Commentary: Innovation can decorate China’s tomorrow

On Monday, the US Commerce Department banned American companies from selling components to China’s telecommunications-gear maker ZTE Corp. This triggered in-depth discussions focused on the urgency for China to support development of its own core technologies in the telecommunications industry.

China’s telecommunications industry has been developing rapidly with the percentage of self-made chips on the rise. However, in higher-end areas such as military telecommunications, domestically-made chips still have a long way to go before they catch up with their foreign counterparts in terms of stability and reliability.

Data has shown that in 2016, China spent $230 billion on chip imports, almost double the money used to import crude oil. That makes the industry realize that core technologies are a weak point, and conceding to others in this industry is the biggest hidden danger.

Faced with this gap, instead of losing faith in the development of our high-tech industry, we should be motivated, striving to master core technologies through self-reliance.

“It is foreseeable that from now on China will increase input to develop chips regardless of the costs and create a historic opportunity to the whole industry,” an investor said.

The government should foster a friendlier system and environment for innovation-driven development, such as creating more opportunity for scientific research and overcoming issues with chip design.

China has managed to develop a high-tech industry from scratch, so it should be confident enough to tackle core technology bottlenecks going forward.

China, as a large country, has a broad space to act in international trading system. The country is able to stand shoulder to shoulder with global telecommunications tycoons and its leading role in 5G era is by no means a result of self-isolation.

Self-isolation will only lead to a dead end, while cooperation will make the way easier. The US ban on exports has made shares of ZTE’s US suppliers fall sharply and so the companies have suffered heavy losses, a result of self-isolation.

China will continue to reform and open up further. By making good use of technological resources both domestically and internationally, it will achieve independent innovation while benefiting the world.

Chinese President Xi Jinping has said that we cannot always decorate our tomorrow with others’ yesterdays, and we should master our own crucial technologies to compete with other countries as well as to safeguard our national security.

Money cannot buy us core technology. The next step for China’s economy is to strive for high-quality development and achieve independent innovation of core technologies. The road is long, but the goal is attainable under diligent efforts.

Strategic competition with China will negatively impact US pension system

The US should not start strategic competition with China, an industry insider has said. He explained that the national financial distribution of the US will be affected by transferring resources for improving people’s lives to national defense.

Stephen Orlins, president of the National Committee on U.S.-China Relations (NCUSCR), said strategic competition with China will hurt the long-term interests of the US. While funding a strategic plan, the country will have to cut down on resources otherwise allocated to key sectors such as innovation, education and infrastructure.

According to a report released together by the NCUSCR and the Rhodium Group last week, two-way investment between China and the US fell by $43 billion in 2017, a drop of 28 percent from the previous year.

The report said this drop was due to China’s outbound investment regulation and the US’s tightened scrutiny of Chinese investment due to “national security” that has restricted businesses of Chinese companies, Xinhua stated.

Daniel Rosen, a founding partner of Rhodium Group, said on Tuesday that perhaps the China-US frictions are unavoidable in the days to come. However, he added that the two countries are actually in a complementary relationship in the economy. He believes economy will continue to be a ballast stone that serves welfare of the two nations.

Orlins said despite the drop in two-way investment, the rapid development of China-US investment is still impressive. He pointed out that when he first came to Shanghai 40 years ago, it never occurred to him that such enormous investment could be exchanged between the two countries 40 years later.

If the US rejects a Chinese enterprise which has won the bid for a public project and lets other bidders win with a lower price, that will devalue US pension funds used to support the public project. Eventually, this will reduce the pensions distributed to retired US teachers, firemen and police, he pointed out.

The US has been competing with China for years, just like it has been doing with the UK, France, Canada and Mexico. Although this is of course normal, the competition should not be lifted to a strategic level as it will hurt both countries, Orlins explained.

Experts: US trade deficit with China can be reduced by expanding cooperation in infrastructure and energy

Experts believe that the US-China trade deficit can be reduced by expanding infrastructure and boosting large transactions of coal power, electricity and gas. Heads of enterprises believe this is due to the two countries both having widespread needs in these sectors.

