Bo Xilai’s former stronghold of Chongqing among places criticised by anti-graft teams for failing to impose sufficient checks on leaders
Ten teams of inspectors sent around the nation four months ago as part of the leadership’s anti-graft drive have wrapped up their field trips, finding “corruption problems” in most places they visited.
They inspected units in Chongqing, Inner Mongolia, Jiangxi, Hubei and Guizhou, as well as the Ministry of Water Resources, the Import-Export Bank of China, the China Grain Reserves Corporation, Renmin University and the China Publishing Group.
The teams have provided feedback to the inspected bodies and alerted the Central Commission for Discipline Inspection (CCDI) to signs of possible corruption, according to a statement released on the official website run jointly by the CCDI and the Ministry of Supervision.
The central inspection teams aim to spot corruption and create an atmosphere of “shock and awe” [among officials] to curb rampant corruption, said Wang Qishan, China’s anticorruption tsar, before despatching the teams in mid-May.
The most eye-catching destination was Chongqing, still smarting from the upheavals of the downfall of its former party chief Bo Xilai. Bo was sentenced to life imprisonment for corruption and abuse of power.
In a comment about the new Chongqing municipal government, Xu Guangchun, head of the Fifth Central Inspection Team, said the municipality had failed to impose sufficient checks and supervision over its top leaders, and certain leading cadres did not have firm political beliefs and failed to reach moral standards.
Xu also warned about “corruption risks” in state-owned enterprises in the municipality, pointing to rampant “fly-style” corruption – committed by lower-ranking officials – within the organisations.
At the China Grain Reserves Corporation, the inspectors also found rampant corruption among low-level officials, as well as loopholes in work safety. They also found false reports about grain storage.
Just days after the inspection team started its work at the corporation at the end of May, a fire broke out at a warehouse in Heilongjiang, causing an economic loss of over 3 million yuan. The public questioned if the fire was started deliberately to cover up fake storage, but an investigation later blamed it on an electrical short circuit.
In southwest Guizhou province, inspectors found a few officials trading their power for money. Many corruption cases also involved mining projects and land transfer deals. In addition, some local departments faked their statistics, the inspectors said.
In the central province of Jiangxi, certain officials and their relatives intervened in construction projects and sought personal benefits. In addition, some officials were promoted and installed in key positions despite having a record of corruption, said inspectors.
Inspectors spotted irregular trading of book codes and illicit dealings with private companies at the China Publishing Group. In China, publishers are required to provide a book code before publishing, but these codes are normally controlled by state-owned publishing firms and most private companies are forced to buy them from state-owned firms.
With the Import-Export Bank, inspectors found some staff used their power to approve loans for personal benefit.
“The latest round of inspections shows the central government’s determination in fighting corruption, as most teams have exposed certain corruption problems,” said Zhu Lijia, a professor at the Chinese Academy of Governance. He also suggested that more external experts and professionals should be invited to join the inspection teams “to increase their efficiency and transparency”.
Source: SCMP “Chinese inspectors uncover widespread corruption in ‘shock and awe’ probe”
China: Severe Anti-corruption Storm on the Horizon dated August 31, 2013
China’s corruption drive extends to provinces dated September 30, 2013
China’s leaders will lay out plans to transform the world’s second-largest economy at a key party meeting in November, leaving the question of how to do it largely unanswered as much of the reform agenda is still a matter of heated internal debate.
People familiar with the discussions say that out of a long list of reforms that the Communist Party’s 200-member Central Committee is set to announce, only a mooted financial overhaul has reached a point where there is a plan and a roadmap.
Fiscal, land and residency registration reform – all key ingredients of China’s declared goal of boosting its urban population – are the major sticking points as politicians debate how to implement the changes and as they also face resistance from powerful interest groups, such as state-owned monopolies.
Still, the November meeting, the third plenary session of the Communist Party’s top body, is being billed as a watershed for China’s development, just like one in 1978 when Deng Xiaoping unveiled his historic reforms to open China to the rest of the world or in 1993 when the party endorsed a “socialist” market economy.
