China News in Brief June, 2016

Compiled by Yimin Zhang, University of Shanghai for Science and Technology and distributed free of charge.

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Jun17

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China's May CPI up 1.5%, PPI up 5.5% BEIJING - China's consumer price index (CPI), a main gauge of inflation, rose 1.5 percent year on year in May, the National Bureau of Statistics (NBS) said Friday. The CPI expansion in May is in line with estimates. It quickened from April's 1.2 percent, March's 0.9 percent and February's 0.8 percent. On a monthly basis, however, the CPI declined 0.1 percent, according to the NBS. Of the 1.5-percent CPI growth in May, 1 percentage point was contributed by the carryover effect of price increases last year, NBS senior statistician Sheng Guoqing said. The NBS attributed the pick-up in CPI partly to higher non-food prices, which grew 2.3 percent year on year in May. However, food prices dropped 1.6 percent. Meat and vegetable prices fell 7.8 percent and 6.3 percent year on year respectively. Excluding volatile food and energy prices, the core CPI increased 2.1 percent year on year in May, which is the same as the previous month. CPI increased 1.4 percent on average in the first five months of the year.The figure is well below the official annual inflation control target of around 3 percent. China's producer price inflation continued to ease in May as commodity price declines dragged down factory-gate costs, official data showed Friday. The producer price index (PPI), which measures costs of goods at the factory gate, rose 5.5 percent year on year last month, according to the National Bureau of Statistics (NBS).The pace retreated from the 6.4 percent growth registered in April and 7.6 percent in March. The index increased 7.8 percent from a year ago in February, the fastest since 2008. Month on month, the PPI edged down 0.3 percent, narrowing from the 0.4 percent decline in April. Factory-gate price declines in the ferrous metal mining and non-ferrous metal smelting industries widened to 4.1 percent and 0.9 percent from a month earlier, respectively, noted NBS senior statistician Sheng Guoqing. Meanwhile, price drops in the oil and gas extraction industry moderated and price gains in the coal mining ended. China's PPI has stayed in positive territory since September, when it ended a four-year streak of declines, partly due to the government's successful campaign to cut industrial overcapacity, which benefited the wider economy. The PPI figures came alongside the release of the consumer price index, which rose 1.5 percent year on year in May. Source: Xinhua: China's May CPI up 1.5%, PPI up 5.5%, 2017-06-9

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Zacks Investment Research: How China's Five-Year Plans Reflect Its Government Structure In order to manage a country of nearly 1.4 billion people under a single government body, both thoughtful planning and smooth execution are essential. The Communist Party of China (CPC) sets the country's agenda through what is known as the "Five- Year Plan (FYP)." This system has been in place since the plan of 1953-1957, when China first restored a functional economic base. FYPs were adopted after Mao Zedong, former leader of the Chinese Communist Party, was inspired by a trip to the Soviet Union, which also made use of the Five-Year model to plan initiatives for national development. Legislature The national legislature of the People's Republic of China (PRC) is known as the National People's Congress (NPC), and conducts annual sessions in spring. Although the FYP serves as China's broader agenda, the NPC is officially meant to iron out the country's plans for the near future, a 12-month time frame. Even though all 3,000 delegates representing each area within the expansive country are present, there is little debate. These delegates are mainly officials and party delegates, and deliberately choose not to speak up against CPC leadership on most occasions. The most important decisions, including the FYP, are decided upon months in advance by the Politburo Standing Committee, which is the highest branch of the CPC; it is currently led by President and General Secretary Xi Jinping. It is important to note that both the president of the PRC, as well as the Premier of the State Council (the second most powerful person in China), are elected by the NPC.The Thirteenth Five-Year Plan China is currently in its Thirteenth Five-Year Plan, which spans from 2016-2020. It was announced during the fifth plenum of the 18thCPC, and officially released after the 2016 NPC last March. The fifth plenum is the fifth of seven major meetings held by the Central Committee of the CPC, and is made up of the party's top leaders. It is held in the third year of the CPC's five-year term, and is usually the meeting during which the FYP is reviewed. The Thirteenth Five-Year Plan marks the first under Mr. Xi's tenure, and contains a multitude of proposals in various sectors. The plan targets a "medium- high" gross domestic product (GDP) growth of 6.5% per year that aims to double GDP and per capita income by 2020 compared to values in 2010. However, this growth target will likely see further reductions as the economy continues to stabilize. Something to note is that a "low" growth target for China is still quite high in context with the rest of the world (also read: Here's How Trade Drives China's Economy). The Thirteenth Five- Year Plan also sees the yuan join the International Monetary Fund's (IMF) reserve currency list, and increase yuan convertibility by 2020 (also read: How the Yuan Reflects China's Currency Policy). Additionally, the country hopes to increase its foreign investments through both federal and provincial governments. China will increase transparency requirements for these investments, along with increasing international cooperation concerning macroeconomic policy. China wants to increase military reform, aiming to establish a military system with "Chinese characteristics"; these changes include less highly-ranked generals and a concentration of branch functions. It also aims to expand the cyber economy through increased network speeds and lower fees. There many social changes in the Thirteenth Five-Year Plan. Notably,

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China is expecting to lift an additional 70 million people out of poverty (also read: The Meteoric Rise of China's Middle Class). It also wants to extend coverage of its social insurance system to all legal residents, as well as universal enrollment in retirement and critical illness healthcare plans. Insurance rates will also be lowered, while the retirement age will progressively be raised. The country hopes to enhance its social and mental health services. While this may not seem like a big deal, the decision signals a key change in a society where mental health issues had otherwise been largely ignored up until now. These changes, along with increased salaries for skilled workers, reflect substantive quality of life improvements. Other goals of the plan include increased autonomy within universities and research institutes and the end of the one-child policy (now the two-child policy). China expects a 5% increase in urbanization, with 60% overall, in addition to a 40% reduction in emissions per unit of GDP; the country also hopes to increase the use of non-fossil energy to 15% overall. China expects to implement a tighter policy concerning the protection of farmers' land, as well as a strict water management system and a national groundwater monitoring system, goals that suggest China now has the capacity to make more thoughtful structural changes.Looking Ahead The Thirteenth Five-Year Plan is a reflection of a focused China that hopes to retain its status as a key player in the world for the years to come. And according to a 2015 PricewaterhouseCoopers study, China could have a $36.1 trillion economy by 2030 and a $61 trillion economy by 2050. This would place the United States in second and third place in those respective time periods, falling behind India in 2050. While the report is speculative, current trends reflect a fair possibility of those estimations coming to fruition. Realistic, responsible five-year plans will lead China to a brighter tomorrow, but the foresight needed to create such policies is vital. China hasn't seen a recession in over a generation, so while that may not be an immediate concern, it is nearly impossible for the country to keep growing at the rate it has to date. Excess volume in the manufacturing, industrial, steel, and shipbuilding industries will likely continue; however, we may see the nation shift toward high-tech production under the "Made in China 2025" initiative. This aims to focus more on innovation and quality than quantity. In other words, China will concentrate more on modern, growing industries. For a look at more investment opportunities in China, check out this special edition of the Zacks Friday Finish Line, where hosts Ryan McQueeney and Maddy Johnson are joined by Brendan Ahern, the Chief Investment Officer of KraneShares. KraneShares is a leading provider of China-focused ETFs and Chinese investment education. https://w.soundcloud.com/player/?url=https%3A//api.soundcloud.com/tracks/3082602 74=ff5500=false=false=true=true=false3 Stocks to Ride a 588% Revenue Explosion At Zacks, we're mostly focused on short-term profit cycles, but the hottest of all technology mega-trends is starting to take hold... By last year, it was already generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for those who make the right trades early. See Zacks' Top 3 Stocks to Ride This Space >> Want the latest recommendations from Zacks Investment Research? Today, you

5 can download 7 Best Stocks for the Next 30 Days. Click to get this free report To read this article on Zacks.com click here. Zacks Investment Research The views expressed in any and all content distributed by Newstex and its re- distributors (collectively, the "Newstex Authoritative Content") are solely those of the respective author(s) and not necessarily the views of Newstex or its re-distributors. Stories from such authors are provided "AS IS," with no warranties, and confer no rights. The material and information provided in Newstex Authoritative Content are for general information only and should not, in any respect, be relied on as professional advice. Newstex Authoritative Content is not "read and approved" before it is posted. Accordingly, neither Newstex nor its re-distributors make any claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained therein or linked to from such content, nor do they take responsibility for any aspect of such content. The Newstex Authoritative Content shall be construed as author-based content and commentary. Accordingly, no warranties or other guarantees are offered as to the quality of the opinions, commentary or anything else appearing in such Newstex Authoritative Content. Newstex and its re-distributors expressly reserve the right to delete stories at its and their sole discretion. Source: Zacks Investment Research: How China's Five-Year Plans Reflect Its Government Structure, Newstex Finance & Accounting Blogs, Chatham: Newstex. Jun 15, 2017.

Li: China's growing economy records major reforms Maintaining a steady upward trend over the second quarter, the world's second- largest economy has shown noticeable achievements in structural reform, Premier Li Keqiang said on Tuesday. Li made the remarks when addressing the opening ceremony of the Summer Davos Forum in Dalian in Northeast China's Liaoning province. New economic driving forces contributed to more than 70 percent of China's employment in 2016, he said. The country will forge ahead, Li added, with economic structural reform and with inclusive and prudent regulation in new economic forms, such as e-business and mobile payments, and economic development would be both positive and clearly defined. In his conversation with Klaus Schwab, founder and executive chairman of the World Economic Forum, Li said China will stick firmly with steady macro-economic policies, with a proactive fiscal and prudent monetary policy. He said China will not resort to massive stimulative measures, and maintaining steady market expectations is of critical importance. China will further expand market access in the service and manufacturing sectors, relax restrictions on foreign ownership, and treat domestic and foreign companies on an equal basis, said Premier Li. "We encourage foreign capital to invest in central and western regions and the northeastern industrial base, where lie tremendous potential," he said, adding that the country remains one of the best investment destinations over the long term, with promising reward. Although China would applaud foreign companies to reinvest their profit in the country, there's no such restriction on the capital flow, he said. The country plans to relax the foreign equity ownership, while expanding the negative list to ensure an equal and convenient business environment among all

6 players, the premier said. Employment has been a top priority as the basis of inclusive growth, Li said. China added 13 million jobs every year over the last few years, and the registered urban unemployment rate stood at about five percent, he said. For a country with 1.3 billion population, maintaining full employment can lead to an inclusive growth, Li said. Economic globalization has greatly facilitated the flow of goods and capital, and all countries can benefit in the course, be it developing or developed countries, he said. However, the problems some countries have encountered are not caused by globalization, he added. "Just like when we sprain our ankle when walking on the road, we should not blame the uneven road and just stop walking," Li said. During the past 30 years or so of the country's opening-up, Chinese consumers have gained more choices of products from all over the world, he said, adding that this would be unimaginable without opening up and globalization. "We need to better steer and adapt to economic globalization, promote trade and investment liberalization and facilitation, and at the same time, reform and strengthen international trade rules to ensure equal rights, equal opportunities and equal rules for all the countries in international economic cooperation," he said. This year's meeting is for the purpose of responding to those changes and uncertainties with the stability and creativity that ensure the world continues the progress of human civilization, the premier said. "The world is making continued progress against the backdrop of globalization and the round of industrial revolution is giving birth to new industries, business models and technologies. Never before have we human beings been presented with so many opportunities of development," Li said. "We also see that the global economy recovery is progressing but the foundation is not yet firmly established and geo-political risks are on the rise and the structural challenges still abound." Li noted that he believed the world can use stability that keeps growing amid innovation and changes to defeat uncertainty as long as holding firm and indomitable spirit. The three-day event is expected to attract over 2,000 prominent personalities from politics, business, civil society, academia and the arts. This year's meeting, themed "Achieving Inclusive Growth in the Fourth Industrial Revolution," focuses on how technology and policy innovations can accelerate a more inclusive style of economic growth that prioritizes meaningful job creation and sustainable development. Source: Zhang Yue, Wu Xiaobo, Zhu Lingqing, Yu Xiaoming and Dai Tian: Li: China's growing economy records major reforms, China Daily, 2017-06-28

China, Taiwan press: Xi Jinping visits HK, new warship The National Intelligence Law lays the legal foundation as well as provides guidelines to authorities on intelligence work at home a and abroad via cooperation among multiple departments. ..." The intelligence law, which also supports counter- espionage work, gives Chinese intelligence officials more power and 'legal authorisation' to crack down on spies, who conduct their operations in the shadow. ..." (Interview with Li Wei, counter-terrorism analyst, China Institutes of Contemporary International Relations (state security ministry-affiliated think-tank)) (29)

7 http://bit.ly/2t37y9j Headline: "Hong Kong may be implicated in new intelligence law" Hong Kong's Apple Daily: hk.apple.nextmedia.com "... The National People's Congress (NPC) has recently been passed and adopted the National Intelligence Law and put it in effect immediately. Analysts believe this shows the Chinese Communists could not wait over what they saw was China's 'national security' in order to give departments the authorities to start work immediately. Source: China, Taiwan press: Xi Jinping visits HK, new warship, BBC Monitoring Asia Pacific; London [London]29 June 2017.

