Archive for the 'private enterprise' Category

China’s Most Incredible Holdout

March 8, 2007

The following is a news article translated from Southern Metropolis Daily. This is about a building site in Chongqing that has brought about suspicion on the web forums in China.

钉子户 = literally means “a slug house” but it means someone who refuses to move out from their house. I have translated it as a “holdout,” there might be a better translation but its all I could think of.

The original can be found here.

More pictures here

打更匠:这是售楼部吧
This must be the sales office building

mertin:可能是文物⋯⋯
It might be some sort of historical relic

yanlimm:这要练习攀岩啊?
Maybe people are practicing rock climbing here?

硬是:不知道这楼将来怎么盖,很考验施工技术啊
How are they going to build this building? This is a true test of construction technology

普通朋友:人家把周围挖了是要建护城河的
They excavated the surroundings to build a moat!

At the beginning of this month, a post titled “history’s most incredible holdout” started circulating on a famous BBS, the content of the post is a picture of a 10 meter deep pit dug around a solitary small two story building, just like a small boat in the middle of the ocean.

Netizens were all shook, either crazily praising “the most incredible holdout” or puzzled as to how anyone would live in there, and how would the building be developed. With regards to the source of the picture, the opinions of the netizens vary. Some people mistook this for last year’s “Most incredible holdout of Shanghai.” Both buildings do have resemblance. Some people also said this is from Chongqing, as they had passed through there in the past few days.

This reporter thus initiated investigation and interview

The isolated island on the side of the light rail

This reporter discovered, the picture first appeared on the internet on the 26th of February. At that time it was clearly written as: “Chongqing City JiuLong Hill District Yangjiaping Pedestrian Street. Author stood on Yangjiaping light rail station and took this picture.” Its possible because of the relative obscurity of the original BBS, and its wide circulation on the web that the original explanation was lost.

Local residents of Chongqing explained that this building is quite famous, alot of people in Chongqing have seen it. If you ride the light rail and pass through Yangjiaping station you are able to see a peculiar landscape: in the middle of a construction site stands a solitary small two story building, the surrounding soil has all been excavated, just like it was built on an isolated island. A chongqing resident then took a picture and named it “China’s most incredible holdout.”

Contractor Temporary Residence? Household resisting eminent domain?

One netizen said this wasn’t a holdout at all, it was actually the contractor’s temporary residence, there were also other netizens who supported this position.

After verification, this was determined as Chongqing city’s “Broadway” real estate construction site currently being put up in the residential quarter. A saleswoman who works for Weilian Real Estate Sales Company stated that the “Broadway” project is already in its second stage, the first stage has already completely been sold, and the small building is a holdout unwilling to relocate. The second phase is currently excavating the foundation; the circumstances are just like what you can see in the picture. For more information I was told to inquire with the developer, but I was unable to get through to their telephone.

Nobody is living in there now.

One netizen revealed, this house used to belong to the Yangjiaping Housing Management Office, according to theory, it’s a state-owned house, but for historical reasons it was rented out to a private leaser. The leaser wanted 200,000,000RMB from the developer or else he wouldn’t move. His family had some background and connections, so the developer didn’t dare take action. As a result this “wonder” was created.

Nevertheless, this netizen’s statement has not been verified. During an interview, Yangjiaping Housing Management Office’s Vice-Secretary Liu Ling indicated the situation was unclear. Furthermore, a worker on duty stated this building is a holdout who has stayed behind.

What the netizens are most interested in is if anyone is living in this building. If there is someone, how do they get in and out? An editor of the Chongqing Morning Report who everyday on his way to work passes through the area said that the building is deserted, there’s no furniture or he hasn’t seen anyone inside, and dug out like this its impossible for anyone to get in.

The Hamptons of China

March 5, 2007

IN Yiwu, a city of 680,000 in Zhejiang province, where the average income in 2005 was 19010 RMB, there also 82,118 cars(80% are privately owned), more than one car per 10 people. Now, these are not normal cars. Zhejiang is supposedly has one of the hottest provincial economies in China, but the wealth gap here is just unbelievable. Article can be found here

According the city transportation bureau’s statistics there are: (in 2005!)

2 Maybachs, 56 Ferraris、2 Spyker V8’s、5 Lamborghini’s、8 Lotus’、2814 BMW’s、1302 Benzes、3698 Audi’s、163 Porches、36 Hummers、8 Rolls Royce’s、32 Bentley’s、184 Caddilacs。

Party cadres busy promoting “social harmony” at their annual meeting. What better way than to drive up in a Ferrari!

China’s non-market economy, a Chinese perspective

February 20, 2007

This is a very interesting editorial that was featured in 南方日报 Southern Daily a few days ago detailing how private industry in China has been cut out by large SOE’s due to the enormous advatage their government connections have given them, most important being regulatory power over the market.

