ENGLISH EDITION OF THE WEEKLY CHINESE NEWSPAPER, IN-DEPTH AND INDEPENDENT
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Issue 564 9-04-2012
Summary:Probe into Dalian-based Shide Group, Health Care Reform and an Investigation into Private Lending


Highlights from the EO print edition, No. 564, Apr 9, 2012
 
Probe into Dalian-based Shide Group
News, cover
~ Various unnamed people have confirmed to the EO that Chen Chunguo (陈春国), has been under investigation since the end of March.
~ Chen is the chief executive of Shide Group, one of the largest businesses in Dalian, a coastal city where former Chongqing governor Bo Xilai built a reputation for efficiency.  
~ Chen owns 11.5 percent of Shide, China’s 66th largest company in 2011, with assets ranging from petrochemicals to finance and annual revenue of 12.1 billion yuan.
~ The China Banking Regulatory Commission said late last month that it wanted to check the accounts of trust trading and group companies in Dalian.
~ Shide was said to have been at risk because of its involvement in the real estate market in 2009. The EO was told that there were problems with Shide’s financing arrangements and that it was using an offshore financing platform called 高登国际(香港)投资有限公司, which would translate into English as Gaodeng International Investment Company [The EO was unable to find English-language references to the company].
~ The company was founded in Hong Kong in March 2000 as an international investment company and was originally called 实德国际投资香港有限公司, which would be translated as Shide International (Hong Kong) Investment Company. In November 2011, it was renamed Gaodeng, with Chen Chunguo as chairman. His deputy at Shide, Jiang Yan (姜岩), served as Gaodeng’s chief financial officer.
~ The EO learned that Gaodeng is in charge of 19 shell companies for Shide and that most of the Dalian firm’s international ventures were negotiated by Gaodeng president, Li Mingwei (黎明伟).
~ The EO also learned that Shide has two real estate businesses managed by Gaodeng: 盛和地产集团, which would be translated as Shenghe Real Estate Group, and Tian'an Shide Group (天实安德集团). Gaodeng also manages 23 industrial companies for Shide.
~ Shide started its real estate business in 2009 and has construction projects in more than ten cities, the company is especially active in China's three northeastern provinces where it received land from the government for industrial investment.
~ Aside from the real estate industry, Shide has also invested in banks. It has a major stake in Tieling Commercial Bank and told the lender to provide a 150 billion yuan credit to Shengyang Coal Trade Group Co. Ltd (沈阳煤业集团). A person told the EO that these funds have gone missing. Sun Yusheng (孙玉升) denied that Tieling was linked to Shide and said the bank had followed the correct procedures with its loans.
~ Chen has kept a low profile since becoming chief executive in 2004. A person told the EO that finance became Shide’s main priority when its core chemicals businesses began to decline. He added that government restrictions on the real estate sector forced the firm to look abroad for growth opportunities.
~ The EO also learned from the Dalian office of China Zhi Gong Party that Shide chairman Xu Ming (徐明) has been removed from his position as vice head of the party's Dalian committee. The Dalian police also told the EO that they weren't involved in the Shide investigation.
Original article: [Chinese]

Sinograin to Regain Exclusive Rights to Purchase Grain at Minimum Prices
News, cover
~ China's grain purchasing policy will undergo major reforms in 2012 after operating under the current system for the past seven years.
~ Sinograin (China Grain Reserves Corporation), a centrally administered state-owned enterprise (COE) that's responsible for storing China's grain reserves, will once again serve as the sole body in charge of conducting the state's purchase of grain at a guaranteed minimum prices.
~ The current grain purchasing policy settings were formally implemented in 2005. When prices are too low, the government will buy wheat and rice from farmers at a minimum purchase price in an attempt to boost farm incomes and encourage farmers to grow more grain. Originally, the country only implemented a minimum price purchasing policy on wheat and rice, but since 2008, authorities have also allowed the purchase of soybeans, corn and rapeseed for temporary storage.
In addition to purchasing grain at a minimum purchase price, Sinograin can also purchase and store grains on behalf of food-processing companies or buy grains at market prices and resell them at an appropriate price later.
~ In 2010, the National Development and Reform Commission altered the policy so that the China National Cereals, Oils and Foodstuffs Corporation (COFCO), Chinatex Corporation and China Grain and Logistics Corporation were also given permission to purchase grain at the minimum purchase price.
~ This year, permission to purchase grain at minimum prices will once again be limited to the Sinograin.
~ China consumes about 500 million tons of grains a year, the government maintains stockpiles equivalent to about 40 percent of demand to safeguard food supplies and control prices.
Original article: [Chinese]

