Chin Peng, a hero or zero?

Ironically on the 50th anniversary of Malaysia Day, Chin Peng the exiled former communist leader has died in Bangkok.

Chin Peng, flanked by C.D. Abdullah and Tan Sri Rahim Noor, during the signing of the Peace Accord in Haadyai in 1989.

Chin Peng’s legacy after his death in a Bangkok hospital remains a hot dispute in Malaysia today.

GOVERNMENT ministers, including Home Minister Datuk Seri Dr Ahmad Zahid Hamid, were quick to denounce Chin Peng as a criminal, while DAP leader Lim Kit Siang and website bloggers have come out to acknowledge the role and struggle of the clandestine Communist Party of Malaya (CPM), which Chin Peng led against British rule, saying it hastened the achievement of Malaya’s national independence in 1957.

Even before his death, while the Government had banned films on the CPM and his return to Malaysia from exile, his role had been grudgingly accepted by even those who once fiercely opposed him.

Since 1989, public controversy has swirled over the party’s role and its real contribution to the achievement of Malaya’s independence in 1957. Some people have argued that while the party’s struggle for independence was valid up to 1957, its continuation thereafter against the popularly elected governments of Malaya and Singapore has been difρcult to justify.

Nevertheless, first Prime Minister Tunku Abdul Rahman in his memoirs, Lest We Forget (1983), acknowledged the communists’ role in the struggle for independence: “Just as Indonesia was ρghting a bloody battle, so were the communists of Malaya, who, too, fought for independence.”

Chin Peng’s application to return to Malaysia to launch his memoirs in September 2003 was rejected by the Home Ministry. He finally lost his appeal against this ban in the Federal Court in 2009.

PAS leaders, including Mat Sabu, and its party organ Harakah have recognised the role played by the CPM’s Malay leaders, Rashid Maidin and C.D. Abdullah, in the CPM’s armed struggle in achieving Malaya’s independence. Even former Inspector-General of Police Tan Sri Rahim Noor has echoed this recognition.

Former Prime Minister Tun Dr Mahathir Mohamad, who played a crucial role in initiating the negotiations to end the CPM’s armed struggle, half-heartedly recognised the role of Rashid Maidin and other Malay communists in Malaya’s independence up to 1957, in a foreword he wrote in a book on the CPM.

Ong Boon Hua, alias Chin Peng, was the CPM’s secretary-general for 42 years. Until his memoirs, Alias Chin Peng: My Side of History, was published in 2003, much of his life and leadership of the party remained shrouded in secrecy and he is best known for his wartime (1942–45) exploits as a guerilla leader.

At the end of World War II, Chin Peng’s heroic role as an anti-Japanese resistance leader was highlighted in Spencer Chapman’s account, The Jungle Is Neutral (1952), in which he is portrayed as the key link between the resistance movement in Malaya and the British armed forces based in Kandy, Sri Lanka.

Post-war Malayan newspapers called him “Britain’s most trusted man”. For his wartime services he was awarded two military medals and an Order of the British Empire (OBE), which was revoked when the CPM took up arms against British rule in June 1948.

Born in Kampong Koh, in Sitiawan, Perak, on Oct 21, 1924, Chin Peng became a communist at 15. He adopted the alias “Chin Peng” because all secret cell members were required to conceal their true identities from the police.

In the interwar period it took great intellectual and moral courage to join the banned CPM as once its members’ identities became known, the British police hunted them down.

Chin Peng found the communist ideology attractive as it stood for social justice, the elimination of poverty, a new classless world order and the end of imperialism.

His father from Fujian province, emigrated to Singapore where he met and married Chin Peng’s mother. They moved to Sitiawan where they ran a bicycle business.

The second of 11 children, Chin Peng studied at the Hua Chiao (Overseas Chinese) Primary School in Sitiawan, and later brieςy attended a secondary school, the Anglo-Chinese Continuation School.

While there, the police discovered his communist activities and he disappeared underground to evade arrest.