The Chinese infrastructure sector is now more open to the world than ever, thanks to the Belt and Road Initiative. At the same time, the US government has released plans to allocate one trillion US dollars to fund the infrastructure sector. This could signify a broader prospect of cooperation, experts said at Harvard China Forum, the annual conference in Boston that focuses on China-US relationship.

“In information construction for infrastructure, China has caught up with the world and even passed the US in some sectors,” said Tan Xu, president of China Telecom Americas.

Tan believes that China Telecom and mainstream US operators are partners rather than competitors. He disclosed that US technology companies are working with China Telecom on a number of new projects. Initiatives such as the New Cross Pacific, which is about to begin, and Hong Kong America, a sea cable project linking China and the US, show a partnership between the two nations.

Furthermore, the US should seize the opportunity brought by China’s energy transformation. They should see China as an opportunity for partnership instead of a rival, according to professor Qingyun Sun with US West Virginia University.

As China’s national policy to replace coal with natural gas is pushed forward, a shortage of gas in the country means a market for the US.

Li Shaolin, president of PetroChina International (America) Inc, says that after technology reform the price of a barrel of US natural gas is $42. However, the same barrel of gas is sold in China for $57, meaning the US has the price advantage between the two.

Li suggests that the US strengthen energy cooperation with China. By increasing bulky transactions in the sector, the US can help deduce a trade deficit with China. In 2017, China imported 420 million tons of crude oil, replacing the US as the world’s largest crude oil importer for the first time.

Li also disclosed that China’s ethylene imports from the US will reach 10 million tons worth $40 billion. He expects that the US exports to China will reach around $120 billion, more than the US’s goal to reduce $100 billion China-US trade deficit.

China will have 900 million middle-income earners by 2050

An expert has concluded that China’s middle-income population will pass 900 million by 2050, more than 60 percent of the country’s predicted total population.

The number of middle-income earners in China has already grown to 400 million, which tops the world charts in this area. He Lifeng, director of the National Development and Reform Commission, revealed these statistics during the annual sessions of China’s top legislative and advisory bodies in March 2018.

His opinion has been echoed by Su Hainan, vice president of the China Association for Labor Studies, who agreed that the size of China’s middle-income earners has exceeded 300 million. He specifically counted earners with between median and triple disposable incomes.

Chinese scholars adopt an objective standard to categorize the middle-income group. But for the earners, some of them do not recognize their income status.

For instance, a family from central China’s Henan province with an annual income of more than 200,000 yuan refuse to be referred to as a middle-income family. Besides daily expenditures, the husband and the wife both have to take care of their respective parents. If one of the seniors is seriously ill, their family income will be insufficient to cover the medical costs.

Su said cases of people falling back into poverty because of disease or illness is a concern to many families. The issue at hand, then, is how to make this group feel less anxious about the future.

He said stabilizing economic growth, improving people’s incomes, elevating the level of social insurance in a reasonable space and especially perfecting the social insurance system to make it an equal one are ways to give the group a better sense of self-identification.

In addition, more high-quality public services should be provided to defuse worries of the middle-income earners, Su pointed out.

According to statistics, the average disposable income of Chinese residents was 23,821 yuan in 2016. This is a 44.3 percent increase from 2012, meaning more people are joining the middle-income group.

However, the percentage of middle-income earners in China still lags behind that of developed countries. A social survey in the US during the 1980s found that 66.7 percent of American citizens regarded themselves as middle-income earners.

Su proposed four paths to expand the size of Chinese middle-income earners, including maintaining steady economic growth, deepening income distribution system reform, improving fiscal and tax systems as well as perfecting social insurance, employment and entrepreneur systems.

If these four measures are fully implemented, Su anticipates that by the end of 2050 the population of middle-income earners in China will reach 900 million, 60 percent of the country’s predicted total population.

