China faces a huge funding gap in pushing forward an urbanisation programme that may cost over Rmb50tn by 2020, Zheng Zhijie, president of the China Development Bank (CDB), the country’s top policy lender, has said. Mr Zheng, writing in a central bank journal, also suggested a thorough reform of China’s project financing methods so as to reduce financial risks. We think the proposed reforms represent a key strand in the Xi Jinping leadership’s vision of a “new-type” of urbanisation (Update Alert, May 16).

Home sales appear to have stabilised, suggesting that some buyers are returning to the market. The recovery may be derailed, however, by the continued strength in home prices, which could lead to further tightening measures being introduced.

China is ramping up momentum for a series of economic reforms to be unveiled at a key Communist Party meeting expected in October, government officials and domestic media reports say. We think the moves, which are taking place largely behind the scenes, present the strongest signal yet that President Xi Jinping’s leadership may yet emerge as a more reformist and purposeful administration than that of Hu Jintao over the last decade (CC Dec 20 2012 Macro View).

Several officials at China’s National Development and Reform Commission (NDRC) have rebuked local governments for their trigger-happy reaction to the government’s plan to accelerate urbanisation, shedding light on the likely form that China’s new urbanisation plan will take. Their comments suggest that a new urbanisation drive may be less capital and resource intensive than many expect, with the emphasis, so far, on improving the quality of life in cities, rather than the scale and pace of new construction. 

DANWEI - The last week brought a new wave of food safety scares in China, as well as news about poisons and pollutants in consumer products. There's lead in skin care products, formaldehyde in cars, mercury in health supplements, pirated books on Amazon.cn, and a dead mouse in yoghurt!

In line with a broader acceleration of reform plans, signs are emerging that the government is taking more concrete steps to tackle pollution. As the government ramps up its campaign several companies involved with air pollution reduction have seen their share price rise (Renminbi Compass May 15, Spotlight). We believe that steel prices could also benefit from these developments, as the sector is a good candidate for stricter emission standards and the closing of out-dated capacity. Previous obstacles  to reform - the fact that construction steel manufactured by backward, heavily polluting mills was in short supply and that vast swathes of the industry were unregulated -  have diminished, potentially paving the way for a clampdown on the worse polluters. 

Home sales remain weak but the pace of decline has moderated, while April data from the National Bureau of Statistics (NBS) suggests that developers are ramping up construction activity in expectation of improved demand going forward.

DANWEI – Additional travel over the May 1 holiday did not result in increased rates of reported bird flu H7N9 infections, but stories about quality problems with consumer brands circulated in the Chinese media. A study by a Chinese university this week found that six brands of whitening toothpaste contained 'carcinogenic sulfites'. The China Oral Health Products Industry Association cast some doubt on the methodology of the study, but the news caused a spike in social media conversations in China on the six brands.