Highlights from the EO print edition, issue no. 428, July 20, 2009

Economic Overview of the First Half
Nation, page 5
~ This week's Economic Observer contains an overview of China's macroeconomic performance during the first half of 2009 with a focus on policies, industry and the banking system.
~ According to the three reports, the Chinese economy has been steadily recovering, with GDP growing at 7.1% compared with the same period last year.
~ Six of the ten sectors earmarked for special attention are experiencing a resurgence, with the auto-industry, textiles and the petrochemical industry emerging as the best performers. Small steel factories are starting to regain orders and the profitability of the textile industry has increased by 5.1% to 30.768 billion yuan over the past 6 months.
~ But problems remain with light manufacturing and the non-ferrous metals sector still doing it tough.
~ The basis for the economic recovery is still not stable experts say, as it's manly driven by governmental investment instead of private capital and domestic consumption. The recovery remains weak and further stimulus, restructruring and a continuation of moderately loose monetary policy is required.
Original Article: [Chinese]

Tax Inspection Drive to Report Soon
News, page 2

~ The State Administration of Taxation (SAT)  is about to end a national inspection drive that has targeted around 100 large enterprises
~ "This year's inspection is different from those we've carried out before. The targets for the first round are 60 big companies, mainly state-owned," said one unnamed source from within the tax bureau.
~ The procedure included two steps: self-inspection and SAT inspection. The latter will only be undertaken if SAT is dissatisfied with the result of self-inspection.
Original article: [Chinese]

China Reconsiders Foreign Capital's Role in Grain Industry
News, page 2
~ The government is reexamining current grain and edible oil policy to determine what kind of role foreign capital should play in the domestic market.
~ Unverified sources revealed that the policies in relation to foreign investment in the industry will be changed.
~ It is reported that the State Grain Administration is drafting a plan to restrict foreign capital investing in the processing of grain, though the claim is said to be an exageration by another unnamed official.
~ The grain and oil processing industry opened to foreign capital early, and currently 70 percent of oil processing plants receive foreign investment while 1 percent of grain processing mills are backed by foreign investment.
~ The policy rethink has been prompted by the global food crisis that hit in the first half of 2008, which aroused concerns of foreign capital's role in national food security.
Original Article: [Chinese]
 

China Relaxes Restrictions on Domestic Capital Investing Abroad
News, page 3
~ The limits placed on domestic capital investing in overseas projects will be reduced from August 1 this year. China recently loosened restrictions on foreign direct investment (FDI).
~ Meaures include: simplifying the approaval process, increasing the amount of capital that is allowed to be invested abroad and also allowing companies to invest first and report later. These are part of the regulatory rules recently released by the State Administration of Foreign Exchange (SAFE), the national regulator of foreign exchange, to smooth the way for domestic institutions to go abroad.
~ "The new policy is aimed at promoting outward foreign investment and cross-border capital transactions," an official with SAFE said.
~ Meanwhile, a Cross-border Capital Statistics and Monitoring System has been set up to supervise transactions and avoid risks.
Original Article: [Chinese]

Government Forced to Export Grain in Order to Maintain Domestic Prices
News, page 4
~ China’s government managed to avoid food shortages and check potential inflation during the 2008 global food crisis by suspending grain exports and increasing its stockpile.
~ With a bumper grain crop in 2009, the seventh year of consecutive growth in the total grain output, China now faces falls in the price of grain. The problem has been further exaccerbatef by the drop in global commodities prices that have accompanied the financial crisis.
~ In order to push grain prices higher and protect the welfare of China's farmers, the government used to purchase the grain from the peasants at a price higher than the market price and then sell it at an even higher price back to the market. But the market price of grain has remained so low, that this time the government has been unable to manipulate the price.
~ China will approve the export of five million tons of corn to reduce inventory and ease surplus. But this might involve a two-billion-yuan subsidy, evoking criticism that the government has subsidized overseas consumers with domestic taxpayers’ money.
Original Article: [Chinese]