Small Businesses in China

  

Small Businesses in China

If you are looking to start a small business in China, there are a few that my pique your interest. First off you could choose to provide Education. There are many opportunities for educators although the Universities in China control the U.S. education in the country. Vocational, management and language schools are some of the opportunities foreign educators have in the country. You might need to partner up with a Chinese national as you will require licensing by the Ministry of Education to educate Chinese national.

The second business that you may consider is that of a wine maker. Wine makers of Washington and Oregon are already making head way in the Chinese wine industry. There are openings for foreign wineries in this industry. You need to keep aware of the local palates and the local price points of the industry. You could just opt to import processed food instead. There is still a very large market with many openings in this industry that a small business could thrive on. The need for convenience in the food they eat and the desire to fulfill a 21st century type lifestyle has driven many Chinese to their cities. This along with their need for more professional jobs has created his need in the industry for businesses of this nature to not only survive but also thrive exceptionally well.
As one of the world's leading construction industries, China is a major player in the solar industry as well that still have meet a very rigid standard in its environment. There are plans in place to construct long lasting eco-friendly structures and this has created a need for renewable energy manufacturers and products from green buildings. There is a very lucrative market in China for foreign high-tech medical devices providers. The ageing population of the nation coupled with the reform in health care has created and ensure this niche in the industry. Western provider may face challenges as it related to registration of product, the pricing and also the intellectual property registration. The U.S. Commercial Service is the perfect source for information on contacts and other vital information.
Already the largest and still growing, China has one of the largest travel markets in Asia. The nation's government has expanded their holiday season in an attempt to create more travel opportunities. The UNWTO states that over a million Chinese visitors to visit destinations all over the world by the year 2020. This nation has a fast growing economy and may need some management help. Consulting firms were not a part of the nation's former economy but have now established multinationals in the market in the form of investment, legal and human resource.
The civil aviation of China as significantly grown over the years and has been predicted to purchase over four thousand new planes by the 2020 year. The nation is purchasing quality parts and industry reaching standard assemblies from suppliers not locally based. Chocolate is a big and expanding business in China. The consumers have desires on not just the unique products but on the gourmet product range as well. The sale of chocolate has now hit China's second-tier cities creating more opening for a successful business but you have to keep in mind that your competitors are entities such as Hershey and Cadbury.
It is believed and predicted that in the coming decade, China will have the number one economy in the world. The U.S and Europe's economy seem to have the feel of a flat fiscal future for the coming years. This is an economy that many businesses see has a source of stability and prosperity for the coming future. The ways and tradition of the country are different and you will have to be prepared to operate in a bureaucratic environment. This is a place that has done the same thing for centuries and there is no space for a cowboy attitude. You will surly fail if you try to operate by your own rules as they will not change their centuries old traditional methods. It will take time to get a proper foot hold in an industry such as this with so many new and challenging traditions. As a business owner it is important that you are a part of China's economy in the coming years. They will have the most stable and thriving one in the coming decades and this will be the place to rest your businesses hopes on.

 

Positive outlook for China markets

  

