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Business leaders bow to Xi as Communist Party pushes in
Beijing (AFP) Oct 29, 2017

China factory activity slows in October
Beijing (AFP) Oct 31, 2017 - Chinese manufacturing expansion slowed in October after two consecutive months of acceleration, official data showed Tuesday, as weak demand weighed on the world's second-largest economy.

The manufacturing purchasing managers' index (PMI), a gauge of factory conditions, stood at 51.6 in October, the National Bureau of Statistics (NBS) said, compared to 52.4 in September, which marked a five-year high.

Anything above 50 is considered growth while a figure below that number points to contraction. Analysts surveyed by Bloomberg News had expected a reading of 52.

"Softer domestic demand was the main culprit" behind the slowdown, Julian Evans-Pritchard of Capital Economics said in a research note.

October's week-long National Day holiday slowed down production and new orders growth, and energy and pollution-intensive industries shifted peak load or reduced production due to tightened environmental controls in some regions, NBS analyst Zhao Qinghe said in a statement.

But "the manufacturing sector continues to maintain an expanding momentum", he added.

Manufacturing activity in heavy industries in northeastern China was curbed due to capacity reduction and a pollution crackdown.

China has implemented tight controls on heavy industry in hopes of improving the country's notoriously bad air quality, which typically worsens in the winter months.

"Softer investment spending in response to slower credit growth and the unwinding of pre-Party Congress fiscal support" also cooled down economic activity, according to Evans-Pritchard.

President Xi Jinping emphasised deleveraging and environmental protection during the recently concluded Communist Party congress, with Beijing looking to transition from a debt-fuelled expansion model towards high-quality growth driven by consumption and innovation.

"The ongoing campaign to clean up financial leverage and the environment will have an impact on economic growth," Tommy Xie, an economist at OCBC Bank in Singapore, told Bloomberg.

October's data came after China registered slightly slower growth in the third quarter, with the economy expanding at 6.8 percent.

Analysts say a decision by the government to allow slower expansion would help lay the groundwork for tackling long-term economic issues such as soaring debt and property-led growth.

Chinese billionaires are boasting about their Marxist bonafides. The Communist Party is tightening its grip on state-owned companies. And foreign companies are being asked to invite party cells into their offices.

Under President Xi Jinping, the country's ruling party is muscling back into business, expanding its reach in private enterprise and even laying out a plan for the government to take stakes in high-profile tech and media companies.

With a stronger mandate after receiving a second term as head of the party Wednesday, Xi plans to deepen its control in "all areas of endeavour in every part of the country", as he told leaders in a three-and-a-half hour speech last week.

In September, the Chinese Communist Party released a new document on entrepreneurship calling in part to strengthen teaching of "socialist core values" to the new generation of entrepreneurs.

It is a significant change for the CCP, which has long had a fraught relationship with the business world.

Since kicking off economic reforms in the late 1970s, Beijing has allowed private enterprises a free rein in many sectors, while slowly loosening its grip on the state-owned sector, which comprises "strategic" industries such as steel and telecommunications.

"Key technology used to be controlled by state-owned companies and the party focused on those companies," said Mark Natkin, managing director at technology consultancy Marbridge Consulting.

But "as private enterprise has grown stronger and become heavily woven into society, there is greater desire by the party to be involved".

- 'Never been so proud' -

China's capitalists are getting on board as the state has taken a bigger role in picking winners and a harder line against those perceived to be defying the party's aims.

This year, a few business icons have disappeared, and others like Wang Jianlin, chairman of entertainment conglomerate Dalian Wanda, have faced immense pressure from regulators over the build up of debt at their companies.

Listening to Xi's speech, "I was overwhelmed by emotions," Wang told the state-run Beijing News.

"As a Chinese, I've never been so proud."

The sentiment was echoed by other titans of industry like Jack Ma of Alibaba, Zhang Jindong of Suning, and Liu Chuanzhi of Lenovo, who told Beijing News the party will unite the people to "realise grand dreams".

To celebrate Xi's address Tencent, China's largest tech company, created an online game for the masses to applaud the nation's president which has racked up 1.4 billion claps.

The app's release followed a report in the Wall Street Journal that the Chinese state is looking to take a one percent stake and gain a board seat at the company, along with other major internet companies.

- More control over SOEs -

The party has already moved to strengthen control at state-owned enterprises, with dozens of publicly traded companies in Hong Kong rewriting their business charters this year to formalise the shift.

From plants in southern China, Guangzhou Automobile Group pumps out Honda Odysseys, Toyota Camrys and Jeep Renegades in partnership with foreign automakers. In July, the carmaker revised its business charter.

The CCP constitution was written into the document, according to filings. Major board decisions are now made after first consulting the company's party committee.

"When the board appoints high level executives, the party committee will deliberate and give opinions and suggestions on the candidates," a filing said.

Investment fund Blackrock, which holds a 7 percent stake in the company, declined to comment on how it voted on these changes.

A spokeswoman for Guangzhou Automobile Group said the changes were made to "meet party building requirements" and in accordance with business regulations.

"The resolution was approved at a shareholder meeting showing the majority of the company's shareholders support the resolution," she wrote in an email.

- Expansion in foreign companies -

The party has also expanded its presence in foreign firms.

Of the more than one hundred thousand foreign-funded companies in China, 70 percent had set up party organisations by the end of 2016, according to Qi Yu, deputy head of the CCP's Organization Department.

Foreign executives view these organisations within their firms as "a positive force for company development," Qi said during the recent Beijing congress.

Some of the largest foreign-owned companies in China like Mary Kay and Walmart have opened party branches.

Analysts say these organisations within multinationals are increasingly active, with their activities varying from the mundane like screening party videos to the helpful like communicating nationally mandated priorities.

In some cases, "party cells want to weigh in on strategic decision making," said Andrew Polk, an economist at Trivium Research.

This summer the European Union Chamber of Commerce in China president Mats Harborn told a meeting there have not yet been any demands to allow party cells to participate in business decisions.

But, if that were to happen, he said, "it would be highly concerning for attracting foreign investment into China".

Japan bank CEO quits over claims of $2.2 bn in bad loans
Tokyo (AFP) Oct 25, 2017
The head of a government-backed Japanese bank said Wednesday he would quit in response to an internal probe that found wide-ranging misconduct involving some $2.2 billion in shady loans. The report alleged that hundreds of employees at almost all of Shoko Chukin Bank's offices across Japan falsified documents to make low-interest loans to firms ineligible to receive them. The scheme was ... read more

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