Within the movement, he worked ρrst in 1940 as a probationary member, in charge of members in the Sitiawan district, then transferred to Ipoh to do propaganda work, and was subsequently appointed the party’s state secretary in 1942, the year he married a party comrade, Lee Khoon Wah, who was from Penang. They had three children.

In 1941, during the Japanese occupation, the British administration, accepted the CPM’s offer of volunteers to ρght the Japanese behind enemy lines.

 

Wanted man: The bounty on Chin Peng's head is equivalent to millions of ringgit today.

In Perak, Chin Peng was responsible for establishing communication and supplies lines between the urban areas and the guerrilla forces in the jungle camps. He was the liaison ofρcer between the British special operations group, Force 136, and top party ofρcials in the Blantan highlands in 1943 and 1945, to discuss the airdrop of money and arms to the guerilla groups.

At the end of the war, in recognition of his wartime services, Chin Peng was awarded a military medal in Singapore and later in London he received a second medal.

In 1947, the party’s central committee purged its secretary-general, Lai Tek, after Chin Peng and another committee member, Yeung Kuo, exposed him as a British agent.

Chin Peng was elected to replace him and the party began to adopt a “militant” line against the British administration.

After British intelligence uncovered information that the party was planning an insurrection, the colonial government decided to seize the psychological advantage by declaring an emergency in Malaya in June 1948.

This was in the wake of widespread labour unrest, including the murder of white planters on rubber estates, which it blamed on the CPM.

The British put up a reward of 250,000 Straits dollars on Chin Peng’s head. This offer was given wide publicity in the local and foreign press.

The Malayan Emergency lasted from 1948 to 1960, in the midst of which, Malaya secured independence on Aug 31, 1957.

In December 1955, Chin Peng and two CPM leaders, Rashid Maidin and Chen Tien, attended “peace talks” in Baling, Kedah, with Tunku Abdul Rahman, who was then Malaya’s chief minister, David Marshall, Singapore’s chief minister, and Tun Tan Cheng Lock, the MCA leader.

At the Baling talks, Chin Peng rejected the offer of amnesty when he failed to secure legal recognition for the CPM, and refused to accept the condition that the police screen his guerillas when they laid down their arms.

However, he made the surprising offer that the party would cease hostilities and lay down its arms if the Tunku secured the powers of internal security and defence in his talks on Malaya’s independence with the British Government in London.

It strengthened the Tunku’s bargaining position in the talks, which allowed him to win Malaya’s independence.

“Tunku capitalised on my pledge and gained considerably by this,” claims Chin Peng in his memoirs. In 1960, the Tunku’s Alliance government ended the Malayan Emergency. An ailing Chin Peng left for Beijing to recuperate and reorganise the party’s struggle.

He remained in Beijing for 29 years and did not return until 1989 to bring the CPM’s armed struggle to a close after negotiating a peace agreement with the Malaysian and the Thai Governments in Haadyai.

Chin Peng, in his book, described himself as a nationalist and freedom ρghter.

He took responsibility for the thousands of lives lost and sacriρced in the cause of the communist struggle. “This was inevitable,” he said, in an interview with me in Canberra in 1998. “It was a war for national independence.

- Contributed by Cheah Boon Kheng

> Cheah Boon Kheng was Professor of History at Universiti Sains Malaysia until his retirement in 1994. He was a visiting fellow in Singapore, Canberra and at USM. He is the author of several books, including The Masked Comrades (1979) and Red Star Over Malaya (1983). 

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Tracing the origins of the formation of Malaysia Sept 16

Historic moment:Sabah's first Governor Tun Mustapha Datu Harun taking his oath of office on Sept 16, 1963

The idea of Malaysia came to fruition in 1963 as a culmination of the combined forces of decolonisation and expanding South-East Asian nationalisms.

THE famous announcement on May 27, 1961 by Tunku Abdul Rahman, then the Prime Minister of the Federation of Malaya, calling for forging closer political and economic cooperation between Malaya, Singapore, North Borneo, Brunei and Sarawak, is generally taken as the starting point for the formation of Malaysia on Sept 16, 1963. The roots of the Malaysia scheme, however, go further back in time and were embedded in British plans hatched in 1942 for the decolonisation of South-East Asia in the post-Second World War period.