Positive outlook for China markets
Well with recent news about Huawei sales top USD $105.2 billion despite US-led pressure as revenue from the smartphone division increased by 45 percent, it proves Huawei is a massive consumer brand which many people love. Huawei is an independent, privately-held company that provides information and communication technology (ICT). They were founded in 1987, in the southern Chinese city of Shenzhen, with about 21,000 RMB in start-up capital. Since then, they've grown to become the world's largest supplier of telecommunications equipment and the second-largest manufacturer of smartphones. Huawei employs 180,000 people in more than 170 countries. They are a market leader in China and many countries across Europe, Asia, and Africa. More than 3 billion of the world's population uses Huawei's products and services to make calls, send text messages, or surf the internet.
Looking back over last few years financial markets point towards a simplified overview of the complexity of China markets. It is being accused of causing a coming recession and slump in stock markets. China has links to the global economy but it is not direct. China is trying to balance between its new growth plans and developing sound financial infrastructure. It is on the right track in order to have a more sustainable growth rather than continuing pumping out goods because there must be underlying demand to sustain economic growth.
China is getting sound progress by shifting its economy to more service based instead of traditional manufacturing. It is an important progress compared to GDP growth alone where people are mostly obsessed with. Most people have been reading too much on the GDP growth rate and trying to figure out the accuracy of the figures. The end of commodity super cycle caused pain to resource economies from Brazil to Canada. The countries were slow to react. It is obvious in fall in oil price even as China uses coal for 70% of its energy consumption. China used 40% of total oil consumption growth in 2014. The plunge in crude oil prices was due to China shifting to services having lower carbon usage. Same goes for metals and industrial materials. There are roadblocks to China's progress in financial reform and economy rebalancing. This is marked by the 2015 stock market crash which spilled over to 2016 and affecting global markets. Regulators had been slow to react to the market bubble in 1H 2015. They tried to stabilize markets by implementing equity purchases and circuit breakers. Many were confused. China had been trying hard to develop its bond markets but have not seen much success. Equity markets regulations were also not definite. A deeper problem is not the crash but an inadequate capital markets which has been heavily reliant on banking institutions. It is a huge letdown in terms of financial reforms.
China is facing a huge risk of capital flight. Beijing's policy of devaluing the renminbi against US dollar may spark currency wars similar of the Asian Financial Crisis that caused south East Asia countries to fall into a deep recession. However this scenario is unlikely as renminbi had been appreciating strongly over the past 10 years and is now trading around its fair value. Its current account surpluses had decrease, which eases the pressure of forcefully adjusting the currency. Renminbi has depreciated 6% against the US dollar in July 2015, but still at a high of 25% appreciation since 2005. China's currency is effectively up 50% against all major trading partners' currencies. China has reasons to slow down the appreciation of renminbi. Its impact will not be severe as the depreciation need to be of larger magnitude in order to spur exports. It is in direct conflict with Beijing's main objective of shifting export driven to consumption driven demand. IMF may decide to withhold inclusion of renminbi in the unique drawing rights scheme.
China has many challenges, ranging from excess leverage and property market imbalance as well as overcapacity for its industrial sector and deteriorating environment. Beijing leader are closely monitoring these issues in their policy debates. Beijing must take good care to balance the economic growth and financial reformation. Economic rebalancing cannot be achieved if capital markets restructuring are in disarray.
Markets need to cool down. There is no real risk of hard landing for China. Recovery in oversold markets could give investors a temporary sigh of relief. One bad news affecting markets is central banks have begun to remove the man-made support of monetary stimulus. That would be worse than China's reported dire situation.

 

Analysis and Reasoning of Economic Imbalances

  

Analysis and Reasoning of Economic Imbalances

According to the Father of Economics, “Adam Smith”, China is one of the world's most advanced, rich, fertile, industrious and prosperous countries in the world and it is one of the world's largest economy by nominal GDP. (Gross domestic product) Gross domestic product is a measure of value for all finished goods and services, which is measured quarterly or annually. This value is estimated to determine the economic performance of the country for a period of time. The nominal GDP does not show any differences in the living strategies of the people, but the fluctuations in the exchange rates may result in the countries ranking from time to time. A Comparison of the national wealth to that of other nations is made on purchasing power parity (PPP - estimates the exchange rate between two currencies) Through PPP the economy can solve its problems which arise from the exchange rates, even though it is not free from some drawbacks.

