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Issue 593 05-11-2012
Summary:Natural Gas Price Reform, Income Distribution Reform and Watered Down Environmental Law.
Issue 593 05-11-2012
 
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Summary: 
 
Highlights from the EO print edition, No. 593, Nov 5, 2012
 
 
Pressing Ahead With Natural Gas Price Reform 
News, page 2
~ A source with the National Development and Reform Commission (NDRC) told the Economic Observer on Nov 2 that “Natural gas price reform will be gradually pushed forward and improved, but this will take a relatively long time. It’s not something to be done within one or two years.” 
~ In the beginning of 2012 at the National Development and Reform Work Conference, NDRC announced that a natural gas price reform plan would be launched this year. However, a clear reform plan has not been introduced yet.
~ On Oct 31, NDRC issued the Natural Gas Use Policy, which again touched upon natural gas price reform. Professor Liu Yijun (刘毅军) from China University of Petroleum told the EO that the document only pointed out a general direction to head. The actual plan is still vague and there’s still a long way to go for China's natural gas pricing to be truly market-oriented.
~ Currently, the factory price and pipeline transportation price of natural gas requires the approval of NDRC.
~ In late 2011, NDRC released a notice on natural gas pilot mechanisms in Guangdong and Guangxi Provinces. The document said that the ultimate goal is to lift controls on the natural gas factory price and let it be determined by the market. However, the pipeline transportation price will still be decided by the government.
~ Natural gas shortages and lower terminal prices are the main driving forces for NDRC promoting natural gas price reform. 
~ Data shows that the proportion of natural gas shortages in 2010 expanded to 9.8 percent. According to the China Energy Development Report (2009), the gap between supply and demand of natural gas in China will reach 30 percent by 2015 and about 40 percent by 2020.
Original article: [Chinese]
http://www.eeo.com.cn/2012/1102/235479.shtml
 
What Will New Income Distribution Policies Look Like?
News, Page 3
~ On Oct 25, the spokesman for the Ministry of Human Resources and Social Security (MOHRSS) Yin Chengji (尹成基) said that government departments are paying close attention to the overall reform of the income distribution system and will try to launch the new policies by the end of the year.
~ After MOHRSS made this announcement, the Economic Observer learned from many different sources that at the core of the reform plan is an effort to increase the proportion of urban and rural residents’income as a proportion of overall national income and to improve the proportion of labor remuneration in primary distribution.
~ The special measures are to implement more proactive employment policies; to establish the normal wage growth mechanism for employees and strictly implement a minimum wage system; to promote the equalization of basic public services in urban and rural areas and invest more in the area of people's livelihood. The policy will also attempt to enhance the dual control on total wages and wage levels in monopoly industries; increase the tax adjustment on income gap; speed up the improvement of the social security system; promote the continuous increase in rural incomes and shrink the income gap between urban and rural areas; standardize income distribution and increase the transparency of income distribution.
~ In addition,the most pressing priority is that the relevant departments develop and improve the supporting policy measures related to the income distribution reform plan.
Original article: [Chinese]
http://www.eeo.com.cn/2012/1105/235630.shtml
 
MEP Attacks Watered Down Environmental Law 
News, Page 4
~ On Oct 31, the Ministry of Environmental Protection (MEP) posted its comments and suggestions on the draft amendment to China's Environmental Law.
~ According to the MEP, the draft amendment as stands weakens the role of the Environmental Law and is going to have an adverse impact on environmental campaigns in the future.
~ The amendment states that it is no longer necessary to incorporate environmental protection into the Plan for National Economic and Social Development. The MEP said that this will reduce the authority of the environmental bureau to some extent.
~ Luo Jianhua (骆建华), the former vice director of Research Office in the Commission of Environment and Resources in the National People's Congress, told a reporter from the Economic Observer that information disclosure is crucial to the success of the amendment - the disclosed information should be supervised by society, because mass incidents have been increasing due to the lack of public involvement in environmental decisions.
~ Another expert interviewed by the EO believes that the drafting of the amendment wasn't done properly. If it's not finalized by next March, the implementation of the changes to the Environmental Law will probably run aground.
Original article: [Chinese]
http://www.eeo.com.cn/2012/1105/235631.shtml
 
