Highlights from the EO prints, issue no. 408, March 2, 2009

China Mulls CIC No. 2 
Cover
The Chinese government has been planning to consolidate some state-owned companies into an asset management company akin to an existing sovereign wealth fund, the China Investment Corporation (CIC), the EO has learned. Dubbed by sources close to the matter as the "CIC no. 2" project, the new entity was said to focus on investments in the real economy, rather than equity and financial products. The project would be spearheaded by the State-owned Assets Supervision and Administration Commission (SASAC), which hoped the project would further consolidate the number of central government-owned firms (central SOEs) from the present 141 down to between 80 and 100. As of the end of last year. The combined assets of these central SOEs totaled some 15 trillion yuan (2.2 trillion US dollars). However, the EO learned that only the less profitable and under-performing central SOEs would be merged into the "CIC no. 2", while the more established state companies would remain untouched.
Original article: [Chinese]

The Final Medical Reform Draft
Cover
The Chinese government is wrapping up the long awaited medical reform formula and its final version would be made public soon, the EO has learned. The final formula would likely scrap an earlier suggestion to set up centralized production plants for medicine, instead, the amended formula would opt for an open tender process to source for the best-priced medicine. On public hospital restructuring, the EO learned that hospital management and medical administration would be separate entities. The reform would also push for more market-oriented elements to be adopted by the health care sector and encourage competition. The final amendments were made after gathering public opinion and experts' views.
Original article: [Chinese]

China to Raise Tax Rebates to Spur Exports
News, page 5
China would likely raise tax rebates for export-oriented companies to revive declining exports and help struggling domestic firms. The EO learned that the Ministry of Commerce was considering higher rebates for labor-intensive industries, such as electronics and textile sectors, to protect not only businesses but also employment. The rebate rate might be augmented to 17% from the current 15% for the textile industry.
Original article: [Chinese]

More Software and IT Services Outsourced to China
News, page 6
More and more software and IT service outsourcing orders have been coming directly from the US and Europe into China recently, according to industry players. Previously, a majority of the orders would have come via India, the established outsourcing hub, said industry players. An official from the Ministry of Commerce believed the current global economic downturn had partly contributed to the growth, as software companies in the US and Europe cut off non-core units and staff strength, the need to outsource increased; and China has the pool of expertise at affordable rates. Some foreign firms also realized that in the past, some of their outsource orders to India had been sub-contracted out to Chinese firms. To cut out the middle-man cost, some foreign firms had sought out Chinese partners directly.
Original article: [Chinese]

Credit Cards Left in the Cold
Market, page 9
The number of new applications for credit cards has been in the decline in China since early this year. In recent years, Chinese banks had been promoting credit card packages for fresh or soon-to-be graduates. But the banks' enthusiasm has been sapped as the economy slowed and employment concerns picked up. While banks became more prudent in issuing credit cards for fear of defaulted overdraft, consumers too grew cautious and spent less with credit cards.
Original article: [Chinese]

Guiding the Flows of Credit
Market, page 12
Following three months of relaxed monetary policies that led to an increase in credit issuance, the Chinese central bank is now drafting a guideline to provide "direction" as to where the money should flow to, sources close to the authorities have told the EO. The draft, the EO learned, stated that banks should give priorities to loans in support of public infrastructure, small and medium-sized companies, agricultural projects, and post-disaster reconstruction. In addition, loans in support of companies consolidation and merger plans, environmentally friendly projects and innovative industries would also be encouraged. The guideline was intended to reign in the surge in credits and channel the money to targeted areas.
Original article: [Chinese]

ZTE Seeks USD15 billion Loan for Overseas Expansion
Corporation, page 18
China's leading telecommunication equipment provider, ZTE Corporation, has been negotiating a 15 billion US dollars loan from the China Development Bank to fund expansion plans in the US and Europe. A source close to the matter told the EO that ZTE was eyeing cash-strapped telecommunication operators in the developed world. A similar tactic had been deployed by ZTE for operators in developing countries, and it saw opportunities to do the same when the financial crisis hit the US and Europe.
Original article: [Chinese]

Top Legislative Meets Special: Charting The Way Forward
Special Focus, page 25 - 40
China's annual top legislature meets from March 3 to 13 would center around collective efforts to overcome the current economic challenges, and the EO has compiled a special focus on the various problems facing the country through a number of case studies and commentaries from experts.

How to Sustain Olympics Venues?
Lifestyle, page 52
Droves of tourists and kept entrance ticket sales high at Beijing Olympic venues such as the Bird's Nest (national stadium) and the Water Cube (aquatic center). Since the two venues were opened to the public on October 1 last year, the Bird's Nest has received three million visitors and collected 150 million yuan in entrance fees; while the Water Cube raked in 50 million yuan through ticketing. However, the authorities were worried that the tourist tide would ebb as the Olympic euphoria faded, and the venues management were seeking ways to increase funding channels. Among the proposals included plans to down-size the spectators areas and convert part of the giant stadiums for other business purposes, such as restaurants, gym, spa, multi-purpose hallss, and so on. The two stadiums have also actively competing for event hosting, especially concerts.
Original article: [Chinese]