Based on the trade and economic reforms , China maintained poor and inefficient status in the global economy. But in the year, 1979 after implementing foreign trade and investment policies, china is the second largest among the fastest growing economies, maintaining a real average growth of gross domestic product of nearly 10% every year up to 2014. The economic crisis affected badly by the China's economy in 2008 and these trends which resulted in the decline in import, export and in foreign trade also. By this China's government responded and implemented some monetary policies to increase bank lending process. However, the statistics show that there is a decline in the China's economy in recent years. The GDP, which was 10.4% in the year 2010 fell to 7.8% in the year 2012 and a further decline i.e 7.3% in the year 2014.
Stock Exchange:
Despite of having two largest stock markets, China's financial system is restricted to market forces. The two china's stock markets are controlled by the domestic Chinese firms, which resulted a significant volatility in the global market. These stock markets were dominated by the speculators and to the greatest extent the shareholders have less influence to move according to the latest trends in the stock market within a short period. From January to June, 2015 these two stock markets bubbled and the investors were buying stocks on borrowing money. In the June 2015, the bubble blasted and there is a fall in the China's two stock markets by 32% to 40% respectively , resulting a major loss to the economy. With this the government entered into the scene and settled by relaxations in insurance policies and by offering public initials, restricting and selling all share and by buying all SEO (state owned organizations) stocks. According to a report, the government spent nearly $250 billions to standardize the stock markets and the government has certain measure to control the market.
Rise in Reserves in China
The latest release of an International Monetary Fund report says that the value of the dollar has declined in both developing and advanced economies. At last the multilateral reserve currencies are increasingly. The currencies other than dollars are gaining, the euro and yen. There is a drastic change in the 2015 Q2 and 2015 Q1. The value of the dollar depreciated in the Q2 increasing the value of nondollar holdings. Broadly speaking, a small depreciation in the exchange rate during Q2 increased the value share of the euro and yen.
Future strategies to restructure the Economy
The current economic trends of China say that again the Economy is strengthening. The 12th Five year plan of China contains about the economy restructure and the economy is targeting to emerge the industries which are going to play an important role in the future restructure of the economy. In the year 2014, China along with some other countries started a “New Development Bank” to assist the developing economies. Some financial analysts reported negatively on about China's economic slowdown, but it is the time for the global economy to face the new Chinese economic developments in the coming years.

 

Silk Road of China

  

Silk Road of China

As the title of the road might suggest, Silk Road of China is not a single road of some market where you can expect to find noteworthy shops lined up in continuity on the roadside selling unique goods to travellers and tourists. It is, in fact, a very old trade route dating back to around 1 B.C. The route connected China to other lands to the Mediterranean region facilitating trade between them, especially of silk when it came to China as China was the only source of silk in the earlier times.

Though with the coming of engines empowered airplanes and cruise ships, the importance of this route has faded today. But the natural beauty of the entire route, the mesmerising views of vast landscapes and the soothing journey that the route offers that is unaffected to date, has made the route a destination for tourism with UNESCO declaring its Tian Shan Corridor as a world heritage site.
It can be presumed that China as a travel destination to visit the Tian Shan Corridor and walk on the road that once connected Asia; it's worth a shot! And while you have decided to make a visit to this road, check some of our selected spots along the corridor that are surely worthy of dropping by.
Army of Terra Cotta Warriors: If you have ever taken an interest in world history or even studied it in high school then you'd have heard about the Terra Cotta Army. A literal army of warriors having archers, chariots, soldiers and every other human unit that constituted an actual Chinese army except that this army was inanimate and made of clay. The army was made to serve as warriors protecting the first Chinese emperor; Qin Shi Huang in the afterlife and so was buried along with him. Thousands of Terra Cotta warriors have been unearthed and are on display in Shaanxi province that is outside of Xi'an city. Terra Cotta army is indeed a vital piece of Chinese culture that attracts tourists from around the world.
Labrang Monastery: If Buddhism fascinates you; then you have to visit this place. It is one of the most important monasteries of Buddhism and was once home for 4000 monks through which the teachings of Buddha reverberated to the outside. The monastery is still occupied and used by monks who continue to practice Buddhism in the monastery's halls and corridors. It is located in Xiahe town within Gansu province.
Singing Sand Mountains and Crescent Lake: The landscape of desert, sand dunes stretching kilometres in length and a crescent moon shaped lake in the middle of the desert; doesn't that sound like fantasy locations taken out from a story book? A crescent moon shaped lake in the middle of a desert with towering sand dunes whose sand when blown by the wind makes an almost instrumental sound; yes this place is real! It is also situated in Gansu province not much away from Labrang monastery.
Tianchi Lake: Right on the border of China and Korea is situated a lake so beautiful that it literally translates to 'Heaven Lake' in English. Tianchi Lake is a crater lake surrounded by mountains and peaks on all sides. The surface of the lake amidst the white gleam of the high rising peaks gives the scenery of that of a mirrored blue disk. Also, other than its scenic excellence that's almost divine, Tianchi Lake is also quite famous for its monster sightings (good news for thrill seekers).
The list doesn't end here. There are many more places along the Silk Road that shouldn't be left to be visited. So take a vacation, hit the Silk Road and familiarize yourself with a beautiful culture and a multitude of soul-penetrating experiences.

