IMF reforms to benefit China, others

WASHINGTON—The IMF spelt out changes to its voting system to boost the rights of four countries including China, in a bid to counter critics who accuse the global body of losing relevance.
The proposed reform would, as a first step, increase the influence of China, South Korea, Turkey and Mexico in the International Monetary Fund's decision-making.
The reform was agreed by the 24 IMF directors late Thursday and is expected to be adopted at the Fund's annual meeting in Singapore on September 19-20.
Beyond that, IMF managing director Rodrigo Rato wants more comprehensive reform by 2008 as he strives to remodel a World War II-era institution that remains dominated by the United States, Japan and Europe.
Despite its growing stature as a global economic powerhouse, China for instance has only slightly more IMF votes than Belgium.
"To meet global challenges, we need to make sure the voice and representation of members is appropriate and the system that determines governance of the Fund is as transparent as possible," Rato said.
The changes would affect the IMF members' quotas, which govern their access to financing and their voting power.
All 184 members would see their basic votes doubled, so raising the base and ensuring no one loses out by the reform, especially low-income countries.
But the four countries promised immediate change in Singapore are said by the IMF to be the only ones under-represented on all four of the criteria that determine a country's voting rights.
Those criteria are the member's gross domestic product ( GDP); its openness to trade; the "variability" of its economy, in other words how volatile its growth is; and the amount of its reserves.
China would have to pay 2.26 billion dollars to raise its IMF quota, and so see its share of the total IMF votes raised to 3.65 percent from 2.94 percent now.
South Korea would be required to pay an extra 1.92 billion dollars, to raise its voting share to 1.33 percent from just 0.76 now. Mexico would pay 843 million dollars and raise its share to 1.43 percent from 1.20, while Turkey would stump up an extra 338 million dollars to go to 0.55 percent from 0.45.
Beyond the ad-hoc changes expected in Singapore, the IMF directors agreed on a two-year programme of reform to be completed "no later" than the Fund's annual meeting in September 2008.

—The Daily Mail-China Daily news exchange item

Challenges lurk in China's trade future

Beijing (China)—The commercial ties between China and developing nations is undertaking subtle changes as competition among them gets increasingly fiercer, a senior trade official said Friday.
Citing textile as an example, Vice-Minister of Commerce Wei Jianguo said if China's textile exports continued to grow 21 percent yearly with Bangladesh, Pakistan and Cambodia climbing 5 percent on average, China would take over more than 80 percent of the textile export market of developing nations by 2020.
Such export boom of China would add pressure to the employment and development of other developing countries and lead to more frequent trade disputes, Wei said while commenting on the country's foreign trade in Beijing.
He said China would complement its trade policies with strengthened foreign aid, debt waiver and enlarged imports and properly handle trade disputes with developing countries.
An July report from the United Nations World Food Program showed that China's total food donations climbed 260 percent year-on-year in 2005 and was surpassed only by those of the US and EU. China's foreign aid was also said to have quadrupled in past decade.
"China's foreign trade volume may probably count as the world's largest provided its export growth keeps outpacing the world average by four percent to remain above 10 percent in 15 years," Wei said.
The Asia's second largest economy raked in 1.42 trillion US dollars in imports and exports last year, the third largest only after the US and Germany.
Wei noted that this rapid trade expansion drove up China's economy but also intensified its friction with global trade partners.
"Peace, development and cooperation are the main principles we will abide by to improve commercial ties with other nations," he added.
To prevent frictions concentrating on certain markets, the Ministry of Commerce has urged domestic companies to diversify their export market and use technical innovation to lift up the value-added of export goods.
Official data revealed that only a small portion of China's export flow to emerging markets. The aggregated market shares held by China in Russia, Italy, Australia and Canada for instance was only 1.4 percent. Neighboring countries such as Thailand, Indonesia and India account for only one percent.
As nearly 55 percent of China's exports were carried out by foreign invested companies or low-end processing companies, Wei said that the title of "World Production Center" couldn't secure China's say in global trade.
Although China is a major exporter of DVDs, only nine of the 57 core DVD production technologies were grasped by Chinese manufacturers, which means Chinese workers remain in the lower echelon of world trade, he said.
When it comes to imports, China has little say in the pricing of energy and resources products despite its heavy purchase. From January to November last year, China paid 11.81 billion U.S. dollars more for crude oil, 6.21 billion U.S. dollars more for steel and 1.46 billion U.S. dollars more for iron ore simply because of price hikes, as an official price monitor report revealed.
Looking to the future, Wei held that surplus, frictions and commercial ties to be adjusted would be the crucial issues to affect China's trade health.