China's economic data in May China's economy generally maintained steady and sound growth in May, along with supply-side structural reform and innovation-driven development. Economic indicators like supply and demand, employment, consumer price, and profit of enterprises showed positive signs, and the economic development was more balanced and stable. "Led by supply-side structural reform and innovation-driven strategy, the national economy continued to grow steadily in May with increasing coordination of development," National Bureau of Statistics spokesperson Liu Aihua said. China's service sector has continued its expansion, with the Services Production index increasing 8.1 percent year on year. The NBS data suggested slower growth in property investment and fixed-asset investment but faster growth in consumption, as retail sales increased 10.7 percent year-on-year in May on the back of strong online sales figures. According to the International Monetary Fund, corporate debt is growing more slowly to reflect restructuring initiatives and overcapacity reduction. At the same time, house prices continue to cool with excess inventory reduced. Total social financing and Chinese yuan loans increased year-on-year in May, indicating robust financial support in the real economy, People's Bank of China data show. Retail sales up 10.7 percent Total retail sales of consumer goods in May reached 2.95 trillion yuan ($433 billion), up by 10.7 percent year-on-year, the same growth rate as the previous month. In urban areas, retail sales tallied 2.54 trillion yuan, a rise of 10.4 percent compared to the same time last year, while in rural areas the figure was 409.9 billion yuan, a 12.7 percent increase. Catering services earned 321.1 billion yuan, enjoying 11.6 percent growth year-on-year, and sales of goods was worth 2.62 trillion yuan, up by 10.6 percent. Total investment in real estate development in the first five months of 2017 was 3.76 trillion yuan ($552 billion), with a nominal increase of 8.8 percent year-on-year, dropping slightly since the start of the year. Investment in residential buildings was up 10 percent, accounting for more than two thirds of real estate development investment. Meanwhile, land purchased by real estate development enterprises totaled 7580

8 hectares in the first five months of the year, up 5.3 percent year-on-year. The growth rate dropped 2.8 percentage points from the figure for the first four months. FAI expands 0.72 percent. In May, investment in fixed assets increased 0.72 percent month-on-month. The growth rate over the first five months of 2017 was down 0.3 percentage points from the growth rate of 8.9 percent recorded for the first four months. Between January and May, private investment in fixed assets reached 12.43 trillion yuan ($1.82 trillion), an increase of 6.8 percent year- on-year. Compared with figures for the first four months, the growth rate was 0.1- percentage point lower, and the proportion of private investment in fixed assets to total investment in fixed assets (excluding rural households) remained unchanged at 61 percent. The growth rate in total value added of the industrial enterprises above designated size remained unchanged from April at 6.5 percent year-on-year in real terms (after deducting price factors). Month-on-month, the total value added of the industrial enterprises above designated size went up by half a percent in May. Across the first five months of the year, the figure was up by 6.7 percent year-on-year. The Producer Price Index (PPI) for manufactured goods increased 5.5 percent year- on-year in May, and decreased 0.3 percent month-on-month. The purchasing price index for manufactured goods increased 8 percent year-on-year, and decreased 0.3 percent month-on-month. Over the first five months, the PPI increased 6.8 percent year- on-year, while for manufactured goods the PPI rose 9 percent. The consumer price index (CPI) rose 1.5 percent year-on-year in May, while it fell 0.1 percent from April. From January to May, average consumer prices were up 1.4 percent from the same period last year. In May, China's manufacturing sector continued to grow steadily with the purchasing managers index (PMI) unchanged from last month at 51.2 percent. It is the eight consecutive month that the PMI has remained between 51 percent and 52 percent. In May, China's non-manufacturing purchasing manager index was 54.5 percent, 0.5 percentage points up from the previous month, maintaining position in the expansion range. China's imports grew faster than exports in May with customs data showing a 22.1 percent and 15.5 percent increase year-on-year respectively in yuan-denominated terms. Foreign trade volume reached 23,500 trillion yuan ($3,449 trillion) in May, up 18.3 percent year-on-year, with a trade surplus of 281.6 billion yuan. The first five months saw total foreign trade volume increase 19.8 percent year-on-year to 10.8 trillion yuan, with the trade surplus shrinking 21.1 percent to 994 billion yuan. The M2, a broad measure of the money supply that covers cash in circulation and

9 all deposits, grew at a record low of 9.6 percent from the previous year to about 160.14 trillion yuan by the end of May. At the same time, the M1, a narrow measure of the money supply that covers cash in circulation plus demand deposits, rose 17 percent year-on-year to 49.64 trillion yuan, slowing from an 18.5 percent increase in April and a 23.7 percent rise a year ago. China's fiscal revenue rose 3.7 percent year-on-year to 1.6 trillion yuan in May, according to the Ministry of Finance. The ministry attributed the lower level of growth rate to slow development of relevant economic indicators, implementation of such policies like tax reduction, and large base of revenues. Foreign direct investment on the Chinese mainland dropped 3.7 percent year-on- year in May to 54.67 billion yuan, extending a downward trend, the data from the Ministry of Commerce showed. The decline followed a mild retreat in the previous month, when FDI was 4.3 percent lower than last April, in contrast with a 6.7 percent increase in March. Despite a drop in the overall FDI, foreign investment in the mainland's service sector, especially high-tech and modern service industries, continued its steady growth. "Foreign investors are gradually quitting labor-intensive industries and shifting to capital and technology-intensive industries in China," Professor Sun Lijian from Fudan University said. Major industrial firms' profits rose 16.7 percent year-on-year, 2.7 percentage points higher than in April, the National Bureau of Statistics said in a statement. The companies reported a 22.7 percent profit increase in the five-month period from the same period last year, a slight drop from the 24.4 percent growth achieved over the first four months. However, it's still much faster than the 8.5 percent increase in 2016. Improving sales, upbeat investment returns drove the profit growth, according to the NBS. Tan Xinyu contributed to this story. Source: Tan Xinyu: China's economic data in May, China Daily, 2017-06-30

President Xi meets HK dignitaries HONG KONG -- Chinese President Xi Jinping on Friday met with a group of dignitaries from all walks of life of Hong Kong, urging them to take the lead in promoting exchanges and cooperation between Hong Kong and the mainland. Since Hong Kong's return to the motherland two decades ago, the successful practice of the "one country, two systems" in Hong Kong has won global recognition, Xi said. The Chinese president arrived in Hong Kong Thursday for a three-day trip to attend celebrations marking the 20th anniversary of Hong Kong's return to the motherland, and the inauguration of the fifth-term government of the Hong Kong Special Administrative Region (HKSAR).Inspection of the HKSAR is on his schedule. New situations and new problems emerging in practice should be treated in a correct and reasonable manner, Xi said, adding ways must be found to solve the problems. When difficulties are overcome and problems solved, progress is made in the practice of the "one country, two systems," he said. The central government stands firm on the "one country, two systems" principle. For Hong Kong, the focus is not whether the principle will change or not, but how to

10 implement it comprehensively and accurately, Xi stressed. He called for efforts from participants of the meeting to support incoming Chief Executive Lam Cheng Yuet-ngor and the new HKSAR government in administering Hong Kong pursuant to law, act as a bridge between the people and the government and facilitate economic development and the improvement of people's livelihood. They should take the lead in safeguarding unity, social harmony and stability, and help solve practical problems for young people, Xi said.

China's economy steadies on structural upgrade BEIJING - China's economic growth held steady in the first five months as key service indicators rose rapidly, suggesting that structural upgrades have cushioned long- term downward pressures. "Led by supply-side structural reform and innovation-driven strategy, the national economy continued to grow steadily in May with increasing coordination of development," said Liu Aihua, spokesperson of the National Bureau of Statistics (NBS) Wednesday. The NBS reported May growth of 8.1 percent for the service sector on Wednesday, flat with April and extending the rally since the beginning of the year. The data confirmed the message that the ongoing growth model transitioning was providing new impetus to the world's second largest economy. The service sector accounted for more than half of the Chinese economy last year. NBS data shows that the service sector has taken up a bigger share of GDP compared to the secondary industry in 60 percent of provincial-level regions. One of the latest provinces to join the trend was Shandong in eastern China. In the first quarter, the proportion of local service sector contribution to GDP rose 1.5 percentage points to 51.1 percent, according to the provincial government. Seven of the top ten provinces with highest GDP have seen such shifts. "The shifts show Chinese economy is becoming dominated by the service sector. Under downward pressures, industrial upgrades are vital for sustaining economic growth and avoiding the middle-income trap," said Chi Fulin, head of the China Institute for Reform and Development. In the eastern metropolitan of Shanghai, the proportion of the service sector contributing to GDP reached 50.8 percent in 2004. Local investment growth rate eased to 6.5 percent in 2014, lower than the 7 percent regional growth. The city's GDP grew 6.8 percent last year, exceeding the national growth rate for the first time in eight years, with the service sector contributing over 70 percent. "The change is a milestone in Chinese economy. It showed Shanghai got over the investment-driven growth model which China has relied on for years," said Li Yang, director of National Institution for Finance and Development, under the Chinese Academy of Social Sciences (CASS). Compared to developed countries such as the United States, however, the service sector's contribution to GDP in China remains low. But the sector has huge growth potential as it becomes increasingly attractive to investments. Wednesday's data showed that investment in the service industry jumped 11.6 percent year on year in the first five months, 3 percentage points higher than overall investment growth. Investment in the service sector rose 10.9 percent year-on-year in 2016, outpacing a 3.5 percent increase in secondary industries, according to official data. Other highly watched economic figures released Wednesday, including retail sales,

11 fixed-asset investment and housing sales, also supported firming of the economy. Boosted by strong online sales, retail sales grew 10.7 percent year on year in May, signaling continued consumption strength. Growth of the property development investment slowed for the first time since November as the market showed signs of cooling after the government's increasingly stringent cooling measures to quash potential asset bubbles. "Backed up by structural upgrades and improving development environment, we are confident of continued growth in the future," the spokesperson said. Source: Xinhua: China's economy steadies on structural upgrade, 2017-06-14

Resource Conflict Resolution in China Mineral resource extraction has frequently caused social tensions in China. This research examines the reactive and pre-emptive strategies used by the Chinese state to cope with resource conflicts. Based on extensive fieldwork in multiple mining areas, we find that the Chinese local state actively mediates between the mining sector and local citizens, and skilfully suppresses collective protests. More importantly, it pre- emptively intervenes in dispute-prone processes and redistributes resource wealth to create vested interests and mitigate popular grievances. We argue that the active state intervention in resource conflicts in China is driven by the party-state's tight control of local officials, which prevents local capture by resource interests, and enabled by the party-state's deep reach into society, which allows grassroots governments to negotiate between conflicting interests and mobilize resources towards conflict resolution. Resource conflicts are widespread across China and arise mostly because of the unaccounted and uncompensated negative externalities associated with the resource sector. Under China's weak rule of law, aggrieved citizens often fail to reach agreement with mining companies regarding levels of compensation either through private negotiation or judicial procedures, and consequently tensions can quickly escalate into organized protest and unrest. We find that the Chinese state has devised a range of coping strategies. In reaction to existing conflicts, local governments in mining areas actively mediate between the conflicting interests to broker agreements on compensation, and as a backup, they also skilfully suppress collective protests. More importantly, they proactively intervene in dispute-prone processes, create resource- based economic opportunities, and redistribute resource wealth to mitigate popular grievances against the resource sector. Compared to compensation and suppression, which use payouts and coercion to make protestors accept the reality, the pre-emptive strategies change citizens' preferences and mindsets and improve relations between the mining sector and local citizens. It seems that the Chinese party-state has many more tools with which to handle social conflicts than the existing literature has realized. The diverse and sophisticated strategies for conflict resolution help to explain the resilience of the Communist regime in the face of mounting social volcanoes. The implementation of these strategies requires both incentive and capacity on the part of the implementers, the local state. We argue that the party-state's tight control over local officials provides the ultimate incentive for local governments to respond to citizens' complaints to certain degrees. Although the existence of natural resources in

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China breeds corruption and collusion between local governments and mining businesses, the cadre management system largely ensures the loyalty of local agents and prevents total capture by resource interests. Meanwhile, the party-state's deep reach into society enables the local state to negotiate between the mining sector and local citizens. Without the many tentacles of grassroots governments and Party organs reaching into the economy and society, the local state would find it difficult to broker agreements between the conflicting interests and mobilize resources to compensate the victims. Therefore, the coexistence of local government incentive and capacity proves to be indispensable in resource conflict resolution in China. We argue that the key to resolving resource conflicts is to establish some redistributive mechanisms between the winners and losers in the resource economy. The Chinese strategies largely follow this logic, but not without flaws. One fundamental flaw is that these strategies are based on bargaining instead of the rule of law, in the sense that the resolution of resource conflicts does not follow clearly defined rules or procedures, but depends on the relative bargaining power of the involved parties. For example, when local governments face mining companies with stronger bargaining power, such as larger firms that carry more weight in the local economy or those with stronger political connections, they may be more inclined to leniency and so sacrifice the interests of local citizens. Alternatively, if the citizens adopt highly disruptive means to advance their requests, local governments may put more pressure on mining companies to give higher compensation sums in order to settle the disputes. Thus, bargaining-based conflict resolution can be arbitrary, outcome oriented, and incongruous with procedural justice. Furthermore, this form of resolution may defuse immediate conflicts but it cannot eradiate the root of the problem, the unfair distribution of benefits and costs of the resource economy, which should be addressed through the proper and legal regulation of mining industries, standardized accounts of their associated negative externalities, and institutionalized compensatory mechanisms based on the rule of law. Source: Resource Conflict Resolution in China, Zhan, Jing Vivian; Ming, Zeng. The China Quarterly; Cambridge230 (Jun 2017): 489-511.

