Highlights from the EO print edition, issue no. 455, February 1, 2010

Qinghai: Two Versions of Local Fiscal Budget
Cover
~ During the recent meeting of Qinghai province's legislature, representatives of the provincial people's congress received a "balanced" annual fiscal budget report as usual.
~ However, the report conflicted with information acquired by the EO in early January.
~ At that time, a fiscal official from Qinghai told the EO that their fiscal budget for 2010 would run into deficit. He attributed the deficit to a blow out in the province's spending.
~ An official from the Qinghai provincial finance bureau said that as of mid-2009, he and his colleagues began to draft a budget for 2010 and finally concluded that the fiscal revenue would amount to approximately 10.3 billion yuan but that spending would reach 11 billion yuan. Meaning a fiscal deficit of 700 million yuan.
~ However, according to China's Budget Law, local governments are not allowed to run deficits and they're also banned from issuing local treasury bonds.
~ In order to pass the budget through the provincial people's congress, local officials made some "technical changes" to the original draft budget.
~ People familiar with the matter revealed that Qinghai was not an isolated case, and many underdeveloped provinces were plagued by similar problems. 
~ In addition, in order to invigorate local economy and support the central government's investment projects, local governments borrowed huge loans from banks. However, these debts were not listed in the local government's draft fiscal budget.
Original article:[Chinese]

The Real Story Behind the Closing of Disanji Bookstore
Cover
~ Disanji, was once the biggest private book retailer in China, the company has since declared bankruptcy and has sold its large office buildings located in Beijing's Haidian district, not far from Peking University.
~ When it first attempted to enter the Beijing market, Disanji attempted to under sell its competitors, mainly state-owned publication giants, by offering hefty discounts.
~ In this manner, Disanji was able to attract more than 30,000 customers a day. This also had an effect on the book stores property value, pushing up the cost of floorspace in its office building to 3,000 yuan per square meter - or a total of 400 million yuan. 
~ Though a bookseller, it seems that Disanji was really just an elaborate real estate project. All of its shareholders, except for the second biggest one - the State-owned Asset Supervision and Administration Commission of Beijing's Haidian District, were large property developing companies.
~  The main reason that the developers decided to focus on establishing a book store was to make it easier to acquire the development rights and also so that they could enjoy the preferential tax policies offered by the Haidian government to those involved in the "creative culture industry."
Original article: [Chinese]  

China to Speed up Elimination of Outdated Industrial Facilities
News, page 4
~ China's State Council will issue a policy document aimed at speeding up the process of getting rid of outdated industrial facilities. The document will include specific quotas and a time table for the dumping of inefficient facilities in the steel, nonferrous metals, coal chemical and several other major industries.
~ The document was drafted by the Ministry of Industry and Information Technology (MIIT) along with assistance from 12 other ministries, although yet to be published, the policy document was adopted at a meeting of the standing committee of the State Council on Jan. 20th.
~ This document sets specific minimum standards on the productive capacity of certain industrial facilities in a range of major industries. For example, in the steel industry, factories with blast furnaces smaller than 400 cubic meters will be eliminated.The remaining facilities will also being required to strict standards in terms of coals and water efficiency, so that no more than 620 kilograms of coal and 5 tons of water may be consumed in the production of one ton of steel.
~ In addition, the central government will set-up special funds to provide support to companies that are forced to exit the market due to outdated industrial facilities.
Original article: [Chinese]

Top Land Regulator to Inspect Local Land Rehabilitation Funds
News, page 4
~ China Ministry of Land and Resources (MoLR) will inspect the use of funds earmarked for land rehabilitation in 2010. The kind of land reclamation referred to in this article involves the returning of polluted, swampy, acidic, saline, deforested or otherwise non-productive land to productive use or its natural state.
~ "The central government invests hundreds of billions of yuan in land consolidation and rehabilitation every year, but supervision of whether these funds are used efficiently is not strong" said Wu Haiyang, director of the Land Consolidation and Rehabilitation Center under the MoLR, at a recent work.
~ He added the land improvement would be one of the ministry's top seven priorities in 2010.
Original article: [Chinese]

Local Governments Shun Introduction of Property Tax
News, page 5
~ As the central government attempts to temper the rise in housing prices, rumors that a new property tax will soon be introduced continue to circulate.
~ However, the Economic Observer has learned from a reliable but anonymous source that it's unlikely that a property tax will be adopted over the coming one to two years. 
~ A source close to the Ministry of Finance said, the introduction of the new property tax will result in developers paying less money to local governments. Local government are also worried that the new tax might destabilise the property market.
~ Experts predict that the central government may choose to gradually roll out the policy by first imposing the property tax on commercial buildings, than on luxury houses and finally on ordinary residential properties. 
Original Article: [Chinese]

Beijing Opens Government Books
News, page 5
~ At the recently concluded meeting of the Beijing municipal people's congress, representatives were able to keep copies of the government's budget for the first time.
~ On January 23, during a meeting of the Beijing municipal people's congress, each delegate received a document called "the implementation of the 2009 budget and the draft budget for 2010."
~ This means that representatives not only have the chance to carefully examine government spending as they did in the past, but that they can now take the budget documents with them, making sure that spending is in accordance with the budget documents.
~ The local government budget has been labeled confidential for many years. Since 2006, Guangdong, Shenzhen and other cities have opened their budget to inspection by members of the local people's congress. The role of representatives to the National People's Congress has also become stronger.
~ This year, not only has the general municipal budget been shared with delegates, but the district-level budget has also been shared with representatives.
~ Some deputies have suggested that the draft budget should be placed on the Internet for all the citizens to see.
Original Article: [Chinese]