Highlights from the EO print edition, No. 603, Jan 14, 2013

NDRC to Back Chinese Investment in Iron Ore Projects Abroad
News, cover
~ Over the past decade, dozens of Chinese enterprises have gone abroad to invest in iron ore projects.
~ According to data released by the National Development and Reform Commission (NDRC), from 2006 to 2011, Chinese enterprises invested over $10 billion in overseas iron ore projects.
~ These projects are mainly located in the western Africa, western Australia and Canada.
~ However, the investments haven't been very successful. The projects encountered problems such as high cost, low production capacity and so on. Some projects even been suspended.
~ Moreover, the high costs have also contributed to the potential for even higher prices for iron ore in the future.
~ Wang Jianjun (王建军), an official from the NDRC said that "At present, only a few projects have reached production capacity,  most of the projects still need a long time until they can start to produce. It is still hard to say whether or not these projects can be successfully developed."
~ The EO learned that the NDRC in coordination with other departments are working on how to promote China investment in overseas iron ore projects. Mr. Wang said "The NDRC will choose a few major projects in West Africa, Quebec and Western Australia to support. We are actively discussing supporting policies with relative departments. Given the current situation, if there are no national supporting policies, these projects will be difficult to develop."
~ According to the NDRC, it's impossible for the government to provide direct funding, but it can provide some support and help in financing, but this also depends on the views of the financial sector.
Original article: [Chinese]
 
Steel Plate Factory Near Three Gorges Dam Runs into Trouble
News, cover
~ Up until early 2012, the investment of Yichang Three Gorges Quantong Coated and Galvanized Plate Co., Ltd had been a successful example of how Yichang, a city on the Yangzte River close to the Three Gorges Dam, could attract investment. The company originally planned to invest as much as 20 billion yuan, with production capacity of 10 million tons of galvanzied steel plates and coil.
~ The company made a big impression when it first started to produce goods in Yichang, taking on the name "Quantong Speed" after setting up a production line which would normally require 36 months in only 15 months.
~ But in Sept 2012, due to financing issues, the company's production was suspended and over 2,000 employees were told to stop work and wait at home for news of when production would recommence.
~ Currently the company's asset-liability ratio is between 62 and 63 percent and total debts have reached about 7 billion yuan.
~ More than 10 financial institutions are owed money which had been raised by the company through bank loans, trust loans, financial leases and other methods.
~ An official in charge of attracting investment to the city told the EO that "If the problem of Three Gorges Quantong aren't dealt with, it will have a very negative impact on Yichang's attempts to attract business and investment."
~ The article goes on to investigate how the company ran into trouble.
Original article: [Chinese]

Hot Properties in Beijing's "School Zones"
News, page 5
~ Despite prices already being high, properties in close proximity to Beijing's best schools are a magnet for parents looking to get their kids into a good school. Since July 2012, Beijing's property market has begun to heat up again, causing anxiety among some parents who are still ineligible to buy property due to property restrictions introduced in 2011.
~ The article gives an example of one mother who sold a house with 100 square meters out past Beijing's fifth ring road and switched it for a smaller place close to the third ring road and had to pay an additional 1.5 million yuan to "upgrade".
~ Some properties attract families with Beijing residential permits as they allow the child living in the area to attend a nearby school.
Original article: [Chinese]

Mengniu to Restructure Core Departments
Corporation, page 25-27
~ China Mengniu Dairy Company Limited (Mengniu 蒙牛) launched a fundamental restructuring in November 2012. The Economic Observer has learned that, the current reconstructuring mainly concerns the amalgamation of three core departments: the normal temperature (常温), low temperature (低温) and ice cream departments (冰淇淋).
~ This is likely to have a big impact on employees and there is widespread concern in the company about potential layoffs. After the restructuring is complete, Mengniu staff are likely to face a choice, they can either accept their new positions or they will fight for the best severance package that they can get.
~ Mengniu told the EO that the planned restructuring is simply a regular adjustment and it won't involve the laying off of any staff. The company went on to say that in fact it is in great need of workers, especially in the sales department.
~ Sun Yiping (孙伊萍), the president of Mengniu, once told the media that there are two basic principles the company sticks to, one is that no one loses their job in the reform of the company; the other says that the interests of no individual or party would suffer during the reform process.
~ A regional manager, who's been working in food sales department of Mengniu for many years told the EO that he's never seen a succesful amalgamation of departments. Yili Group once tried something similar but they failed.
Original article: [Chinese]

Tainted Chicked Leads to Fall in Sales for Yum in China
Corporation, page 31
~ On January 7, Yum! Brands Inc. (百胜餐饮集团) estimated in its report to the US Securities and Exchange Commission (SEC) that its sales volume in the Chinese market in the forth quarter of 2012 had dropped by 6 percent. This is the first time that Yum, which owns the franchise to many well-known fast food chains in China such as KFC, saw a quartely drop in sales growth since it entered China in 1993.
~ According to a report by China Central Television (CCTV), a company in Shandong that supplied chicken to Yum's Chinese operations, had been sourcing its chickens from farms that had been feeding the poultry with illegal drugs.
~ What's worse, CCTV reported that after the hormone-laced Chicken arrived at the Yum logistics center in Shanghai, no checks were carried out and the chicken went directly to KFC and other shops in Shanghai.
~ After it was revealed that some KFC outlets had been selling this chicken, analysts say that the chain suffered from a 20 to 50 percent drop in sales which lasted for between 3 to 5 months.
~ In fact, Yum had already suffered from subdued sales earlier in 2012, even before this scandal emerged and some analysts are questioning whether the major reason for Yum's falling sales might lie with the general economic situation in China rather than the Chicken scandal.
~ Others quoted in the article say that young people in China are less loyal to brands and that the popularity of foreign brands maybe fading in China.
~ While foreign fast food is facing a more difficult situation, Chinese restaurant chains are continuing to flourish. Popular brands like Kungfu, Haidilao Hot Pot and Xiabu Xiabu are gradually gaining their popularity among the Chinese people.
~ Yum still remains quite optimistic about its prospect in China. In response to an e-mail from EO, Yum said that it planned to open at least another 800 stores in China next year.
Original article: [Chinese]