In fact, such an idea was first suggested in 1893 by Lord Brassey, director of the British North Borneo Company, who proposed the amalgamation of all British possessions in South-East Asia into “one large colony”. Brassey’s proposal, however, did not find favour with the British Government.

The outbreak of the Second World War and the subsequent capture of all British colonial possessions in South-East Asia by the Japanese changed everything. The British felt humiliated and partly laid the blame for their defeat on the disunited nature of their territorial possessions in South-East Asia which made it difficult to organise a coordinated defence.

In 1942, the Colonial Office led by its Eastern Department headed by G. Edward Gent began to lay plans for a more coordinated post-war policy in South-East Asia. This policy was founded on two principles: preparing dependent territories for the goal of self-rule, and integrating smaller units into larger political blocs.

The justification given for the second objective was administrative efficiency, economic development, political stability and defence viability. Anchoring their policy on these two principles, the Colonial Office laid plans for a “Grand Design” in South-East Asia after the Second World War. This called for the creation of a “union”, a “federation”; a “confederation” or a “dominion” of all British territories in the Malayan-Borneo region.

This large union or federation was to include the Malay states, Straits Settlements, North Borneo, Sarawak and Brunei. This “Grand Design”, which may be appropriately named the “Colonial Malaysia Scheme”, was to be achieved gradually and in stages beginning with political integration in two separate blocs, that is, between Malaya and Singapore on the one hand, and between the Borneo territories on the other.

Confirming this line of action, J. D. Higham of the Colonial Office minuted on Jan 20, 1953 as follows: “Our original idea was that Malaya and Singapore would form one bloc and Sarawak, North Borneo and Brunei, another, and that the two blocs might then merge into some sort of confederation.”

From 1946 to 1949, and even later, the British Government wished to push ahead with the process of integration within the two blocs, but political, strategic and economic exigencies and contingencies on the ground, such as the importance of maintaining Singapore as a naval base, the desire to push the Malayan Union proposals in Malaya, managing the Anti-Cession movement in Sarawak, and the wide gap in the political, economic and social development between the Malayan and Borneo territories, hindered all attempts to bring about any union within these blocs.

Seeing that integration in two separate blocs was not working, the British Government revived the “Grand Design” or the “Colonial Malaysia Scheme” idea in 1949.

Towards this end, the British Government created the post of the British Commissioner-General for South-East Asia to act as a coordinating body in the region. The man chosen for the job was Malcolm MacDonald.

Although he tried very hard, MacDonald achieved little success from 1949 to 1951, however. In 1951, he began to introduce new innovations, the most important being the setting up of branches of the Commonwealth Parliamentary Association (CPA) in the British territories in the Malayan-Borneo region.

By this move, MacDonald was able to foster much regional solidarity and goodwill among the local leaders through the mechanism of CPA meetings. In light of strong support especially from non-officials for a wider regional integration, MacDonald began to push vigorously for the realisation of the “Grand Design” or a British Dominion of South-East Asia in 1952.

Independence and expansion 

But the Commissioner-General’s exuberance was short-lived. By the early months of 1953, support for the Grand Design or Colonial Malaysia began to dissipate mainly as a result of uncompromising attitudes of British colonial officials in Malaya and Singapore. Ongoing animosity between top British administrators of these two states forced the Colonial Office to abandon the idea of forming an overall British Dominion of South-East Asia in favour of the pre-1951 formula of encouraging the formation of separate political blocs.

While the Colonial Office concentrated its efforts in improving relations between Malaya and Singapore, a strong initiative commenced in the Borneo region in 1953 to promote greater administrative coordination between North Borneo, Sarawak and Brunei with a view of their “ultimate federation”.

Political developments in Malaya also began to take fundamental decision-making out of the hands of the colonial masters. The formation of the Alliance Party comprising Umno, MCA and MIC in 1954 and its resounding victory in the 1955 elections to the Federal Council effectively placed Malayan leaders in charge of their destiny.

