BHP Billiton Behaving Badly
News Cover
~ Australian-based mining giant BHP Billiton announced in October that it had entered an agreement that would offer to acquire all outstanding shares in United Minerals Corporation NL (UMC) for 1.30 Australian dollars per share.
~ If the deal succeeds, China Railway Material Commercial Corporation' earlier agreement to acquire a 11.38% holding in UMC will be annulled.
~ This aggressive play comes on the back of BHP Billiton's role in blocking Chinalco's plan to invest more than 19 billion US dollars in Rio Tinto earlier this year.
~ Reports in the Australian media have outlined the intensive and high-level lobbying that BHP Billiton engaged in when trying to disrupt Chinalco's attempts to gain a bigger stake in Rio Tinto.
Original article: [Chinese]

China Suspends Approval of New Projects in Seven Industries
Nation, page 3
~ The National Development and Reform Commission (NDRC) has announced that it's suspending the approval of any new projects within seven industries currently plagued with problems of overcapacity for the next three years.
~ The industries targeted by the directive are steel, coke, calcium carbide, chemically-processed coal, wind power turbines, electrolytic aluminum, and shipbuilding.
~ Meanwhile, the central government is urging its local counterparts to come up with detailed schemes of how to eliminate outdated equipment and factories that are contributing to problems of overcapacity in the steel, cement, glass, polycrystal silicon, ship-building and other sectors.
Original article: [Chinese]

NDRC Takes on Overcapacity in Steel Industry
News, page 5
~ A senior official from the National Development and Reform Commission (NDRC) recently revealed to the EO that much of the overcapacity in the Chinese steel industry was caused by the establishment of new steel factories that lacked official examination or approval from the NDRC.
~ Xiong Bilin, deputy director of the Industrial Coordination Department of the NDRC, said this excess production capacity of 58 million tons, would be completely eliminated in accordance with the recent State Council circular.
Original Article: [Chinese]

Advance of the State: Shanxi's Disappearing Grey Economy
Nation, page 9
~ Recently, small private coal mines in Shanxi province are being incorporated into large state-owned mining conglomerates as part of a consolidation campaign launched by the provincial government.
~ As part of the transition, many of the unspoken rules that allowed smaller players in the industry to bend safety, environmental and transportation rules are gradually being terminated.
~ Private coal mine owners told the EO that local agencies in charge of coal mine safety and environmental protection will be most affected by the disappearance of small mining companies that often paid for the "services" of these local government regulators.
Original Article: [Chinese]

Advance of the State: Dairy Farmers      
Nation, page 10
 ~ The melamine scandal that shook China last year involved the death of six children and many others developing kidney stones after drinking chemically contaminated milk products over a long period of time.
~ It's now been over a year since the scandal emerged but it continues to have an impact on the mainland's dairy industry.
 ~  To ensure the purity and safety of their milk, Yili Group, one of the state-owned dairy giants affected by the scandal, has co-founded small dairy cooperatives with local governments around the country. The cooperatives are run like companies and dairy farmers are allocated shares in return for agreeing to send off their cows to be fed, milked and housed according to uniform standards at the cooperative.
 ~ The recent investment in Mengniu Dairy Group, another Chinese dairy giant, by centrally-owned conglomerate COFCO Group is also said to be part of a plan to provide capital to allow Mengniu to pursue a similar cooperative program.
Original Article: [Chinese]

QFII Stay Away from ChiNext
Market, page 23
~  Despite remaining optimistic about the prospects of China's stock market, qualified foreign institutional investors (QFII) have shown little interest in investing in the country's newly-established Nasdaq-style growth enterprise board - ChiNext.
~ According to EO's interviews with senior managers at several foreign investment banks, many QFIIs seem to believe that P/E ratio of the companies that will officially start trading when the board debuts on Oct. 30 are over-valued.
~ In addition QFIIs report that the new board continues to use the electronic call auction trading model that is used on the main Shenzhen and Shanghai boards and that they prefer the "market maker" system used on the major American boards including the Nasdaq.
~ Further more, some of the QFII are bound by the limits of their contracts with investing funds that require them not to invest in high-risk securities in emerging markets.
Original Article: [Chinese]

China's Version of the Bill and Melinda Gates Foundation
Corporation, page 26
~ Chan Fashu,  who ranked 15 in this year's Hurun Wealth Report, recently founded China's biggest private charitable foundation and by doing so has been dubbed China's Bill Gates.
~  Though not the first charitable fund in China, Xinhuadu is the first to strictly follow the model of the Bill and Melinda Gates Foundation, so that Chan is still the only owner of these shares, but all of the profits, including those made if he chooses to sell his house, will belong to Xinhuadu.
~ Chan plans to build Xinhuadu hope schools, aid poor college students and help 200,000 college graduates to upgrade their qualifications and find jobs.
Original Article: [Chinese]

Sinopec Squeezed Out of PX Market by Mobil
Corporation, page 31
~ Up until recently, Sinopec was able to make a killing by selling a petrochemical known as PX in the Asian market, but now the trade has turned into a losing proposition for the Chinese oil giant.
~ An aromatic petrochemical officially known as Paraxylene, PX is used in the manufacture of terephthalic acid (TPA), purified terephthalic acid (PTA) and dimethyl-terephthalate (DMT) all of which are used in turn to manufacture polyethylene terephthalate (PET) saturated polyester polymers. One of the many uses that these polymers are used for is to make plastic soft drink bottles.
~ One of the base material used to produce PX is naphtha. Only when the price of naphtha is at least 350 US dollars lower than that of PX, will Sinopec's PX producers be able to make a profit.
~ But, in a move aimed at grabbing a place in the Asian market, over the past 2 months, Exxon Mobil, the world's major PX supplier has reduced the price of PX by 20% to 840 US Dollar per ton, only 160 US dollars higher than the current price of naphtha.
Original Article: [Chinese]

China's Auto Industry: Moving from Big to Strong
Industry, page 33
~ This year China will become the third country in the world with the ability to produce ten million cars a year.
~  "Though our car industry is big, it's not strong," China's vice premier Zhang Dejiang said in a congratulatory letter to the whole industry.
~ Zhang went on to to urge the whole industry to "pay more attention to technology innovation, structure-readjusting and brand identity development. We should actively develop environmental-friendly and new energy cars and improve the international competence of the whole industry," Zhang said.
Original Article: [Chinese]