Progress Slow on Three-year-old Health Care Reforms
News, page 4
~ Three years after China released its "Opinions on Deepening Health Care Reform," patient numbers are rising in many places and drug costs remain high
~ Zhang Lei(张雷), the head of a county hospital in western China told the EO that patient numbers have doubled.
~ Chen Zhu (陈竺), the minister of Health, says that the greatest achievement of the reform is the nationwide medical insurance system.
~ According to the findings of Zhuang Yiqiang (庄一强), deputy secretary general of the Chinese Hospital Association, 1.3 billion people, or 95 percent of the population, were covered by the medical insurance system by the end of 2011.
~ Over 800 million rural residents have also signed up to new rural cooperatives.
~ The Ministry of Health said that the proportion of the population living within 15 minutes of a hospital grew from 80.3 percent in 2008 to 83.3 percent in 2011.
~ The average price of the 307 medicines that were added to a basic medicine list introduced in 2009, fell by 25 percent according to Zheng Hong (郑宏), who heads up the basic medicine department in the Ministry of Health.
~ However, the medicines on that list don’t cover all ailments and other medicines remain expensive.
~ Apart from the "basic medicine" system, the reform of public hospitals is also controversial.
~ Due to insufficient support from the government, public hospitals traditionally rely on selling drugs at inflated prices in order to funds the costs of running hospitals, which has resulted in high prices and a spike in violent incidents involving patients and doctors.
~ Reform of the subsidy system is key to solving these problems and changes were piloted in 16 cities from February 2010, however, despite many reforms being implemented in public hospitals in these pilot cities, none of the reforms have really addressed the core of the problem.
~ Chen Zhu, the health minister, said in March that the government will try to solve the problem with public hospitals within three years.
Original article: [Chinese]

An Investigation into Private Lending in Three Cities
Market, page 17-18

Private Financing in Zhengzhou, Henan
Market, page 17
~ The once-vibrant loan guarantee industry of Zhengzhou in Henan Province is collapsing, affecting 1,600 companies with 100,000 clients and involving more than one trillion yuan. The EO found that documentation is missing for many of the loans. "All we want is transparency, justice and fairness," one lender told the EO.
Original article: [Chinese]

Regulating Private Lending
Market, page 17
~ Liu Rong (刘荣), from the Anhui Branch of China's central bank, talked about new features, trends and possible influence on private financing in China as well as possible policies in the future. Private financing is classified as that which takes place outside official financing channels.
~ A larger variety of economic entities are participating in private financing and the sources of capital are widening. The loans are becoming more flexible and for longer terms. Private financing brings added risks and conflicts for businesses. It also multiplies financial crimes. The laws on private financing need to be improved and systematized.
Original article: [Chinese]

Private Financing and Suicides in Ordos, Inner Mongolia
Market, page 18
~ Haoda Investment Company(鄂尔多斯昊达投资有限责任公司) the biggest private financing company in the Inner Mongolian coal town of Ordos, has been closed down.
~ Founded on Oct 23, 2008, Haoda attracted the boomtown’s excess capital with the acquiescence of local government.
~ On December 10, 2011, with many creditors eager to get their investment back, the police opened an investigation into Haoda’s boss Bai Hao (白昊). Together with the firm’s general manager and vice general manager, he was accused of being involved in illegal financing involving 2.32 billion yuan and placed under residential surveillance.
~ Prior to the case, there were a series of suicides in Ordos. The government held a meeting on private financing in August and a "black list" of lenders was leaked.
~ Many suspect that the suicides of three civil servants - Wang Fujin (王福金), Liu Yongjun (刘永军) and Ding Hu (丁虎) - due their involvement with private financing.
~ Local governments had been supportive of private financing and the region’s coal assets were closely associated with the lending. In the two major cases - the "Baihao Case" and the "Sū Yènǚ Case" (苏叶女案) - the collateral seems to have "vanished" and most of the borrowed money can’t be traced either.
~ The local government is keeping a very low profile and information on the private financing cases has been hidden from the public.
~ "We are more depressed and have to keep silent," said one person who lent money to Su Yenǚ. The person didn’t dare to ask for the money back since he/she works as a civil servant.
Original article: [Chinese]

Greentown China: A Property Developer's True Lies
Property, page 37
~ Reading the latest financial reports of China’s real estate enterprises, it’s easy to wonder whether the industry really witnessed a slump last year.
~ Greentown, one of the country’s major developpers, reported revenue of 21.96 billion yuan for 2011, up 97 percent from 2010.
~ The company’s gross profit more than doubled to 7.41 billion yuan.
~ In fact, the annual report really reflected the situation in the second half year of 2010 and the first and second quarters of 2011.
~ Real estate companies' annual reports tend not to reflect the business performance of that year, said Song Yanqing (宋延庆), CEO of Rand Consulting (Chins) Co., Ltd.
~ "Greentown did show a positive change [in 2011]," said Xue Jianxiong (薛建雄), an analyst from China Real Estate Information Corporation. The company reduced its debt ratio and eased its cash position by only purchasing nine tracts of land.
~ Its sales and management costs grew 15.8 percent.
Original article: [Chinese]

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