—The Daily Mail-China Daily news exchange item

China's top 500 enterprises account for 78% GDP

BEIJING—China Top 500 Enterprises 2006 posted total operating revenue of 14.14 trillion yuan (1.77 trillion U.S. dollars), accounting for 77.6 percent of the gross domestic product.
China Top 500 Enterprises 2006 Analysis Report said Saturday that the Top 500 reaped combined profits of 642.8 billion yuan (80.4 billion U.S. dollars) in 2005, up 22 percent year on year.
Sinopec was ranked the first with its operating revenue of up to 823 billion yuan(102.9 billion U.S. dollars) and profit of 21.9 billion yuan (2.7 billion U.S. dollars) in 2005, up 29.75 percent and 108 percent respectively over 2004.
The report by China Enterprise Confederation and China Enterprise Directors Association said the proportion between the operating revenue of the Top 500 and the GDP, although not a direct indicator of their contribution to the national wealth, can reflect the important role and influence of the the Top 500 in a great sense.
It rose steadily from 55.7 percent in 2001 to 73.5 percent in 2004.
According to the report, the petrochemical, natural gas extraction, banking and ferrous metals industries represented profits of 31.4 billion yuan(3.9 billion U.S. dollars) in 2005, accounting for nearly half of the total profits of the Top 500.
The State Grid, the China National Petroleum Corporation, the Industrial and Commercial Bank of China and China Mobile ranked the second, third, forth and fifth of the Top 500.
The report said the high profits in the petrochemical and natural gas extraction industries, accounting for 20.6 percent of the Top 500, are contributed by the monopolistic market position, strong demands and price increases. Meanwhile, the high profit in the banking industry, accounting for 19.6 percent, is resulted from the share-holding reform conducted in recent years.
The profit-generating capacity of the country's enterprises are generally weak.
84 enterprises with profits of over 1 billion yuan (125 million U.S. dollars) took up 85 percent of the Top 500 in profits.
The average profit growth rate of the Top 500 is 20.14 percent with trade and wholesale, retail, aviation and enginery sectors over 100 percent. 474 enterprises are in profit and 21 are in the red.

—The Daily Mail-China Daily news exchange item

US envoy to visit China next week over N.Korea

BEIJING—US envoy Christopher Hill will visit China next week, a US embassy spokeswoman said, amid efforts to revive the long stalled six-party talks aimed at ending North Korea's nuclear program.
The visit will be the second leg of a three-nation trip to countries that are key players in the effort to convince Pyongyang to abandon its nuclear weapons program.
"He's coming out to meet with senior officials on bilateral, regional and global issues of mutual interest, and he will also meet with his six-party talks counterparts in the countries where he's visitng," said the spokeswoman.
The US assistant secretary of state for East Asia and Pacific affairs will arrive in Beijing Tuesday, fly to Chengdu Wednesday and head to Guangzhou Friday, before heading to Shanghai Saturday, the spokeswoman said.
Hill will visit Japan first and head to South Korea after China.
He made his last visit to Chin in July after Pyongyang drew international condemnation by test-firing several missiles.
At the time, China failed to make headway in convincing the reclusive regime to come back to the negotiating table.
Hill's latest visit comes amid fears the North may test a nuclear weapon.
North Korea said in February 2005 that it had nuclear weapons, but there have never been reports that it has tested a nuclear bomb.
Since the missile tests, the United States has stepped up pressure on China to take stronger action to urge North Korea to return to the six-way talks.
The talks, which involve China, the United States, North Korea, South Korea, Russia and Japan, have been stalled since November, with Pyongyang refusing to return unless Washington lifts financial sanctions against it.