Rosy Results for Chinese Banks But Increase in Provision Coverage Sign of Risks Ahead
Market, page 23
~ The third quarter results of Chinese listed banks exceeded market expectations. Profits of the big four state-owned banks that dominate China’s banking industry (Bank of China, China Construction Bank, ICBC and Agricultural Bank of China), grew by between 10 and 20 percent in the third quarter. The Agricultural Bank of China (ABC) led the pack, with profits growing by 19 percent.
~ Although the third quarter results of China’s 16 listed banks are looking rosy, there appears to be a divergence in relation to non-performing loans (NPL). While the ratio of bad loans held on the books of the big four is decreasing, many small- and medium-sized banks are seeing their NPL ratios increase. The big banks have however been increasing their provision coverage ratio, a measure of the amount the bank has set aside in order to cover for potential bad loans in relation to total bad loans, for the past three quarters. This suggests there might be worse to come.
~ Jin Lin (金麟), an analyst with Orient Securities Company, noted in a recent research note that overdue loans among the vast majority of listed banks were higher than their NPLs and “under review” loans, causing him to be concerned about the potential for the NPL ratio to continue to increase in the future. 
~ Another trend worth noting from the third quarter results of the listed banks is that the amount of interbank lending among financial institutions which had blown out over the past two years now appears to have subsided as a result of regulatory and market pressure.
Original article: [Chinese]
http://finance.sina.com.cn/chanjing/cyxw/20121102/223913566430.shtml
 
Listed Insurance Companies Rake in a Paltry 800 million in Profits in 3Q
Market, page 25
~ China’s four listed insurance companies made a combined net profit of only 800 million yuan in the third quarter of 2012, the lowest quarterly results in recent years. 
~ An increase in impairment losses stemming from continued weakness in China's capital markets has kept profits weak, with volatile capital markets eating into investment returns. The four listed companies announced that they were making provisions for a combined write-down of 20 billion yuan in assets during the third quarter.
~ According to Jiao Wenchao (缴文超), an analyst with Citic Securities, “if you compare investment yields, insurance companies would have been better off depositing their funds in the bank. It was probably a strategic error to increase their holdings in equities.”
~ China’s insurance regulator recently introduced new rules that expand the investment channels into which domestic insurance companies are permitted to invest but analysts note that aside from China Life, the three other insurance companies will probably have to make more provisions for asset write downs in the fourth quarter while also dealing with an uptick in the surrender ratio of insurance policies.
~ China Life (中国人寿保险), largest life insurer by premiums, reported its first quarterly loss in four years. The company announced losses of 2.21 billion yuan over the three months from July to September.
~ Ping An Insurance Co. (中国平安), the second-largest life insurer by premiums, announced net profits of 2.13 billion yuan over the same period. China Pacific Insurance (中国太保) made net profits of 497 million yuan and New Chin Life Insurance Company Ltd. (新华保险) reported profits of 420 million yuan.
Original article: [Chinese]
 
http://www.eeo.com.cn/2012/1102/235509.shtml
 
What is China's No. 1 Online Video Site? 
Corporation, page 33
~ Tencent (腾讯), Sohu (搜狐), Tudou (土豆), Youku (优酷), and iQIYI (爱奇异) are in cutthroat competition for ad revenue in China’s online video market and disputes have arisen as to how the sites stack up against one another in terms of viewers.
~According to Tencent, the top ranking belongs to it with 275.5 million monthly viewers, nearly 10 million more than YouKu. However, Tudou has stated that the statistical method Tencent uses relies on traditional traffic measures that aren’t relevant to video sites.
~The CEO of Baidu (百度) claimed that iQIYI ranks first when considering length of viewing time.
~The video sites are pulling out all stops to attract users. This year alone, Sohu imported 30 American hit TV series and one of the company’s salesmen even dressed up as a character from the show “Breaking Bad” on Halloween for publicity.
~The CEO of iQIYI, Gong Yu (龚宇), said that the total market share of video ads is expected to reach over 8 billion yuan this year.
Original article: [Chinese]
http://www.eeo.com.cn/2012/1102/235519.shtml


