China Research

Political issues dominated the 13^th National People’s Congress (NPC), topped by the constitutional reform giving China’s leader Xi Jinping the possibility to remain in office also beyond 2022 which would not have been possible without this constitutional amendment. The re-election of Xi as China’s president and Prime Minister Li Keqiang’s re-endorsement were, of course, also important political events – not to forget the establishment of the new corruption-fighting super agency named National Supervision Commission.

When applying a purely economic and financial view on the results of the NPC, the unofficial upgrading of financial concerns and the increase of power for China’s central bank – the People’s Bank of China (PBoC) – seem to be the most important news to consider. Sure, one could read about quite some sharpened warnings by Xi and Li already in recent months – warnings that also were stressed very recently by the multinational central bank of the central banks, the BIS in Switzerland (www.bis.org/publ/qtrpdf/r_qt1803e.htm). But this time was – or rather is – different.

Despite the fact that official China tries to play down the very strong concerns of the BIS – where China by the way is a member – the very clear strengthening of the PBoC during the NPC convergation demonstrates all the same that China’s political leadership now worries more about the state of the financial sector than before. Now, the PBoC will be responsible for the macroprudential supervision of both China’s banks and insurance companies; it has also received the mandate to implement supervisory laws and regulations. For better decision-making, supervision of banks and insurance companies will be merged into the so-called China Banking and Insurance Regulatory Commission (CBIRC) under the aegis of the PBoC. The objective is obviously to create more efficient early warning signals and to implement well-working tools against misleading developments in the financial sector.

Altogether, the growing official awareness of structural problems in the financial sector and the approved improvements and changes of financial supervisory institutions have to be considered as positive. However, improvements of transparency should be achieved as well – whenever necessary and/or appropriate.

During the days of the NPC, a lot has been said by political leaders about the need of ever improving confidence. Better information on non-performing loans (NPL), shadow banks, new financial products and their risks should be part of such a strategy. The PBoC has now a good chance to contribute to a confidence-increasing development if China’s political leadership really wants to support such a positive change – and if a modern and forward-looking PBoC leader will succeed retiring, well-respected Governor Zhou Xiaochuan.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

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During many years as a chief and academic economist, I visited quite a number of emerging countries in all continents. Particularly China drew my attention many times. One of my conclusions from all these trips to China, for example, has to do with insufficient Western knowledge about this giant country. But also the understanding of China and of many other emerging markets – and, of course, also of advanced countries – is very important when we meet people from these countries.

Necessary knowledge and understanding include history, traditions, culture, popular sports, geography and many other issues. It is always good to know what people from other countries are proud of and what may be sensitive national issues for them. Talking about undesirable sensitive issues can even shatter business negotiations. We are talking about applied business psychology.

Turning to China again, I still get particularly confused about the lean knowledge that foreigners tend to have about Chinese geography (apart from business people with commercial reasons to get around). My experience is clearly that the Chinese like to tell their foreign guests during a dinner or a coffee break where they come from – or to be asked about it. One certainly can get bonus points when knowing the location of this specific province and the name of a major city there. Furthermore, if you also can mention the names of China’s currently best table tennis players like Fan Zhengdong, Ma Long or Chen Meng, you can quite easily gain further sympathy points.

I got the idea for this article with its “knowledge angle” when I recently saw a message in the Chinese press that another two cities had joined China’s
“1 trillion yuan GDP City Club” (not considering in this context statistical shortcomings). Now there are 14 cities that have exceeded this magical amount of production; altogether they stand for as much as 30 percent of China’s GDP.

If you need assistance: 10 of these 14 places can be found in Eastern China, 2 of them in Central China and two in the West. Now you can try and find out (or know) where these 14 expanding cities are located (east, central or west) – and then you can try to add the name of the province. Enjoy!

China’s 1 trillion yuan GDP City Club, 2017  (ranked):

¤  Shanghai
¤  Beijing
¤  Shenzhen
¤  Guangzhou
¤  Chongqing
¤  Tianjin
¤  Suzhou
¤  Chengdu
¤  Wuhan
¤  Hangzhou
¤  Nanjing
¤  Qingdao
¤  Wuxi
¤  Changsha

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

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