No. 382 Aug 25

Highlights from EO print, issue no. 382, August 25, 2008

A Proposed Economic Stimulus Package
Cover Story
A market report stating that high-level Chinese officials were considering a 200 to 400-billion-yuan economic stimulus package has led to temporary surges in stock prices and debates amongst economists. Though no forthcoming official confirmation since the JP Morgan report* was released on August 19, the EO learned from sources in the Ministry of Finance that an "expansionism" formula was under study in case the economic growth slowed further. The proposed formula might include 150 billion yuan of tax incentives and 220 billion yuan of additional expenditures, mainly to be spent on public facilities and services. Some held that the Chinese market was still growing healthily and that such interventionist measures were unnecessary.
(*the initial translation had mistakenly named the JP Morgan note as Morgan Stanley report, our apologies for the error) 
Original article: [Chinese]
Translation: [English]

Lifelines for Wenzhou Businesses
Cover
In view of rampant usury businesses and the potential massive closure of small and medium enterprises (SMEs) in Wenzhou - the cradle of Chinese private capital - the local government has announced counter measures which included additional credit and helping at least 30 local enterprises to go public in the next three years.
Original article: [Chinese]

Post-Olympic Oil Prices in China
News, page 3
Sixteen yuan per liter could be the fuel price in China if its government allowed domestic oil prices to be fluctuate in line with global ones. China's fuel prices have been under official control through government subsidies to major oil enterprises and refinaries, who have in recent times complained of huge losses due to high imported crude oil prices but low domestic processed oil selling prices. The imbalance has led to some companies cutting production and led to fuel shortages in some areas. The National Development and Reform Commission has vowed to adjust oil prices, most likely after the Olympics.
Original article: [Chinese]

Legalizing Volunteer Services in China
News, page 4
China's Civil Affairs Ministry has been studying rules and regulations to standardize and promote the growth of volunteer services, hoping to pass a related law by 2010. The thought was inspired by a sudden surge in volunteering following the Sichuan earthquake and the Olympic Games this year, according to sources from the Ministry. The move to institutionalize and legalize such efforts would pave the way for a transition from being government-driven to community-driven.
Original article: [Chinese]

Farmers Leaving for Cities, Yet Agro Production Rises
Nation, page 9
The worry over more farmers leaving their land behind in search of jobs in the cities would lead to a dive in agriculture production has yet to materilize, at least for now, as China's grains output has rose alongside expanding populations of migrant workers in cities. The outcome, some believed, was due to advances in agricultural production, which had become less labour-intensive. In addition, large scale farming has become more common as small scale farmers gave up their land when they left for the cities.
Original article: [Chinese]

China Ping An's Takeover Plan for Guangzhou Bank
Money & Investment, page 20
China's leading insurance company Ping An Group may takeover half of the 7-billion-yuan in bad loans held by the Guangzhou Commercial Bank (GCB) as part of a merger plan; the other half would be shouldered by the bank's major stakeholder, the Guangzhou municipal government, according to industry sources. The Shenzhen–based Ping An Group has done a pre-acquisition assessment and intended to takeover the bank to boost its relatively small financial arm. The group's Ping An Bank presently has only three bases in China, and if the merger materialized, it would gain all the 84 branches of GCB across the country.
Original article: [Chinese]

China UnionPay Going International
Money & Investment, page 20
Chinese credit card and interbank network UnionPay has launched a strategy to form an East Asia payment ring that include Korea, Japan, Mongolia and Russia, hoping to challenge the dominant market status long enjoyed by Visa and Master cards in the region. UnionPay would tap China's economic influence in the region, and the vibrant trade between East Asian nations to implement its plan in stages. Presently, UnionPay has issued some 150,000 cards to Koreans.
Original article: [Chinese]

Empty Claims for Liu Xiang's Insurance Policy?
Money & Investment, page 21
Though Chinese 110m hurdler Liu Xiang has declined to claim a 100-million-yuan insurance for the injury that forced him to pull out from this year's Olympics, his policy provider Ping An Insurance has come under public attack for issuing an empty check as a marketing gimmick.
Original article: [Chinese]

Zero Yuan Bid for Telco Procurement
Corporation, page 25
Companies competing and undercutting each other in a recent bid for China Telecom's CDMA network equipment procurement had led price quotes to vary widely, ranging from 690 million (by Huawei) to 14 billion yuan (by Alcatel-Lucent). Sources who attended the bidding proceedings said Motorola even offered zero yuan to set up facilities in 15 of the 81 areas opened for tender. The result of the bid has yet to be announced. Industry sources said the low rates quoted were aimed at long-term returns, as once the equipment was installed, future maintenance and upgrading would follow.       
Original article: [Chinese]

China Taking Steps to Boost Polysilicon Supply
Information Technology , page 33
China has been investing billions of yuan to develop 33 polysilicon projects, and if all the projects met the target of producing 140,000 tons per year, by 2010, there would be an oversupply. At present, China imported about 95% of its polysilicon, which prices had surged from an average of 60 dollars per kilogram to about 500 dollars in recent years, adding pressure for China to pave a road to self-sufficiency.
Original article: [Chinese]