Highlights from The Economic Observer, issue no. 339, October 29th 2007

Editorial: Make Room for Monetary Policy
Cover, editorial
Inflation is expected wane over the next few months, but excess liquidity will continue to worsen due to hot money and a ballooning trade surplus. Although a metered appreciation of the yuan over the past two years has eased domestic industries into new competitive environments, its rigidness has led to these other problems. It's time to worry less about caving to outside pressure on exchange rate policy and more about acting rationally to mend the economy.
Original article: [Chinese]

Source: Banking President Shift Marks Reforms
Cover story
Sources say Su Ning, vice-president of the People's Bank of China, will take over the presidency of the China Development Bank. His coming is intended to kick-start the bank's reform, as it intends to become a totally commercialized credit institution within the medium-term.
Original article: [Chinese]

The Heavy Schoolbag
Cover, human interest
Since 1982, the government has issued many documents calling for "reducing burdens" in education. Despite this, students in middle school are packing more books than before in their schoolbags. Why has this happened?
Original article: [Chinese]

Massive Surplus in the State Revenues
Cover story
For the first time, the Ministry of Finance has voluntarily consulted the Nation People's Congress over this year's surplus balance in state revenues before acting on the issue. By the Ministry's count, this year's surplus is 700 billion yuan. Policymakers are deadlocked over how best to approach the situation.
Original article: [Chinese]

New Corporate Income Tax Enters Critical Drafting Phase
From News, page 3
The new corporate income tax law was recently reviewed at a meeting by the State Council's legislative arm, other top government agencies, financial experts, and an international auditing agency. Participants pointed out that the law still leaves much room for tax evasion, and may even require a thorough overhaul. As a result, it is not likely to be passed until late November or early December.
Original article: [Chinese]

Emergency Meeting of Bankers
From News, page 3 
On October 24, the central bank summoned top brass from the five state-owned banks and large stock-holding banks to discuss the proliferation of loans being used to purchase extra commercial properties. 
Original article: [Chinese]
 
Banking Watchdog Limits on Guarantors on Agency Debt
From News, page 4
Domestic commercial banks are forbidden from being guarantors for agency debt, according to a document released by the Chinese government. Without the banking system's major support for their credit, agency debt issuers are having a difficult time maintaining their regular customer.
Original article: [Chinese]

Oil Pricing Reform Dilemma
From News, page 5
With both international crude oil and domestic goods become more and more expensive, the 2007 oil product price system will be put in an awkward position. In China, because of government intervention, oil prices have traditionally been kept lower than those in the international markets. But according to the new reform, the prices will have to rise.
Original article: [Chinese]

Drug Distribution Policy Faces Difficulty
From News, page 6
A once active medicine distribution clinic in Shangdi district of Beijing is now stricken by shortages of popular medicine, especially those for the elderly. As prices have dropped with the now year-old policy, demand has soared, leaving many unable to find the medicine that they need at many such clinics.
Original article: [Chinese]

Can Infants be Shareholders?
From Comments, page 15
Eighty-four underage members were found in the list of share holders of the Bank of Beijing before its market listing in September. Lawyers with the bank say that these underage share holders are legitimate since relative laws and regulations don't forbid such cases. Should listed companies' be obligated to adopt "special management" procedures in such cases?
Original article: [Chinese]

Individual Investors "Take Over"
From Money & Investment, page 17
As the Shanghai Stock Exchange composite index broke the 6,000 point mark, institutional investors are retreating by selling off shares to eager individual investors. The latter group is taking over shares at high prices, since institutional investors created the illusion of vibrant trading through simultaneous buying and selling.
Original article: [Chinese]

International Investors Losing in Chinese Stocks
Money & Investment, page 22
International investors have encountered a great loss in Chinese stocks after an injudicious sell-off. As the Chinese government gave mainland investors the green light to trade Hong Kong stocks, a large amount of capital flows into Hong Kong drove up HK stock prices to an unexpected level.
Original article: [Chinese]

Huawei Resets Employee Contract Durations Ahead of Labor Law
From Corporation, page 25
China's communication and internet products giant, Huawei, is poised to pay staff with more than eight years in the company to reset the record of their years there back to zero. Inside sources said the move is aimed at preparing the company to face the new Labor Contract Law, which will come into effect next January.
Original article: [Chinese]

The Passing of a Legend
From Corporation, page 25
EO traces the rise and fall of Dixian Corporation, once the only publicly listed private company and the largest textile enterprise in China. The company's charismatic director Wang Suxian, with an initial investment of 50,000 yuan, spent 18 years building up his textile empire. But the collapse of Dixian took only two years as the company sank into financial crisis amidst smuggling scandals.
Original article: [Chinese]

Lifelong Happiness, Sorrow
From Observer, page 45
Two Chinese documentaries, Fengming: A Chinese Memoir and Bingai, were awarded prestigious prizes at the Yamagata International Documentary Film Festival. Cui Weiping reveals that they come to grasp the same truth: that certain fragments and moments carved to one's memory can support them throughout life, its sorrow, and happiness.
Original article: [Chinese]