Highlights from the EO print edition, No. 593, Nov 5, 2012

Pressing Ahead With Natural Gas Price Reform 
News, page 2
~ A source with the National Development and Reform Commission (NDRC) told the Economic Observer on Nov 2 that “Natural gas price reform will be gradually pushed forward and improved, but this will take a relatively long time. It’s not something to be done within one or two years.” 
~ In the beginning of 2012 at the National Development and Reform Work Conference, NDRC announced that a natural gas price reform plan would be launched this year. However, a clear reform plan has not been introduced yet.
~ On Oct 31, NDRC issued the Natural Gas Use Policy, which again touched upon natural gas price reform. Professor Liu Yijun (刘毅军) from China University of Petroleum told the EO that the document only pointed out a general direction to head. The actual plan is still vague and there’s still a long way to go for China's natural gas pricing to be truly market-oriented.
~ Currently, the factory price and pipeline transportation price of natural gas requires the approval of NDRC.
~ In late 2011, NDRC released a notice on natural gas pilot mechanisms in Guangdong and Guangxi Provinces. The document said that the ultimate goal is to lift controls on the natural gas factory price and let it be determined by the market. However, the pipeline transportation price will still be decided by the government.
~ Natural gas shortages and lower terminal prices are the main driving forces for NDRC promoting natural gas price reform. 
~ Data shows that the proportion of natural gas shortages in 2010 expanded to 9.8 percent. According to the China Energy Development Report (2009), the gap between supply and demand of natural gas in China will reach 30 percent by 2015 and about 40 percent by 2020.
Original article: [Chinese]

What Will Income Distribution Reform Look Like?
News, Page 3
~ On Oct 25, the spokesman for the Ministry of Human Resources and Social Security (MOHRSS) Yin Chengji (尹成基) said that government departments are paying close attention to the overall reform of the income distribution system and will try to launch the new policies by the end of the year.
~ After MOHRSS made this announcement, the Economic Observer learned from many different sources that at the core of the reform plan is an effort to increase the proportion of urban and rural residents’income as a proportion of overall national income and to improve the proportion of labor remuneration in primary distribution.~ The special measures are to implement more proactive employment policies; to establish the normal wage growth mechanism for employees and strictly implement a minimum wage system; to promote the equalization of basic public services in urban and rural areas and invest more in the area of people's livelihood.
~ The policy will also attempt to enhance the dual control on total wages and wage levels in monopoly industries; increase the tax adjustment on income gap; speed up the improvement of the social security system; promote the continuous increase in rural incomes and shrink the income gap between urban and rural areas; standardize income distribution and increase the transparency of income distribution.
~ In addition,the most pressing priority is that the relevant departments develop and improve the supporting policy measures related to the income distribution reform plan.
Original article: [Chinese]

MEP Attacks Watered Down Environmental Law 
News, Page 4
~ On Oct 31, the Ministry of Environmental Protection (MEP) posted its comments and suggestions on the draft amendment to China's Environmental Law.~ According to the MEP, the draft amendment as stands weakens the role of the Environmental Law and is going to have an adverse impact on environmental campaigns in the future.
~ The amendment states that it is no longer necessary to incorporate environmental protection into the Plan for National Economic and Social Development. The MEP said that this will reduce the authority of the environmental bureau to some extent.
~ Luo Jianhua (骆建华), the former vice director of Research Office in the Commission of Environment and Resources in the National People's Congress, told a reporter from the Economic Observer that information disclosure is crucial to the success of the amendment - the disclosed information should be supervised by society, because mass incidents have been increasing due to the lack of public involvement in environmental decisions.
~ Another expert interviewed by the EO believes that the drafting of the amendment wasn't done properly. If it's not finalized by next March, the implementation of the changes to the Environmental Law will probably run aground.
Original article: [Chinese]