Under the dynamic leadership of Tunku, Umno and the Alliance, Malaya thus began to move towards independence at a pace far ahead of the British “time-table”. In this context, the views of Tunku and Umno concerning the Malaya-Singapore merger and the wider Colonial Malaysia Scheme became decisive.

Although there grew a strong body of opinion in Singapore in 1954 and 1955 advocating merger with the Federation of Malaya, Tunku and Umno strongly opposed such a union. They feared being outnumbered by the addition of over a million Chinese; that the Malays would lose political dominance; and that Malaya’s security would be seriously threatened. The British, taking stock of the situation, could not countenance merger in the face of Umno’s rejection.

As far as the Colonial Malaysia Scheme was concerned, Tunku in fact lent support to the idea in 1955 and 1956, but the format was to be “Greater Malaya”, which was to be established in the future after Singapore, Sarawak, Brunei and North Borneo had achieved independence.

In 1956, Tunku was more concerned in winning independence for Malaya in a hurry and did not want any scheme of merger or territorial expansion to derail this supreme objective.

“At this stage,” he declared in 1956, “it is wise to be prudent like Kamal Ataturk who resolutely opposed territorial expansion in favour of improving Turkey itself first. Thus, when Malaya achieved independence in 1957 ahead of the colonial “time-table” and ahead of Singapore, the British Grand Design was rendered untenable and therefore remained unfulfilled.

But the idea of Malaysia remained alive both in the minds of the British and Tunku, and finally came to fruition in 1963 as a culmination of the combined forces of decolonisation and expanding South-East Asian nationalisms.

Tunku’s Malaysia
       
After achieving independence for Malaya in 1957, Tunku Abdul Rahman again broached the subject of forming Malaysia on May 27, 1961. His motivation were, however, slightly different than those of the British. One was to help complete the unfinished British Grand Design of decolonisation, which had been derailed as a result of Malaya’s unexpected independence. When this Grand Design had to be aborted in 1957, Britain began to face an intractable dilemma of finding a workable solution for decolonising the rest of her colonial possessions in the region.

The British found it unfeasible to grant independence separately to Singapore, North Borneo, Sarawak and Brunei as they were too small or too weak politically, economically and in security terms to survive alone. They were also extremely vulnerable to the forces of expanding communism, a situation the British colonial masters wished to avoid for the preservation of their own interests in the region.

In Borneo, the British tried to find a workable solution by fostering the formation of a North Borneo Federation from 1957 to 1960. This attempt failed miserably due to the opposition of the Sultan of Brunei, the rise of Party Rakyat Brunei which wanted to establish Negara Kalimantan Utara linked to Indonesia, and the rising tide of communism in Sarawak spearheaded by the Sarawak Communist Clandestine Organisation.

The Singapore problem became even more alarming with the stark possibility of a communist takeover of the government in 1961.

In these dire circumstances, the British began to look to Malaya and Tunku Abdul Rahman, who was quite ready to do the job for them but had another motive as well for the creation of Malaysia. This second orientation was the desire for territorial expansion, an impulse very much consistent with the phenomenon of expanding nationalisms at the time especially in insular South-East Asia.

Paradoxically, the rise of nationalism in the Philippines, Indonesia, Brunei and the Federation of Malaya also produced a desire among the leaders of these countries for territorial expansion in the region for various reasons.

In the Philippines, the main architect of this nationalist expansion was Diosdado Macapagal who, since the country’s independence in 1946, began to advocate the extension of Philippine jurisdiction on all former Spanish possessions including the Turtle Islands and North Borneo.

Sukarno in Indonesia, wanting to resurrect the Majapahit Empire, laid claim to all former Dutch colonies in the region, including West New Guinea (West Irian) which was not handed over by the Dutch to the Indonesian Republic in 1949. Indonesia also had designs over British Borneo, over which it was casting “covetous eyes” as early as 1953.

