Highlights from the EO's print edition, issue no. 373, June 23, 2008

Fuel Prices' 10-Day About-Face
Cover story
Just 10 days after saying domestic fuel prices would remain unchanged for social stability, the Chinese government announced at 10pm on June 19 that prices of petrol and diesel would go up by 1,000 yuan per ton the very next day. Some industry players believed the earlier stand was a smokescreen to prevent speculation and hoarding at a time when fuel supplies were short. Also to be increased would be the price for electricity drom next month. The hike in energy prices was expected to help reduce government subsidies to money-losing state-owned energy producers.
Original article: [Chinese]

Chinese Banks to Get US Fed's Nod to Set up Branches
Cover
Obstacles have been cleared for two Chinese state-owned banks – the Industry and Commerce Bank of China and the China Construction Bank – to set up branches in the United States, according to industry sources. The US Federal Reserve was initially skeptical of the two banks, which have China's sovereign wealth fund, the China Investment Corporation (CIC), as their major shareholder. China had given assurance that CIC would not interfere in the operation and administration of the two banks, and would strictly play by market rules. Market analysts said based on understandings reached during the fourth Sino-US strategic dialogue concluded last week, there appeared to be more optimism in Chinese banks gaining entry into the US market.
Original article: [Chinese]   

Capital Flows: Chinese Knotting Style
News, page 4
Liquidity has been ebbing from the Chinese stock market and real estate while the savings rates and banks' capital has gone up. Meanwhile, businesses have been turning to loan sharks as credit controls tightened. Some market observers said they expected the above scenarios to continue into the year end – adding to the risk that China's economy makes a hard landing – and adjusted their projection for China's economic growth rate to below 10% after years of double digit growth.
Original article: [Chinese]   

Real Estate "Promotion" instead of Price Cut
News, page 4
Real estate developers have reached a consensus to counter sluggish sales through promotions – such as maintaining published price but throwing in other incentives – instead of direct price cuts, according to the industry's federation. The understanding was reached to prevent chain reactions that could send the property sector into a price abyss. Market analysts, however, predicted that prices of real estate would drop significantly as early as next month as developers were under capital strains.
Original article: [Chinese]  

Second Review of Chinese State Assets Draft Law
News, page 5
China's Ministry of Finance would likely be entrusted with managing the country's 60 trillion yuan worth of state-owned financial assets, contrary to earlier expectations that a special state-owned assets commission or sovereign wealth fund would do the job. The EO learned that the Ministry's role would be written into the state assets draft law presently under second review. China has one of the world's largest sums of state-owned financial assets, gathered through state affiliated banks, securities and futures firms, insurance companies, funds, rural cooperatives, amongst others.   
Original article: [Chinese]  

Reawakening of Shenyang
Nation, special focus, page 9 – 13
Shenyang was once the pride of new China's planned economy with the flourishing of state-owned factories until the 1990s, when workers lost their jobs en-mass as these companies folded under the pressure of competitive markets. However, things were looking up again after the government launched a campaign to revive northeastern China's industrial base five years ago. Inflows of private capital, entrepreneurs, and high technology industries that followed have given the city a new lease on life. Those having benefitted under this transformation included ex-factory workers turned cab driver or real estate investor, a scandalized ex-civil servant turned famous writer, and former professors turned successful entrepreneurs, just to name a few.
Original article: [Chinese]

Citizen Hao's Quest for Truth
Nation, page 14
Late last year, the Chinese forestry authorities of Shaanxi province released a newly taken photograph of a wild South China tiger thought to have extinct some 30 years ago in the wild. The photo, however, sparked controversy as it was believed to have been dotted with digital technology. Though public attention seemed to have waned on the issue, lawyer Hao Jingsong insisted on trying all possible channels to get to the bottom of the truth. Since last year, he had been writing to forestry authorities demanding investigation, and this year, with the information openness law having come into effect in May, he has taken the case to court.
Original article: [Chinese]  

A Slow Opening-up for Joint Venture Securities Firms
Money & Investment, page 22
Switzerland-based Credit Suisse has become the first to secure Chinese regulator's approval on June 14 to set up securities joint venture in the country following a two-year ban, leading to optimism that liberalization process for the sector would speed up.
Original article: [Chinese]  

Cross-border Football Gambling using Chinese Online Payment Network
Corporation, page 25
Though gambling is illegal in China, that did not deter Chinese from betting on their favorite football teams during the recent Euro Cup through the internet. The EO investigated  how funds were successfully transferred from domestic banks through Chinese third-party payment services into overseas accounts. The cross-border gambling fund was believed to have run into billions of yuan.
Original article: [Chinese]

Bertelsmann to Close Retail Outlets in China
Corporation, page 30
German-based book club and chain store Bertelsmann has announced that it will close all its 36 retail outlets across China, save the one in Shanghai, by August this year. The over 150-year-old international brand has been in the red since entering the Chinese market 11 years ago. Industry players analyzed that Bertelsmann's failure was mainly due to a management system that led to a failure of understanding the Chinese market and reading culture. Instead of "importing" many different chiefs from abroad to head its China operation, Bertelsmann should have appointed local strategist to map its development, said an ex-employee now operating a Chinese online bookstore.

Original article: [Chinese]

Car Sale in China Drooping
Automobile, page 33
Tight credit controls, oil price spikes, tumbling stock market and natural disasters all have combined to mop up market liquidity. As a result the once-soaring car businesses are braving for a "freezing" year after sales dropped drastically over the past two months. In fact, some sale agents had already been forced out of business due to slow turnover, more were expected to go under by year-end.
Original article: [Chinese]

Asian Drama in Session
Observer, page 41-42
Forty years ago, in his book Asian Drama: An Inquiry into Poverty of Nations, Swedish economist and sociologist Karl Gunnar Myrdal described the risks of Asian countries sinking into failure due to over population, corrupt governance and poverty. Decades later, though many Asian countries are still living under the shadow of the 1997 financial crisis, many have taken off economically and joined the rank of vibrant emerging markets. However, despite impressive growth, governance and structural problems remained, and these countries would have to push more reforms to ultimately put on a real fantastic Asian drama.
Original article: [Chinese]