 

Inferring Information in China’s Stock Markets

  

Shanghai Stock Exchange

Anyone who follows the financial markets must already be familiar with the story. Chinese stock markets had previously experienced a boom and the Shanghai Composite was standing at 5,178, when the market reached its peak on June 12. Overall in 2018, Chinese stock market had a loss in 2018 reducing bubble worries. Looking back before this drop the Shanghai index seemed to be continuously rising by more than 135% per year. From a fundamental point of view, the boom was almost incomprehensible. The markets were soaring even when the growth expectation from Chinese economy were vague, corporate profitability was squeezed, while the banks, which dominate the index, experienced a sharp rise in Nonperforming Loans (NPLs). Also during the same time period it was quite clear that the declining GDP growth of China was excessively reliant on the increasingly rapid credit growth. It was also evident that to have a control on credit growth, the GDP growth still had to drop.

The markets reached their peak in mid-June but the panic among the investors began somewhere in the first week of July. Actually July 7 is being referred by many as “Black Tuesday” of the Chinese market. By that time the Chinese market almost lost one third of its value. Beijing started to implement a series of measure since late June, in order to stop the decline. Ultimately it did not have its desired effects. By the first weekend of July, a complete sense of desperation was being experienced as the regulators did their best by taking exceptional measures in attempt to control the imminent fall.
The panic in the stock market seemed to end on July 9, when Shanghai markets closed up 5.8% on a single day. It was followed by considerable gains on the following Friday and Monday. Although the decline of 3.0 % on Tuesday had the hearts of the investors throbbing again and the nervousness also did not subside over the period of next three days as the markets rose with quite some drama. For now it can be safely said that the panic has finally ended, but with none of the fundamental questions resolved, volatility is still expected. It can also be observed that the markets still remain overvalued. However, there is little doubt in it that at least one more quite nasty bearish trend will take place.
The panic and policy responses have ignited a ferocious debate on the economic reforms of China and Beijing's capabilities regarding the cost of bearing the economic adjustment. Volatility is among this cost. Rebalancing of the economy and withdrawing of the state control over various aspect of the economy, especially the financial system will surely reduce the ability of Beijing to smoothly manage the economy over the short term, although it may be necessary for preventing a dangerous surge in the volatility over long term.
Although volatility is not the only thing to be considered but volatility can never be taken out of the equation. In one variable the volatility can be suppressed just by increasing the volatility in some other variable or by temporary suppression in exchange for more disruptive adjustment at some specific point in future.
When monetary volatility is being considered, for example, whether it is money supply and interest rate volatility or exchange rate volatility, the central banks can make the choice of controlling the later in exchange for greater volatility in the former and vice versa.
In other words, it can be said that the regulators never choose how much volatility will be permitted. Although they can choose any form of volatility which is least preferred by them and then try controlling it. It is always a political choice rather than an economic one. In short it is about deciding that which economic group will have to bear the cost of the volatility.
One way or another, it can be safely said that there is a huge amount of volatility in the Chinese economy. It is not only because of the fact that it is lower in the list of developing countries, which are always more volatile economically as compared to the advanced countries but also because of the fact that it is depending highly on investment for generating growth. It is argued by Hyman Minsky that the economies that are actually driven by the investment are highly volatile and quite susceptible to the changes in the sentiment. He is quite right.