Tunku’s Malaysia Scheme also smacked of expansionist aims. He basically wanted North Borneo, Sarawak and Brunei as part of Greater Malaya and was willing to bring in Singapore only if the British Borneo territories were brought in first. In Brunei, Party Rakyat Brunei led by A. M. Azahari was seriously advocating the revival of the former Brunei Empire in the form of Negara Kalimantan Utara from 1956 to 1962.

These expanding nationalisms overlapped in the territorial milieu and produced a period of intense conflict. The concepts of Greater Malaya, Greater Brunei, Greater Indonesia and Greater Philippines were totally irreconcilable and were bound to produce political turmoil in the region.

There was in fact also strong opposition initially from the peoples of British Borneo against Tunku’s Greater Malaya. A great deal of diplomacy and safeguards were necessary to gain their support, and even then Brunei stayed out.

Sabah and Sarawak indeed claim they did not join Malaysia, but formed Malaysia as equal partners with Malaya and Singapore.

Contributed by By Prof Dr D.S. Ranjit Singh
> The writer is Visiting Professor at the College of Law, Government and International Studies, Universiti Utara Malaysia (ranjit@uum.edu.my

Malaysia needs to produce more houses to achieve 20/20 by 2020

KL to rank 20th Most Competitive and 20th Most Livable City by 2020

AS I walked the streets in Melbourne, people are either taking pleasure in their daily activities or catching up with their friends. More importantly, they are enjoying an abundance of economic and lifestyle opportunities, supported by their affordable housing prices and convenient transportation. It comes as no surprise that the city has been ranked as the world most livable city by The Economist for years.

Melbourne tops the list as the most livable location, according to a survey of 140 cities conducted by the Economist Intelligence Unit (EIU).

For Malaysians, the good news is, Kuala Lumpur ranked second in South-East Asia after Singapore on the same list, while the challenging part is we were at No. 77 in the world ranking, according to the survey last year.

In terms of competitiveness, the World Economic Forum (WEF) has ranked Malaysia as the 24th most competitive nation among 148 countries in its Global Competitiveness Report 2013-2014. Under the Economic Transformation Programme (ETP), the Government aspires to elevate Kuala Lumpur to be the top 20 most economically dynamic cities and top 20 most livable cities by 2020.

To realise these goals, we need to gear up our efforts in building both the hard and soft infrastructure of the country. And if we are to be a truly developed nation, one of the most critical criteria is to have more homes, as the nation’s housing needs must first be addressed to ensure quality living.

Let’s take a look at how developed nations house their people. Take Australia as an example, where four of its cities, i.e. Melbourne, Adelaide, Sydney and Perth, ranked in the top 10 most livable cities as measured by the Global Liveability Survey in 2012. Australia has a population of around 22 million living in 9.1 million homes, according to its census in 2011, which means their average person per household is 2.5.

Another developed nation in Europe, United Kingdom, has a population of 62.7 million people and number of homes is approximately 25 million, which also works out to have an average of 2.5 persons per household.

In Malaysia, while our population is about 28 million, we only have about 4.6 million homes, according to National Property Information Centre. This is equal to 6.08 persons per household. For us to catch up with Australia and United Kingdom which have an average of 2.5 persons in a household, we would require a total of 11.3 million homes in our country, which is a 250% increase from what we have currently!

However, at our current housing production of about 100,000 homes a year, it would take us 67 years to catch up with the benchmark displayed by these developed nations, assuming there is no additional increase in population.

The statistic above paints a picture of the fundamental required for a developed nation. As a developing nation, the Government and the relevant private sectors need to find ways to grow the number of homes in Malaysia. We are in need of more housing especially when the Government aims to move our country towards developed nation, and to grow the population of Greater KL from 6 million people to 10 million by the year 2020, which would put further pressure on the housing market in urban areas.

Currently, production has not been able to keep up with demand and this has pushed up housing prices. Having ample supply is the only long-term sustainable way to keep housing affordable. The Government needs to streamline the delivery system to increase the number of homes built every year, instead of stifling the supply which also include the cooling off measures which may eventually lead to higher prices due to inadequate supply.