China's overcapacity cuts progressing smoothly: NDRC BEIJING - China's top economic planner announced Thursday that the country's drive to cut overcapacity in steel and coal has progressed well. As of the end of May, 42.39 million tons of crude steel capacity and 97 million tons of coal capacity had been cut, accounting for 84.8 percent and 65 percent of the annual goals, respectively, said the National Development and Reform Commission (NDRC). China will phase out about 50 million tons of crude steel capacity and over 150 million tons of coal capacity this year, according to the NDRC. By the end of June, all facilities producing inferior- quality steel bars will be dismantled, the NDRC said in May. As excess capacity has weighed on China's overall economic performance, cutting overcapacity is high on the reform agenda. In 2016, China completed both its annual targets for coal and steel capacity reduction ahead of schedule. The government plans to adopt more methods based on market rules and related laws while phasing out outdated capacity. It also

13 decided to eliminate illegal production facilities and prevent those that have been shut down from opening again. Source: Xinhua: China's overcapacity cuts progressing smoothly: NDRC, 2017-06-15

Financial regulators vow reform and innovation Editor's note: A gathering like Lujiazui Financial Forum offers a platform for dialogues among financial regulators and professionals. The annual meeting, which kicked off in Shanghai on Tuesday, focuses on the industry issues and global economy. Here is a selection of quotes made on the first day of the forum. "Many Chinese financial institutions have entered the global market and have adapted to international competition, and have experienced substantial changes, particularly in terms of risk management, pricing, and anti-money laundering. ...financial service is a competitive industry and can benefit from opening up. China's financial sector is going to open up further." -Zhou Xiaochuan, governor of the People's Bank of China "China is falling short of financial innovation, rather than excess. We cannot waver or stop what has to be done in financial reform and innovation, due to some market chaos. It's not contradictive to strengthen supervision, prevent financial risk while deepening reform and pushing innovation." -Wang Zhaoxing, vice-chairman of the China Banking Regulatory Commission "We should retain an effective and consistent regulatory style, making timely response to the problems within market operation. We should prevent radical changes, and guard against systematic risk. Stability comes ahead of proactiveness. We should accelerate developing a multilayered capital market, laying a healthy and solid foundation." -Jiang Yang, vice-chairman of the China Securities Regulatory Commission "The primary purpose of insurance sector is to serve the real economy. We should strive to develop businesses closely related to the well-being of the country and people's livelihood." -Huang Hong, vice-chairman of the China Insurance Regulatory Commission Source: Financial regulators vow reform and innovation, China Daily, 2017-06-21

Opening benefits financial sector Zhou Xiaochuan, governor of the People's Bank of China, China's central bank, said further opening up helps to build a strong and competitive financial sector in China. Zhou said this in a speech on Tuesday in Shanghai at the Lujiazui Financial Forum 2017, an annual meeting focusing on the development of the financial sector and on issues in global ecomic development. He said protectionism hurts China's financial sector. Protectionism and protectionist behavior limiting the participation of foreign players in China would lead to laziness and weakness, and will lead to weak competitiveness, hurting the industry's development. "Protectionism ... will lead to unhealthy and unstable markets and institutions", he said. "Looking back, since China introduced foreign-capital banks to the domestic market, domestic commercial banks have learnt a lot from competition and helped China's financial sector in terms of product evolution, market building, business models, and management expertise. China's banks also have

14 improved a lot in terms of efficiency, asset quality and corporate governance through competition-driven equity reforms and public offering," said Zhou. China's financial institutions, which are also "going global", have benefited, said Zhou. "A lot of domestic financial institutions have entered the global market and have adapted to international competition, and have experienced substantial changes, particularly in terms of risk management, pricing, and anti-money laundering," said Zhou. Zhou said development and healthy trends in China's financial market have attracted the attention of the international bond market and emerging market index institutions, which illustrates that the financial services sector is competition-driven and has benefited from opening up. "China's financial services sector ... is going to further open up," he said. The second-phase development of renminbi cross-border interbank payment system will operate in Shanghai to facilitate wider international use of the renminbi, and financing projects related to the Belt & Road Initiative, said Zhou. Zhou said financing for development, such as those playing active and positive roles in the Belt and Road Initiative, would also bring more opportunities to China's financial sector opening up and international cooperation. While opening up, China's financial sector must always stick to risk-management standards and shall not tolerate highly leveraged, low capital and non-performing loans, said Zhou. Shanghai aspires to become a world- class financial hub and shipping services center by 2020, according to the city's long- term plan for the second decade of the century. By the end of 2016, Shanghai had 1,515 financial institutions, and has attracted more foreign asset management companies. Source: Wu Yiyao in Shanghai: Opening benefits financial sector, China Daily, 2017- 06-21

China to standardize insurance on credit risks BEIJING - To contain risk in the financial sector, China's insurance regulator issued a draft of rules to standardize insurance businesses and cushion against credit risks. Insurers that offer protection against credit risks may have a core solvency adequacy ratio of at least 75 percent in the most recent quarter, while their comprehensive solvency adequacy ratio should stay above 150 percent, according to the draft released by China Insurance Regulatory Commission. Companies that fail to meet the requirement should stop offering new insurance on credit risks, according to the draft. Insurance companies will also be prohibited from offering credit risk insurance to companies rated AA or lower. The companies should also establish a mature system of internal risk control and conduct due diligence on the client's willingness and ability to pay. The draft is currently open for revision, and the public will have until June 25 this year to provide opinions. Source: Xinhua: China to standardize insurance on credit risks, 2017-06-21

BOC, Tencent establish joint laboratory of financial technology BEIJING - Bank of China (BOC), one of the country's big four State-owned lenders, and Tencent have established a joint financial technology laboratory, said the lender in a statement on Thursday. The lab will work on cloud computing, big data, blockchain and artificial intelligence to promote financial innovation such as finance in the cloud.

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"After months of work, the two sides have made breakthroughs in the fields of cloud computing, big data and artificial intelligence applications, and set up a unified platform of financial big data," said the statement. The two companies will set up a cloud platform of financial technology, improve risk control and raise efficiency. China's service sector is expected to play a bigger role in powering the economy as increasingly affluent Chinese consumers demand more diverse and better-quality services. Source: Xinhua: BOC, Tencent establish joint laboratory of financial technology, 2017- 06-23

World News: Beijing Defends Efforts to Boost Jobs DALIAN, China -- Premier Li Keqiang made a strong defense of his signature program aimed at bolstering China's new economy as traditional drivers lose steam, saying the initiative has led to significant job creation. The "mass entrepreneurship and innovation" program, put in place in 2014 and intended to encourage individuals and businesses to jump into technology-oriented industries, has created millions of new jobs annually in the past few years, helping the nation keep its jobless rate under 5%, Mr. Li said at the plenary session of the annual June meeting of the World Economic Forum, which started Tuesday. The Chinese government has given priority to employment in its pursuit of inclusive growth that can benefit the public overall, Mr. Li said, adding that the program had led to "unimaginable job growth." His remarks come as concerns grow over the health of the world's second-largest economy. Mr. Li said China has sufficient capabilities to manage the risks, pointing to the country's high savings rate and Chinese banks' capital buffers. He also urged foreign investors to be "bullish about China." Mr. Li also vowed not to resort to stimulus measures to jump-start China's economy. Instead, he said, China will continue to focus on structural changes. Source: World News: Beijing Defends Efforts to Boost Jobs, Wei, Lingling, Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]28 June 2017: A.18.

China trims Q1 current account surplus, shifts capital account to surplus BEIJING - China has lowered its current account surplus and revised its estimate for the capital and financial account from a deficit to a surplus. The first-quarter surplus under the current account was cut to $18.4 billion from a preliminary figure of $19 billion, data from the State Administration of Foreign Exchange (SAFE) showed on Thursday. The country posted a $39.3 billion surplus in its capital and financial account in the first three months ending March, a revision from an initial deficit of $19 billion for the period, the SAFE said. The administration said China's outbound financial assets totaled $6.5 trillion at the end of March, with its outbound direct investment and overseas securities investment standing at $1.3 trillion and $392 billion, respectively. The SAFE said the data indicated domestic businesses have become more rational in making overseas investment while foreign investors remain upbeat on China's economic outlook and continue to increase investment. Source: Xinhua: China trims Q1 current account surplus, shifts capital account to surplus, 2017-06-30

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New regulations to ensure country's financial safety China's central bank will formulate regulations on finance infrastructure construction to guarantee national financial safety, its deputy governor said on Saturday in Beijing. Chen Yulu, deputy governor of the People's Bank of China, said that with the rapid development of finance technology, there are higher requirements on financial infrastructure construction. Key fields include payment, credit and financial statistics. In May, China's central bank set up a finance technology committee for fintech research and planning and paying attention to prevent risks. Source: Cai Xiao: New regulations to ensure country's financial safety, China Daily, 2017-06-3

China keeps manageable pace of financial deleveraging BEIJING - The market fears a cash crunch in late June as seasonally tight liquidity meets the mid-year macro-prudential assessment and tightening regulations in the banking sector. However, volatile market adjustments, seen in 2013 due to similar regulatory tightening, will not happen, as China's deleveraging process is manageable and balanced. China's financial regulators have rolled out a string of harsh regulations to crack down on financial irregularities in the past three months, with palpable effects. The broad measure of money supply, M2, hit a record low in May, growing at single- digit speed, according to the People's Bank of China (PBOC). While keeping cash conditions relatively tight to underpin the government's deleveraging efforts, authorities have been careful not to squeeze liquidity too much to avoid dampening demand. PBOC data shows that the total social financing and Chinese yuan loans both increased year on year in May, indicating robust financial support in the real economy. Meanwhile, recent economic indicators show that the economy is expanding steadily with strong consumption and slightly slower investment. Compared with the clampdown on risk in 2013, China is deleveraging the economy in a more pragmatic, balanced and coordinated manner, according to a research note from the China International Capital Corporation (CICC). Chinese financial regulators has improved coordination to maintain stable liquidity conditions and anchor market expectations since May. The PBOC has increased its net open market operation injections recently, injecting over 400 billion yuan ($58.6 billion) into the market last week, nearing a five-month high. Meanwhile, local government bond insurance also accelerated while the top banking regulator decided to give banks more time to check and rectify their problems. CICC expects incremental easing of market liquidity stress levels from June if the PBOC continues with open market operations to guide short- term rates to a more sustainable level. "Lessons from the global financial crisis showed us that guarding against financial turmoil should start from keeping financial institutions clean and not tolerating high-leverage and bad loan practices," Zhou Xiaochuan, governor of the PBOC, said at a forum Tuesday. Going forward, regulatory tightening will be gradual and pragmatic to balance the longer-term goal of financial deleveraging and the objective of maintaining stable growth and liquidity, CICC added. Source: Xinhua: China keeps manageable pace of financial deleveraging, 2017-06-21

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HSBC Wins Approval to Operate Majority-Owned Joint Venture in China HSBC Holdings PLC has received regulatory approval to operate a majority- owned joint-venture securities company based in China, the first foreign bank to win such a setup. The joint venture with Qianhai Financial Holdings Co. Ltd., a state-owned financial company, will be called HSBC Qianhai Securities Limited and will be based in Shenzhen, HSBC said Friday. The U.K. lender had been waiting since November 2015, when it announced plans for the joint venture, for approval from the China Securities Regulatory Commission. The joint venture will conduct stock research, underwriting of stocks and bonds and advising on domestic and outbound mergers and acquisitions, HSBC said, and is expected to launch by the end of the year. Foreign banks generally are not allowed to have majority control of their joint-venture businesses with local brokerage firms in China. They are capped at 49% of such ownership and most are restricted from trading domestic securities. Banks, including Goldman Sachs Group Inc., have clamored for years to get control of the businesses, hoping to reap more of the profits and be able to make more decisions on a local level. Beijing has signaled it is open to gradually allowing investment firms to have greater stakes, but so far the cap has remained in place. HSBC was able to secure a majority stake under an arrangement between Hong Kong and mainland China designed to encourage trade and economic cooperation. Under that arrangement, Hong Kong-funded financial institutions such as HSBC that satisfy various criteria are allowed to set up one such company each in Shanghai, Guangdong Province and Shenzhen. The Hong Kong-funded financial institutions can own up to 51% of the joint venture. HSBC has been deploying capital to fund growth in the Pearl River Delta, an area of southern China adjacent to Hong Kong. Separately, Bank of East Asia Ltd. also said Friday it had received approval to operate its own joint venture, East Asia Qianhai Securities Company Limited. Bank of East Asia will have a 49% stake in the company, which will also be based in Shenzhen. Source: HSBC Wins Approval to Operate Majority-Owned Joint Venture in China; HSBC becomes the first foreign bank granted such a setup in the country, Steinberg, Julie, Wall Street Journal (Online); New York, N.Y. [New York, N.Y]30 June 2017: n/a.

