Highlights from the EO Print, issue no. 398, Dec 15, 2008

Fuel Tax to Replace Toll Fees
Cover Story
The Chinese government has indicated that secondary tolled roads would be made toll-free in stages after the proposed fuel tax came into effect. Part of the fuel tax revenues would be channeled to local governments for road maintenance, staff compensation, and loan repayment. However, early estimations suggested that outstanding secondary road construction debts could run over 500 billion yuan, a large amount that could delay the plan to replace toll fees with the fuel tax entirely, considering the increasing fiscal pressure from recent stimulus spending.
Original article: [Chinese]

Melamine-tainted Milk Compensation Scheme
Cover
The EO has learned that a compensation scheme worth some four billion yuan for those sickened by melamine-tainted milk was being considered by China's Health Ministry. Sources revealed that from that amount, the government would fork out 2.6 billion yuan for medical fees, with the remainder to be shouldered by the 22 companies found to have produced the tainted milk, the consumption of which caused babies to develop kidney stones, leading to 11 deaths and some 290,000 sick children.
Original article: [Chinese] 

Priority for Assisting Small and Medium Enterprises
Editorial, cover
To prevent further job losses and promote a stable job market, the Chinese government should give priority to helping small and medium enterprises (SME). Some labor-intensive SMEs have recently been targeted for removal due to supposed use of heavily polluting, energy inefficient, outdated production methods. We stress that supporting such companies is not tantamount to promoting backwards industries; instead, the government should realize that even big industries needed the support of smaller downstream factories, and that these firms are a key staple of the Chinese economy.
Original article: [Chinese]

Worries of Chinese Village Heads
Cover
More and more migrant workers have returned to their villages after urban plant shutdowns have left them jobless. Rural employment has since become a grave concern for village heads that were seeing a surge in returnees. Open arable land, like jobs, are also limited, and many of the returnees - especially the younger ones - are ill-equipped for agricultural work. Family disputes too have increased, as family members fighting over land once leased to others for care when the earlier left for the cities for jobs.
Original article: [Chinese] 

China's Budget Deficit to Hit 500 billion yuan
News, page 3
China's fiscal spending could hit a 500 billion yuan deficit next year, about 320 billion yuan more than this year's. Deficit spending in 2009 would be the highest in recent memory, of which some 200 billion would be invested in large-scale infrastructure projectss, while 120 billion for post-earthquake reconstruction.
Original article: [Chinese]

Orders Flow from South to Center China
News, page 7
Garment and footwear factories in China's Yangtze River Delta – including cities like Wenzhou, Taizhou and Hangzhou – claimed to have taken over foreign orders that used to be sent to factories in the Pearl River Delta in south China. Industry players reasoned that plants in south China were mainly owned by Taiwanese or Hong Kong investors, who pulled out of the market early when rental and labor costs soared and orders dried up. In contrast, plants in central China would hold out longer as local investors usually bought their own factories and had more access to both formal and informal loans.
Original article: [Chinese]

Exodus of Migrant Workers
Nation, special focus, page 9 – 12
The once-bustling industrial parks in south China had seen increasing number of plants closing down, and migrant workers were leaving in bulk for home. Earlier this year, Guangdong provincial government wanted to accelerate the pace of removing low technology and labor-intensive companies to replace them with high value-added ones. As the economy worsened, however, debates set in over whether to save the ailing companies or to expedite industrial structural change. Economist Li Gang believed selective government aid was necessary, and that it should aim to help those with potential for upgrades later.
Original article: [Chinese] [Chinese]

Yunnan Launches Metal and Fertilizer Reserve Purchases
Corporation, page 25
China's Yunnan provincial government has launched a scheme to stockpile non-ferrous metal and fertilizer. The move came after prices of non-ferrous metals – including aluminum, copper, tin, lead, zinc, steel, alloy, phosphorus yellow, calcium carbide, and sodium hydroxide – had sunk to the bottom after hitting an all-time high several months ago. Related businesses suffered badly as they had bought the raw material at high prices but by the time their products were out in the market, prices had fallen by more than half. The latest scheme would allow companies to mortgage their products to get subsidized loans from banks to tie over the bad times.
Original article: [Chinese]

China's Luxury Restaurant Chain Lowering Prices
Corporation, page 32
China's luxury branding chain-restaurant South Beauty (Qiao Jiang Nan) has revised its menu to offer price cuts of up to 30% to retain customers. The restaurant's clientele is mainly the expatriate community and corporate big shots, but the recent global financial storm has affected their spending pattern. The restaurant staff noticed that regular customers had cut the frequency of their visits. One waitress claimed the once proud clients were no longer insulted when being informed that: "Do come more often, we are lowering prices."
Original article: [Chinese]

China to Award 3G License Soon
Industry, page 36
China is expected to award the third-generation (3G) mobile phone license either late this month or early 2009. China Mobile will get a license for TD-SCDMA; China Unicom will operate a WCDMA system, while China Telecom will get CDMA 2000 technology.
Original article: [Chinese]

30 Years of Sino-US ties
Observer, special focus, page 41 – 48
The EO interviewed US diplomats, an East Asia scholar, a former US defense official, and a former US security counselor to reflect on the 30 years of bilateral ties between China and America. Some viewed that the current phase is the best in terms of cooperation between the two nations.
Original article: [Chinese]