Imagine if we are having 11.6 million houses today instead of 4.6 million, our house prices would be more affordable due to ample supply. The bottom line is we need more houses, especially affordable houses. It will help in the long run if the authorities can find ways to encourage housing supply, and this include putting off cooling measures on the property industry which only work in the short run as shared in my last article “Cooling Off Measures Choke Supply”.

More production of houses will make prices more affordable. And, if the Government can further support the housing needs with infrastructure including having a good public transportation system, the aspirations of making Kuala Lumpur the top 20 most livable and most competitive cities in the world can become a reality by 2020.

FOOD FOR THOUGHT BY ALAN HONG KOK MAU
FIABCI Asia Pacific chairman DATUK ALAN TONG has over 50 years of experience in property development. He was FIABCI World president in 2005/06 and was named Property Man of The Year 2010. He is also the group chairman of Bukit Kiara Properties.

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Prevent ATM thieves and cyber crimes on the rise

Banks to arm machines with ink bombs to stain stolen notes

PETALING JAYA: Thieves who rob automated teller machines will be left with worthless pieces of paper if a Bank Negara proposal is put into place. Dye bombs are to be placed in the ATMs and if anyone tampers with the machines, the “bomb” goes off, leaving the notes stained in red and easily recognisable as stolen money.

Bank Negara, in its guidelines on Dye-Stained Banknotes dated Aug 26, is calling on both banks and Cash in Transit Companies to consider using the currency protection device (CPD) to deter ATM theft.

Local security company Extro Code Sdn Bhd demonstrated yesterday a CPD or dye pack which is already available in the market.

Its technical director Mohd Zaki Sulaiman said that once installed, the dye pack would be triggered when someone tries to break into the ATM.

“The device is like a smoke bomb which releases the ink onto the stacks of banknotes in the ATM,” he said.

Mohd Zaki said there’s no actual explosion but there is some heat when the CPD is triggered.“The actual triggering mechanism is a trade secret,” he added.

He said the ink called Disperse Red 9 was not harmful. He said the ink was imported but the actual CPD was developed and produced locally.

Mohd Zaki declined to reveal the cost of each dye pack and the installation cost. “Who pays for the device will depend on Bank Negara and the banks,” he said.

He said there are four ATM providers in the country but installing the dye-packs in the different machines should not be a problem.

The Bank Negara guidelines state that the CPD would emit a bright coloured dye by smoke, liquid or any other agent to stain the currency in the event ATMs are broken into.

This will enable authorities and the public to easily identify the defaced stolen currency and render them unfit for use.

The guidelines also sets out conditions under which these banknotes will be replaced. Among them:

• > The ink has to be indelible by water, fuel, gas, bleach and detergent.
• > It must be traceable to the ATM, to assist police investigations.
• > It must stain at least 10% of each bank note.
• > It can be detected and rejected by banknotes authentication machines used by banks such as Cash 

Deposit Machines. >It must be non-hazardous and non-toxic.

If banks retrieved the dye-stained currency, they can submit the banknotes to the central bank for assessment.
Tellers will also be trained to detect these banknotes.

The public and retailers will be advised not to accept dye-stained banknotes as they are likely to be stolen.

These measure, Bank Negara believes, will reduce ATM robberies.

In the United States, banks have dye bombs in vaults and any unauthorised person who tries to remove any money will trigger the bomb, leaving all the money – and the robber – stained in ink.

- Contributed by NEVILLE SPYKERMAN  neville@thestar.com.my

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Cyber crimes on the rise - millions of ringgit being lost annually to scams

 

Public awareness: (From left) Ambank deputy managing director Datuk Mohamed Azmi Mahmood, Khalid and AmIslamic Bank Berhad CEO Datuk Mahdi Morad at the launch of the Scam Alert campaign in Bukit Aman 

KUALA LUMPUR: Fraud and cyber crimes in the country have risen unchecked due to the lack of public awareness, while victims are hesitant to report the crime, the police said.

Millions of ringgit have been lost annually to crimes like sms scams and parcel scams, which have mostly gone unnoticed in the public eye.

In a bid to stop such crimes, the police has launched an awareness initiative on the various types of scams in the country.