China punishes irresponsible securities brokerage firm BEIJING - China's securities regulator has punished the Chongqing-based Southwest Securities for not exercising due diligence on the reorganization of two companies. Southwest Securities served as the independent financial adviser for the reorganization of Shenzhen-listed Anshan Heavy Duty Mining Machinery Co. with Nine Top Group, an office service company based in east China's Zhejiang Province. The brokerage firm did not sign a delegation agreement with the Anshan Company as required by regulations, and failed to fulfill its responsibility of "full, extensive and reasonable investigation" into Nine Top Group, the China Securities Regulatory Commission (CSRC) said in a statement. Southwest Securities did not discover the facts that Nine Top inflated its service charge income and trade income from 2013 to 2015 and that it factitiously raised its bank deposits by 300 million yuan ($44 million), the statement said. The independent financial advisory report provided by Southwest Securities in April 2016 thus included false content and major omission. CSRC decided

18 to confiscate the brokerage's 1-million-yuan income from the case and impose a fine of 5 million yuan. Two staff members in charge of the business also received penalties. In past few days, the commission also dealt with three violations of information disclosure rules and another case of stock sales within restricted period, the statement said. Source: Xinhua: China punishes irresponsible securities brokerage firm, 2017-06-14

MSCI’s big China decision: Have authorities done enough to open up A-shares? Fund managers have said China has taken plenty of action that should encourage the MSCI to include A-shares in its Emerging Markets index, despite the provider's chief recently warning mainland shares may not be included this year. The MSCI is set to decide on June 20 whether to include A-shares in the EM index for the first time, after choosing to put off the move last year. It said then that investors needed more time to assess the effectiveness of the Qualified Foreign Institutional Investor program investment quota allocation and new trading suspension policies. Charlie Awdry, manager of the Henderson China Opportunities fund, said the move would bolster China's status as an investable proposition, similar to when the renminbi was included in the IMF reserve currency basket. Source: MSCI’s big China decision: Have authorities done enough to open up A- shares?, Kenway, Natalie. Investment Week; London (Jun 19, 2017): 5.

Press Release: Results of MSCI 2017 Market Classification Review MSCI Inc. (NYSE:MSCI), a leading provider of global equity indexes, announced today that beginning in June 2018, it will include China A shares in the MSCI Emerging Markets Index and the MSCI ACWI Index. This decision has broad support from international institutional investors with whom MSCI consulted, primarily as a result of the positive impact on the accessibility of the China A market of both the Stock Connect program and the loosening by the local Chinese stock exchanges of pre- approval requirements that can restrict the creation of index-linked investment vehicles globally. Consequently, MSCI plans to add 222 China A Large Cap stocks, representing on a pro forma basis approximately 0.73% of the weight of the MSCI Emerging Markets Index at a 5% partial Inclusion Factor. A two-step inclusion process will be used to account for the existing daily trading limits on Stock Connect. The first inclusion step would coincide with the May 2018 Semi-Annual Index Review followed by the second step which would take place as part of the August 2018 Quarterly Index review. MSCI reserves the right to revise the planned implementation to a single phase should the daily limit on Stock Connect be abolished or significantly expanded before the scheduled inclusion dates. MSCI will start to calculate a number of MSCI Provisional Indexes as part of the MSCI ACWI Index Series that include China A shares. These indexes serve to manage the implementation of the inclusion of China A shares in investors' portfolios on the schedule of their choosing. In particular, MSCI will launch the MSCI China A International Large Cap Provisional Index on June 21, 2017, followed by additional global and regional provisional indexes, including the MSCI China and MSCI Emerging Markets Provisional Indexes, in August 2017. "International investors have embraced the positive changes in the accessibility of the

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China A shares market over the last few years and now all conditions are set for MSCI to proceed with the first step of the inclusion." said Remy Briand, MSCI Managing Director and Chairman of the MSCI Index Policy Committee. "The expansion of Stock Connect has been a game changer for the market opening of China A shares." Mr. Briand added, "When further alignment with international market accessibility standards occurs, sustained accessibility is proven within Stock Connect and international institutional investors gain further experience in the market, MSCI will reflect a higher representation of China A shares in the MSCI Emerging Markets Index. MSCI is very hopeful that the momentum of positive change witnessed in China over the past years will continue to accelerate. " International institutional investors welcomed the expansion of Stock Connect and viewed it as a more flexible access framework compared to the current QFII and RQFII regimes. They also welcomed the decrease in the number of suspended China A shares, but continue to view the number of suspensions as an outlier compared to other international markets. Investors encouraged the Chinese authorities and exchanges to consider additional measures to address the issue of suspensions. The proposal to include Large Cap shares that are not in trading suspension was approved by the vast majority of institutional investors. Additionally, many of them also recommended that MSCI include China A Large Cap shares of companies that already have H share equivalents in the MSCI China Index. Hence, MSCI has amended its original proposal to include all China A Large Cap shares accessible through Stock Connect that are not excluded due to trading suspension. This change to the original proposal brings the number of China A shares in the pro forma MSCI Emerging Markets Index from 169 to 222. A subsequent inclusion of China A shares in the MSCI Emerging Markets Index could potentially include an increase of the currently announced 5% Inclusion Factor as well as the addition of China A Mid Cap shares. MSCI will continue to monitor the situation and launch a public consultation to solicit feedback from investors once warranted. In today's announcement, MSCI also said that it will include the MSCI Saudi Arabia Index in its 2018 Annual Market Classification Review for a potential inclusion in the MSCI Emerging Markets Index. Finally, MSCI today released the 2017 Global Market Accessibility Review for the 84 markets under its coverage. Each June, MSCI communicates its conclusions, based on discussions with the international investment community, on the list of markets under review. At that time, it also announces markets to be reviewed for potential market reclassification in the upcoming cycle. More details are available on MSCI's website at: https://www.msci.com/market- classification. Source: Press Release: Results of MSCI 2017 Market Classification Review, Dow Jones Institutional News; New York [New York], 20 June 2017.

MSCI adding China big-cap stocks to indexes－in a year MSCI's decision to include China A-share big-cap stocks in its Emerging Markets Index and All Country World Index is a big shot in the arm for further opening-up of Chinese equity markets. Morgan Stanley Capital International, known as MSCI, is a

20 leading provider of global equity indexes. Inclusion of the 222 China A-share large-cap stocks will not begin for a year. Further, A-shares weighting in MSCI indexes will be limited early on. Gao Ting, an analyst at UBS Securities Co, said in the short term the inclusion would not bring significant benefits to the A-share market considering how much capital would be channeled into A-shares compared with the size of the market. But in the long term, A-shares will be more appealing to international investors. Gao estimates some $14 billion could be channeled into A-shares in the long run, which is about 25 percent of A-shares' daily transaction volume. "After the inclusion, global investors will pay much more attention to A shares and seek more investment opportunities. In the longer term, there is great potential for more A-share stocks to be included in the indexes, and A-shares will weigh more in the indexes," Gao said. "On a 10-year view, this decision is very significant. This marks the beginning of A-shares, the biggest emerging equity market by market size and trading volume, joining the pool of investable assets to global investors. Over the past year, more offshore investors have expressed interest in Chinese equities for relative valuation, superior growth outlook and China's economic, social and political stability," said Wendy Liu, head of China equity research and chief strategist of Greater China with the Nomura global investment bank. According to Eric Lee, Seoul-based analyst with Daishin Securities, the move will have controllable impacts on the securities market in South Korea.China has made several efforts to increase A-share market accessibility. Source: Wu Yiyao in Shanghai: MSCI adding China big-cap stocks to indexes－in a year, China Daily, 2017-06-22

Governance minefield awaits China A-share buyers Two events — one that has just happened and one that may be imminent — are swelling the ranks of investors willing to bet that a great environmental rehabilitation in smog-choked China will become a stock market megatrend. First came last week’s decision by Donald Trump to pull the US out of the Paris climate accord, ceding leadership over the global green agenda to China and Europe. Then there is the prospect of MSCI, the index provider, deciding this month to include some Chinese A shares into one of its benchmarks for the first time. “What the Chinese dream about is blue sky and blue water,” says Karine Hirn, partner at East Capital, an emerging market asset manager. “Investment into the global leaders in environmental protection is very exciting.” Environmental degradation in China — the biggest emitter of greenhouse gases — has created an unstoppable “green” momentum, galvanised by social pressure and reinforced by Beijing’s regulatory will. This means there is no chance that Beijing will follow the US and back out of the 2015 Paris agreement to combat climate change, says Wang Yao, director-general of the International Institute of Green Finance in Beijing. Mr Trump’s move “makes China into a leader”, she adds in an interview. “But really we are just doing what we must do for our own domestic reasons. We face a very serious environmental challenge so we must continue with green development.” This imperative has accelerated an avalanche of investment in clean technologies, green transportation and renewable energy in the past few years. China has more than a third of the world’s wind power capacity; a

21 quarter of its solar power; six of the top 10 solar-panel makers; and four of the top 10 wind turbine makers. It recorded more battery-only electric car sales last year than the rest of the world combined. Ms Hirn estimates that a sum roughly equivalent to the GDP of Denmark is invested in Chinese clean tech each year, while the total market capitalisation of about 350 listed green Chinese companies is about $600bn. But although these are big numbers, she says, China will need far greater investment if it hopes to rehabilitate its contaminated air, land and water. John Lin, portfolio manager at AllianceBernstein, is also animated by the green theme. Opportunities have come in industries where small polluting factories have been shut en masse, boosting profit margins for larger environmentally friendly group, he says. In paper production, shares in Nine Dragons Paper and Shandong Chenming Paper have impressed, while there have been beneficiaries in steel, non-ferrous metals and chemicals, Mr Lin says. Ms Hirn favours the clean transportation theme, particularly companies involved in new energy vehicle technology. Opportunities beckon in waste management and air pollution control as local governments answer exhortations from Beijing to clean up their cities, she adds. Many companies that stand to gain from the green agenda are listed on the $7tn domestic A-share market, which remains exotic for many overseas funds. However, this could change on June 20. If MSCI decides to include A shares in its emerging markets index, passive managers will be obliged to take on exposure for the first time, while active managers seek the best Chinese stocks, says Caroline Owen, chief executive, of RMB Global Advisors in New York. “We are on the verge of one of the greatest rebalancings in global portfolios in recent years,” she says. MSCI delayed inclusion for a third straight year last June, citing regulatory worries and the need for greater accessibility for global investors. This year it has reduced the number of A shares slated for inclusion from 448 to 169, in a move that was intended to make inclusion more palatable to global asset managers. Source: Governance minefield awaits China A-share buyers by: James KYNGE; Financial Times, June 22, 2017

Xi calls for more ways to help poor President Xi Jinping visits a family in the mountainous village of Zhaojiawa, Kelan County, during his Shanxi inspection tour on Wednesday. He and the CPC are trying to lift families from poverty and to help them get rich. President Xi Jinping, while visiting a village in North China's Shanxi province, called on Wednesday for greater efforts and measures that are more effective to help those living in poverty. The people's longing for a happy life is the goal that the Communist Party of China is striving for, Xi said during a stop in the village of Songjiagou, Kelan County, during his Shanxi inspection tour. The village is newly built for local people who relocated from poverty-stricken homes nearby. Xi also is general secretary of the CPC Central Committee. The committee is making efforts now to lead people from poverty and to get rich, and the people's livelihoods will "rise joint by joint like sesame flowers on the stem," the president said. He called on the villagers to "roll up their sleeves and work on"

22 following the steps of the CPC Central Committee. During the tour, Xi also visited three families in the mountainous village of Zhao¬jiawa, which also is beset by poverty. Xi talked with villagers about the causes of their poverty and how to improve their incomes. He also went to the fields to inspect crops and check on the water in the village's only well. Xi recognized the local government's efforts to relocate villagers from impoverished areas to newly built residences. He urged local authorities to take more measures to help poor people improve living conditions and raise their incomes. In the village of Zhaojiawa, Xi held talks with civil servants who were dispatched from the Kelan county people's congress for the village's poverty-alleviation work. He encouraged the civil servants to have intensive contacts with villagers and help them out of poverty. Noting that the CPC has dispatched a number of officials and teams to take charge of poverty relief at grassroots organizations in recent years, Xi said that the measures are effective for poverty alleviation. He encouraged the promotion of officials capable of poverty reduction. The president has paid much attention to poverty reduction in recent years. In his New Year's address, Xi said that what he cares most about is poor people. The poverty reduction work requires tailored relief policies and precise measures, and sometimes patience and accuracy, like "doing embroidery", Xi told lawmakers during the top legislature's annual session in March. Under a standard set in 2011, China categorizes individuals with an annual income less than 2,300 yuan ($334) as poverty-stricken. The CPC has promised to lift all those still living in poverty out of that status by the end of 2020. The number of people living in poverty nationwide was reduced by 12.4 million last year to 43.35 million. The government will lift another 10 million people out of poverty this year, according to the Government Work Report. During the inspection tour on Wednesday, Xi also visited a memorial hall in Xingxian County, Lyuliang, and presented flowers at the site for revolutionaries there. At a former headquarters of a military command of the Communist Party of China during World War II, Xi urged the public not to forget the revolutionaries who contributed to the success of the revolution, the resistance against Japanese invaders during World War II, the founding of the People's Republic of China, and the socialist revolution and construction. Source: AN BAIJIE: Xi calls for more ways to help poor, China Daily, 2017-06-23