“The meeting will deepen reforms in all fronts,” said a senior economist with a government think-tank in Beijing, which has been involved in drafting the reform blueprint.
“The focus will be economic reforms – financial reform, tax and fiscal reform, resource pricing reform, and there will be reforms in related areas, such as social welfare and income distribution,” said the economist who declined to be identified because discussions of reform plans remain confidential.
The changes will layout how China intends to overhaul the economy to allow greater domestic consumption to drive growth, shifting away from an exports- and investment-led model that Beijing says has run its course after three decades of breakneck expansion.
A major part of that is an urbanization plan aimed at drawing hundreds of millions of Chinese to live in towns and cities. But to do that, China needs to overhaul land and household registration policies that currently make many rural Chinese reluctant to move.
Progress in working out those and other reform details will serve investors and observers as clues on whether and how soon China’s promised Great Transition will become a reality.
Financial reform is further along because it is already a work in progress. China has been gradually relaxing restrictions on the currency and in July freed up bank lending rates.
Thanks to the efforts of China’s veteran central bank governor, Zhou Xiaochuan, there is broad support for reforms to help correct economic distortions, such as over-investment at the cost of household consumption, surging local government debt and property bubbles.
“The direction on financial reforms is clear and a consensus has been reached on how to push ahead,” said Xu Hongcai, a senior economist at the China Centre for International Economic Exchanges (CCIEE), who is involved in the reform talks.
It is already clear that the next step will be creating a deposit insurance scheme, possibly by the end of this year. That will allow the central bank to free up deposit rates, which are now subject to administrative caps. Beijing worries some smaller lenders could go under as banks compete for deposits under a more open regime, so wants insurance in place first.
Government economists say Premier Li Keqiang has thrown his weight behind a free-trade zone in Shanghai, China’s financial center, as a testing ground for opening up financial services to foreign investors and lifting restrictions on the yuan.
There is less clarity about other parts of the reform agenda, which has been in the works since early this year and now is open to feedback from provincial leaders and selected policy advisers.
For example, Finance Minister Lou Jiwei is resisting calls from local governments to give provinces a greater share of revenues, sources close to the ministry say. He is worried they will use the money to fund grandiose schemes rather than much needed public services.
Right now local governments get half of tax and other revenues, but are responsible for more than 80 percent of public spending. The mismatch, together with a relentless pursuit of economic growth by local officials and Beijing’s stimulus launched in 2008, has driven many local governments to sell land to developers, fuelling a property frenzy, and rack up over 10 trillion yuan ($1.75 trillion) in debt.
“It will be problematic if they (local governments) embark on a construction spree. So, we need to be cautious,” said Sun Gang, a researcher with the Finance Ministry.
To ease the spending burden on local governments, Beijing is willing to assume greater responsibility for spending on social security, healthcare and education and take over expenses on environmental protection and food safety, people familiar with the discussions say.
Some provinces may be allowed to issue bonds to help cover expenses linked to the urbanization push but most indebted local governments will be shut out of the debt market, they say.
To try to remove key obstacles to the urbanization drive, Beijing will loosen the grip on residence registration, or hukou, which prevents migrant workers and their families from getting access to education and social welfare outside of their home village.
Beijing is also pushing land reforms that would allow farmers to sell land when they leave villages. Currently, they cannot sell their land freely and often get a fraction of the market value as compensation from local governments. Many do not leave their farms for fear of land grabs by local governments for development.
Beijing wants to expand a property tax to help cool the red-hot sector, is considering an inheritance tax to help reduce the yawning rich-poor gap and an environmental tax to punish polluters, government sources say.
Political reform and an overhaul of China’s state-owned enterprises will be low on the agenda, think-tank sources familiar with the discussions say. Beijing sees reform of state giants – a key pillar of national security and a major employer – as less urgent, analysts say.
Under political reform, Beijing might propose some steps to streamline government administration and crack down on official corruption, the think-tank sources say.
When it comes to reforming China Inc, Beijing prefers an incremental approach of opening up key sectors to private competition. Economists say the approach is flawed though because private firms lack the access to state banks that state firms enjoy.