Inspector-General of Police Tan Sri Khalid Abu Bakar said the initiative, under the National Blue Ocean Strategy, comprised cooperation with the Association of Banks in Malaysia (ABM) and the Association of Islamic Banking Institutions Malaysia (AIBIM).

The public would be informed and educated on the different types of fraud and cyber crime scams being used by today’s criminals.

“We are posting a list of the various methods and modus operandi used in these scams at our official police website at www.rmp.gov.my.

“This will be linked to the websites of all banks in the country so that anyone can easily access the information which will be regularly updated,” he said after launching the initiative at Bukit Aman yesterday.

Khalid said RM98.6mil in losses was recorded last year in cases involving cyber crimes, including Internet banking fraud as well as sms and parcel scams.

“So far this year, such losses have reached RM80.7mil, which shows that such cases and losses are increasing,” he said.

He added that losses to sms scams had jumped from RM5.8mil last year to RM39.2mil so far this year.

- The Star/Asia News Network

China's steams ahead; Reforms enter critical stage

Industrial Output growth at quickest pace in 17 months

China’s industrial output grew at the fastest pace in 17 months in August and the broadest measure of new credit almost doubled from July as a recovery in the world’s second-largest economy gains traction.

Factory production rose 10.4 percent from a year earlier, the National Bureau of Statistics said in Beijing today, Aggregate financing was 1.57 trillion yuan ($257 billion), the central bank said, topping the median analyst estimate of 950 billion yuan. UBS AG said China’s liquidity and credit squeeze appears over, while Societe Generale SA said corporate and local-government debt is rising from already alarming levels.

Premier Li Keqiang said today that August data show a recovery trend, after the government used measures from tax cuts to extra spending on railways to defend the year’s 7.5 percent expansion goal. As Communist Party leaders prepare for a November meeting to discuss policy reforms, Li said that industrialization and urbanization will fuel growth, the official Xinhua News Agency reported.

“The government growth target appears within reach, which reduces the chance of stimulus and allows the government to focus on reform,” said Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong.

The benchmark Shanghai Composite Index rose 1.2 percent to the highest close since June. The yuan was little changed at 6.1200 per dollar.

The gain in output compared with a median forecast of 9.9 percent in a Bloomberg News survey. The government doesn’t release separate industrial data for January and February, which are distorted by the Chinese New Year holiday.

‘Downside Risk’

“If credit growth picks up persistently from here, China’s current growth recovery may well last a bit longer and go a bit further,” said Yao Wei, China economist at Societe Generale in Hong Kong. “However, that only adds to the downside risk afterwards, as the leverage of Chinese corporates and local governments keeps rising from the already alarmingly high level.”

Industrial production topped all 45 analysts’ estimates in a Bloomberg News survey, with projections ranging from 9.2 percent to 10.2 percent, following a 9.7 percent gain in July. Thirty-nine of 41 industries reported growth, including a 13.6 percent gain in ferrous metals and 12.3 percent in chemicals, according to the statistics agency.

Steel production rose 15.6 percent in August, up from 10.9 percent in July, and electricity output expanded 13.4 percent, compared with 8.1 percent the previous month.

Retail Sales

Retail sales advanced 13.4 percent, while fixed-asset investment excluding rural households increased 20.3 percent in the January-August period, both topping estimates.

The median estimate for retail sales was a 13.3 percent advance after 13.2 percent in July. Fixed-asset investment was projected by economists to rise 20.2 percent in the January-August period, after a 20.1 percent gain in the first seven months of the year.

A separate report today showed China’s passenger-vehicle sales gained the most in four months in August, led by sales of sport utility vehicles. Wholesale deliveries of cars, multipurpose and sport utility vehicles climbed 11 percent to 1.35 million units, according to the state-backed China Association of Automobile Manufacturers today.

China’s exports rose 7.2 percent from a year earlier, the General Administration of Customs said Sept. 8. That exceeded the 5.5 percent median estimate of analysts. At the same time, imports rose a less-than-estimated 7 percent from a year earlier, leaving a trade surplus of more than $28 billion.

