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Highlights from the EO print edition, issue no. 426, July 6, 2009

Regulators Investigate China AMC
Cover, lead story
~ The EO learned that China Securities Regulatory Commission (CSRC), the country's stock exchange watchdog, was investigating two fund products managed by the China Asset Management Company (China AMC), a well-known domestic fund management firm.
~ The CSRC has sought trading information about two funds: China AMC's Large Cap Select fund and their Strategy Select fund.
~ As of July 2, the value of the China AMC Large Cap Select fund and China AMC Strategy Select fund reached 7.552 yuan and 1.515 yuan per share respectively.
~ The two funds are currently the responsibility of Wang Yawei, the company's vice president and chairman of the investment board.
Original Article: [Chinese]

Unprofitable Cental State-Owned Enterprises to be Eliminated
Cover, second lead
~ After introducing a policy of merging central state-owned enterprises back in 2003, the state asset watchdog is now considering a new method of  integration: eliminating backward, small-scale and uncompetitive enterprises.
~ A third state asset management company known as "CIC No. 2" has been established to manage the task of eliminating these unprofitable enterprises.
~ According to SASAC, "CIC No. 2" is designated to manage the withdrawal of those central state-owned enterprises that have been targeted. They will be either be merged into bigger state-owned enterprises or taken over by listed companies, private companies, local state asset watchdogs or foreign companies.
~ In this way, SASAC hopes to reduce the number of central state-owned enterprises to between 80 and 100, from the present 138.
Original Article: [Chinese]

Eight Key Points in Managing Investment Risk
News, page 2
~ Zhou Fangshen, an official of State-owned Assets Supervision and Administration has outlined eight key points in regard to managing investment risk.
~ The key points included, decision making, feasibility study of a project, decision-making systems, cost control, investment systems, legal person responsibility system for projects, assessment on and after project construction.
~ Zhou said enterprises solely funded by the state are attempting to let the investors hire outside directors directly, who will outnumber the internal directors, a move which should improve the management of investment risk at SOEs.
Original Article: [Chinese]

NDRC Reports on Huge Growth in Company Bonds
News, page 4
~ The number of company bonds issued in the first half of this year has reached a historic high, the EO learned. 
~ According to the National Development and Reform Commission (NDRC), there were 104 company bonds issued by the end of June this year, the total value of which approached 184 billion yuan, over six time that of last year's figure.
~ The EO learned that the total amount of company bonds currently on offer or under review by the NDRC as of the end of June, exceeded 400 billion yuan. These include bonds for large state-owned companies such as State Grid, China Southern Power Grid and others.
~ The total amount of company bonds issued in the past five years was less than 500 billion yuan.
Original article:[Chinese]

The End of China's Export-led Era of High Growth
News, page 6
~ According to some exporters, the decline in demand abroad marks the end to the export-led growth model of China's economy.
~ According to a report released by the Ministry of Commerce, exports have dropped to 2007 levels.
Original Article: [Chinese]

Chenzhou Train Collision
Nation, page 11
~ On June 29, two passenger trains collided in China's central Hunan province, leaving at least three people dead and 63 injured.
~ The railway management body, Guangzhou Railway Corporation, attributed the incident to "brake failure" when reporting on the cause of the accident to the State Administration of Work Safety.
~ Members of the public questioned the conclusions reached, some held that the incident was caused by a wrong signal being given by the local railway station.
~ The incident occurred just as China's railways were about to introduce a new schedule around the country. The accident raised safety concerns about the introduction of the new system.
Original article: [Chinese]

Shanghai Building Collapse
Nation, page 13
~ Early on the morning of June 27, a 13-story apartment building that was still under construction collapsed in Shanghai.
~ Although the local government has reported on the direct cause of the collapse, suspicions still surround the issue, with some questioning whether the land on which the project was being developed was purchased at an artificially low price and also whether local officials had invested in the project.
~ Chen Chiqiang, spokesman of Minxing district government told the EO that the Shanghai Municipal government had set up a special team to investigate the incident.
Original article: [Chinese]

Xi'an Named as Trial Reform Area
Nation, page 14
~ Following the central government's designation of Shanghai, Tianjin, Chengdu-Chongqing and Wuhan-Changsha as experimental areas in recent years, the city of Xi'an has now also been chosen as a trial reform area.
~ Xi'an, including its surrounding area, was designated as a trial reform area on June 25. The reforms aim to improve the regions scientific and technological resources as part of a comprehensive reform package.
~ Xi'an, an economic center of West China, is home to many national level development centers and industrial bases, as well as college scientific zones and research centers.
~ Wang said the reform trial is an important measure to promote the development of West China after the "Go West" development of the west policy was first introduced 10 years ago.
Original Article:[Chinese]

Exporters in Dongguan look to e-commerce
Nation, page 14
~ A project targeted at selling direct to domestic online customers got underway in late June in Dongguan, a manufacturing center in southern China.
~ Known as the Songshan Lake Taobao start up park, the endeavor is a cooperative effort between Taobao.com, one of the biggest online retailers in China, and manufacturers.
~ Taobao.com is China’s biggest eBay-style online shopping website, with sales in 2008 just shy of 100 billion yuan.
~ The local government will invest 250 million yuan in the park to help enterprises train online salesmen, teams, and build sales channels online and so on. Start ups that achieve a certain level of online sales, will also be eligible for favorable loans and other services.
~ The Songshan Lake Park was originally set up as a scientific park when it opened 8 years ago. Its transformation into an e-commerce park is an indicator of how export-orientated manufacturers, with support from local government, are attempting to sell into the domestic market.
Original Article: [Chinese]

The Challenges of Changing China's Macroeconomic Model
Observer, page 41
~ The investment-driven model of economic development in China has long been a target of criticism. The shift to a model in which the economy is propelled by domestic demand is not only the key to surviving the present financial crisis, but also a vital point for ensuring sustainable economic development.
~ As China's economy is dominated by state-run enterprises, the majority of China's national wealth is controlled by the state instead of ordinary people.
~ That means, unlike citizens in other countries who can gain an income from asset appreciation in the capital markets, working is the only way for Chinese people to gain income.
~ To release the consumption demand of ordinary people and realize the full potential of the Chinese economy, it's vital that the state-controlled economy becomes a civil-dominated economy.
~ Furthermore, transferring all the state-owned wealth to one National Citizen's Fund and 31 Provincial Citizen's Fund will be an effective way of ensuring that public property really is "owned-by-all-the-people".
Original Article: [Chinese]