 

Follow The 3 Wheels to Standardize the Economy

  

G20 Argentina

The 2018 G20 Buenos Aires summit, was the 13th meeting of G20, held on 30 November and 1 December 2018. Looking back in time; In the year 1999, an International forum was started to promote discussions on policy issues to build up the financial stability globally. This forum includes institutions such as “World Bank”, IMF (International Monetary Fund) and “World Trade Organization”. The forum includes 20 major economies, so it is called G-20 or “ A Group of Twenty”. The G-20 hosts meetings separately with its members. In March, 7th, in Beijing at National People's Congress press meeting, the finance minister of China expressed his view while hosts in a two-day, G-20 meeting.The meeting shaped their comments mainly on government support and on tax reforms. The finance minister also expressed that the government can face the problems, but cannot escape from them. At the end of the G-20 meeting all the leaders, along with the finance minister and Governor of People's Bank agreed to use all the combined available policy tools collectively to strengthen and stabilize the market situations. The finance minister in the G-20 negotiations on monetary policies, he opined generally that the largest economies take an optimistic part in the serious matters and risks. At last the finance minister said that the agreement is up to the expectations of the country.

The media company interviewed the Finance Minister, and inquired about the G-20 meeting about the global economy. The Finance Minister gave a statement , that the fluctuations which are occurring in the bullion market, are because of the pessimistic outlook of the global investors, the leaders vowed that, these factors do not reflect on the global economy and by collective usage of combined policy tools, the government can face the situations, but cannot escape from the situations. Regarding the disagreement on monetary policies, the Finance Minister explained that the negative interest rates may decrease the bank balance sheets which may further lead the economy to risks. Along with the monetary policy , fiscal policies and structural reforms, should be promoted to stabilize the price in the markets. The media asked the finance minister about the how different economic conditions meet the finalized consensus. The Finance Minister replied all the leaders of G-20 agreed to use the policy tools commonly according to their necessity and situation. As the expectations met by the policy tools there will be no scope for the capital flows. The media asked about the structural reforms and the Finance minister replied that the country has lots of opportunities and launched many short and long term measures. He expressed that smaller and mid sized companies have followed the administrative procedures and those were very simplified and innovate. They followed a pricing system and urbanization reforms. The most reason behind this is decentralization. This is the distortion problem. Decentralization may lead to lack of stabilization of the economy.
Targets of G-20:
To run the economy smoothly, every country has to keep in balance all the three wheels that are stability, progress and development. The International Monetary Fund reform has to regulate and strengthen the international coordination to control and stabilize the effects of monetary policies. The progress agenda has to look towards the global supply and demand. All the countries have the policy tools to regulate the institutional policies to increase the trade.The development agenda is the most important where the growth is to be more balanced in the long run. The environmental and many factors involved in the global development agenda. As the world economy started the recovery program, the G-20 started managing its growth and development crisis.
There are high expectations that the 2016, G-20, gives China an ownership to lead the global economic governance, China is preparing to contribute its share for the world's benefit. The main function of the G-20 is to manage the major economic policies and to support the smaller countries. The activities of G-20 are not concerned only within the country, as they are of multi- platform, where the whole china can participate and express their views and support the economic governance. In 2013, the State Counselor said that China is the Participator, supporter and contributor for G-20 consensus.

 

Financial Scams

  

Financial hope for better 2019 

There was a high number of scams in 2015 - 2018, lets hope 2019 is better. As the watchdogs started to fight to conform with the number of fluctuations that has conformed to the financial business, this was revealed during a meeting to deal with the problem. The number of cases that the government has declared as illegal fundraising went up by over 70% in the past year, it was Yang Yuzhu who leads the inter-agency body assigned to deal with the issue, during a meeting on the 27th of April that has attended by around fourteen ministries as well as commissions.