Chinese export businesses stable amid tensions

Chinese firms’ export business appears so far to have been unaffected by tariff frictions between China and the US, as their export destinations have become more diverse and firms have sought independent innovation, Chinese businessmen told the Global Times.

At China’s largest and most important trade fair, which opened on Sunday in Guangdong, South China’s Guangdong Province, a number of exhibitors said their business has not been affected yet. However, some admitted that if the situation worsens, it might lead to rising costs for their US operations.

The 123rd session of China Import and Export Fair, widely known as the Canton Fair, has three phases, and the first phase, focusing on electronics, lasts until Thursday.

Zhang Ziyue, a sales assistant for the North America Region for Gree Electric Appliances Inc, said that orders from US customers are stable, although the proposed tariffs announced by the US may affect one of the components in their refrigerators for export.

“It’s possible that the price of replacing the particular component for our US customers might rise if the tariffs take effect, thus further affecting our after-sales service in the US, and this is worrying,” Zhang said. The US is one of their biggest export destinations.

“However, we’ve mentioned our concerns to our US customers, and they are quite optimistic about the coming situation and haven’t cut their orders,” Zhang said.

Feng Liguang, a trade representative for Wangxingda electronic company based in Meizhou, South China’s Guangdong Province, which mainly exports sound equipment to overseas markets including the US, said that he cannot see any influence in their US businesses now, but “we will see at the end of the first phase.”

“The number of buyers from South America and Africa has been increasing in recent years and they are our main customer base now, which is another reason why we are not affected so far,” Feng said.

Yao Shenghua, CEO of Jingsheng Import and Export Company, also said that they are doing business with more buyers from the Middle East and Africa now.

“The truth is, most Chinese companies’ export destinations are more diverse; no one puts all their eggs in a single basket now,” Yao noted.

An exhibitor surnamed Chen who runs an auto spare parts company based in Chengdu, Southwest China’s Sichuan Province, noted that most companies are so far not affected because the proposed tariffs have not been implemented yet.

“Some US buyers just visited our booth, and showed an interest in our company’s products, easing some of my concerns,” Chen said, adding that their products are also sold in Europe and Japan.

A US buyer, who talked on condition of anonymity, told the Global Times on Sunday that the trade connections between China and the US cannot simply be “cut” by rising tariffs. He has been coming to the fair for five consecutive years.

“For example, the auto parts, we don’t produce them in our country, we have to import from other countries like China. In the end, the rising costs will be paid by the US and Chinese people, which are stupid and will cause losses on both sides,” he said.

More than 200,000 buyers from around 210 countries and regions are expected to visit the fair this year. The number remains stable compared with 2017, though rising unilateralism and protectionism has further complicated the global trade environment, Xu Bing, spokesperson for the Canton Fair and deputy director general of the China Foreign Trade Center, said at a press conference ahead of the fair in Guangzhou on Saturday.

While Xu also admitted that there would be some uncertainties on the number of US buyers due to the Sino-US trade tensions, he stressed that buyers from the US are the second-largest group of overseas customers at the fair.

“Chinese exhibitors have already prepared for the situation through optimizing their product structure and actively exploring a diversified market,” Xu remarked.

China’s foreign trade reached 6.75 trillion yuan ($1.08 trillion) in the first three months, with export volumes reaching 3.54 trillion yuan, an increase of 9.4 percent and 7.4 percent year-on-year, according to data China’s General Administration of Customs released Friday.

Source: Global Times


Insurance industry ready for further opening-up: experts

China’s insurance industry has the conditions for further and speedy opening-up, and further opening up of the insurance industry will benefit China and the world as a whole, industry insiders believe.

As one of the first sectors to open up after China’s entry into the World Trade Organization (WTO), the insurance industry has been playing an important role within the national reform and opening up strategy, said Zheng Wei, chair of the Department of Risk Management and Insurance of Peking University.

The scale of China’s insurance industry has become the world’s second largest, with many domestic enterprises becoming Fortune 500 companies.

The modern insurance industry is an important pillar to high-quality economic and social development, a backbone for perfecting the financial system and an opportunity to guarantee livelihood and innovate social management.

