Green Wealth

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Green Wealth

Two women from the Tujia ethnic group show off locally grown tea leaves to visitors in Yanhe Tujia Autonomous County, Guizhou Province, on March 1.

The local government has hired experts to help farmers grow high-quality tea, which generates a revenue of more than 12 million yuan ($1.83 million) every year.

Liquidity Easing

On March 1, China’s central bank lowered its reserve requirement ratio (RRR) for commercial banks by 0.5 percentage points, the latest effort to bolster growth.

The move, the first such cut this year, aims to “ensure reasonably ample liquidity in the financial system, guide a stable and appropriate growth in credit, and create a favorable financial environment for supply-side structural reform,” the People’s Bank of China (PBOC) said in a statement on its website.

The decision surprised the market as the PBOC has conducted open market operations and lending facilities more frequently to pump cash into the market in recent months for fear of further slips by the Chinese currency yuan.

PBOC Governor Zhou Xiaochuan disclosed the fine-tuning of China’s policy stance, shifting from a “prudent” monetary policy to one that is “prudent with a slight easing bias” in Shanghai on February 27.

To boost economic growth, which in 2015 slowed to its lowest level in a quarter of a century, the central bank lowered the RRR five times last year.

Recovery Boost

On February 27, G20 nations pledged to use all their policy tools, including monetary, fiscal and structural ones, to strengthen a global recovery.

“The global recovery continues, but it remains uneven and falls short of our ambition for a strong, sustainable and balanced growth,” noted a communiqué issued after the twoday G20 Finance Ministers and Central Bank Governors Meeting in Shanghai.

The participants cited volatile capital flows, slumping commodity prices, escalated geopolitical tensions, a potential UK exit from the EU and increasing refugees as major vulnerabilities affecting the global economy.

To foster confidence, monetary policies will continue to support economic activity and ensure price stability, but monetary tools alone cannot lead to balanced growth, said the communiqué.“We will use fiscal policy flexibly to strengthen growth, job creation and confidence,” it added.

The nations reaffirmed their previous exchange rate commitments, including refraining from competitive devaluations and not targeting exchange rates for competitive purposes.

“We will carefully calibrate and clearly communicate our macroeconomic and structural policy actions to reduce uncertainty, minimize negative spillovers and promote transparency,” the communiqué pledged.

Relaxed Limits

China’s new rules that will further relax quota allocation and foreign exchange control are credit positive for foreign asset managers, Moody’s said in a report on February 27.

Earlier this February, the State Administration of Foreign Exchange of China announced that it will give licensed foreign institutional investors-those participating in the Qualified Foreign Institutional Investors (QFII) program-more flexibility to invest in onshore investment products.

Following the change, the quota allocation process, which determines how much any given foreign investor can invest directly in Chinese assets, is simpler and more transparent, and the quota limits have been relaxed.

This regulatory liberalization is credit positive for QFII-licensed foreign asset managers, such as BlackRock Asset Management and UBS Global Asset Management, as they will enjoy more flexibility in the way they manage their cross-border investments, Moody’s said.

This additional flexibility will, over time, favor asset inflows from foreign institutional investors, whose current investment in Chinese capital markets remain marginal, Moody’s said.

The rule changes have removed some of the barriers to redemption and repatriation of funds, which in turn will lead to higher liquidity, Moody’s added.

Since December 2002, when the QFII program was launched with a total quota of $4 billion, China has simplified and relaxed access to the QFII scheme, allowing more foreigninstitutions to invest in a growing amount of assets.

Slipping PMI

China’s manufacturing activity contracted for the seventh straight month in February, signaling persistent weakness, official data showed on March 1.

The purchasing managers’index (PMI) fell to its lowest level since August 2012 at 49, down from January’s 49.4, according to the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing.A reading above 50 indicates expansion, while a reading below 50 reflects contraction.

NBS statistician Zhao Qinghe attributed the retreat to slowing factory activity during the Chinese Lunar New Year holidays in early February, as well as the trimming of industrial overcapacity.

The breakdown showed that the sub-index measuring production stood at 50.2, down 1.2 points from a month earlier, and that for new orders settled at 48.6, down 0.9 points.

The PMI for the non-manufacturing sector came in at 52.7 in February, down from 53.5 in January.

The service sector sub-index stood at 52.2 in February, down 0.5 points from January.

Businesses related to retail, travel, post and catering services expanded in February, thanks to the Lunar New Year holidays, Zhao said.

The sub-index for new orders settled at 48.7, down 0.9 points from the previous month, showing dwindling demand in the nonmanufacturing sector.

Job Commitments

China will make stable employment a priority as structural reform affects the job market, said Vice Premier Ma Kai on March 1.

The government should focus on stable employment along with economic expansion, said Ma at a State Council meeting.

Local authorities should support mass entrepreneurship and innovation since they can create jobs.In addition, migrant workers should be encouraged to start up their own businesses back in their hometown.

Workers that are made redundant as industrial overcapacity is addressed should be relocated and offered training.

Policymakers have made cutting overcapacity a top priority in supplyside structural reform, which will help the world’s second-largest economy achieve sustainable growth.

In the process of overcapacity cuts, around 1.3 million people in the coal and steel sectors are expected to lose their jobs, according to Minister of Human Resources and Social Security Yin Weimin.

China has successfully met its employment targets for the past five years with 64 million jobs added and a low registered urban unemployment rate of 4.1 percent, a bright spot in China’s economic and social development, Ma said.

Bank Preparations

China and the BRICS New Development Bank signed documents in Shanghai on February 27, marking the completion of the legal procedures before the operation of the bank.

The documents govern the establishment of the headquarters of the bank in Shanghai and make provision for the requisite immunities, privileges and other facilities to be accorded to the bank.

The multilateral development institution operated by the BRICS members (Brazil, Russia, India, China and South Africa) was launched last July as an alternative to the existing multilateral development bodies such as the World Bank and the International Monetary Fund.

With an initial subscribed capital of $50 billion to finance, it will “start appraisal of the potential projects in April,” said Chinese Foreign Minister Wang Yi.He added that China hopes the bank will support the development and connectivity of BRICS countries and developing economies at large.

Commenting on the downward pressure faced by BRICS economies, Wang said that economic growth slowdown is not unique to the BRICS members, but a problem worldwide.

“The BRICS countries are poised for growth and an increasing role in international political and economic affairs,” Wang said.

Maiden Flight Expected

The cabin of a China-made C919 large passenger aircraft at its research base in Shanghai, east China.

C919 is the first civil aircraft produced domestically in accordance with the latest international airworthiness standards.Its first flight is scheduled for later this year.

Spring Ploughing

Farmers select rotary cultivators in an agricultural machinery factory in Julu County, Hebei Province, on March 1.