Those who have attended the meeting that has been open to the media personnel never said anything pertaining to the number of fraud cases concerning the authorities in the past year. The government is actually unclear about what is enclosed in the illegal fundraising, however, there were more reported scams as well as Ponzi schemes. This, however, see the money from new investors who used to pay for the previous ones, they have shown in the news in the past years as well. The amount of the money that was involved in the scam in the past two years went up by over ½ in 2015 as well as the number of cases that involves more than a hundred million Yuan rose by 44% year after year, according to Yang.
With the rising coverage of the issues, the courts on the other hand do not have much judges with the financial information according to Yongyi, who also happened to be a judge of the Supreme People's Court. There were new kinds of scams that have been modelled for regulators encouraging Zhang Xiaojin who is an officer at the Supreme People's Procuratorate. According to the office of the top prosecutors, unlawful fundraising is normally done under the roof of the monetary modernization. The prosecutors must go through more training, this way, they can determine the difference between the scams as well as the financial technology, this is in accordance with the statement of Zhang.
The internet has made it harder for the regulators to restrict the coverage of the fraud, this is according to Yang. During the latter part of this year, the government has closed the Ezubo, which is a kind of P2P lending site that the investigators said has cheated more than 900,000 small investors from the more than fifty billion Yuan using the Ponzi scheme. According to the officials during a meeting once said that they will just use the newest technologies. This is to keep up with the stronger methodology of monitoring in terms of the financial sector, thus to persuade the government bodies to share some of the information that they have. They also said and promised to start the campaign in May. This aims to give some information about the risks and the effects of the scammers to the government.
The central government gives more time on the scam after untying the string of the financial corruptions. The Beijing government and so do with Shanghai as well as Shenzhen has paused the opening of the companies with the names suggests that they give some financial services, the people linked in this matter tells all about it, but it will just be for a period of time until the problems are settled. The documents sent to different firms last April said that the rules will be stricter for the internet finance products. The contents that assures high returns, endorsement of various celebrities as well as wrongful information will be banned in the net finance companies' advertisements.

 

Survive the Chinese Business Scene

  

Survive the Chinese Business Scene

We bring you Eight Golden Rules to Survive the Chinese Business Scene. The best way to learn about China is to be physically present and experience first-hand outside of luxury cars. Store visits and learning on the ground by checking up on the private residences are the best activities to learn about China. Travelling to third tier cities can give you a better overview picture of China.

Secondly, one must be sensitive to industrial changes. Common factor for business losses is that overseas firms are too obsessed with market share growth and abandon other competitive traits. For example, there were 20 or more foreign brewers in mid 90s for the beer sector. Each planned to capture 15% of the market. However, lack of differentiation made them compete head to head with 600 plus local brewers, heavily reliant on government subsidies. Twenty years on, same issue is still present. Other industries have similar traits to the beer sector, all facing overcapacity, highly fragmented, heavily subsidized by local government and foreigner willingly absorbing strategic investment losses.
The third key rule is to take it slow. Many liked to rush things. A CEO once wanted its operations to commence within 6 months. Being too fast can cause headaches later on due to lack of planning. Attention should be focused on looking for the suitable local partner. One must be patient or risk losing out on the negotiation tables with the Chinese partner.
The fourth rule is to understand that Chinese society work in groups. The trait is reinforced by Geert Hofstede's groundbreaking research on Chinese culture. Chinese may appear individualistic to outsiders and directly conflicts with the research. This is because Chinese appear collectivist among close family members, friends and clan. They co-operate within the circle and all other outsiders must compete fairly. It is extremely difficult to attain self-organized cooperation, as highlighted by Sun Yat Sen's observation for China. Chinese counterpart will also reluctant to agree to a win-win outcome. Negotiations may be re-open anytime even an agreement seems settled. They may argue that they have not bargained well and hard enough.
In China, mistrust as well as opportunism are widespread. One must understand this fifth rule well. Either you trust wholeheartedly at first meeting or trust only after gathering enough evidence. Chinese will only trust after cross examining a potential partner. China will use its position to gain upper advantage of groups outside their clan. There is no legal mechanism for such checks and balance. Chinese are usually skeptical of outside clan members. There may be issue on enforcing contractual agreements and signed letters, and one must always have countermeasures such as withholding cash until goods are delivered and examined for completeness.
The sixth rule is that trust takes a long time to foster due to interpersonal nature of trust. It is a great defense to foster close relationships in personal of business dealings. Building personal contacts is a must for business, and takes time and patience. One must attend sporting or dinner events. Drinking alcohol is part of the role. Smart experienced negotiators often dispose the alcohol from their glass to water glasses and wet towels available in restaurants.
The seventh rule is be ready to encounter any unusual behavior that may be common in China but not in western countries. Chinese often go beyond conventional negotiation tactics. For instance, they may threaten to use political links to block the distribution rights for the western companies' products. Another case involved Chinese party getting western guests drink excessively to prevent effective negotiations. Always be on alert as well as standby defense measures. Learn to drink well or delegate drinking to team members.
The final rule is that Chinese society is very hierarchical. Decision flows from top to down approach. There is little delegation and supervisory control is high. Middle level managers have little power in decision making and their role usually functions as passing orders and execution of orders.