Premier Li to ensure reliability of nursing care insurance “The commercial pension care insurance, similar to social security fund, comes from people’s pocket. All insurance organs must ensure its security,” Premier Li said during the State Council executive meeting on June 21. The meeting decided to speed up measures in the development of commercial pension care insurance to improve the social insurance system and provide basic health care for the elderly. “To make people purchase the insurance, the government should regard safety as a priority while lowering their expectations on payback and following the rules of operation,” said the Premier. Premier Li added that the development of such an industry should stick to market principles while providing individualized and differentiated health care services, in order to attract people to voluntarily purchase the products. For a nation with over 1.3 billion people and annual labor increase of over 15

23 million people, employment is becoming more flexible as new modes spring up. Along with this development is the aging population. Data shows China has more than 200 million elderly over 60 years old. To adapt to the aging population and new employment trend while satisfying people’s increasing demands for pension insurance, efforts should be made to improve the social pension system. Commercial pension insurance is an important part of such system, the Premier said. According to the Premier, government organs should implement financial and taxation policies to support insurance and the elderly care service industry, accelerate commercial pension insurance trials, encourage commercial pension insurance institutions in basic pension insurance fund and investment management, and offer commercial pension insurance capital with quick and convenient service. Efforts should also be made to enhance supervision, improve insurance institutions’ services and protect consumers’ legal rights, he added. Source: The STATE COUNCIL of The PRC: Premier Li to ensure reliability of nursing care insurance, 2017-06-23

Chinese mainland, HKSAR sign two new agreements under CEPA The Chinese mainland and Hong Kong signed two new agreements under the framework of the existing bilateral economic pact Closer Economic Partnership Arrangement (CEPA) on Wednesday. Chinese Vice-Minister of Commerce Gao Yan and Financial Secretary of the Hong Kong Special Administrative Region Paul Chan addressed the signing ceremony. The two agreements, the Investment Agreement and Agreement on Economic and Technical (Ecotech) Cooperation, came into effect on the day of signing, with the former to be implemented from January 1, 2018. The Investment Agreement is the first investment agreement of the mainland with pre- established national treatment commitments made for the advocation of investment adopting a negative listing approach. Furthermore, the agreement on Ecotech specially emphasizes mainland's support to Hong Kong in participating in the Belt and Road Initiative. Signed on June 2003, CEPA covers four areas: trade in goods, trade in services, investment, and economic and technical cooperation. So far, the Chinese mainland and Hong Kong Special Administrative Region have signed 10 supplement agreements, six appendixes, and two agreements related to service trade (excluding the two agreements signed on Wednesday). Source: Chinese mainland, HKSAR sign two new agreements under CEPA, China Daily, 2017-06-29

China's sharing economy facing more market competition, government support BEIJING — China's sharing economy is facing mixed prospects for growth: market competition is increasing and weighing on players, while the government is trying to offer more support to create an enabling environment. Bicycle sharing, representative of China's popular sharing economy, has been making headlines in the past week. Wukongbike, a bicycle-sharing app developed by a Chongqing-based company, announced it will stop service on June 13, citing rising cost burdens due to lost bikes. It is the first bicycle-sharing market player to be pressured out of the sector.

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The two bicycle-sharing giants ofo and Mobike also face many uncertainties in the future despite having deep pockets, as their respective major investors Monday debated online over which firm will take the lead. About 30 bike-sharing brands have sprung up in China, placing millions of bicycles on streets around the country and attracting over 100 million users. "The bicycle- sharing sector is now undergoing a reshuffle and weak players might be forced out of the market by the end of this year," according to Wang Chenxi, analyst with Analysys, a domestic data analysis provider. While the market can be cold-hearted, the good news is that the central has decided to nurture the sharing economy's sustainable growth. The State Council, China's cabinet, Wednesday announced its decision to facilitate the healthy development of the sharing economy, amid its efforts to boost mass innovation and entrepreneurship. The sector will enjoy easier access, greater policy transparency, and better protection of legitimate rights of platform companies, resources providers, and consumers, according to the statement released after the State Council executive meeting chaired by Premier Li Keqiang. These moves will help mass innovation and entrepreneurship thrive, create more jobs and provide more diverse and efficient services at a lower cost, the statement noted. "We should give credit to the sharing economy as a reinvigorating force in China's economic growth," Li said. Entrepreneurs are encouraged to explore the sharing economy, while the authorities aim to adjust administrative approval and business registration procedures in light of new business models. Authorities are tasked with improving public services in terms of data sharing, government service procurement, urban planning and resources management innovation, the statement said. Financial institutions are encouraged to provide innovative services and products tailored to the demands of companies in the sector while innovative companies are encouraged to go global, establish their presence and build their brand name. Sharing, whether bicycles, automobiles, property or any other asset, has become popular in China, as people seek to make their lives easier and save resources. The trading volume of China's sharing economy more than doubled year-on-year to 3.45 trillion yuan ($505 billion) last year, according to a report released by the State Information Center. The sharing economy will grow at an average annual rate of 40 percent over the next few years and will account for more than 10 percent of the country's GDP by 2020, the center predicted. The rapid development of the sharing economy also bring challenges for urban management. For example, haphazardly parked shared bikes has led to congested city sidewalks. The Ministry of Transport (MOT) issued draft rules last month requiring real-name registration for the bike-sharing service while urging local governments to better manage bike sharing and arrange for orderly parking. "The regulation of sharing economy should be tolerant while prudent, as there is still much yet to be learnt about new business models. We should avoid simply applying traditional methodology on sharing economy," Li said. Source: Xinhua: China's sharing economy facing more market competition, government support, 2017-06-22

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Chinese e-commerce adapts to new consumption trends BEIJING - As Chinese consumers become increasingly affluent and sophisticated, the country's e-commerce companies are catering to new consumption patterns to grab a larger market share. Yanxuan, an e-commerce site under Chinese internet company NetEase, offered a special deal for the June 18 shopping festival: customers can enjoy 20 percent off for the first three items they buy, but no discount will be given for any extra purchase. They want to concentrate on the quality of purchases not just the volume. Just like its name, meaning "strict selection," Yanxuan is trying to make its way through a crowded e-commerce market with quality control and calls for a simpler lifestyle. NetEase is not alone in adapting to changes in consumer demand. According to a report jointly released by e-commerce giant JD.com and data analytic firm Analysys, Chinese consumers are becoming more and more rational in their online shopping behavior and tend to focus more on the shopping experience rather than just low prices. Companies acted fast on the change. MIJIA, an online e-commerce site launched by leading smartphone maker Xiaomi, offers selected products, especially smart devices and home appliances, to meet the demand of consumers craving high quality goods. Alibaba's Tmall changed its slogan from "It's enough to shop on Tmall" to "Go on Tmall for an ideal life" this year, reflecting a shift toward quality products. "E-commerce companies in China are gradually moving up the supply chain, producing high-quality products themselves. That will be an important trend for online retail in the future," Analysys said in another research report. In addition to quality upgrades, e-commerce giants in China are also looking at physical retail stores, trying to integrate online and offline customer experiences, using big data. China's online shopping is seeing robust growth, with total online retail sales hitting 2.47 trillion yuan in the first five months of 2017, up 32.5 percent year on year. However, physical goods sold online accounted for only 13.2 percent of total retail sales in the same period, according to the National Bureau of Statistics. That leaves Alibaba and other e- commerce companies a lucrative offline market that is relatively untapped. In a speech last year, Alibaba founder Jack Ma raised the concept of "New Retail," which aims to eliminate the distinction between online and offline commerce via streamlined services from shopping to payment and delivery. Since then, Alibaba has made dozens of ventures in offline retail, including its share-swap deal with Suning Commerce Group and a deal to merge with brick-and-mortar retail chain Intime. In May, Alibaba bought an 18 percent of stake in Lianhua Supermarket, becoming the second largest shareholder of the supermarket chain, which operates more than 3,600 affiliated stores throughout 19 provincial-level regions in China. The investment in physical stores allows e-commerce companies to better integrate data collected offline to create more sophisticated customer profiles, offering customized shopping experiences, according to analysts. For example, Hema Xiansheng, a fresh food chain invested by Alibaba, only accepts online payment at its physical stores. With a mature logistics system, the company allows customers to order online and delivers fresh food within 30 minutes ordering. "New retail, in its essence, is a strategy that adapts to the change in customer demand," said Hou Yi, founder of Hema Xiansheng. "Online retail is playing a dominant role in reshaping the retail industry," the Analysys report said. "We expect to

26 see more cases of strategic cooperation between online retailers and physical stores." Source: Xinhua: Chinese e-commerce adapts to new consumption trends, 2017-06-16

China extends tax breaks to encourage rural financing BEIJING - China announced Tuesday it would continue tax breaks for financial institutions lending to rural households to support the development of financial services in the countryside. Financial institutions will be exempt from value-added taxes for interest income from small loans to rural households from Jan 1, 2017 to Dec 31, 2019, according to a notice from the Ministry of Finance and the State Administration of Taxation. In addition, only 90 percent of such income will be subject to income taxes, according to the notice. Similarly, only 90 percent of insurance firms' premium income from policies sold to rural agricultural businesses will be taxable. Under the preferential tax policy, small loans refer to loans of no more than 100,000 yuan ($14,713) borrowed by a rural household at one time. Total outstanding loans for the household should also not exceed 100,000 yuan. Outstanding loans to China's rural sector stood at 29.23 trillion yuan as of the end of the first quarter this year, up 8.9 percent year on year, according to the central bank. Source: Xinhua: China extends tax breaks to encourage rural financing, 2017-06-14

Strains Emerge as China's Dollar Debt Piles Up A fall in the price of bonds issued by China's largest property developer last week is adding to strains in the market even as Chinese companies continue to pile up a mountain of dollar-denominated debt this year. China Evergrande last week sold bonds worth $6.6 billion in total, the largest issuance by an Asian high-yield company ever, according to Dealogic. The company issued $3.8 billion of new and exchanged $2.8 billion of old bonds into new debt, paying coupons of up to 8.75%. Still, the bonds fell sharply in their first few days of trading, and on Monday, just days after the issue, they were still trading below their face value, according to Thomson Reuters data. Such a price fall is unusual for newly issued bonds, market analysts say. Evergrande's bond deal comes on top of a dizzying amount of dollar-bond issuance by Chinese companies this year. Collectively, they have sold about $90.5 billion in dollar debt, nearly as much as the $102.8 billion issued in all of 2016 and already more than the $84.8 billion issued in 2015, according to Dealogic. The year-to-date issuance is a record this century, based on Dealogic data. Alongside the surge, Chinese regulators have in recent months tightened scrutiny over companies wishing to issue bonds overseas. The Wall Street Journal reported last week that China's banking regulator is checking the borrowings of some of the country's biggest overseas deal makers, including property giant Dalian Wanda Group. The offshore bonds of many of those companies were hit hard last week, according to research firm CreditSights. Market participants said the fall in Evergrande's bonds appeared to be mostly due to a large amount of bonds being allocated to buyers. Investors often place larger orders for new bond issues than they want to receive, because they do not expect to get the full amount of their order. "The price reaction was predominantly because of the very large volume," said Rick Mattila, international head of market strategy at MUFG Securities Asia Ltd. in Hong Kong.

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"Investors ended up with more bonds than they would have perhaps liked." Evergrande could not be reached for comment. Chinese companies have turned to offshore markets for funding in recent months as Beijing takes steps to bring down the country's lofty debt levels. Rising yields in China's government-bond market have made it more expensive for Chinese companies to borrow onshore, since investors generally demand even-higher yields to own corporate bonds because of the risk of default. Falling U.S. Treasury yields have made it more attractive for Chinese companies to issue U.S. dollar debt. The yield on the 10-year Chinese government bond has risen to 3.566% on Monday in Hong Kong from 3.07% at the end of 2016, while the 10-year U.S. Treasury yield has fallen to about 2.135% from 2.43% in the same period, according to Thomson Reuters data. "One consequence of the deleveraging campaign by the [Chinese] government: Companies have been able to borrow more cheaply offshore than onshore," said Teresa Kong, a portfolio manager at Matthews Asia in San Francisco, adding that she owns some dollar-denominated debt issued by Chinese companies. Chinese investors who have stashed dollars away offshore, and are familiar with the companies raising debt are snapping much of that dollar debt up, market participants say. Some say investors could now become more selective about dollar debt issued by Chinese companies. "For high-quality names, the appetite is still there," said Ben Sy, head of fixed income, currencies and commodities at J.P. Morgan Private Bank in Hong Kong. The boom has caught the Chinese authorities' attention. The National Development and Reform Commission, the country's economic planning ministry, has required most Chinese companies to register their plans to issue offshore bonds since September 2015. That has operated more like an approval process recently, market participants say. In recent months, the NDRC has cracked down on foreign-debt issuance by property companies and financing vehicles linked to local governments, according to Ying Wang, a senior director at Fitch Ratings in China. On June 12, the ministry issued a statement naming companies that had not complied with registration requirements, and warned others from doing the same. Still, if the debt has a maturity of less than one year, it does not need such approval for issuance, according to the NDRC's official rules from 2015. Some Chinese companies have recently issued bonds with maturities just shy of one year--including by just a day. Fantasia Holdings Group Co. Ltd., which focuses on property, this month issued 364-day notes that pay a coupon of 5.5%. Also in June, Hainan Airlines Hong Kong Co. Ltd. issued 364-day U.S. dollar senior notes that pay a coupon of 5.5%, and Greenland Global Investment Ltd. issued 363-day U.S. dollar senior notes that pay a coupon of 4%. Some analysts are warning investors to be careful of such bonds. "I am generally a bit of a skeptic on this," said Harsh Agarwal, head of Asia credit research at Deutsche Bank. "If this avenue closes down, you have to be sure that the company can repay the bond." Source: Strains Emerge as China's Dollar Debt Piles Up; Evergrande's $6.6 billion of dollar-denominated debt is trading below face value days after sale, Vaishampayan, Saumya. Wall Street Journal (Online); New York, N.Y. [New York, N.Y]26 June 2017: n/a.

