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Issue 630 29-07-2013
Summary:Summary: Tianjin's "Blue Hukou," Cities Ease Real Estate Controls and Imported Coal Hits Struggling Domestic Industry

Highlights from the EO print edition, No. 630, July 29, 2013

Several Cities Ease Real Estate Controls
News, page 1
~ At a local auction on Friday, July 26, a Shenzhen real estate company spent 12.4 billion yuan to buy two plots of land. Similarly, two weeks ago the Shanghai government put a plot of land on the market priced at 17.5 billion yuan, breaking the record for the most expensive real estate ever in the city.
~ In recent years, a number of prime parcels of land in Shanghai and Shenzhen have been released from the government's reserved list, and have proceeded to set records with the prices they've fetched.
~ The real estate industry has been excited by this relaxation of strict real estate policy. Even Beijing, which was considered to have the strictest real estate controls, recently started fetching high prices for some prime properties. In Yancheng (盐城), Jiangsu Province, the housing price policy put in place three years ago has been axed.
~ Signals of easing land policy can also be seen in banks attitudes toward real estate developers. According to data from the Bank of Communications (交通银行), 70 percent of its new loans are going to the real estate industry.
~ However, the central government has not changed its macro-control policy over the housing market. A real estate expert told the EO that the new government's biggest concerns regarding housing are urbanization, the reconstruction of slums and construction of replacement homes for those who've had their land seized.
~ "The government is releasing land now, but the precondition is that you're willing to change the structure of the real estate industry and increase employment," a senior manager at a Tianjin state-owned real estate company said. According to the source, the released land needs to be used to drive employment and aid the transition of China's economy.
~ Another reason for the hot land market is the fall in GDP growth over the past half year. According to Zhang Yin (张寅), a veteran investment consultant in Beijing, the government's control over the housing market will be less strict in the future. Zhang says that real estate was one of the most important industries driving the country's economic growth.
Original article: [Chinese]

China to Map Radioactivity Levels and Pass Nuclear Safety Law
News, page 2
~ The State Bureau of Nuclear Safety (国家核安全局) has initiated a nationwide survey into levels of radioactivity around nuclear bases and other nuclear facilities, according to its supervisory body, the Ministry of Environmental Protection.
~ Data on radioactivity levels is currently being collected by monitoring stations around the country and an assessment report that gives a clear and detailed overview of radioactivity levels and their effects is due to be completed in about 2016.
~ A previous attempt to map radioactivity in China was published in 2010. "China's Radioactivity Levels" (中国辐射水平) attempted to collect data on radioactivity levels in China during the 1949-2000 period. At that time, the largest source of radioactivity was found to come from natural background radiation (天然本底辐射), at an average of 3.1 millisieverts per year. A sievert (Sv) is a standard measure of radiation dosage and its potential biological effects. 1 millisievert (mSv) = 0.001 Sv. The report also noted that as of 2007, 10 people had been killed by radioactivity poisoning following accidents in the handling of radioactive material in China. The report also noted an increase in the levels of natural background radiation since the nineties.
~ The new report is aimed at bringing data collection and analysis up-to-date and will include levels measured during 2012. These levels will be used when conducting future environmental impact assessments of nuclear projects in order to get a handle on any possible risks to the public. Unlike the earlier report, this survey will also include data about radiation levels in urban centers.
~ According to what the Economic Observer understands, the data is being collected by the Qinshan Nuclear Power Base (秦山核电基地), the China Institute of Atomic Energy (中国原子能科学研究院) and the 404 Nuclear Industrial Base (四零四核基地).
~ In addition to getting a clearer idea of radiation levels around the country, the National People's Congress (NPC) is also pushing ahead with legislating laws on nuclear safety. Both the standing committee of the NPC and the State Council are working on drafting the new law, said Zhao Yongkang (赵永康), deputy director of Nuclear and Radiation Safety Center under the Ministry of Environmental Protection.
~ The process of debating a new Nuclear Safety Law (核安全法) has already concluded, and the standing committee of the NPC is expected to add the passing of such a law to its legislative agenda over the course of the new government.
~ There are currently 29 nuclear power plants under construction in China and another 17 are operational.
Original article: [Chinese]

