PureInsight | June 3, 2002
(7) Running Out of Life-Sustaining Material Resources
Forests:
Presently, China’s forests are seriously depleted. In 1997, the Chinese Forestry Department published the following data. Deserts, particularly the Gobi, and land encroached upon by deserts, make up a total area of 1.689 million square kilometers, covering 17.6 percent of the nation. In the past twenty years, the desert-encroached area has increased at an average rate of 2,460 square kilometers per year, directly resulting in a yearly economic loss of 54 billion Yuan. The habitable land of nearly 400 million people living in 471 counties of 18 provinces is in danger of becoming a desert.
Cultivated Land:
In the latter half of the previous century, principally due to man-made damage, nearly 2 billion mu of cultivated land on which to settle were lost. However, under the pressure of a rapidly increasing population and for the continued national existence, 2.4 billion mu of land were cleared by destroying woodland and grassland. Statistically, there is always a certain amount of land reserved for cultivating. Unfortunately, this land was already depleted because of mass cultivation of woodland, grassland and sloping fields.
Water Resources:
As a result of being overused, water resources are also drying up. Three hundred out of 600 cities in China are short of water. The gross value of the industrial output in those cities makes up 70% of the total amount for the country. Among them, 110 are severely short of water, including 50 that are in a most urgent situation. Of the 32 larger cities in China, each with a population of over one million, 30 have been troubled by this long-standing problem. Meanwhile, water pollution in China is globally ranked. The GDP of China accounts for 3% of the world’s production, yet the total amount of wastewater produced accounts for 10% of the world’s output. That means the wastewater for every unit of the GDP is 3 times the world average.
Garbage Pollution:
“A garbage-surrounded city” is known as one of China’s features. Here, two-thirds of the cities are encircled by garbage. In Beijing alone, there are nearly 7,000 garbage hills. Furthermore, there are garbage-polluted rivers flowing around these cities. The Yangtze and Yellow Rivers carry and transport almost 100 million tons of garbage every year. Except in uninhabited regions, none of the Chinese rivers escape being polluted by this garbage.
Air Pollution:
Industrialization has brought the cities heavy air pollution. Data shows the average density of particles in the air of 12 cities in northern China has reached as much as 860 micrograms per cubic meter. This is 20 times that of New York City, 40 times that of London and 9.6 times the standard approved by the WTO. The pollution of suspended particles in every Chinese city goes far beyond the standard set by the WTO (90 micrograms per cubic meter). Even out in the country, the average density (309 micrograms per cubic metre) is 3 times the WTO standard, 7 times that of New York City and 14 times that of London.
Mineral Resources:
According to 1997 statistics, China’s GDP has grown tenfold since 1949. Unfortunately, during this time, the consumption of the mineral resources has increased by 40 times. From 1952 to 1987, the GDP increased by 8.6 times, and the consumption of energy resources by 24 times. The material consumption rate for the aggregate social product was 42 percent in 1952, 56 percent in 1987 and finally 62.6 percent in 1990.
Natural Calamities:
On March 18, 2002, Beijing was attacked by the fiercest sandstorm since spring began. It covered a wide area and brought horrific problems to the city. At the same time, rising sand or sandstorms appeared one after another from the west to the east of China. They developed in the greater northwest area and the north and west of northern China, accompanied with severe winds. The stronger ones appeared in the middle and west areas of Gansu, the north area of Ningxia, and the middle, west and east of the southern area of Neimenggu. In more than half of them visibility was reduced to less than 500 meters. In other areas, it was reduced to only 50 meters or less.
Sandstorms, which have frequently attacked Beijing and other cities before, reached a new peak this year. Their destruction of natural resources has severely damaged people’s living environments. While enjoying a small, immediate improvement in the acquisition of material goods, people have suffered greater losses.
(8) Businesses in a Moral Crisis: Chinese Enterprises Reaching an Impasse
The Chinese ancients always said people should maintain a good foundation of de [virtue] in order to establish themselves well in society. Equally, enterprises should also possess the proper foundation to conduct themselves well in business. Enterprises should earn their profits by honest work, and establish a good reputation for their long-term development. Looking back at modern Chinese enterprises, especially during the 20-year period of economic reform, we have found the whole society is experiencing a grave crisis of lack of morality, which is reflected in business. This is due to too much emphasis on personal interest and greed. People are being swindled by the common practices of false advertising, the production of pirated products (knock-offs) and low-quality items. It is well known by the stock market players that listed companies “cook the books.” It is fairly shocking to find so many bad debts and questionable accounting practices employed by the banks. There are continuous cases of enterprises defrauding huge amounts of money, often ranging from 10 to 100 billion Yuan. One can’t imagine how these degenerate enterprises are able to survive. How long can this superficial prosperity last?
