Economy

　　Declining Confidence

　　Chinese entrepreneurs， bankers and residents have become less optimistic about the country’s economic conditions， central bank data revealed on June 25.

　　The entrepreneurs’ confidence index came in at 64.9 percent in the second quarter， retreating 2.1 percentage points from the previous quarter， the central bank said in a report， citing results from a survey of over 5，900 Chinese entrepreneurs.

　　In a separate report based on a survey of 3，100 bankers， the central bank said their second-quarter confidence index was down 13.9 percentage points from the previous quarter to 53.7 percent.

　　The surveys found that more people are concerned about employment. Of the 20，000 savers the central bank surveyed， 43.8 percent considered employment conditions “harsh” or “murky，” and their expectation index was 47.8 percent， down 2.1 percentage points from a quarter earlier.

　　Home prices are still a major issue of public concern， with 63 percent of people surveyed describing prices as “high and hard to accept，” down 1.3 percentage points from the previous quarter.

　　Some 50.3 percent reported that they expect home prices to remain unchanged in the third quarter， while 21.2 percent predicted rises.

　　The changing outlook came as China’s property sector continued to cool in May， as new home prices in half of a sample of 70 major cities showed month-on-month drops.

　　Fiscal Pressure

　　China may struggle to meet this year’s fiscal revenue target， the finance minister warned on June 24.

　　The central treasury received 2.9 trillion yuan ($472 billion) from January to May， a year-on-year growth of 6.3 percent， 0.7 percentage points lower than the budgeted target， said Lou Jiwei， when briefing lawmakers on the final accounts for 2013.

　　This year’s budgeted growth of central fiscal revenue is 7 percent. The government is “under heavy pressure，” Lou said.

　　Difficulties lie in the downward pressure on the economy and the program to replace business tax with value-added tax (VAT) in some service sectors， which will reduce tax revenue by some degree， Lou said.

　　A Net Investor

　　China’s outward foreign direct investment (FDI) is very likely to exceed its inward FDI in 2014， making the country a net investor， according to the United Nations Conference on Trade and Development (UNCTAD).

　　In 2013， China’s inward FDI rose by 2.3 percent to $123.9 billion， ranking second in the world after the United States， according to the UNCTAD’s World Investment Report released on June 24.

　　“What’s more， China’s outward investment is more striking，” said Zhan Xiaoning， Director of the Investment and Enterprise Division at UNCTAD.

　　In 2013， investment outflows from China increased by 15 percent to $101 billion， the third highest in the world after the United States and Japan， the report said.

　　As China continues to deregulate outbound investment， outflows to developed and developing countries are expected to grow further， it said.

　　Outward investment will serve as an important driver for industrial upgrading and economic growth， Zhan said.

　　RRR Review

　　The central bank is considering an annual review system to decide whether to cut lenders’ reserve requirement ratio (RRR)， China Securities Journal reported on June 25.

　　Reviews will focus on whether or not a bank’s lending to small and micro-sized enterprises and the agricultural sector has met requirements set by the central bank. The central bank has been encouraging lending to those areas—long neglected by banks in China because of higher risk.

　　Banks that meet the standards will have lower reserve ratios， the newspaper said， citing an anonymous source. A lower RRR gives a bank more funds to lend and the chance to make more profits.

　　The central bank started cutting RRRs selectively this year， as part of its effort to allow greater monetary flexibility while maintaining a prudent monetary policy amid an economic slowdown.

　　Subsidy Ends

　　China is moving to replace its decades-old agricultural subsidies with a more flexible pricing mechanism， as domestic harvests in the world’s largest grain importer are expected to see their 11th consecutive year of growth.

　　Experts say the change will not endanger food security nor result in steep price drops in major agricultural products.

　　Decisions to scrap the minimum purchasing price for rice， the temporary storage policy for soy and cotton and other agricultural subsidy policies were made on June 25 at a State Council executive meeting led by Premier Li Keqiang.

　　Under the new policy， the government will set up a target price for each kind of major agricultural product. Farmers will receive subsidies from the government when the market price is below the target， and low-income groups will also receive subsidies when the market price sours.

　　The reform， which aims to restore a market-oriented pricing mechanism， as domestic grain prices are usually above the global price， will be conducted first from selected areas and particular types of agricultural products.

　　According to a statement released after the meeting， soy and cotton will be first in line to test the concept before the policy is applied to other major agricultural products， such as wheat， rice and corn.

　　China has gradually set up various subsidy policies since 2004 to shore up grain prices and protect farmers’ motivation.

　　Overseas Expansion

　　Alipay， China’s largest third-party payment service provider run by e-commerce giant Alibaba， announced on June 25 a partnership with the U.S. online payment startup Stripe.

　　Under the agreement， overseas merchants who use Stripe’s payment software can now detect if shoppers are located on the Chinese mainland and give them the option of paying through their Alipay accounts.

　　The move is expected to be warmly welcomed by Chinese shoppers who are not happy with providing their credit card details to overseas websites but who use Alipay as an alternative payment solution.

　　Stripe didn’t disclose the number of merchants Alipay is cooperating with， but said it now allows online merchants to conduct transactions using 139 currencies and Bitcoin， a virtual currency. It also plans to form more partnerships with popular payment providers in regions where credit cards are not widely used， according to media reports.

　　Hydroelectric Plant

　　On June 25， China’s Sinohydro signed a deal with Bolivia’s Corani Electric Co.， an affiliate of the National Electricity Co.， to build a hydroelectric plant that will produce an additional 124 megawatts for Bolivia’s national power grid， the National Interconnected System.

　　Bolivia’s President Evo Morales said the whole project will be developed in three stages through to 2018， with an estimated investment of $235 million.

　　“The investment is guaranteed to generate energy for the department and all Bolivia，” said Morales.

　　The government aims to consolidate the nation’s electric power infrastructure by 2020， so it can meet domestic demand and generate up to 1，000 extra megawatts for export.

　　The project includes building a reservoir， a network of roads and three tunnels， among other infrastructure. The plant is expected to be operational by 2018.

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