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CHINA: Summit moves OBOR towards internationalisation The future of China's One Belt One Road initiative: China convened the first summit of the Belt and Road Initiative (previously known as 'One Belt One Road', OBOR) on May 14-15. With this major diplomatic event, President Xi Jinping aimed to showcase and buttress international support for his central foreign policy initiative, the success of which will hinge on the participation of other countries, regional organisations and international financial institutions. Their contribution, or lack thereof, will affect the nature of OBOR and determine the impact of the Chinese initiative on Asia's infrastructure connectivity and economic system, as well as on the international order. SIGNIFICANCE: China convened the first summit of the Belt and Road Initiative (previously known as 'One Belt One Road', OBOR) on May 14-15. With this major diplomatic event, President Xi Jinping aimed to showcase and buttress international support for his central foreign policy initiative, the success of which will hinge on the participation of other countries, regional organisations and international financial institutions. Their contribution, or lack thereof, will affect the nature of OBOR and determine the impact of the Chinese initiative on Asia's infrastructure connectivity and economic system, as well as on the international order.

ANALYSIS: Impacts. : Cooperation between China and multilateral development banks may increase the number of OBOR projects with competitive procurement. Plans for OBOR's corridors may be altered to accommodate competing visions for Asia's connectivity, such as Russia's. The Asian Infrastructure Investment Bank may more formally align its mandate with OBOR's. 110 delegations, 29 national leaders, and the heads of the UN, IMF and World Bank attended the first Belt and Road Forum for International Cooperation. Their presence demonstrated the international support for Xi's signature foreign policy initiative.

Institutionalisation. : China capitalised on this support to anchor OBOR in an embryonic set of dedicated structures. Xi announced the establishment of an advisory council and a liaison office for the summit's follow-up activities, along with operative mechanisms such as the Facilitating Center for Building the Belt and Road. Since the launch of the initiative in 2013, China has used OBOR as a narrative to guide and justify various domestic and foreign activities. Similarly, foreign countries and Chinese provinces have used the OBOR brand to obtain the Chinese central government's backing for various infrastructure projects. The new institutions, however, have the potential to empower OBOR with the capacity to enable activities that would not have otherwise taken place. The nascent framework will remain under the authority of China, which is also due to host the next OBOR summit in 2019. Made in China. : OBOR remains a physical and relationship network with China as its sole node. For instance, bilateral agreements represented most of the 76 items in the list of deliverables prepared by the Chinese delegation. Similarly, only China committed new financial resources for OBOR, the bulk of which is to be delivered via bilateral channels.

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They include: 100 billion renminbi (14.5 billion dollars) for the Silk Road Fund, the China-owned investment fund established in 2014; 130 billion renminbi for the China Export-Import Bank; and 250 billion renminbi for the China Development Bank, for the creation of multi- currency lending schemes for infrastructure and industries, and multi-currency credit lines for foreign financial institutions. In a bilateral setting China can leverage its full weight to achieve its economic and strategic goals under the OBOR. In particular, tied bilateral financing allows China to maintain control over project preparation and implementation, thereby favouring Chinese companies or undertaking projects, such as dual-use ones, that do not provide sufficient commercial returns. However, a China-centric model is not sustainable if OBOR is to be successful, as China does not have the capacity to implement it alone. First, Chinese resources are significant but limited. For instance, foreign exchange reserves have now dropped to 3 trillion dollars from a peak of about 4 trillion in 2013. Second, the risks involved in the construction and operation of infrastructure projects in unstable regions are considerable. Facing possible sovereign defaults in other high- risk countries, China will want to limit its exposure. These challenges explain, in part, why according to a recent study by the American Enterprise Institute, China's combined investment in all OBOR countries since 2014 is smaller and growing more slowly than Chinese investments in the United States alone over the same period ( see CHINA: Belt and Road paves way for new global role - May 18, 2017). China therefore faces a dilemma: maintain the current model, at the risk of the failure of the initiative; or in a process similar to the establishment of the Asian Infrastructure Investment Bank, multilateralise OBOR to leverage the resources of partners at the expense of China's control. China's declarations at the OBOR summit reflect this balancing act.: Internationalisation. The recent name change from 'One Belt One Road' to the 'Belt and Road Initiative' reflects China's efforts to shift the narrative from that of a Chinese policy to a more inclusive Chinese-led international initiative. Xi reiterated his proposition that the cooperation and coordination take place within the framework of existing regional organisations such as the Shanghai Cooperation Organisation. The summit also marked an effort to enrol new partners, both non-OBOR governments and private sector organisations. The joint communique mentioned the importance of non-discriminatory procurement procedures and that of private participation in infrastructure. Furthermore, China signed a memorandum of understanding with six traditional and non-traditional multilateral development banks (the Asian Development Bank, Asian Infrastructure Investment Bank, European Bank for Reconstruction and Development, European Investment Bank, New Development Bank and the World Bank). They pledged to collaborate on matters of common interest under OBOR, including via a new forum for financial cooperation. In parallel, the World Bank is establishing the Global Infrastructure Connectivity Alliance, a platform mandated by the G20 under

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China's presidency, whose mission will include mapping the OBOR and sharing information on associated bankable projects. China and the IMF will also set up a joint capacity-development centre focused on the OBOR countries. The involvement of international financial institutions will help improve the policy and regulatory environment and provide additional financing, thereby facilitating the implementation of OBOR.China's effort to internationalise OBOR is not open-ended, nor is it necessarily a step toward multilateralism. New aspirations: China has also used the summit to expand the geographic and thematic realms of OBOR. In the process, the OBOR might grow to supersede, instead of merely complementing, existing mechanisms. The summit further blurred the geographic boundaries of OBOR. It opened the possibility of expanding OBOR to the rest of Africa and to Latin America. It also demonstrated the continued effort by China and bilateral partners to expand the use of the renminbi for trade settlement and other cross-border financial transactions, at the expense of the dollar. The internationalisation of the renminbi has the support of several OBOR countries, including that of Russia following the imposition of international sanctions in 2014. China reiterated the need for the development of hard infrastructure that had formed the core of OBOR. However, at the summit it placed a greater emphasis on the soft infrastructure -- customs clearance systems, quarantine processes, market access, trade barriers and foreign investment procedures. This shift may signal a renewed effort by China to set regional economic norms and standards, in part filling the vacuum created by the withdrawal of the United States from the Trans-Pacific Partnership (see CHINA: China readies to exploit 'America First' - February 10, 2017). CONCLUSION: OBOR will remain a Chinese project, tied to China's evolving economic and political ambitions. China will provide the undisputed leadership and the bulk of the financing, but Xi will seek more followers, if not partners, to implement the initiative. China will leverage their resources in projects, sectors and regions where their positive-sum involvement will help China achieve its long-term goals under OBOR. In turn, China may make concessions on some contested issues, such as project standards and public debt sustainability. Source: CHINA: Summit moves OBOR towards internationalization, OxResearch Daily Brief Service; Oxford [Oxford]07 June 2017: 1.

Guangzhou Embraces Strengthened Collaboration with US Enterprises through a Sharpened Edge of Innovation GUANGZHOU, China, June 8, 2017 /PRNewswire/ -- Guangzhou, host of the 2017 Fortune Global Forum later this year, is becoming an economic hub of innovation and is strengthening international investment and trade with the United States. This week, key representatives from the municipal government of Guangzhou are visiting Chicago to meet with representatives from related U.S. government agencies and enterprises to allow engagement across public and private sectors. The 2017 Global Fortune Forum will take place in December where world leaders and heads of global businesses will discuss creating an open perspective and innovative approach for future development and investment. "Guangzhou and U.S. businesses have had a strong

31 economic relationship and I am happy to see we've had many success stories of cross- border collaboration," said Vice Mayor Cai Chaolin. "It is clear both sides will continue to benefit from mutual investment and I truly look forward to what we can achieve together." Guangzhou not only has a rich history and unique culture, but it is an important trade center, an open port to China and is currently one of the most active economic regions in the world. As Guangzhou is enhancing its connection to the global market, it attracts nearly 200 thousand purchasers every year from around the world just to the Canton Fair alone. In 2016, the total sales of Guangzhou goods reached up to around 799.62 billion USD and the total imports and exports reached 129.7 billion USD. The U.S. is currently Guangzhou's largest trade partner. In 2016, Guangzhou had a trade volume of around 16.03 billion USD with the U.S., which accounted for 13.1 percent of Guangzhou's total foreign trade volume. In the first quarter of 2017, the Guangzhou-U.S. trade volume soared to around 4.03 billion USD, up 22.1 percent. By March 2017, U.S. direct investment in Guangzhou reached 999 companies, worth up to 2.24 billion USD in foreign capital and 1.55 billion USD in actual capital. The investment atmosphere in Guangzhou has become more convenient for foreign entrepreneurs and enterprises as it provides on-going support for enterprises, start-ups and talent. Polices are being implemented to reduce the burden for these enterprises through government self-reforms and through the streamlining of administrative examinations and approval permissions. Guangzhou also continues to lower operating costs, reduce administrative fees, establish government funds and provide incentives for foreign corporations. In 2016, the government reduced up to around 10 billion USD in the cost burden for investing companies. More than half of the Fortune Global 500 companies have already invested in Guangzhou or established operations there. Guangzhou's "IAB" Strategic Development Plan aims to develop, innovate and integrate the information technology, artificial intelligence and biomedical industries. Guangzhou vows to nurture and introduce a group of leading enterprises in these strategic emerging industries. Recently, the information technology industry has been pushing for the joint development of a new generation of IT manufacturing and internet expansion. Guangzhou is now home to 120 thousand tech and innovative companies and has become one of the three largest communication hubs in China. The artificial intelligence industry in Guangzhou has been rapidly developing with some major enterprises pathing the way with outstanding innovative abilities. EHANG 184, the world's first Autonomous Aerial Vehicle (AAV) has made its maiden flight in Guangzhou and, as a result, received an order of 500 AAVs from Dubai. Early this year, a stunt was made by 1000 AAVs with a formation show beside the famous Guangzhou Tower, which broke the record of 500-UAV in a show formation held by Intel and set a new Guinness World Record. A series of policies are being reformed to expand the scale of the biomedical industry, increase its efficiency, and improve the industrial chain. With 12 national engineering centers in the fields of biology and tech, 13 special incubators, 158 key laboratories, and 128 engineering and technology centers, the industry is attracting international talents and accelerating international cooperation. Guangzhou continues to show its growth potential, developments in science and

32 technology as well as unlimited business prospects. "Guangzhou has been a major contributor to China's dynamic economy and with the goal of innovation and openness, the possibilities of close collaboration with the United States is endless," said Vice Mayor Cai Chaolin. "We have an exciting future ahead of us." To view the original version on PR Newswire, visit:http://www.prnewswire.com/news- releases/guangzhou-embraces-strengthened-collaboration-with-us-enterprises- through-a-sharpened-edge-of-innovation-300470985.html SOURCE Guangzhou News Center Source: Guangzhou Embraces Strengthened Collaboration with US Enterprises through a Sharpened Edge of Innovation: An open dialogue between Guangzhou and the US public and private leaders takes place in Chicago to discuss innovation and exchange， PR Newswire; New York [New York]08 June 2017.