At the end of the day, government analysts expect Beijing to move slowly and carefully, employing Deng Xiaoping’s gradualist formula: “cross the river by feeling the stone”.
“The fear is that it could be chaotic if you push changes in all fronts and you may fall off a cliff if you take too big a stride,” said Zhang Bin, an economist at the Chinese Academy of Social Sciences (CASS), a government think-tank.
Source: Reuters “China’s grand makeover plan a work in progress; fuzzy on implementation”
China’s anti-corruption watchdog said it had uncovered abuses at several provincial governments and state-owned enterprises, in the latest sign of an expanding crackdown on graft.
Since taking office in March, Chinese President Xi Jinping has called corruption a threat to the ruling Communist Party’s survival and vowed to go after powerful “tigers” as well as lowly “flies”.
Authorities have already announced the investigation or arrest of a handful of senior officials. Among them, former executives from oil giant PetroChina are being investigated in what appears to be the biggest graft probe into a state-run firm in years.
Taskforces working since May had found mismanagement and corruption in Jiangxi, Hubei and Guizhou provinces, along with the sprawling western city of Chongqing, the party’s Central Committee for Discipline Inspection said in a statement published on its website late on Thursday.
The statement gave no details on individuals or specific crimes, but noted cases of widespread graft and abuse of power. Corruption was also found at state-owned enterprises China Grain Reserves Corporation and the China Publishing Group Corp.
The Commission also sent an inspection team to the Ministry of Water Resources, where it said supervision of anti-corruption initiatives was “weak”.
In the poor southern province of Guizhou, a small number of officials had engaged in “trading power for money” and the probe had uncovered a high incidence of corruption in construction projects, land transfers and mineral extraction.
In southeastern Jiangxi province, some leaders and their relatives had “meddled” in construction projects, sought personal gain and received kickbacks, the statement said.
In Chongqing – once run by former politician Bo Xilai, jailed for life this month for a range of crimes including graft – a probe revealed “hidden corruption dangers” at state-owned businesses.
China has announced corruption crackdowns before that have met with little success, but the latest campaign appears to have more bite than usual.
State media have also reported that Chinese military officials will face audits before they can retire or get promotions, although a lack of transparency could limit the effectiveness of those measures.
Experts say only deep and difficult political reforms will have a lasting impact on curbing corruption.
Source: Reuters “China’s corruption drive extends to provinces”
Huang Zijuan of people.com.cn reports: According to recent report by foreign media, J-20 fighter jet that China has been conducting extensive test flights, has begun to carry for test the newest Pili-13 missile. A J-20 that carries Pili-13 will constitute grave threat to US F-22 fighter. Military expert Li Li said in an interview with media that if J-20 was equipped with that type of missile and assisted by an AEW&C aircraft, no aircraft locked on by them can escape the attack.
The report says that Pili-13 missile, 3.0 meters long, 170 mm in diameter and 500 mm in wingspan, exceeds in size all the existing fighting missiles in the world. It is similar to French MICA missile with concurrent medium-range interception function. Judging by its pneumatic shape, it uses strip-fins in its design similar in shape and position on the body of the missile to the fins on Russian R-77 missile, while the shape of its pneumatic rudders at its tail is similar to the reverse-trapezoid of Russian R-27 missile. It is possible that thrust vector is adopted in the design of its tail.
The US has organized air battle between the same type of F-22 fighters and found that the air battle between stealth fighters may possibly become close-range fighting. Obviously, China has accepted that theory while Pili-13 missile is perhaps a product of that theory. If mass production of Pili-13 begins recently, it can be used in coordination with an AEW&C aircraft so that the aircraft transfer through data chain to the J-11B and J-10 equipped with Pili-13 the information of the target it has detected, to enable the PLA to have the ability of super long-range attack.