Inflation, Stimulus

Consumer prices rose 2.6 percent in August, the statistics bureau said yesterday, leaving room for extra stimulus if needed. The producer-price index (SHCOMP) fell 1.6 percent, the least since February.

Premier Li, in an opinion article published yesterday in the Financial Times, said the economy “will maintain its sustained and healthy growth,” with expansion around a 7.5 percent “lower limit” intended to ensure steady growth and employment.

Goldman Sachs Group Inc. last week raised its estimate for China’s economic growth for the third and fourth quarters, citing improving global demand and a stronger-than-expected domestic industrial recovery. JPMorgan Chase & Co. and Deutsche Bank AG raised their growth forecasts over the past month, bolstering optimism that Li will meet the government’s target for expansion this year.

Analyst Forecasts

Analysts surveyed by Bloomberg News last month gave a median estimate for 7.5 percent expansion this quarter and 7.3 percent in the October-December period.

China’s top solar-panel makers are returning to profitability following two years of losses as higher demand and prices drive up margins. JinkoSolar Holding Co. last month reported second-quarter net income of $8 million, its first profit since the third quarter of 2011, as sales jumped 43 percent from a year earlier.

In other economies today, French industrial production unexpectedly fell in July from the previous month, while Italy released final figures for second-quarter gross domestic product that showed a deeper contraction than initially estimated.

- Contributed  by Bloomberg News

 Reforms enter critical stage, says Premier Li Keqiang 

Finance-sector restructuring poses the greatest challenges as drive moves into 'deep-water zone'

Premier Li Keqiang says Beijing's economic restructuring drive has entered a critical stage, with an overhaul of the financial sector one of the most important and most complicated tasks to be tackled.

Indicating concerns that the world's second-largest economy might decelerate too much as overdone, Li said the central government was confident it could meet this year's economic goals through structural reform, ruling out the need to significantly loosen fiscal or monetary policy to stimulate short-term growth.

Financial reform is an important part of economic system reform. It is a complex, systemic project

In his opening speech to the World Economic Forum in Dalian yesterday, Li also said the government would seek to identify the core issues in reforms, which, once implemented, could exert a major impact on the entire process.

"Financial reform is an important part of economic system reform," he said. "It is a complex, systemic project, and because it is such a complex, systemic project, it means China's reforms have entered a deep-water zone, or the most difficult phase." In the next stage, he said, the key was to stick to market-oriented principles. The government would "actively and steadily" push forward with interest rate and exchange rate liberalisation, promote the yuan's convertibility under the capital account, and ease barriers for new, smaller players to enter the state-dominated financial industry, he said.

The steps already taken by Beijing to stem a sharp slowdown in economic growth had had an effect, he said.

"Some people expressed concern about whether China's growth might decelerate too fast, as some other countries experienced, or even see a so-called hard landing," he said.

But Li said the economy's fundamentals were "sound" and its operations stable.

The mainland's economic growth cooled to 7.5 per cent in the second quarter, from 7.7 per cent in the first and 7.9 per cent in the fourth quarter of last year, hit by global headwinds and excess capacity at home.

Since then, Beijing has cut tax for small companies, boosted investment in railways in poorer regions, and raised spending on urban facilities, while maintaining its grip on credit growth.

Industrial output growth jumped to a 17-month high last month while export growth quickened, suggesting a solid recovery in economic dynamics.

Li also said that local governments' borrowings, highlighted by analysts as an area of concern for financial risks, remained "safe and controllable".

- Contributed by Victoria Ruan South China Morning Post

Premier Li Keqiang's Profile:

Li Keqiang, born in 1955, became China's premier in March 2013. Like ex-president Hu Jintao, his power base lies with the Communist Youth League, where he was a member of the secretariat of the league’s central committee in the 1980s and later in the 1990s the secretariat’s first secretary. His regional governance experience includes a period as vice party boss, governor and party boss of Henan province between 1998 and 2003 and party boss of Liaoning province beginning in 2004. He became vice premier in 2008. Li graduated from Peking University with a degree in economics.