Guangzhou Embraces Strengthened Collaboration with US Enterprises through a Sharpened Edge of Innovation GUANGZHOU, China, June 8, 2017 /PRNewswire/ -- Guangzhou, host of the 2017 Fortune Global Forum later this year, is becoming an economic hub of innovation and is strengthening international investment and trade with the United States. This week, key representatives from the municipal government of Guangzhou are visiting Chicago to meet with representatives from related U.S. government agencies and enterprises to allow engagement across public and private sectors. The 2017 Global Fortune Forum will take place in December where world leaders and heads of global businesses will discuss creating an open perspective and innovative approach for future development and investment. "Guangzhou and U.S. businesses have had a strong economic relationship and I am happy to see we've had many success stories of cross- border collaboration," said Vice Mayor Cai Chaolin. "It is clear both sides will continue to benefit from mutual investment and I truly look forward to what we can achieve together." Guangzhou not only has a rich history and unique culture, but it is an important trade center, an open port to China and is currently one of the most active economic regions in the world. As Guangzhou is enhancing its connection to the global market, it attracts nearly 200 thousand purchasers every year from around the world just to the Canton Fair alone. In 2016, the total sales of Guangzhou goods reached up to around 799.62 billion USD and the total imports and exports reached 129.7 billion USD. The U.S. is currently Guangzhou's largest trade partner. In 2016, Guangzhou had a trade volume of around 16.03 billion USD with the U.S., which accounted for 13.1 percent of Guangzhou's total foreign trade volume. In the first quarter of 2017, the Guangzhou-U.S. trade volume soared to around 4.03 billion USD, up 22.1 percent. By March 2017, U.S. direct investment in Guangzhou reached 999 companies, worth up to 2.24 billion USD in foreign capital and 1.55 billion USD in actual capital. The investment atmosphere in Guangzhou has become more convenient for foreign entrepreneurs and enterprises as it provides on-going support for enterprises, start-ups and talent. Polices are being implemented to reduce the burden for these enterprises through government self-reforms and through the streamlining of administrative

33 examinations and approval permissions. Guangzhou also continues to lower operating costs, reduce administrative fees, establish government funds and provide incentives for foreign corporations. In 2016, the government reduced up to around 10 billion USD in the cost burden for investing companies. More than half of the Fortune Global 500 companies have already invested in Guangzhou or established operations there. Guangzhou's "IAB" Strategic Development Plan aims to develop, innovate and integrate the information technology, artificial intelligence and biomedical industries. Guangzhou vows to nurture and introduce a group of leading enterprises in these strategic emerging industries. Recently, the information technology industry has been pushing for the joint development of a new generation of IT manufacturing and internet expansion. Guangzhou is now home to 120 thousand tech and innovative companies and has become one of the three largest communication hubs in China. The artificial intelligence industry in Guangzhou has been rapidly developing with some major enterprises pathing the way with outstanding innovative abilities. EHANG 184, the world's first Autonomous Aerial Vehicle (AAV) has made its maiden flight in Guangzhou and, as a result, received an order of 500 AAVs from Dubai. Early this year, a stunt was made by 1000 AAVs with a formation show beside the famous Guangzhou Tower, which broke the record of 500-UAV in a show formation held by Intel and set a new Guinness World Record. A series of policies are being reformed to expand the scale of the biomedical industry, increase its efficiency, and improve the industrial chain. With 12 national engineering centers in the fields of biology and tech, 13 special incubators, 158 key laboratories, and 128 engineering and technology centers, the industry is attracting international talents and accelerating international cooperation. Guangzhou continues to show its growth potential, developments in science and technology as well as unlimited business prospects. "Guangzhou has been a major contributor to China's dynamic economy and with the goal of innovation and openness, the possibilities of close collaboration with the United States is endless," said Vice Mayor Cai Chaolin. "We have an exciting future ahead of us." To view the original version on PR Newswire, visit:http://www.prnewswire.com/news- releases/guangzhou-embraces-strengthened-collaboration-with-us-enterprises- through-a-sharpened-edge-of-innovation-300470985.html SOURCE Guangzhou News Center Source: Guangzhou Embraces Strengthened Collaboration with US Enterprises through a Sharpened Edge of Innovation: An open dialogue between Guangzhou and the US public and private leaders takes place in Chicago to discuss innovation and exchange， PR Newswire; New York [New York]08 June 2017.

BRICS countries to step up fiscal, financial cooperation SHANGHAI - Senior finance officials from BRICS countries agreed at a meeting in Shanghai Monday to strengthen cooperation in nine fiscal and financial areas. Brazil, Russia, India, China and South Africa will push the development of the BRICS New Development Bank, ensuring it plays an important role in BRICS cooperation, according to an official document released after the second BRICS finance ministers and central bank governors meeting. Local currency bond markets in BRICS countries

34 will be advanced through collaboration, while a cooperation framework for public private partnerships will be set up, according to the document. The parties also agreed to strengthen financial regulatory collaboration and establish an improved network of financial services institutions, boosting the integration of financial markets among the BRICS countries. Coordinated efforts will be made to converge accounting and auditing standards, laying a solid foundation for connectivity in bond markets in BRICS countries. The BRICS Contingent Reserve Arrangement, which provides protection against liquidity pressures, will be improved. Coordination will be advanced in currency swaps, local currency settlement, direct investment in local currency and tax cooperation. The countries will also step up collaboration in anti-money laundering and combating the financing of terrorism. Source: Xinhua: BRICS countries to step up fiscal, financial cooperation, 2017-06-20

Asia-Europe forum underscores big need for global connectivity Enhancing and strengthening digital connectivity is vital to reach common development and share the fruits of a digital world, said top officials and experts at the Asia-Europe Meeting High-Level Forum on Digital Connectivity. By creating new business opportunities and significantly reducing the costs of transactions and transportation, digital connectivity proves to be a key force in driving growth, creating jobs and promoting innovation, according to a statement issued at the forum that was held from Monday to Tuesday in Qingdao, Shandong province. "We should intensify cooperation on internet technology and data sharing and develop the Internet Plus industry to foster a 'Digital Asia-Europe', and advocate best practices in cloud computing application in the region to forge synergies across the industrial chain," said the Qingdao Initiative issued at the meeting. "We should encourage investment in the construction of cross-border fiber cable and other telecommunication trunk networks, increase broadband coverage and enhance service capability and quality," the initiative said. Vice-Premier Wang Yang said China would make joint efforts with Asia-Europe Meeting members to help build information infrastructure, enable countries develop digital economies, and bridge the digital divide. "China will expand opening-up in areas such as telecommunication and the internet in an active and prudent manner, and deepen digital industry cooperation with other countries," Wang said in his keynote speech on Monday. "China is committed to improving transparency and security of digital economic activities, to maintain fair and just market order and better protect legitimate interests of enterprises and users." Luigi Gambardella, president of ChinaEU, a nonprofit organization in Brussels that promotes bilateral digital and internet cooperation, advocates a "digital silk road", adding that the Belt and Road Initiative requires a borderless cyberspace area where manufacturing-as-a-service or product-as-a-service can be developed and where big data can be stored and analyzed. "Business in the manufacturing and logistics industries from all Belt and Road economies should therefore increase cooperation around standardization initiatives, improvement of the security and reliability of technologies and dedicate efforts on labor skills and organizational changes," said Gambardella. Participants at the forum also called for policies that encourage small and medium-sized

35 enterprises to conduct cross-border e-commerce and integrate into the global value chain, and provide shared opportunities for both foreign and domestic companies to embrace better inclusive economic growth. Arturo P. Boncato Jr, assistant secretary of the Department of Trade and Industry of the Philippines, said as the digital economy develops rapidly, digital connectivity and innovation could improve the scale of MSMEs further. In the early era of globalization when the internet and digital connectivity were less developed, large enterprises played a major role in globalization, said Gao, but with the help of digital technology and internet infrastructure, MSMEs can have the capacity to compete with large enterprises in global trade. The Asia-Europe Meeting was established in 1996 to foster cooperation between the two continents and facilitate international dialogue. The two continents represent about 60 percent of the world's population, GDP and trade. More than 600 people from ASEM countries and international organizations attended the forum. Source: Xie Chuanjiao in Qingdao, Shandong: Asia-Europe forum underscores big need for global connectivity, 2017-06-21

Alibaba woos US small business China's e-commerce giant Alibaba Group chose Detroit, Michigan to stage its inaugural two-day Gateway '17 Summit, which kicked off on Tuesday and is designed to educate American small- and medium-sized enterprises (SMEs) on the Chinese market and consumer demands to ultimately help them sell to China. Approximately 3,000 American SMEs registered for the summit, almost triple the number Alibaba expected. Among them, 673 are from Michigan and 103 of those from the Detroit metro area. In a conversation with American SME representatives on Tuesday, Alibaba founder and executive chairman Jack Ma said this first-ever event was "what he has been dreaming of for 18 years" - a trade show held solely for the benefit of small businesses. Industry observers believe the event is also to fulfill the promise Ma made during his meeting with the then-president-elect Donald Trump in January - that Alibaba could help create 1 million US jobs over five years by enabling small businesses to sell goods on Alibaba's e-commerce platforms. Small businesses in China have an acclaimed record of helping Alibaba lay a solid foundation for a decade of rapid growth, and transform the e-commerce company into today's robust conglomerate that has 50,000 employees worldwide and has generated $547 billion in gross merchandise volume as of March 2017, said Ma. The Chinese success stories can be replicated in the US, he added, "Alibaba is made in China but our mission is to help SMEs worldwide." Calling himself a true believer in globalization and free trade, Ma hopes globalization could be more "inclusive and support SMEs' participation in globalization". Having accumulated more than 800 flight hours last year by attending trade shows and expos worldwide to promote Alibaba's business solutions, Ma said he plans to fly longer hours, probably 1,000 or so this year, to help American SMEs grow globally and sell to China. "This summit is just the very beginning of our endeavors in the US," he said. Becky Feinberg-Galvez, CEO of Shop4Ties, brought samples of ties and bows from her 30-year-old family factory in Chicago. She said China is a market too huge to miss, and "this summit is educational and informational."

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Timeless, a skincare products manufacturer in South California wants to learn more about the Chinese market at the event. "It's eye-opening to know the huge market potential in China," Glenda Nunez, customer relations manager, said. "We are in the process to work with Tmall to expand our business to China." On Monday when meeting with Michigan State Lieutenant Governor Brain Calley, Ma shared his thoughts on connecting Midwest small businesses through Alibaba with the 300 million Chinese middle class who will not hesitate to pay heftily for good- quality products. Representing the vast Midwestern states in the US and hometown to tens of thousands of small businesses and farms, Michigan suffered heavy losses in the economic recession of 2008 and is still struggling to bring back its vigor. "When the economy went down, big companies just left, but small businesses chose to stay," said Ma. "We want to help them succeed and grow through the internet." Calley agreed closer and stronger business collaboration with China would benefit the local economy. He said he hopes to launch more cooperation with Alibaba on logistics and tourism in the future. "We are not Amazon or eBay, we are not selling Alibaba brands," said Ma. "Instead, we are helping American small businesses sell their high-quality products to China. We are happy to help farmers in Michigan to sell their fruits and vegetables to Asia." Calvin Zhou contributed to this story. Source: CHANG JUN and ZHANG YUAN in Detroit, MI: BOC, Alibaba woos US small business, China Daily, 2017-06-23

China wants to expand cooperation with US, state councilor says China hopes to expand mutually beneficial cooperation with the United States and push bilateral ties to keep developing healthily and steadily, State Councilor Yang Jiechi said when meeting US President Donald Trump in the White House on Thursday. Conveying President Xi Jinping's greetings to Trump, Yang said bilateral ties have achieved new and important progress under the guidance of the important consensus the heads of state of the two countries reached in their meeting at Mar-a-Lago, Florida in April. Such progress, including reaching agreement on the "early harvest" from the 100-Day Plan, a plan the two presidents agreed on in their Mar-a-Lago meeting to bolster bilateral economic ties, has brought tangible benefits to people of both countries. State councilor.Yang also said China is willing to work with the US to maintain high- level exchanges as well as exchanges at other various levels and handle properly disputes on the basis of mutual respect. The state councilor was in Washington attending the first round of the China-US Diplomatic and Security Dialogue, which was held on Wednesday. He said this round of the dialogue, which both sides believe was constructive and fruitful, was an important step to implement the important consensus between the heads of state of the two countries.Yang said Xi looks forward to meeting Trump again during the G20 Summit in Hamburg, Germany in July, and welcomes Trump to pay a state visit to China this year. Yang also said China highly appreciates the fact that the US government sent delegates to attend the Belt and Road Forum for International Cooperation, which was held in Beijing in May.Trump requested Yang to convey his

37 greetings to Xi, and said he was pleased with the progress bilateral cooperation has achieved since the Mar-a-Lago meeting. Trump said the US hopes to cooperate with China in projects related to the Belt and Road Initiative. Speaking of the Korean Peninsula nuclear issue, Trump said the US looks forward to strengthening cooperation with China to achieve the peninsula's denuclearization at an early date. Yang reiterated China's position on the issue, and said China hopes to continue to maintain communication and collaboration with all related parties, including the US, to make joint efforts to ease tension in the peninsula and solve the issue properly. Yang also met US National Security Advisor Herbert Raymond McMaster and Jared Kushner, senior advisor to the US president in the White House on Thursday. Source: Wang Qingyun: China wants to expand cooperation with US, state councilor says, China Daily, 2017-06-23

FTZs open wider to foreign firms More sectors are now open for foreign investment in China's 11 pilot free trade zones, ranging from helicopter manufacturing to financial services, the Ministry of Commerce announced on Thursday. China has pledged to offer more market space to foreign companies to carry out manufacturing, transportation, information, mining, scientific research and culture-related business in these zones. Sun Jiwen, the ministry's spokesperson, said all activities conducted by foreign firms in businesses not on the negative list only need to be filed at the relevant commerce bureau, rather than being reviewed by government branches. The central government removed the restriction that Chinese partners must hold stakes when foreign businesses set up companies to manufacture helicopters over three metric tons in its FTZs, and that urban rail vehicle production business must be conducted under the format of joint ventures. In addition, they are entitled to establish companies with individual ownership. Eager to restore the country's earning ability, the State Council, or China's cabinet, on June 16 issued the 2017 negative list for its FTZs, which removes 27 items that were in the 2015 edition, leaving 95 areas off-limits to foreign investors after four sets of modification since 2013. The country had 190 entries on its negative list when the first FTZ－the Shanghai Pilot FTZ－was launched in September 2013. "The change will allow foreign investors access to the same regulation rules for new investment as domestic firms, as long as the business is not on the negative list," said Sun. The 2017 negative list has further clarified the requirements of investors' background, earning ability and stock proportion for foreign companies to participate in China's banking and insurance industries to raise transparency and competitiveness in China's FTZs. Since China launched its first pilot FTZ in Shanghai in 2013, another 10 provinces and municipalities have been included in the second and third batches of new FTZs in 2015 and earlier this year. Expert said the revision could be viewed as a significant move by China to open its economy in a global environment of rising protectionism. "The country is moving fast to lower thresholds for foreign investors. More industries have been accessible to foreign investment in the country's FTZs, while laws were amended last year to simplify the approval procedures for foreign companies,"