According to media analysis, Pili-13 is equivalent in performance to America’s most advanced Sidewinder missiles. In an air battle, almost none of them is able to free itself when it has been locked on by another. US media are worried by the emergence of Pili-13. They believe that that type of missile will greatly improve the combat capability of Chinese air force and constitute a serious challenge to US air force and marine air force. Japan is in great panic. A Japanese military research monthly says that J-20 is China’s most advanced homegrown fighter jet with phase array radar of equivalent performance to that used by US F-22. If it is equipped with Pili-13, none of the weapons and equipment Japan purchases from the US will have any superiority over them
Regarding foreign media’s allegation that if a J-20 is equipped with Pili-13, no aircraft it has locked on can be free from its attack, Li Li says that she has to add one more factor, i.e. there shall be coordination between the J-20, an AEW&C aircraft and Pili-13 to make them an integrated system. J-20’s own radar has a limited range, but if the AEW&C in the system has detected a target first within its range of several hundred kilometers and transfer the information to the J-20 and enable it to guide the missile to attack the target, the system will function satisfactorily.
Li Li says: many present-day missiles are of wholly intelligent design so that as soon as it has locked on a target, the target cannot avoid being hit by the air-to-air missile no matter how great maneuver it has made. As for the reason why foreign media have compared that type of missile to US Sidewinder, a Sidewinder is guided by infrared ray, but it is not a tailing type. It follows the trajectory of its target to hit the tail of the target. Many advanced missiles do so now. As a result, there is little possibility for the target to escape.
Source: people.com.cn “J-20 may be equipped with Mach 5 Pili-13 not escapable from: expert” (translated from Chinese by Chan Kai Yee)
Related post: Photos and Video Footage of China’s New Air-to-air Missile with Super New Technology dated September 25
China: Landmark Progress in Rule of Law: Court Ruling against Finance Ministry in transparency lawsuitPosted: September 28, 2013
A Beijing court has ruled in favour of a lawyer in his lawsuit against the Ministry of Finance, and ordered it to disclose publicly information it claimed were “state secrets”.
Lawyers hailed the verdict as a victory for transparency and the rule of law on the mainland.
Starting in May of last year, the Finance Ministry has tacked 50 yuan (HK$63) on to the price of domestic air tickets and 90 yuan to international ones, with the money going to a government aviation development fund, Xinhua reported.
Wang Luchun felt the extra charge was unfair and, the following month, requested as a private citizen that the Finance Ministry make public its reasons for the fees and how they were used in the development fund, according to the Xinhua report.
In June 2012, the ministry wrote him a letter denying his request, saying the information was a state secret. Wang took the ministry to court.
He said he believed that the government should treat public disclosure of official information as the norm in light of a law on the matter enacted in 2008.
He felt there should be a “clear legal basis to justify the classification of information as state secrets”, Xinhua said.
The Beijing First Intermediate Court last week ruled that the ministry lacked sufficient evidence to prove the information amounted to state secrets.
The court ordered it to publicise details on the fees and its use for the aviation development fund, as Wang had requested.
“The verdict shows the Chinese court is demanding government bodies to be more transparent and accountable,” said a lawyer at an international law firm. “Increasingly, more litigation is brought against Chinese government bodies.
“It’s an evolution of Chinese society,” the lawyer added.
A managing partner at a US law firm said: “This can be a sign that the Chinese government is trying to emphasise that nobody is above the law.
“Transparency, accountability to the law and the rule of law are on the rise in China. This trend is going to continue.”
The US Securities and Exchange Commission had been trying to obtain information on Chinese companies listed in the United States, as part of its fraud investigations into some US-listed Chinese firms.
Previously, the SEC could not access certain corporate information on the mainland as it fell under the category of state secrets. The Chinese and US governments resolved this stand-off with an agreement reached in May, which gave US regulators limited access to Chinese companies’ documents.
Source: SCMP “Court rules against Finance Ministry in transparency lawsuit”
BBC says in its report today: Chinese police have rescued 92 abducted children and held 301 suspected members of a huge trafficking network, the authorities say.
They say two women were also freed in an operation involving police forces in 11 provinces of the country.
The traffickers are believed to have targeted children in the south-western Yunnan and Sichuan provinces and then sold them in other regions.
Child-trafficking has become a serious problem in China, correspondents say.
Critics blame the country’s one-child policy and lax adoption laws, which they say have created a thriving underground market for buying children.
Some families buy trafficked women and children to use as extra labour and household servants, as well as brides for unmarried sons.