The Washington Post reported that, an investigation done in the first half of 2001 by a Chinese Official Financial Department revealed that 99% of the listed companies have published false information at least once. During the same period, more than 400 registered chief accountants were punished for various kinds of fraud. Thus, there are frequent slumps in share prices in the Chinese stock market. During the first half of 2001, 5,338 cases of fraudulent contracts were found, totaling 16.3 billion Yuan. It occurred with even graver consequences in coastal provinces, where most foreign businessmen are located. The results of a survey done by the Chinese Consumers’ Association (CCA) was especially astonishing in that, during the year of 1998 alone, 68.4% of consumers were victimized by business fraud at least once. They range from fake commodities trading and deceptive financial and stock information to falsifying national statistical data. There is hardly anything that is honest and worthy of people’s trust in current Chinese enterprises.
There is another critical area that the Chinese banking circles never dare to disclose. According to the Sing Tao Daily, the Office of the Comptroller of the Currency (OCC), which is part of the U.S. Treasury Department, and the People’s Bank of China announced in January 2002 that the OCC fined the Bank of China’s New York Branch about $20 billion for financial misconduct. This was one of the largest civil penalties brought against a bank in the United States. The major concerns were that “the misconduct” extended to Bank of China’s three U.S.-based branches, and included actions such as “the facilitation of a fraudulent letter of credit scheme, the facilitation of a loan fraud scheme, the unauthorized release of collateral and the concealment of that action, and other suspicious activity and potential fraud.” For example, having personal relationships with some officials of the branch’s management, a metal trading company got a loan of $18 million from the bank. This was eventually declared a bad debt after a so-called operational loss of the company. Later, the New York Branch provided a low-interest loan of $50 million to the company again and allowed the money to be saved in another branch to earn interest. Furthermore, the branch once lent $12 million, and the receiver was said to be a company owned by the wife of the head of the branch. In addition, another $3 million was released to his housekeeper. All the money was ultimately lost. According to the data uncovered, the New York Branch lost over $34 billion US dollars from 1992 to 2000. Frankly speaking, the Bank of China still operates better than the other banks in China. Yet, these things were allowed to happen. No wonder quite a few overseas financial people believe that, given the banks’ financial situations, Chinese banking is faced with a much graver crisis than most of the Southeast Asian countries trapped in 1997’s financial crisis. They see the Chinese situation as even graver than that of the Japanese, who are now experiencing an economic depression. Chinese banking is certainly in a terrible situation!
Another startling event took place in Shantou City, Guangdong in 2001. It was a serious case of evading taxes and remittances of money amounting to 100 billion yuan. It was ranked as another of the largest economic fiascos following the Fujian Yuanhua smuggling case that included evading taxes of 80 billion Yuan. It exposed how national properties have been badly managed. As reported in the Ming Pau (a HK newspaper), Li Chunhong, the mayor of Shantou City, said that the 700 or so enterprises in Chaoyang and Puning City alone were suspected of tax evasion, totalling 2.7 billion Yuan. Such rampant offenses are beyond the public’s imagination. Regarding the cases of tax evasion, among the 700 or so enterprises in Chaoyang and Puning City, the “triple-no” corporations, namely no registration-no funds-no licenses for production or marketing, make up 65 percent of the total. They’ve written out more than 40,000 fraudulent VAT (value added tax) invoices, claiming a fraudulent VAT of more than 10 billion Yuan. Some lawless people have evaded taxes by registering a false company with the IDs of an 88-year-old woman and of a 16-year-old girl. The offenders even collude with Hong Kong businessmen to make a complete crime link of evading taxes and remittances, producing and selling false commodities and spending their ill-gotten gains. Meanwhile, they built up a direct relationship with the senior leaders of the Communist Party, and fear nothing because of this strong backing.
This is just the tip of the iceberg. The national treasury is becoming weaker and the national economy more fragile. How many robber barons can the common Chinese people support? Once the truth is known, the Chinese public will not tolerate it. There is a grave risk not only for a little city like Shantou but the whole Chinese economy.
Moreover, how many western people will still dare to invest in Mainland China and do business with China? Since China has already been listed by western scholars as one of the bad-credit countries, The Wall Street Journal, the concerned departments of the governments of Hong Kong and Taiwan and the European financial circles all remind the investors to pay special attention to the huge risks of investing in China. All of the indisputable facts have strongly undermined the outside investors’ confidence of investing in China.
(To be continued)
Translated from:
http://www.zhengjian.org/zj/articles/2002/4/14/15365.html