Currency Value

  

Currency Value

The RMB was found by the PBoC to be overvalued in contrary to the beliefs that this currency was undervalued. The discussion of this particular currency came to the forefront following the currency regime deregulation by the PBoC. If this organization should stop their interference, the ratio of dollar demand to supply would cause a dramatic decline in the worth of the RMB currency. This information is supported by the market operations and the actions of the investors. You may need to know that the valuation of most assets is not always indicated by the ‘market forces'.

The market forces is the balance and or ratio of supply and demand. This is not the only definition of the term as it is described in many fashion but it is generally the economic fundamentals valuation of assets. The market fundamentals that drive the demand and supply can be considered as an overvalued currency. Technical factors also drive the supply and demand of assets. They rely on the changes in terms of supply to demand that results from the activities other than what the fundamental factors create. This can be explained using China's approval of the QFII program. This program allowed investors not native to the Asian country to buy Chinese stocks. The inclusion of these Chinese stocks on the MSCI global benchmark would have or should have increased the demand immediately for Chinese stocks. This would result in the increase of prices that was unrelated to and improvement in the economy's outlook.
It is taught that if there was an increase in price, it would be by an imperceptible amount. This is due to the trading levels being consistence with the supply and demand fundamental balance. The aim is for Chinese investors to off load their stocks at the point prices are increased thanks to the foreign purchases, unfortunately this was not the case. The prices fluctuated as expected from buying and in instances where the purchases materialized. In this instance, the fundamental valuation that usually anchors of the prices was absent.
The consensus of many traders is that the fundamental valuation has no real significance to the drive of the market. This is the opposite of what is taught in schools and one might have to unlearn this notion. Instead of total rejection, it might be more beneficial to you analyze the market and identify the times and conditions the prices react to the fundamentals.
Without the intervention of the PBoC the RMB currency is sure to lose value but it is not an indication that the currency is overvalued either. The truth of the matter simply is, if you were to try and obtain information from the fundamentals it is almost assured that you will get the complete opposite of what you seek thanks to the market itself being largely driven by technical. This causes the RMB to remain undervalued but not by a whole lot.
Is it possible for the market to settle on a suitable value for RMB?
Is it possible for the market to settle on a suitable value for RMB?aDo you support free trade? Do you support supply side economics? Do you support fiscal deficit limits and debt? These are all questions that seem to be of some principles but they are not. The same can be said for the value of the RMB being determined by the market. The principles sometimes work in certain situations and fail to in others. It may be best for you to just determine the conditions that they may work. The question arises about the conditions that would make China decide on the markets setting the value of the RMB currency.
In a situation such as this, you would have to ask yourself a couple questions. Do you have any political objectives such as the redistribution of capital or plan to aid in the protection, until it reaches a level of competitiveness, of selected industries? To answer this question you may need to look at the exchange rate as a whole then decide in which direction you will move it in relation economy's fundamentals. Some of the distortions in the Chinese economy will need to be eradicated as they are responsible for weakening the mispriced economical inputs and capital. In their case it has left them with a dependence on excess capacity, debt and a state in division. Innovative incentives and created values may be shadowed by the politics.