Last year, more than 24,000 abducted women and children were freed in China, according to the public security ministry.
It said that some of those kidnapped had been sold for adoption or forced into prostitution.
Greater freedom of movement as a result of China’s economic reforms is thought to have made it easier for trafficking gangs to operate
Hong Kong’s SCMP gives a report on the same event in greater details saying:
Newborns among children held sedated and prepared for sale in mainland trafficking racket
Police have rescued 92 abducted children and held 301 suspects in connection with the bust of one of the biggest cross-country child-trafficking networks on the mainland in years.
The suspects are said to have sedated the children, many of whom were under the age of two, including some newborns, with sleeping pills to render them docile while they were transported to sellers.
Police in Henan province began to investigate the ring in March and started to detain people on September 11, state media reported on Friday, citing the Ministry of Public Security. Suspects have been held in 11 provinces.
Members are believed to have collected children in Yunnan and Sichuan provinces by either purchasing them or deceiving the parents. Deliverymen would take them to sellers elsewhere on the mainland in a highly organised operation, the ministry said.
“The ring members took buses or the train to go to places like Henan, where some of the children were sold, while others would be taken to Shandong or Hebei ,” said the leading police officer in the bust, Chen Shiqu. “The children are very little, and were fed a lot of sleeping pills. It must have wrecked them mentally and physically,” Chen said.
One woman suspected of delivering the captives said feeding the babies sleeping pills “spared a lot of potential trouble” because they would be sound asleep for a day or two. She said she got 4,500 yuan (HK$5,680) for smuggling each child. A notebook owned by one of the suspected ringleaders showed the details of each transaction. Most babies were sold for about 20,000 yuan each.
The ministry said it was drafting a law in co-operation with the judiciary and the prosecutor general to impose harsher punishments on traffickers and buyers, and that parents who sold their children would also be sentenced severely.
But Beijing-based lawyer Zhang Zhitong, of Jingrun and Partners, was doubtful whether the heavier punishments would stop the practice, as long as the demand for other people’s children existed.
“Those who sell and buy children are usually in inland, poorer areas, and people know little about the law. They see the economic incentive – from thousands to tens of thousands of yuan – and think it’s a good deal,” he said.
The total number of children that the gang has kidnapped is unknown
Zhang said the market was fuelled in part by the adoption law. Rather than navigating the bureaucracy that was involved, adults would sometimes turn to traffickers instead, he said.
A month ago, it was revealed that a maternity doctor in Fuping county in Shaanxi province sold over 20 newborns after lying to parents that the babies had died or had serious birth defects.
In 2011, 178 abducted children were rescued in an operation that saw more than 600 people detained across 10 provinces.
Source: BBC “Chinese police rescue 92 abducted children”, SCMP “Scores of children saved as police bust China kidnap ring”
According to CCTV, the State Council’s recent issue of the “General Scheme for China (Shanghai) Free-Trade Zone” marks the official launch of the pilot reform of Shanghai Free-Trade Zone.
The Scheme mentions that Shanghai Free-Trade Zone shall persist in giving priority to implementation and test in order to boost reform and development by opening-up and strive to establish within 2 to 3 years a pilot free trade zone with convenient investment and trade, free conversion of currency, highly efficient and expedient supervision and regulation and an environment regulated by the rule of law.
The Scheme raises the following requirements for the pilot zone. First, it shall speed up the transformation of government functions and promote improvement of government administration so that attention will be switched from examination and approval prior to matters to regulation during and after the matters. Second, it shall further intensify the opening-up of financial, shipping, trade and cultural service sectors and explore the establishment of management by negative list. Third, it shall deepen the pilot project of international trade settlement center to boost transformation of trade and upgrade international shipping service. Fourth, it shall speed up innovation in its financial system to set up a foreign exchange control system commensurate with the free trade zone so as to facilitate cross-border financing and promote the overall opening-up of financial service industry to private and foreign capital.
The Scheme points out that the Pilot Shanghai Free-Trade Zone is an experiment project to boost reform and upgrade open economy. Experience shall be gained that can be copied and popularized so as to set a positive example to bring along and serve the whole nation and finally boost joint development of various areas.