“Furthering the opening up of the industry will provide a bigger platform and more business opportunities for foreign insurance institutions. These measures are not only what the world expects, but also an example of a proactive choice being made by China,” Zheng said.

According to statistics, by July 2017, investors from 16 countries and regions had established 57 insurance companies in China, with more than 1,800 branches.

The market share of foreign-funded insurance companies keeps increasing. Upon China’s entry into the WTO, their market share was less than one percent, and by the end of 2016 that number had reached 5.19 percent. The total assets of the foreign-funded insurance companies will surpass one trillion yuan ($151 billion) by the end of July 2018, which is 300 times what it had been previously.

In big cities, such as Beijing and Shanghai, insurance companies with foreign shares above 25 percent have accounted for more than 20 percent of the market. “In fact, that market share will be higher when foreign shares below 25 percent are counted,” said an official with the supervision department.

The foreign players have undoubtedly brought about many positive changes to the domestic market, for instance, forcing the Chinese companies to work harder, said Wang Xujin, a professor at the insurance department of the school of economics at Beijing Technology and Business University.

Chinese companies have learnt new technologies, management and concepts from their foreign counterparts, and improved services for Chinese consumers, according to Zhong An chief executive Chen Jin.

China targets to build a modern insurance industry offering comprehensive services and full functions by 2020, Wang Xujin said, adding that insurance fees will eventually account for 5 percent of the country’s GDP and furthermore that insurance concentration will come to 3,500 yuan per person by that time.

A more open market needs stricter supervision. China still lags behind developed countries in the business environment and the supervision system. “In the opening process, we should stick to protecting consumers’ rights and guarding a fair business environment,” Zheng Wei said.

Xi’s Boao Forum speech makes this Hainan folk song a hit

“Long time no see! Although we are with each other right now, I know I cannot wait to see you again,” Chinese President Xi Jinping borrowed words from a local folk song to extend his greetings to global guests at the opening ceremony of the 2018 Boao Forum for Asia held on April 10 in Boao, South China’s Hainan Province.

“Long Time No See”, a love song of the Li ethnic group in Hainan, is regarded as a window to Hainan music. The Li people are adept at singing and dancing. As one of the original residents on the Hainan Island, they have their own culture, in which music is the most splendid part.

Folk songs are an important tool to pass on the ethnic culture and customs as the Li ethnic group doesn’t have its own written characters. In 2008, the Li folk songs were put onto the national intangible cultural heritage list.

The Li folk songs are very distinctive even regionally. They cover a wide range of themes, including story-telling and feeling expression and they are sung at various occasions, such as at workplaces and at happy ceremonies.

The tunes of the Li songs are also rich. They are graceful and lyrical, resounding and bold, soft and touching, signifying the positive, unsophisticated, straightforward and firm character of the Li people.

One sentence of a song in the Li language normally consists of five words, while those found in the Hainan dialect generally consists of seven words. Furthermore, locally four sentences are referred to as chapters.

Pizza makers in east China give Westerners a taste of home

Because of pizzas especially made to target foreigners’ stomachs, a tiny pizzeria in China’s eastern city of Hangzhou has become a popular place among foreign students living in the city. The small pizzeria, less than 20 square meters in size, is packed with guests from the UK, the US, Italy and France at lunch time. The shop owners, a couple from east Anhui province, speak zero English.

Maritime Silk Road initiative applauded

International representatives on Monday praised China for its pursuit of the 21st Century Maritime Silk Road, which facilitates investment in island countries, while building networks between these distinctive economies.

At the ongoing Boao Forum for Asia Annual Conference 2018 held in South China’s Hainan Province, representatives from countries and regions along the Maritime Silk Road recognized that the Road would improve connectivity and bring huge opportunities.

“In the modern computer age, trade and investment benefit much from software – which is trade and investment … But aside from the software, we also need hardware and that is the Belt and Road [B&R] initiative, which provides infrastructure needed for trade and investment,” former Philippine president Gloria Macapagal Arroyo told the Global Times on Monday.