 

Fossil Fuel VS Renewable Energy Resources

  

Fossil Fuel VS Renewable Energy Resources

China, The world's largest producer of Photovoltaic power (it is a method to convert solar energy into current) and also the largest producer and consumer of coal . China leads the world in its production of renewable energy, to that of combined production of Germany and France power plants. China is in leading production of renewable energy than fossil fuels and nuclear power. In September 2013, as an action plan, to control the air pollution, China's government desired to utilize more renewable energy as it has abundant water, wind and solar power than oil, coal and gas. In the year 2013, the coal production and consumption increased rapidly and later on, it dropped continuously by 3.7% in 2015. However the central government restricted and issued directions for construction of new coal plants in the country, and the National Energy Agency banned new constructions of coal mines for three months and sealed some thousands of small coal mines. In the year 2016, even though wind power generation capacity increased , nearly 26% of the total turbines were not utilized up to their maximum extent. Despite this, new turbines, which can generate 33 million kilowatts of electricity are installed, and now the country reached in generating the electricity to 129 million kilowatts per year. In previous years the over supply of wind turbines and the lack of smart grid to control the fluctuations resulted in the wastage of the wind, hydro and solar energy. To meet the demand and to stabilize the supply, the local government, along with some grid companies assigned power quotas to control the weakening demand. Coal plants are the easiest and fastest way towards the economic growth and in creating jobs.
Diversified Preferences
Some of the experts expressed that, the adopted policies of the local government are not appropriate and they are interrupting the development of the renewable energy sources. And others expressed that government supports fossil fuels rather than renewable resources which are cheap and supports the local people by creating the jobs. In the month of December in some parts of the country the respective authorities squeezed the production and levied more fee on wind, solar and hydro power producers and in some places the authorities reduced the price paid by the state from 40 to 75 %, to facilitate the local grid. This was strongly opposed by the renewable energy producers, this resulted a major loss for the wind energy producers. Due to the consequences, the wind power generating companies lost more than 18 billion yuan in production slots, and the world's largest wind energy firms also suffered a loss of 500 million yuan in 2015 as some of their turbines were forced to stop the production. Despite the demand drops, the local authorities support the coal fired power plants, without central government approval, approved 155 new coal power plants which is three times more that that of the approval rate of the previous year.
Increased Pressure
In the year 2014, the National Development and Reform Commission (NDRC) in China, had set up some long term future plans and targeted to increase the production of non-fossil fuel sources to more than 90% by 2050. Coal is the cheapest source of power generator, which costs 0.3yuan for one kWh, whereas 0.6yuan for solar power. To meet the goal now the government has to impose a pollution tax or a carbon tax on producers of fossil fuels, ultimately then there will be a rise in the cost of production of electricity. If this tax is levied, then by 2020, the coal power generation cost increases to 0.85 yuan per kWh to that of 0.51 yuan and 0.62 yuan per kWh for wind and solar energy.
One of the Main Functions of the NDRC is to formulate and implement strategies of national economic and social development, annual plans, medium and long-term development plans; to coordinate economic and social development; to carry out research and analysis on domestic and international economic situation; to put forward targets and policies concerning the development of the national economy, the regulation of the overall price level and the optimization of major economic structures, and to make recommendations on the employment of various economic instruments and policies; to submit the plan for national economic and social development to the National People's Congress on behalf of the State Council.
The central government has to observe the consequences that are occurring by the local authorities and has to take certain measures to control and implement the national level policies which supports the economy's growth and works wonders.

 

  
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