On the other hand, SCMP reveals some details of the free trade zone in its report today titled “Shanghai free-trade zone details revealed”, full text of which is given below:
China announced 18 new policy initiatives for its first free-trade zone in Shanghai, reducing restrictions on six key industries, including financial services and telecommunications.
The free-trade zone, to be officially launched on Sunday, is a major step to further liberate the world’s second largest economy. Chief Executive Leung Chun-ying on Friday called it an “irresistible trend”, but said it would not threaten Hong Kong’s position as an international financial centre.
The setting up of the free-trade zone is widely seen as one of the key reforms to be introduced under Xi Jinping’s leadership. But it remains uncertain how far the government is ready to go. Some of the boldest ideas – such as breaking the state monopoly over internet, data transmission and storage business – are still under discussion and may require special permission.
Premier Li Keqiang, the driving force behind the free-trade zone idea, is eager to see it as a testing ground for wider and deeper financial reforms. He earlier said the central government would copy the Shanghai model to the rest of the country if it proved to be successful. State media compared it to Deng Xiaoping’s creation of the Shenzhen Special Economic Zones some three decades ago.
Just like Deng, Li faced serious, at times open, resistance from entrenched interest groups.
Most of the new rules introduced on Friday have been reported earlier by the South China Morning Post, such as the further liberalisation of the foreign exchange regime in the special zone.
The Post on Wednesday also reported that Beijing is considering lifting a ban on internet access to Facebook, Twitter and news websites within the free-trade zone to attract foreign investors and professionals to the zone.
The idea seems to have run into resistance from the conservatives. The People’s Daily on Friday ran a commentary by a government researcher warning of the potential political risks such a move would entail. The article compared lifting the internet ban to the creation of “foreign settlements” in Shanghai under unequal treaties forced on China by imperial powers a century ago.
The article defended the need for internet controls and said “even if one day the free-trade zone does get rid of the [internet] firewall, it would be part of a synchronised effort by the country as a whole.”
“Undeniably, the importance of the firewall will gradually weaken until one day when it will be phrased out. But that will be the result of China’s growing overall strength and confidence, and … the balance of power between China and the US hegemony. It can not be forced.”
Among the key industries facing reduced restrictions is that of banking and financial services.
Beijing will allow foreign banks to skip long and often bureaucratic approving processes when setting up their wholly owned units in the free-trade zone.
It often took a few years for a foreign bank to first set up a symbolic representative office in China and then upgrade it to a full-service branch.
Peter Wong, chief executive of HSBC Asia Pacific said in a statement that the free-trade zone in Shanghai “will open a new phase in China’s financial reform process, bringing greater flexibility and fresh options to the heart of the world’s most dynamic economy.”
In August, Beijing gave final approval for Shanghai’s free-trade zone, which will span almost 29 square kilometres in the Pudong New Area of Shanghai, which includes the Waigaoqiao duty-free zone, Yangshan port and the international airport area. The Post reported the zone might eventually be expanded to cover the entire 1,210 square kilometre Pudong district if it proved to be a success.
Sources: SCMP “Shanghai free-trade zone details revealed”, CCTV “China (Shanghai) Pilot Free-Trade Zone Officially Launched” (translated from Chinese by Chan Kai Yee)
Chinanews.com reports: At 1237 hours Beijing Time September 25, 2013, China used Kuaizhou (quick-vessel) small carrier rocket to launch Satillite Kuaizhou 1 smoothly into its preset orbit. (Comment by Shen Ze, special military commentator of huanqiu.com: The photo shows the launching of a small solid carrier rocket by the US. Foreign media believes that the Kuaizhou small carrier rocket launched by China is similar to that in the photo.)
Satellite Kuaizhou 1 will mainly be used for emergency disaster monitoring and information support for disaster rescue and relief. Its user is the National Remote Sensing Center of China’s Ministry of Science and Technology.