I have translated this from Chinese, original can be found Here


China’s Biggest Economic Threat Has Already Emerged

Ye Tan, Southern Daily

In the past few days, like a shooting star that is gone in a flash, the immeasurable amount of young female powerful elite has aroused people’s intense interest in the bagua or balance of finance and economic problems. Strip the cover off these ornamental surface issues, and the story behind the news is a refraction of private enterprises frantic inability to find a return on investment. Another just as important piece of news that lightly glided out of people’s vision: in 2006 State Owned Enterprise (SOE) economic performance increased by 18.2%, absolute profit rose, but relative decline, after experiencing the high growth of 2003 and 2004, centrally controlled SOE’s profit rate of increase declined by over 5%, central SOE’s have entered a declining passageway, the realization of over capacity and rampant production has taken a step closer to reality.

Private capital is unable to find a channel of investment, the commanding height of SOE’s monopolized profits are entering a decline, both sides folded together are the biggest threat to China’s economy. A key factor has been that until now, China has been unable to devise a way to efficiently use it’s resources. With the lack of high-efficiency enterprises, which are propped up by the internal demands of the market, this could imply the development of Chinese enterprises is unsustainable.

The worry of China’s SOE monopolized profits is being completely replaced by an even deeper worry: if the production of these high-grade, resource consuming gigantic enterprises see a decline in production, or if medium and small sized companies are unable to absorb the supply in raw materials provided by big SOE’s in China, what kind of economic situation will emerge?

This gradually recessive danger is emerging on the surface. The newest data from the State Statistics Department show that in 2006, raw materials and fuel wholesale purchasing prices increased by 6%, and that factory pricing of industrial products only increased by 3%. China’s capacity of production is in serious excess. The previous figures reflect the reality that the chain of raw materials and finished products between the upper and lower reaches of industry has become disconnected. The upper reaches of industry depend on price fixing power in order to increase production, and when they actively seek to make people admire their returns on investment, the lower reaches of the economy is left to do nothing but piece together a fight for survival. On the other hand, due to the decrease in profits for large-scale SOE’s, whose profits come from bank loans and the capital market, both which are almost completely owned by large SOE’s, we may yet see another push of state assets being shifted to the capital market.

Recently, this overcapacity has existed due to two main characteristics: the first is much of this phenomena been seen in the capital-intensive heavy chemical industry, for example: steel, electric power, petrochemicals, auto industry and construction materials etc. Secondly, government investment or government leadership takes up a considerable portion; the majority of industries experiencing overcapacity are solely dominated by large SOE’s. This reality warns us that the intentional and controversial bias in planning the allocation of resources has not achieved much success. Special privileged SOE.s in order to construct a high rate of return on investment, contrary to planning can create a devastating aftereffect.

Hong Kong Chinese University president Mr Liu Zunyi in the past pointed out that macro-economic in-stability is because of the bankruptcy of large scale enterprises, their failure will very quickly influence other companies. These failed companies faced with a heavy burden, will drag suppliers with them, and then suppliers will pull in other companies. This chain of events will ultimately lead to the closing of the banks, thus leading to a full-scale economic crisis. Even if it doesn’t lead to a full scale crisis, the dramatic reduction in costs by large companies in the heavy chemical and natural resources industries will still be hard for people to bear; banks, tax revenue, employment and the stability of society will all be seriously effected.

Both upper and lower enterprises can create a healthy industry chain through the means of implementing market adjustment to the pricing system, thus reaching a rough balance in supply and demand. Yet, due to the systematic differences in China’s upper and lower reaches of it’s economy, in reality what exists is a system of plundering, oppression and exploitation, leaving insufficient small companies with a thorough loss of space for making a profit. Today, with private capital losing space for survival, it is also time for the glacier like big companies to melt away.

This model will not only harm private industry concentrated at the lower reaches of the economy, but will sooner or later lead them to falsely accuse big industry for not allowing the enterprising of private companies, blind production, and the loss of global market price fixing ability. Increasing domestic demands and exports in order to solve this problem is not a realistic solution, expanding internal demand over the years has not seen significant progress: China’s trade surplus has already become the biggest drawback of economic development, leading to conflict at every turn. So-called expanding exports are no more than a meaningless term. The first step in solving these hard problems is immediately cutting preferential treatment for heavy industry. These man made special privileged companies simply in the pursuit of quick profits, are endangering China’s long-term economic security.

MIT processor Huang Yasheng’s research has indicated that China’s small and medium sized entrepreneurs after the golden boom of the 1980’s and early 1990’s have sunk into decline. The scope of China’s private industry is still incomparable to the peak time of growth for India’s private industry at the beginning of the 1980’s. (It created large barriers to limit the nationalization of banks, restriction of foreign investment, and the heavy hindrance of private enterprise.) The exhaustion of China’s private companies can be seen everywhere. Private industry is still unable to transgress the market entry threshold, large declining private companies have been bought out by SOE’s, investment faces obstructed channels, entrepreneurs are often chased off by the government, thus forth large private entrepreneurs seek the refuge with SOE’s, using a “Mixed economic model” to achieve success. These conditions without exception reflect the helplessness of private investment. Central SOE decrease in profits, represent private investments lack of a fair competitive platform, these hidden dangers are already unable to be covered up.

We almost always seem to fall into a state of hallucination upon hearing the cheery figures of China’s SOE’s, but their profit sources and investment return should warn us, this hallucination cant sustain for long, as this non-market economy which is the biggest threat to China, has already begun to emerge.