Highlights from the EO print edition, Issue Wrap No. 481, August 9 

China to Set Rules for the Cooperation of Banks and Trust Companies
Cover 
~ In early July, the China Banking Regulatory Commission (CBRC), issued a verbal order requiring requiring all banks to cease their wealth management operations with trust companies.
~ The CBRC suspected that many loans were entering the market via this channel and were appearing on loan balance sheets of banks.
~ Currently, a draft regulation on the cooperation between banks and trust companies is being circulated within departments at the CBRC.
~ According to the draft regulations, the scale of cooperation between banks and trust companies should not exceed 30 percent of the operations of the trust company.
Original article: [Chinese]

International Investors Left Guessing Regarding RMB Exchange Rate Reforms
News, page 2 
~ Following announcements from China's central bank indicating their intention to continue to reform the management of China's capital account, some international investment banks are predicting that further liberalization of the country's capital account is not far off. 
~ In addition, a recent series of articles written by the deputy president of the People's Bank of China Hu Xiaolian, is also being considered a signal of China's intent to turn the RMB into a global currency.
~ The central bank has stated in public that in the future, the RMB’s exchange rate will be set according to a basket of currencies of which the US Dollar will account for less than 50%. However, the ratio of the other currencies to be contained in the basket remains a tightly-kept secret.
Original article:[Chinese]

Speculators Continue to Play Havoc With Agricultural Produce Markets
News, page 4 
~ Following the recent spikes in ginger and garlic prices, more and more agricultural products have become targets of domestic speculators. 
~ With a gloomy property and stock market outlook, investors are seeking out alternative investment options and agricultural products is one alternative.
~ These investors can be split in to three categories: big companies who function as agencies; former coal mine owners from Shanxi and Inner Mongolia who speculate through agencies and the third category is individual speculators.
~ Their success up until now is also connected to the fact that China's agricultural product markets are fully open to all participants.
Original article:[Chinese]

BHP Pursues Monthly Pricing System
News, page 5 
~ While Chinese steel producers are still using the quarterly pricing system of iron ore, BHP, one of the three international mining giants, is thinking about shifting to a monthly pricing mechanism.
~ BHP might realize its dream because the iron ore price in spot market has slipped below that agreed to on long-term contracts and it is more profitable for steel companies to purchase iron ore at spot prices.
~ As a response, the China Iron and Steel Association plans to cut the number of steel companies that are licensced to import iron ore from over 110 to no more than 30 and then help organize a united front between them in order to negotiate with the three mining giants: BHP, Rion Tinto and Vale.
Original article:[Chinese]

The US and EU Chambers of Commerce on China's Investment Environment
News, page 6 
~ The Economic Observer (EO) published a special report on the changing foreign investment environment in China.
~ The EO interviewed the chairman of the US Chamber, Christian Murck, and the general secretary of the EU Chamber, Dirk Moens, about how they perceive this change in environment and how it has impacted the strategic planning of foreign companies in China.
~ Dirk Mones thinks that foreign firms are absolutely confident in China's growth, but also worry that because of China's indigenous innovation policy, the government will give domestic firms more support and thus will not offer an equal and open opportunity for foreign firms to compete with domestic ones.
~ Murck said that generally speaking, the investment environment for foreign firms in China is still pretty good, but many firms are concerned whether the reform and opening trend that has been in place for thirty years will continue or stop and whether market access for foreign firms will be frozen or narrowed in the future.
Original article: [Chinese]and [Chinese]

Shenzhen at the Crossroads
Nation, page 9-15 
~ August 26, 2010, marks the 30th anniversary of the founding of the Shenzhen Special Economic Zone.
~ This week's Economic Observer features a special report on Shenzhen's history as a special economic zone and how it is struggling to make reforms to its political system so as to maintain its vitality.
~ The Shenzhen government had planned to separate local government into administrative, decision-making and supervising bodies. However, as the reforms ran against many vested interests, it has stalled.
~ Aside from stalled political reforms, Shenzhen is also facing challenges in terms of maintaining economic growth at a time when the central government has removed most of the areas preferential policies.
Original article: [Chinese]

Futures Industry at a Turning Point
Market, page 17 
~ The draft regulation on the investment consulting services of futures companies has been given to several futures companies by the China Securities Regulatory Commission (CSRC) to solicit their comments.
~ The regulation divides consulting services into two categories: analysis and transactions.
~ At present, futures companies in China are living off transaction commissions, if the regulation are passed, futures companies will have an additional channel for making money.
Original article: [Chinese]  

The EO's Monthly Observer Forum: The Roles and Responsibilities of Chinese Intellectuals
News page 41
~ In early August, the EO held a monthly discussion on the topic of the roles and responsibilities of Chinese intellectuals.
~ The EO invited four scholars including Cui Weiping, a professor at the Beijing Film Academy, He Weifang, a professor at the Law School of Peking University, Jin Yan, a professor at the College of Arts and Sciences of Renmin University and Guo Yuhua, a sociology professor at Tsinghua University to discuss this topic.
~ The edited texts of their presentations are featured in this week's paper on pages 41 to 42.
Original articles:
http://www.eeo.com.cn/eeo/jjgcb/2010/08/09/177487.shtml
http://www.eeo.com.cn/eeo/jjgcb/2010/08/09/177594.shtml
http://www.eeo.com.cn/eeo/jjgcb/2010/08/09/177488.shtml
http://www.eeo.com.cn/eeo/jjgcb/2010/08/09/177593.shtml