In future space war, once our satellite is destroyed by the enemy, we can promptly replace the lost satellite through the quick response satellite launch system and turn the adverse situation into a favorable one in theater. Analysts say that Kuaizhou small carrier rocket is a part of the new generation of space quick response battle system that China is developing. At present, only two countries China and the US are developing systems like that.
Space quick response battle system is mainly used in the quick launch of satellites or anti-satellite weapons. The successful launch this time marked China’s victory in its competition with the US to become the first country that has tested a complete quick response space vessel with integration of launch of satellite and rocket. It is of great strategic significance.
In 2002, in order to achieve world hegemony and control the space, the US began to develop its space quick response system so as to turn the above-mentioned combat imagination into reality. In 2013, China’s official media also began to disclose times and again similar battle system. Certainly, other countries lack the technological and economic strength to do so. No wonder, some media believe that the competition between China and the US for monopoly of space superiority will thoroughly change world military situation because in the 21st century, the one who controls the space will have the initiative.
At present, due to various reasons, the US has not implemented its quick response satellite system that DARPA was the first to have the idea of though it has already launched some static satellite systems and small solid rockets. However, there has been no record of US launch of a complete integrated system of launch rocket and satellite. China’s test commenced a new era in the history of human warfare.
Source: Huanqiu.com “China launched its Kuaizhou system: first maneuver of its space quick respond vessel” (excerpts translated from Chinese by Chan Kai Yee)
China’s recent economic data reinforce the International Monetary Fund’s forecast that the world’s second-largest economy will avoid a second-half slowdown and grow 7.75 percent this year, a fund official said on Thursday.
Markus Rodlauer, deputy director of the IMF’s Asia Pacific Department and the fund’s mission chief for China, said the IMF expected China’s economy to sustain its pace of growth despite a difficult international environment.
“This is borne out by a number of high frequency indicators out of China. These indicators suggest that activity has indeed been stabilizing into the third quarter, into the second half,” Rodlauer told a conference in Tokyo.
He noted double-digit retail sales growth and figures for industrial added value and fixed asset investment as some examples of such indicators.
In July, the IMF called for more reforms to sustain China’s impressive economic performance and kept its 2013 growth forecast at 7.75 percent, above Beijing’s 7.5 percent target, although at the time it noted downside risks to the forecast.
Since then, however, a series of economic indicators has suggested that China is regaining traction after more than two years of cooling growth and prompted several investment banks to upgrade their outlooks.
At the same time, last month’s jump in credit raised concerns that the authorities were easing up on their efforts to prevent a buildup of imbalances in the economy in order to prop up near-term growth.
The IMF is due to publish its new world economic outlook on October 8 ahead of the fund’s annual meeting.
Source: Reuters “Recent Chinese data reinforce IMF’s 2013 GDP forecast: official”
In March last year, after getting government approval to go ahead with a $900 million refinery expansion in China’s southeastern Fujian province, state-run oil giant Sinopec Corp warned the team handling the project against taking bribes.
“Project engineering and construction has been a main area for corruption at Sinopec,” the Fujian unit of Asia’s largest refiner said in a blunt memo, according to a Sinopec source who read it to Reuters. “All members, especially those in key posts, must treasure their positions, stay guarded and resist temptation.”
The memo underscores what experts say is one of the biggest challenges facing President Xi Jinping and his drive to tackle corruption – rampant graft in engineering, procurement and construction contracts awarded by state firms.
Graft in the state sector has been acknowledged before but shot to the headlines recently when authorities stunned the energy industry with an investigation into five former senior executives at state-run oil and gas behemoth PetroChina and its parent firm China National Petroleum Corp.
That investigation has raised questions about how far Xi will go to root out graft in an industry that ranks as one of the most powerful corners of the state-owned corporate sector.
Virtually all senior officials at state firms are members of the ruling Communist Party, whose power is largely unchecked.
And there is a lot of money on the table.
According to the European Union Chamber of Commerce in China, state enterprises issued tenders for goods and services worth 9.26 trillion yuan ($1.51 trillion) in 2011.
It’s not clear how much of this was for engineering, procurement and construction contracts, commonly referred to as EPCs in the industry. Nor are there any figures for graft investigations into EPC contracts.
