Monthly Archives: February 2009

China Passes Food-Safety Law

China has passed its first food-safety law, and established a cabinet-level commission to oversee it. The idea is to create a national set of food-safety standards under one regulator and put more legal liability on China’s 500,000 food producers.

How effective it is and whether it will reassure consumers whose confidence has been left in tatters following a succession of scandals, notably melamine-tainted infant formula last year, remains to be seen. The lesson from food-safety regimes around the world is that it is employing the inspectors and having the political will to enforce the regulations that matters more than having the law on the books. But having the law is a start.

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Filed under Economy, Product Safety

China To Get A Muni Bond Market

In the wake of the Asian financial crisis a decade ago, China dabbled with issuing local government debt to fund local projects. Come another financial crisis, and the idea is being dusted down again.

Officials have reportedly been discussing a tentative plan to sell some 200 billion yuan ($29 billion) of bonds through the Finance Ministry this year to finance provincial and municipal stimulus spending on infrastructure projects such as airports, power plants and railways. Six provinces and municipalities,  including Beijing, Shanghai, Tianjin and Chongqing, have been earmarked to lead the experiment, according to the South China Morning Post.

Local governments’ fiscal revenues fell 2.7% to 316.7 billion yuan in January (central government’s were down 28.4%), the finance ministry has reported, thanks to tax cuts and a slowing economy. Land sales, a mainstay of local government budgets, have also dried up, leaving provinces and cities strapped for cash, and relying otherwise on city and provincial-owned companies to raise bank loans. This mechanism could mask local government debt equivalent to 10% to 20% of GDP on some estimates, similar to central government debt’s share.

The proposed bond issues would make this debt more transparent, and may have a life long after the current crisis — and the need to pump prime the economy — has passed.

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China Strikes Back At Christie’s For Auctioning Two Historic Bronzes

Christie’s is going to find itself wading through a lot more red tape in China following its sale of two Qing dynasty bronzes in the Paris auction of the late Yves St. Laurent’s art collection.

The State Administration of Cultural Heritage will subject the auction house to close scrutiny whenever it seeks to bring in or take out items. This will likely make it tougher for Chinese to bring home artifacts they buy from Christie’s auctions, particularly in Hong Kong, where Christie’s and its rival Sotheby’s, holds biannual sales. Christie’s sold $130 million worth of Chinese antiquities there last year; it is its third most valuable market after New York and London.

China holds the two bronzes to be looted antiquities, and wants them returned. It went to court earlier this week to seek to force Christie’s to withdraw the pieces form the sales. Jiang Yu, a foreign ministry spokesman said earlier this month that the pieces had been “stolen and taken away by intruders” and “should be returned to China.”  China’s bloggers have taken an equally vociferous line.

The two sculptures, representing the head of a rat and the head of a rabbit, were taken from the Summer Palace in Beijing when it was burned down by invading French and British forces in 1860 during the Second Opium War. The event remains one of the most powerful symbols of what China considers its humiliation when Western nations tried to force it open in the 19th century.

The two fountainheads have reopened the seemingly intractable question of how to deal with cultural artifacts that have been removed from their country of origin whether through theft or as a result of war. Despite several international conventions, the issue of whether they should be returned, and whether legal ownership rights that may have been established in the interim should be overridden remains a controversial and inconclusive one.

There are estimated to be more than 1 million relics outside the country, distributed among 200 museums in 47 countries. Ten times as many could be in private hands.

Christie’s has maintained that the Yves St. Laurent collection held legal title to the bronzes. It sold the pair for a combined 31.4 million euros ($40 million) to an unidentified telephone bidder at the Paris auction.

They may still find their way back to China. Five other of the 12 fountainheads have been bought by Chinese companies or businessmen and repatriated.

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Filed under China-E.U., Politics & Society

Japanese And South Korean Families Ship Out Of Shanghai

The press officer at the South Korean consulate in Shanghai was unable to answer a question from the FT‘s Patti Waldmeir about South Korean companies retrenching their presence in the city and emptying out Little Korea because her own job had just been cut and she was being recalled home.

An amusing anecdote, but she is not the only one. The report says the city is seeing the first wave of expats leaving China’s financial capital as a result of the financial crisis, with both South Korean and Japanese companies shipping staff home or repatriating wives and children without their menfolk to cut costs.

If nothing else, it leaves room for the city’s seven year non-resident residents to become permanent resident residents.

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Filed under China-Japan, China-Koreas, Economy

Work Starts On New Chengdu-Lanzhou Railway

Work has started on a new high-speed rail line between Chengdu and Lanzhou. When completed in 2014/2015 it will cut travel time between the Sichuan and Gansu provincial capitals from 20 hours to four.

As well as being a shovel-ready infrastructure project to set free stimulus yuan–the line will cost 62 billion yuan ($9 billion), state media reports– the line is part of a grand plan to open up transport links to western China (and beyond), shipping Xinjiang’s oil, coal and cotton east and tourists in the opposite direction; the route will pass through the Minshan Mountains, home to giant pandas, and Jiuzhaigou and Gannan, both popular destinations.

China's Rail Network

China's Rail Network

Work is expected to start later this year on other new rail lines connecting to the Chengdu-Lanzhou railway, including Lanzhou-Chongqing, Baoji-Chengdu, Sichuan-Qinghai and Sichuan-Tibet. These complement the high-speed inter-city lines being built in the east.

Overall, China has earmarked 2 trillion yuan ($300 billion) of spending up to 2020 to improve its rail system, particularly for freight, expanding the network from 78,000 kms of track to 120,000 kms.

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A Typical Couple Of Days

The last couple of days encapsulate modern China. U.S. Secretary of State Hillary Clinton wrapped up her visit with an exhortation to her hosts to keep buying U.S. treasury bonds, and an online chat with netizens. A gas blast at one of China’s hitherto safest mines in a industry riddled with dangerous ones killed more than 70 people, and three top officials were sacked. Scores of people in the southern province of Guangzhou were sickened in the latest tainted food scandal, pork contaminated with an illegal steroid additive. Authorities said they had uncovered more than 6,000 business-related bribery cases last year. Rains came to the North China Plain, alleviating the three and a half month drought in the country’s wheat fields. And for most, life just went on.

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Another Tainted Food Scare

China Daily reports that 70 people in Guangdong have been sickened after eating pork contaminated with the steroid clenbuterol, an illegal animal feed additive used to reduce the fat content of meat. The tainted pork was sold in Guangzhou and the pigs it came from raised in Hunan.

Eighteen months ago, more than 300 people in Shanghai were hospitalised after eating pork contaminated by the steroid. We’ll see how far this latest incident goes (three victims are in hospital; and three people are reported to have been arrested in connection with the outbreak of illness), but it seems like another breakdown in food safety enforcement in the face of farmers cutting corners to get by in tough times.

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