure sectors. Faced with crippling Western sanctions, Mugabe has adopted a “Look East” policy, with the country receiving loans from a number of Asian nations. According to the World Bank, the African economy grew 4.5 percent in 2010, while it is expected to expand 5.1 percent this year. China replaced the United States as the continent’s top trading partner in 2009.
Source: China Daily, February 10, 2011.

POLICY/ DOMESTIC
Boosting Grain Production

Keeping in mind the fact that steady agricultural production could stem inflationary surges, help maintain economic growth and social stability and harmony, Premier Wen Jiabao called for more efforts to boost grain production while pledging to make available more funds to the agricultural sector. He asked local authorities to monitor drought conditions, and adopt measures to minimise the impact of drought on wheat growing regions, make preparations for spring ploughing, provide technological services for farmers and strengthen fired management. China would also strengthen the regulation of farm produce markets and raise minimum rice purchases to boost farmers’ incomes.
Source: China Daily, February 10, 2011

Coach Overturns in Xinjiang

A coach overturned in Xinjiang’s Uyghur autonomous region on February 11, 2011. Five people were reported to be dead and 19 were injured. The coach was carrying 40 people and was en route from Daheyan township of Turpan city, to Hotan prefecture. The passengers were mainly migrant workers from outside Xinjiang. The cause of the accident is being investigated by the police.
Source: China Daily, February 11, 2011.

Expansion of Rural Road Network

In the 12th Five Year Plan (FYP) period, China will focus on upgrading roads and bridges, to ensure all townships and villages are accessible by vehicles. At the end of 2010, at least 1200 townships and 120,000 villages had no roads linking them, and most of these were in the western regions and poor areas, according to Li Shengling, the Minister for Transport. In the past five years, the central government invested 197.8 billion Yuan in rural road construction. Investment for 2011 will exceed 30 billion Yuan, and the focus as stated by Li will be on improving the quality of roads, and not just quantity. In the next five years, more investments are expected in the construction of rural roads.
Source: China Daily, February 11, 2011

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