A Second Attempt at Restricting the Pay of Executives at China's SOE
News, page 5
~ According to Wen Zongyu (文宗瑜), director of the State-owned Economy Research Department at the Ministry of Finance (财政部财科所国有经济研究室), in 2009, the government launched guidelines to restrict the maximum salaries of executives at centrally-administered SOEs. However, the actual effect was very modest.
~ Executives at these major SOEs are normally appointed by the Organization Department of the Central Committee of the CPC and the State-owned Assets Supervision and Administration Commission (SASAC). However, salary information for these executives isn't included in the annual reports published by SASAX. The "grey income" of these executives are also kept secret.
~ According to Wen, the government should require SOEs to publish how much their managers are paid in order to increase transparency and rein in excessively high salaries. He also said reform of the executive employment system in SOEs should begin as soon as possible. According to him, although SASAC has often hired senior managers from open recruitment over the past few years, they've mostly been deputy managers, which make up less than 5 percent of all executives in SOEs.
~ Wen said that in the next round of salary control, the government should focus on central government-controlled enterprises. He says that if restrictions can be well implemented at these top level companies, it will drive reform at SOEs at all levels across the country.
~ The proposed SOE employment system would carry out public recruitment at different management levels of an enterprise, including at the executive level. The new system would effectively avoid the "black box operation" at SOEs and give the public a supervisory role.
~ The 2009 guidelines required that an SOE executives' salary be no more than than 30 times the pay of an average employee at the company. However, during the past few years, some senior managers from central enterprises have received salaries much higher than this.
~ In April, media reported executive income information from 192 SOEs. It showed that more than 10 executives earned over 2 million yuan last year. These executives either worked at top-level SOEs or subsidiaries of central enterprises. According to Su Hainan (苏海南), vice-chairman of the China Association for Labor Studies (中国劳动学会), the 2009 salary guidelines only had influence on some top-level central enterprises that were under the direct control of SASAC. It had little effect on subsidiary companies or SOEs in cities other than Beijing.
~ As the chairman of China COSCO, Wei Jiafu's (魏家福) income in 2010 was more than 400,000 yuan above what he should have been getting. Though he decided not to accept any pay for the latter half of 2011, the average wage of employees at the company increased by 24,000 yuan that year, despite the company registering a 10.4 billion yuan loss.
~ According to Wen Zongyu, top-level SOEs like China COSCO own many second-level or third-level SOEs. In order to avoid the government's salary restrictions, executives at these large SOEs may choose to get paid from subsidiary enterprises or other companies in which the parent SOE holds shares. Wen said that the government overlooked some loopholes like this in the 2009 restrictions.
Original article: [Chinese]

Tianjin's "Blue Hukou" Stirs Debate
Nation, page 9-10
~ People are rushing to Tianjin to purchase property in order to obtain a "Blue Hukou" (蓝印户口), a kind of city registration that allows non-residents permission to enroll their kids in high school and sit the university entrance exam (gaokao) in the coastal city. According to China's household registration or Hukou system, individuals who reside in a location but are not officially registered there as permanent residents, are disqualified from receiving a whole raft of social services and this extends to permission for their children to sit the university-entrance exam.
~ In recent months, in response to protests against the restrictions, some localities have loosened their policy in relation to allowing non-residents to sit the gaokao. One of the key attractions of Tianjin is that the city's college enrollment rate is higher than other regions, this means that students who take part in the exam in the city have a better chance of getting into a good university than if they sat the test in say Shandong or Henan.
~ The "Blue Hukou" policy certainly benefits several parties: some students will have a better chance of getting into a good university, real estate companies attract customers by pointing out the benefits of having a "Blue Hukou" to potential property buyers and some say even local high schools will get a boost once ambitious students start flowing in and drive up the average test results.
~ On the other hand, some experts suspect that this policy will harm the interest of local citizens and the future of Tianjin. According to an incomplete estimate, there were 8,000 "Blue Hukou" students who took the gaokao exam in Tianjin this year. This represents a huge increase over the 5,000 "Blue Hukou" students that set the test last year and the 2,800 in 2011. Another major concern is that many houses in Tianjin sit vacant because the purpose of the purchase was to obtain a "Blue Hukou," not actually live in Tianjin.
Original article: [Chinese]

