Highlights from the EO print edition, issue no. 467, May 3, 2010

Roll Out of Integration of Three Networks Delayed
News, COVER
~ The EO has learned that a program detailing the trial roll out of the integration of the services provided by the telecom, computer and cable television networks (the Three Networks or三网融合角 sān wǎng rónghé) has once again been delayed and will not be submitted to the State Council for approval until late May.
~ In early April, the Ministry of Industry and Information Technology (MIIT) and State Administration of Radio, Film and Television (SARFT) jointly handed over a draft pilot plan for the integration to the office responsible for the integration under the State Council; however, the plan was rejected by the office and the two government bodies mentioned above were ordered to improve the draft plan and submit it in early May.
~ The latest timetable shows the submission of the draft has again been postponed until the end of May.
~ According to sources, the MIIT and SARFT disagree on the scale of the pilot and the scale of service reciprocity; they are yet to reach any agreement on these issues.
Original article: [Chinese]

Changes to Budget Law May Result in Local Governments Being Allowed to Issue Bonds
News, page 4
~ Local governments may soon be allowed to issue local treasury bonds (T-bond), according to officials and scholars who have seen proposed reforms to China's Budget Law which is currently under revision.
~ According to existing regulations, local governments are prohibited from issuing government bonds and are forced to rely on the central government to issue bonds on their behalf.
~ The revised law is also likely to prescribe that any move to make changes to local government budgetary outlays first require approval from the National People's Congress (NPC) or its standing committee. Currently approval is only required for additional spending that exceeds 1% of the total budget.
~ Many scholars and officials interviewed by the EO believe that the NPC's standing committee is very likely to pass the revised budget law. They argue that  if it is not passed, future changes to the country's fiscal and taxation system would be difficult to implement.
Original article: [Chinese]

Shenzhen to Crackdown on Criminal Gangs
Nation, page 9
~ On March 30, representatives of the Shenzhen government announced at a press conference, that in order to ensure the success of next year's Universiade (a international university sporting event), the city is determined to crackdown on local criminal gangs.
~ Shenzhen locals have been suffering from gang-related crime since the 1990s when the Shenzhen Special Economic Zone was founded. Locals often have to pay a "protection fee" to gangs if they want to avoid being hurt or killed because the local police are either being bribed or are too weak to offer help.
~ Shenzhen is a city where the migrant population is far greater than the number of residents, which makes it difficult for the local government to maintain social stability. Sometimes, the local government even has to rely on gangs in order to manage the city.
~ The gangs in Shenzhen come from a variety of backgrounds, some were founded locally while others migrated from Hong Kong, Macao or even overseas.
~ According to local authorities, 67 gang members have already been sentenced, with one criminal handed a 20 year jail sentence.
Original article: [Chinese]

Healthcare Reform: Ma'anshan Case Study
Nation, Page 13
~ Tao Jun is a Ma'anshan city resident trying to decide what hospital his child should be born in. Should he choose the hospital affiliated with his company where his expenses would be partially covered by his employer, or the public hospital with a better reputation where he would have to pay himself? This dilemma facing Tao Jun illustrates problems with the health care system in this city.
~ To reform this system, the local government decided to build medical groups with a large comprehensive hospital, several hospitals with specific focuses, and some small village hospitals. Although many opponents disagree with this reform method, advantages, such as unified management and independent funding, do exist.
~ Although the results of this reform have been positive,  there are questions remaining about how long the reforms will continue after the departure of a key official who pushed for the reforms?
Original article:[Chinese]

Is China's Economy Overheating?
News, page 3
~ In preparing a report on the current macroeconomic conditions in China, the EO has observed and interviewed enterprises and other economic players in Wenzhou, Shanghai, Suzhou, Guangzhou and Shenzhen.
~ All companies investigated expressed optimism about the economic prospects for this year, though they are worried that some industries may over-heat as many enterprises, stimulated by the improving economy, choose to blindly expand capacity.
~ Prompted by increasing food prices, the expectation of inflation is strengthening. The increased price of raw materials has also raises the price of industrial products.
~ As the central government tightens access to bank loans for those investing in property, some investors are exiting the real estate industry and seeking new opportunities in traditional sectors as well as the financial market. Others believe buying and selling commercial properties will remain profitable.
Original article: [Chinese]

The Birth of a Financial Supervision Coordination Commission?
Market, page 17
~ According to sources, China is planning to establish a Financial Supervision Coordination Commission to monitor large financial institutions whose business spans the the fields of securities, insurance and banking which are presently monitored by separate regulatory bodies.
~ It's possible that details of the framework that such a body might operate under will emerge in August this year.
~ The proposed new regulatory body is likely to operate directly under the authority of the State Council.
~ It's also been predicted that the three existing regulators - the China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission - will all contribute personnel to the new body.
~ Aside from being charged with monitoring diversified financial institutions, the new commission will likely play an active role in coordinating the actions of the three existing regulatory bodies.
~ Details on how the new commission will function are likely to be discussed at the annual National Financial Working Meeting which is scheduled to be held in the second half year of 2010 and which will be devoted to improving coordination of financial supervision.
Original article: [Chinese]

Internal Audits Sweep Through Securities Industry
Market, page 17
~ The China Securities Regulatory Commission (CSRC) has required all individuals either working in the securities sector or for the regulator itself, to either close their personal stock trading accounts as well as the accounts of their spouses and parents, or to report the stock trading accounts that they own to the securities companies where they are employed and cease trading on the account.
~ This inspection will be targeted at both institutions and individuals concerning securities, funds, investment consultancy, etc and 10 percent of such institutions will be randomly reviewed by the CSRC.
~ To hide their illegal actions, some people in the securities industry have already re-installed or changed computers; others have chosen to use restraint when using their official computers online.
Original article: [Chinese]

Baidu Competes with Taobao for Website Partners
Corporation, page 25
~ Recently, China's largest search engine Baidu began to compete over website advertisements with Taobao, China's largest online commerce platform.
~ At the company's annual general meeting on April 27th, Chu Dachen, president of Baidu Union, the advertising network operated by Baidu Inc, said he would raise the percentage of profit sharing with its allied website owners to 15 percent from 10 percent.
~ At present, Baidu has 350,000 website alliance partners. Li Zhi, an analyst from Analysis International, a well-known advisor about technology, media and telecom (TMT) industries in China, said these partners contributed nearly 30 percent of Baidu's total advertising revenue.
~ Taobao Union, also an advertising network which officially launched on April 8th, announced that it would offer 1 billion yuan of its profits to its allied website users.
Original article: [Chinese]

Vanke Raises Warning About Drop in Trading Volume in First-tier Cities
Property, page 41
~ China's largest property developer Vanke released its first quarter financial report, warning that the trading volume of houses in first-tier cities has decreased sharply; a dangerous signal.
~ Data showed Vanke's sale areas in the Pearl River Delta in the first quarter dropped 45.1 percent from a year earlier, while during the same period, its sale areas in Yangtze River Delta declined 33.9 percent.
~ The report said the implementation of policies related to the real estate market would have a significant effect on the market and that the boom in housing prices in some cities would come to an end.
Original article: [Chinese]