Rosy Results for Banks But Increase in Provision Coverage Sign of Risks Ahead
Market, page 23
~ The third quarter results of Chinese listed banks exceeded market expectations. Profits of the big four state-owned banks that dominate China’s banking industry (Bank of China, China Construction Bank, ICBC and Agricultural Bank of China), grew by between 10 and 20 percent in the third quarter. The Agricultural Bank of China (ABC) led the pack, with profits growing by 19 percent.~ Although the third quarter results of China’s 16 listed banks are looking rosy, there appears to be a divergence in relation to non-performing loans (NPL). While the ratio of bad loans held on the books of the big four is decreasing, many small- and medium-sized banks are seeing their NPL ratios increase. The big banks have however been increasing their provision coverage ratio, a measure of the amount the bank has set aside in order to cover for potential bad loans in relation to total bad loans, for the past three quarters. This suggests there might be worse to come.
~ Jin Lin (金麟), an analyst with Orient Securities Company, noted in a recent research note that overdue loans among the vast majority of listed banks were higher than their NPLs and “under review” loans, causing him to be concerned about the potential for the NPL ratio to continue to increase in the future. 
~ Another trend worth noting from the third quarter results of the listed banks is that the amount of interbank lending among financial institutions which had blown out over the past two years now appears to have subsided as a result of regulatory and market pressure.
Original article: [Chinese]

Listed Insurance Companies Rake in a Paltry 800 million in Profits in 3Q
Market, page 25
~ China’s four listed insurance companies made a combined net profit of only 800 million yuan in the third quarter of 2012, the lowest quarterly results in recent years. 
~ An increase in impairment losses stemming from continued weakness in China's capital markets has kept profits weak, with volatile capital markets eating into investment returns. The four listed companies announced that they were making provisions for a combined write-down of 20 billion yuan in assets during the third quarter.~ According to Jiao Wenchao (缴文超), an analyst with Citic Securities, “if you compare investment yields, insurance companies would have been better off depositing their funds in the bank. It was probably a strategic error to increase their holdings in equities.”
~ China’s insurance regulator recently introduced new rules that expand the investment channels into which domestic insurance companies are permitted to invest but analysts note that aside from China Life, the three other insurance companies will probably have to make more provisions for asset write downs in the fourth quarter while also dealing with an uptick in the surrender ratio of insurance policies.~ China Life (中国人寿保险), largest life insurer by premiums, reported its first quarterly loss in four years. The company announced losses of 2.21 billion yuan over the three months from July to September.~ Ping An Insurance Co. (中国平安), the second-largest life insurer by premiums, announced net profits of 2.13 billion yuan over the same period. China Pacific Insurance (中国太保) made net profits of 497 million yuan and New Chin Life Insurance Company Ltd. (新华保险) reported profits of 420 million yuan.Original article: [Chinese]

What is China's No. 1 Online Video Site? 
Corporation, page 33
~ Tencent (腾讯), Sohu (搜狐), Tudou (土豆), Youku (优酷), and iQIYI (爱奇异) are in cutthroat competition for ad revenue in China’s online video market and disputes have arisen as to how the sites stack up against one another in terms of viewers.
~According to Tencent, the top ranking belongs to it with 275.5 million monthly viewers, nearly 10 million more than YouKu. However, Tudou has stated that the statistical method Tencent uses relies on traditional traffic measures that aren’t relevant to video sites.
~The CEO of Baidu (百度) claimed that iQIYI ranks first when considering length of viewing time.
~The video sites are pulling out all stops to attract users. This year alone, Sohu imported 30 American hit TV series and one of the company’s salesmen even dressed up as a character from the show “Breaking Bad” on Halloween for publicity.
~The CEO of iQIYI, Gong Yu (龚宇), said that the total market share of video ads is expected to reach over 8 billion yuan this year.
Original article: [Chinese]

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