Larry Chan, president of Liwayway (China) Co, whose headquarters is in the Philippines, told the Global Times that construction of infrastructure in the Philippines had helped reduce costs, increased his company’s efficiency and competitiveness and had been key to overcoming physical obstacles, especially in the transportation of fresh products.

The Maritime Silk Road connects Thailand with the rest of the world, said Vira Rojpojchanarat, Thailand’s Minister of Culture, at a session of Boao Forum on Monday.

“By connecting with our country’s Eastern Economic Corridor, the China-proposed Silk Road Economic Belt and Maritime Silk Road link tens of million of people in Thailand through infrastructure projects like railways and airports,” Rojpojchanarat said.

John Aquilina, Ambassador of Malta to China, said at the same session that limited resources encumber Malta’s economic growth but the B&R initiative offers a solution.

“A good example is Shanghai Electric Power’s potential acquisition of a 30 percent stake in Malta Resource Co. By shifting an old resource public utility into a modernized one, our major resource will be natural gas instead of diesel in the future, and thus our environment will be greatly improved,” he said.

Eliminating weaknesses

Island countries’ weaknesses – simple industries, relatively small domestic markets and fragile environments – require these countries to forge a community of share future, Chi Fulin, president of the China Institute for Reform and Development, said at the same session.

How to improve connectivity and industrial cooperation while enlarging island economies’ market is crucial at this time, Chi said.

“We can jointly establish a pan- South China Sea tourism cooperation circle. If a breakthrough is made, it will greatly benefit the construction of the Maritime Silk Road,” Chi said.

Given island economies’ reliance on trade and investment, free flow of goods and capital helps release these economies’ growth potential, Chen Xiaodong, China’s assistant foreign minister, said at the same session.

Apart from free trade agreements with countries including Maldives, New Zealand and Singapore, China seeks free trade arrangements with more economies to build open global economy, he said.

As for free trade, Chi said on Monday that Hainan is very likely to launch significant measures to facilitate the opening-up of the services sector.

“With its important location along the Maritime Silk Road, Hainan is expected to launch new measures for all-round opening-up in 2018, with focus on the services sector,” he said, noting that Hainan plans to play a bigger role in the South China Sea region.

One of Hainan’s biggest firms HNA Group, will vigorously support construction of an international tourism island and a pan-South China Sea economic zone with direct flights linking countries and regions along the Maritime Silk Road.

HNA will help transform Hainan into a hub of the Maritime Silk Road with air routes connecting Hainan with ASEAN, the US, Australia and some EU countries, read a statement the firm sent to the Global Times.

Source: Global Times


Justin Yifu Lin: China able to maintain 6 percent GDP growth annually in next decade

China is able to maintain annual GDP growth of 6 percent in the next 10 years, Justin Yifu Lin, former chief economist of the World Bank firmly believes, reported on April 9.

The growth rate is capable of satisfying targets in various aspects related to the Chinese government and the people, Lin said at a breakfast meeting in the Boao Forum for Asia (BFA) on April 9.

He said to make that possible, three things are to be done. The first is to build a comparatively prosperous society in a short term. China needs to eliminate poverty, an object needing efforts of not only the government, but also the companies.

Also, financial crisis should be avoided, Lin said, adding that the Chinese government is taking measures to lower leverage for a soft landing.

He also said that the business environment should be improved and that green development should be further promoted. “China must find balance by adhering to green development. Furthermore, an open economy in China will benefit from and benefit the global market,” he explained.

Chinese economic growth should also be inclusive, which can be achieved by further deepening reform and building a modern society based on rule of law.

“China will possibly become the world largest economy, even when exchange rates are taken into consideration,” Lin said. “By then, China’s economy will account for more than 30 percent of global economy annually, becoming a very good opportunity for enterprises and people around the world,” the economist added.

The 2018 Boao Forum for Asia, themed “An Open and Innovative Asia for a World of Great Prosperity”, is being held in Boao, South China’s Hainan province.