38 said Wei Jianguo, vice-chairman of the Beijing-based China Center for International Economic Exchanges. Source: Zhong Nan: FTZs open wider to foreign firms, China Daily, 2017-06-23

China, US inseparable community of shared interests: Premier Li DALIAN - Despite twists and turns, Sino-US economic and trade relations are sound, and the world's top two economies have formed an inseparable community of shared interests, Premier Li Keqiang said Wednesday. He made the remarks when meeting with world business leaders during the Annual Meeting of the New Champions 2017, also called Summer Davos, in the northeastern coastal city of Dalian. Bilateral trade has expanded from around $1 billion, before diplomatic ties were established, to over $500 billion in 2016, he noted. Stable China-US relations not only benefit the people of both countries, but are also a boon for world peaceful development and cooperation, he said. "No matter how our domestic situation changes, we firmly believe that despite the twists and turns, we continue to move on," Li said. From Tuesday to Thursday, around 1,500 politicians, officials, entrepreneurs, scholars and media representatives from over 90 countries and regions will discuss topics spanning inclusive growth to the new industrial revolution at the Annual Meeting of the New Champions 2017, also called Summer Davos. Established by the World Economic Forum (WEF) in 2007, the summer forum is held each year in China, alternating between the port cities of Dalian and Tianjin. Source: Xinhua: China, US inseparable community of shared interests: Premier Li, 2017-06-28

Full text of Chinese premier's speech at EU summit The following is the full text of the speech given by Chinese Premier Li Keqiang at the 12th China-EU Business Summit published by official Chinese news agency Xinhua (New China News Agency) on 3 June. Work Together to Embrace a New Era of High-standard and Mutually Beneficial Cooperation Speech by H.E. Li Keqiang Premier of the State Council of the People' s Republic of China At the 12th China-EU Business Summit Brussels, 2 June 2017: President Juncker, Ladies and Gentlemen, Friends, It gives me great pleasure to come to the beautiful city of Brussels and join you for the China-EU Business Summit. On behalf of the Chinese government, I would like to congratulate you on the success of the Business Summit and pay tribute to people from all sectors who have long been committed to promoting friendship and cooperation between China and Europe. The most urgent task now is to uphold free trade, re-energize trade and investment, push the global economy onto the track of steady recovery and spread the benefits of economic globalization to more countries and communities. Both being beneficiaries of free trade, China and the EU should also be its staunch advocates. Some people raised the issue of fair trade. As a matter of fact, free trade is the premise of fair trade. Article 15 of China's WTO Accession Protocol is a "sunset clause," which obliges all members to unconditionally cease, upon the date of its expiry, the application of analogue country methodology in their anti-dumping investigations against China. China stands ready to

39 enhance the sharing of experience and good practices on cutting overcapacity under the framework of the Global Forum on Steel Excess Capacity and under the framework of the Global Forum on Steel Excess Capacity and set up a steel trade mechanism with the EU, in an effort to promote sound growth of the global steel industry. Climate change is a common challenge to mankind. Green and low-carbon development has become a compelling trend of our times. The Paris Agreement represents the broadest consensus of the international community. All parties need to jointly safeguard this hard-won outcome and work for its effective implementation. China always stands by its words. From 2011 to 2016, China' s CO2 emission per unit of GDP was cut by 26.2%. Given the complexity and volatility in the international situation, it is all the more important for China and the EU to stand firmly together, jointly advance mutually beneficial cooperation towards higher level and better quality for the benefit of both peoples, and make even greater contribution to world peace and common development. Thank you. Xinhua news agency in English 0825 3 Jun 17/BBC Monitoring/(c) BBC Source: Full text of Chinese premier's speech at EU summit, BBC Monitoring Asia Pacific; London [London]03 June 2017.

China's May exports up 15.5%, imports up 22.1% BEIJING - Both China's exports and imports surged in May, beating expectations, customs data showed Thursday. Exports in yuan-denominated terms hit 1.32 trillion yuan ($194 billion) last month, up 15.5 percent year on year, higher than market expectations and the 14.3 percent growth in April, according to the General Administration of Customs (GAC). Imports grew 22.1 percent in May, much faster than market forecasts and the 18.6 percent growth in April. This led to a monthly trade surplus of 281.6 billion yuan, in contrast with a 262.3 billion yuan surplus in April. However, the May surplus declined 3.4 percent year on year. Total foreign trade volume reached 2.35 trillion yuan last month, up 18.3 percent year on year. May's data continued the growth in China's foreign trade since the beginning of the year. In the first five months combined, exports increased 14.8 percent from a year ago to 5.88 trillion yuan, and imports jumped 26.5 percent to 4.88 trillion yuan, resulting in a 21.1 percent decline in the trade surplus. During the first five months, trade with the EU jumped 16.1 percent from the same period last year to hit 1.6 trillion yuan. The EU is China's biggest trade partner, accounting for 14.8 percent of the country's foreign trade. Meanwhile, trade with the United States, ASEAN and Japan went up by 21.1 percent, 23.2 percent and 17.5 percent, respectively. Machinery, electronics and clothing exports rose in the first five months, while labor-intensive products such as fertilizer, steel and automobiles saw shrinking orders. A leading indicator for China's exports increased from 40.7 to 41.1 month on month in May, signalling positive export potential. Source: Xinhua: China's May exports up 15.5%, imports up 22.1%, 2017-06-8

Chinese premier calls for free trade ahead of G20 summit Beijing (dpa) – "Free trade is the precondition of fair trade" said Chinese Premier Li Keqiang on Tuesday as he hailed the benefits of globalization ahead of the G20 summit of leaders from the world’s major economies next month. "Restricting free

40 trade will bring unequal trade," he added. Li made the remarks as he opened a World Economic Forum event known as the Summer Davos in the northern Chinese city of Dalian. Li's speech was reminiscent of Chinese President Xi Jinping's vigorous defence of globalization and free trade in Davos in January and contrasted with US President Donald Trump's protectionist measures and calls for "fair" trade deals. "Globalization brings benefits to all," Li said. He compared countries that are blaming globalization for their economic difficulties with a person who sprains an ankle on an uneven road and blames the road instead of adapting to it. Despite the Chinese leaders' declared support of free trade, China has long been criticized for restricting foreign access to its market. European companies last month said they find it difficult to conduct business in China and feel less welcome than before. However, Li said China would further open up its markets and treat domestic and foreign enterprises equally. Li also tried to dispel international concerns about China’s mounting debt by saying that the country’s financial risks "are generally under control." Moody’s last month downgraded China's sovereign credit rating due to the country's worsening debt outlook. "In the financial sector there are risks, but we have the ability to uphold the bottom line of non-systemic financial risks," Li said, adding that, for China, "the lack of development is the biggest risk." China's economic growth is maintaining momentum from the first quarter, when GDP grew by 6.9 per cent year- on-year, Li said. The country is "fully capable" of reaching its economic growth target of about 6.5 per cent for the whole year, he said. "China has refrained from massive stimulus," Li said, adding that the Chinese economy was relying less on exports and investments and more on consumption. The G20 summit takes place in Hamburg, Germany on July 7-8. Source: Chinese premier calls for free trade ahead of G20 summit, Mistreanu, Simina. DPA International (English); Hamburg [Hamburg] 27 June 2017.

WSJ D.Live Asia (A Special Report) --- Microsoft's Perspective On the Chinese Market: The Wall Street Journal's Jason Anders spoke with Microsoft Corp.'s chairperson and chief executive for greater China, Alain Crozier. With another big piece of Microsoft's business, a cloud business, a joint venture that we started some time ago here in China, is experiencing very nice and very solid growth. MR. CROZIER: It's going very well. In the past 10 days, as an example, we've done two very large announcements. First, we did the first world-wide launch of any product out of China with the new Surface Pro. That's a big sign that the Chinese market is very important for Microsoft. Most, if not all, products are launched out of the U.S. Already, this is our second-largest market for Surface. If everything goes well, China is going to be the first market for Microsoft from a hardware standpoint. The second one is also very important. We have now a Windows 10 government edition available for the Chinese government but also for the state-owned enterprises. Windows 10 is the most secure operating system Microsoft has ever built. When you look at how Windows 10 is used by all types of governments, including some very conservative governments, Windows 10 is by far the best operating system. With another big piece of Microsoft's

41 business, a cloud business, a joint venture that we started some time ago here in China, is experiencing very nice and very solid growth. Source: WSJ D.Live Asia (A Special Report) --- Microsoft's Perspective On the Chinese Market: Alain Crozier explains why tech companies must change their mind-set to succeed in China Anders, Jason. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]14 June 2017: B.7.

China opens wider to foreign investors with shortened FTZ negative list BEIJING — China has this year significantly trimmed its negative list, which restricts foreign investment, in its pilot free trade zones (FTZs). Sun Jiwen, spokesperson for the Ministry of Commerce (MOC), said Thursday that the number of items on the list stands at 95 this year, 27 fewer than in 2015. In 2017, China has reduced the restrictions on the mining, manufacturing, transportation, information, commercial service, finance, and scientific research and culture sectors. For example, overseas investors can now design and produce civil helicopters with a maximum take-off weight of 3 metric tons and above in the FTZs, Sun said. The ministry has also promoted transparency of the negative list to help facilitate foreign investment, according to Sun. The items on the negative list only apply in the FTZs - which have expanded from the first in Shanghai to the current 11 across the country. In 2013, there were 190 items on the list. This was reduced to 139 in 2014. China's FTZs are a way of testing new policies, including interest rate liberalization and fewer investment restrictions, to better integrate the economy with international practices. China will establish unified and transparent market access rules and boost reform in the commercial registration system to improve market access, according to the 2016-2020 plan released by the State Council in January this year. Source: Xinhua: China opens wider to foreign investors with shortened FTZ negative, 2017-06-22

Crossing the river; Schumpeter Last month HNA, an airlines-and-tourism conglomerate from Hainan, said it had bought a 10% stake in Deutsche Bank, having earlier considered buying a Landesbank. The experience of Britain, and then America, in the 20th century suggests that economic hegemons control a disproportionate share of the world's stock of cross-border corporate investment. The second difficult category consists of acquisition sprees by leveraged conglomerates, financed by debt or by the funds that policyholders entrust to these firms' insurance subsidiaries. In the last category are outright flops: $230bn of deals worth $1bn or more have collapsed because the buyer or the Chinese government got cold feet, or because of a hostile reception abroad. Chinese buyers are seen as unreliable. Other countries have been on foreign M&A benders: in 1989-90 Japanese companies bought a Hollywood studio and the Rockefeller Centre and in 2005-15 Indian firms splurged overseas. But China is different. It is much bigger. And its firms' weaknesses abroad reflect the unique problems of its economy at home. China's outbound foreign investment dropped by 49% year on year in the first quarter of 2017, with an official clampdown on such speculative deals partly to blame.

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State-controlled firms are the most financially undisciplined. They are also more likely to provoke opposition abroad from private rivals and from politicians who can argue that China's government is meddling in their economy. As for the country's entrepreneurs, cheap loans from state banks and a reluctance to issue equity leads them to assume too much debt and to speculate. They need to be politically connected to get bank loans and get around currency controls, but such connections can be fickle. This month Anbang has had to deny that its chairman is banned from leaving the country. China's outbound foreign investment dropped by 49% year on year in the first quarter of 2017, with an official clampdown on such speculative deals partly to blame. Source: Crossing the river; Schumpeter, The Economist; London423.9044 (Jun 10, 2017): 68.

China's ODI down 38.8% in May BEIJING — China's non-financial outbound direct investment (ODI) dropped 38.8 percent year-on-year to $8.22 billion in May, official data showed Friday. In the first five months of this year, the country's non-financial ODI dropped 53 percent year-on- year to $34.59 billion, according to the Ministry of Commerce (MOC). Chinese companies invested in 3,121 overseas enterprises in 145 countries and regions from January to May, data showed. Commercial services, manufacturing and information transmission as well as software and information technology industries took the lead in investment value. Outbound investment to countries involved in the Belt and Road Initiative accounted for 14.4 percent of the total ODI in the first five months, up 6.7 percentage points from the same period of 2016. China's direct investment to Africa increased 15.2 percent year-on-year during the January-May period this year. In the first five months, engineering contracts totaling $75.4 billion were signed between Chinese companies and overseas partners, down 0.1 percent year-on-year. More than half of the contract value came from 2,128 new contracts for overseas engineering projects signed with 61 countries involved in the Belt and Road Initiative. Source: Xinhua: China's ODI down 38.8% in May, 2017-06-17

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