—The Daily Mail-China Daily news exchange item

China should transform its foreign trade growth perspectives

Beijing—Vice Minister of Commerce Wei Jianguo says there is still great potential for China to expand her foreign trade because her trade with developing countries is still very low, however China still needs to speed up her growth of foreign trade.
In an interview with Economic Daily, Wei Jianguo said that by 2010 China's per capita income would reach US$ 2000 predicted that China would become the world's first or second greatest trade power by 2020. However currently, China's trade quality and efficiency are still not good enough, readjustments still needs to be made to growth perspectives.
Wei Jianguo says that there are fewer brand products in China's export which results in lower profit. 55% of export products come from processing and foreign enterprises. China still lacks her own core technology and sales network which can reap abundant profits. China is a big exporter of DVD players, but among the 57 key technologies in DVD, China only controls 9. Only less than 20% of export enterprises have their own trade marks and less than 10% of the enterprises have their own brands. China is strong in production capacity, but weak in exchange capability. Therefore China is a manufacturing center, but the big profit lies in circulation field for which China only occupies a small proportion and lies in the lower end of the international division of labor.
In import, China is a big buyer, but doesn't have the appropriate price setting. Due to this situation, the cost of resources and energy import becomes higher and higher. By November 2005, China had spent an extra US$ 30 billion on 42 types of resources and energy products such as crude oil, steel, plastic and iron ore which are under key supervision by China.
Under such circumstances, China must speed up her means for transforming foreign trade growth. Firstly, core competitiveness should be improved. There must also be independent innovation and international marketing capability. Chinese enterprises must develop their own brand and have their own intellectual property products in order to increase profit. China should develop her own multinational companies. Secondly, China's processing trade should further develop into deep processing and finish machining and change China's position in the international division of labor.
Thirdly, China should develop green trade by restricting export of resources and high energy consuming products in order to protect strategic resources and natural environment while importing resources, energy and technology.
Fourthly, China should strengthen resources import and export coordination mechanism in order to expand the long term trade proportion and complete the future market.
Fifthly, service trade should be developed. China has to adapt to the new trend of the international service trade to contract international service project and improve the domestic service level.
Wei Jianguo says that from this year onwards, trade surplus, frictions and foreign trade relations will be key issues that influence the healthy development of China's international market. China has entered into an area of trade frictions with Europe and America. The main sources of friction are various kinds of international trade protectionism. To deal with the frictions, China should take it as normal but also take it seriously. Chinese enterprises should consolidate their self-discipline, protect workers' and farmers' interests, avoid waging a price war, and when there is a case, they should actively respond to protect their own interests.
Wei Jianguo says China should readjust her relations with major trade partners and international organizations. The basic principle for dealing with such relations is peace, development and cooperation while taking big trade powers as key partners, putting surrounding countries first, taking developing countries as basis and multilateral trade as important platform. "China should be flexible, but also practical".
From now on, trade relations between China and other trade powers including the US, Europe and Japan will continue to be of strategic importance in China's foreign trade, the mainstream of common development will not change and the framework of co-existence of cooperation and competition will not change.
"The relations with developing countries need new adjustment. China and other developing countries will inevitably have a competitive relationship with each other for example in the textile industry. China's development will bring about some pressure for other developing countries. Therefore, we must continue to keep and develop friendly relations with them and promote common development", says Wei Jianguo.
The vice minister says that China will actively expand the integrated effect of policies in foreign aid, resource development, expanding import and debt reduction or cancellation. Trade frictions with developing countries need more attention and trade barriers should be eliminated in order to achieve a win-win situation.
Wei Jianguo says that China needs to have new cooperation with bordering countries. The economic and trade relations should be strengthened and mutual trust be improved.
"In the long run, we should deal properly with relations between economic and political benefit, national and regional benefit, competition and cooperation, bordering countries and other trade partners."
China should also readjust relations with international organizations. With the improvement of China's economic strength, China needs to participate in making the international rules. China should change her passive role of accepting international rules into active participation in order to promote the establishment of a new just and rational international political and economic order.

—People’s Daily, Daily Mail news exchange item