But China’s petrochemical engineering market should be worth $40 billion by 2016 alone, according to industry data. China is also investing $65-$80 billion between 2012 and 2016 to expand its oil refining capacity.
“It’s inevitable to have the corruption problem because of the high concentration of power at the top,” Chen Weidong, chief energy researcher at CNOOC Group, parent of Chinese offshore oil giant CNOOC Ltd, said of graft in tenders for energy EPC contracts in China.
“They hold public tenders for projects but the process of choosing winning bids is not open.”
EX-RAILWAYS MINISTER CONVICTED
China has taken steps to curb graft in public procurement.
It passed laws in the early 2000s requiring tenders for state-funded projects with an estimated construction contract value of more than two million yuan or where the purchase of equipment would exceed one million yuan.
It has also sought to improve transparency with online platforms for purchases, although this cannot always be used because not all local governments or state entities have the system and a unified national procurement program has yet to be finished.
But industry officials and analysts say the process is still riddled with graft partly because China’s rapid economic growth has fuelled a surge in fixed asset investment by the government and state firms that has often escaped proper oversight.
They say officials at state firms involved in tendering often accept bribes to award contracts or select companies run by relatives or friends. Irregularities include splitting a major project into pieces to dodge the tender process, they add.
One recent example was former railways minister Liu Zhijun, who was given a suspended death sentence this year for graft. Liu was found to have helped 11 people win railway contracts or get promotions in return for 64.6 million yuan in bribes between 1986 and 2011, official media said.
The party’s top graft buster, the Central Commission for Discipline Inspection, last week called for an overhaul of how transactions take place for public resources – such as procurement and land transfers.
It gave no details and did not explain what prompted the commentary on its website, although it referred to the anti-corruption campaign Xi launched when he became party chief in November.
Officials from the commission or the agency overseeing major state-owned enterprises could not be reached for comment.
FIRST SINOPEC, NOW PETROCHINA
Sinopec vowed to step up its fight against graft after former chairman Chen Tonghai was given a suspended death sentence in 2009 for taking $32 million in bribes.
It has been relatively open about the problem – part of the 2012 memo was cited in a report posted on its website, including the following quote: “The number of major corruption cases at Sinopec has been on the rise, especially in the area of project tendering, contracting and sub-contracting and procurement.”
Sinopec did not respond to a request for comment.
Its refinery expansion is taking place at a $6.5 billion refinery and petrochemical complex run jointly with Saudi Aramco and Exxon Mobil. The project is scheduled to be completed by the end of this year. There have been no public reports of any irregularities.
The focus, instead, is on PetroChina after the government in late August and early September said several of its former senior executives were being investigated for “serious discipline violations” – shorthand used to describe graft.
No details of the investigation have been released. PetroChina also did not respond to a request for comment.
Similarly, Chinese authorities have released no details about a probe into Wison Engineering Services Co Ltd, a private contractor whose major customer in recent years has been PetroChina.
“Public procurement corruption is not limited to energy. It is across the board,” said Lin Boqiang, director of the China Centre of Energy Economics at Xiamen University in Fujian and an adviser to China’s National Energy Administration.
“The energy sector gets more attention as the projects they build are mostly huge.”
EU CRITICAL OF CHINA PUBLIC PROCUREMENT
The European Union has criticized China for the murkiness of its public procurement and has called for a further opening of the market to foreign players.
“The bidding process … still cannot be fully executed online, which inhibits optimal information sharing and transparency of the various entities’ processes,” the EU said in its 2013/14 annual China position paper.
To try to address some of the concerns, China’s Finance Ministry is developing a nationwide government procurement system that will have a shared database and more e-commerce related functions to enable online bid appraisal and payments.
Still, some industry insiders don’t believe a clean system will emerge anytime soon in the absence of a transparent decision-making process.
“Some of the tenders are conducted behind the curtain,” said a Chinese oil industry official with knowledge of the public procurement process in the energy sector.
“It is not about whether there are rules and regulations. It’s about implementation.” ($1 = 6.1210 Chinese yuan)
Source: Reuters “China state sector a honey pot for corrupt officials”