The Future of Hydropower and Mining in China's Earthquake Zones
Nation, page 10
~ After Gansu Earthquake on July 22, Liu Jie (刘杰), the director of earthquake forecast department of China Earthquake Networks Center (CENC), said that he suspects that the Chinese North-South seismic belt (中国南北地震带) - which stretches from Ningxia in the country's northwest to Yunnan in the southwest passing through eastern Gansu and western Sichuan - may have entered a ten-year period of activity since the huge Sichuan Earthquake in 2008. If what Liu says is true, the hydropower and mining industry in the area is expected to go through a period of major restructuring.
~ Although hydropower stations could now be threatened by an increase in seismic activity, the Chinese geologist Xu Daoyi (徐道一) says that the region is unlikely to abandon hydropower as it is a financially rewarding industry that can pull in as much money as the coal sector. More importantly, Xu predicts that in the future, governments would emphasize the protection of local environment in the construction of hydropower stations and be more careful in selecting the location of any new dams.
~ Feng Hongbing (冯洪滨), an official from Heilongjiang province, suggests that governments should build a large number of solar power stations in the seismic area, which would not only help reduces emissions, but also ensure abundant electricity supply after an earthquake.
~ The mining industry, another pillar industry of this area, has suffered from economic losses after earthquakes in recent years. Scientists have been urging local governments in the region to develop new pillar industries such as tourism since 2008. Experts suggest that it would be difficult for the whole area to alter its industrial pattern. They argue that the mining industry is a significant consumer of hydropower, and therefore governments are still supporting small mining operations.
Original article: [Chinese]

Imported Coal Hits Struggling Domestic Industry
Nation, page 13
~ An interim regulation controlling commercial coal's quality has been suspended after coal traders and power plants clashed with coal companies and local governments in late July, according to the National Energy Administration (国家能源局).
~ Coal companies wanted to raise the calorific value standards of imported coal to no lower than 4,544 kilocalories per kilogram, while coal traders and power companies in Guangdong and Guangxi wanted to lower the standard so they could continue to import coal from Indonesia and Australia.
~ Coal from Guangxi and Guangdong is of higher quality than that from Australia and Indonesia. However, local power plants prefer the imported coal since delivery costs are cheaper. After receiving the imported product, they mix it with high-grade coal, which makes its quality comparable to that of local coal.
~ In June, Shenhua Group (神华集团) and China National Coal Group Corp. (中煤集团) jointly started lowering prices in order to compete with imports. This has pushed prices down across the market and put pressure on companies in Shanxi, Shaanxi and Inner Mongolia.
~ Local governments in coal producing regions are also starting to take action in order to protect their enterprises. Shanxi province is promoting long-term cooperation between local coal enterprises and power plants and is trying to restrict coal bought from other provinces like Shaanxi and Inner Mongolia. Likewise, the Ordos local government in Inner Mongolia has sought more business with state-owned enterprises.
~ "The domestic coal industry is burdened with excess capacity," said Yang Xianfeng (杨显峰), vice chairman of China Coal Transportation and Sale Society (中国煤炭运销协会). "Many of the coal companies will go bankrupt after economic restructuring. Now they're on a tight budget. Seldom can any enterprise earn a profit."
Original article: [Chinese]

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