No. 384, Sept 8

Highlights from the EO print, issue no. 384, Sept 8, 2008

China Tightening Rules on Foreign Food Companies
Cover story
One foreign company was denied a permit to buy grains in China recently, and as the EO inquired further, State Administration of Grain's local officials in northeastern and southern provinces revealed that they had received verbal directives from the top to temporarily halt permit issuance to foreign firms. Around the same time, the National Development and Reform Commission released guidelines for "enhancing the healthy growth of the soy bean processing industry". The guidelines stated the need to "strengthen the leading position of domestic production, processing, and distribution of soy bean". Observers believed these were signs that China, out of concerns that multinational food companies would threaten the country's food sovereignty and security, was re-examining policies regarding foreign players in the food industry.
Original article: [Chinese]

Stronger SOEs, or a Stronger Chinese Economy
Editorial, cover
Only 98 private companies made it into China's 500 Top Firms rankings, released recently. On the contrary, 331 state-owned enterprises (SOEs) made up the bulk of the list, and some 80% of the total revenues from these top 500 firms came from SOEs. The main reason behind this imbalance was due to SOEs' monopoly status in several strategic industries, such as oil and gas, telecommunication, power generation and aviation. SOEs had become more influential in recent years following a series of restructuring and consolidation, and a new round of integration was expected to make them even stronger. However, our editorial argued that this development would not be healthy for the Chinese economy as a whole, as it would kill off the enthusiasm of private businesses and encourage state-giants to flex their monopoly muscles indiscriminately.
Original article: [Chinese]

The Last of the Fuwa
Human interest, cover
Toys and products of the Beijing Olympics' mascot – Fuwa, would be taken off the shelves in six months as per rulings, and their producers and retailers were rushing against time to offload the stocks. Sales of the Fuwa products had been slow, except from July to September. Traders were also unable to do promotion by slashing prices, as their contracts with the Game's organizing committee stipulated that discounts were prohibited, even during stock clearance periods.
Original article: [Chinese]

Provinces to be Impacted Differently by VAT Reform
News, page 3
Government revenue losses for industrialized Chinese provinces, such as Jiangsu, were expected to be higher than the less developed region under a proposed value-added tax reform, which was scheduled to kick in next year. However, local officials from Shenzhen, which has high concentration of industries, believed the tax reform would benefit the city, which was gearing for a transition from low-end industries to high value-added productions. Resource-rich provinces in the western region, such as Inner Mongolia, were also expected to benefit, as the new rules to allow machinery procurement and capital assets investment be deducted from tax bills would enhance production technology in the energy sector and boost output.
Original article: [Chinese]

The Pressures Facing China's Current Account
News, page 4
A recently released regulation on tightening inflows of foreign exchange was aimed at easing pressures facing China's ever-ballooning current account surplus, said one official from the State Administration of Foreign Exchange (SAFE). SAFE general affairs department head Zou Lin, in a training session held for officials last week, said the pressure mainly came from three factors: first, limited channels to spend foreign exchange; second, limited rooms for control measures on currency circulation, as the central bank's intervention was a passive tool; and third, pressure from yuan appreciation forced the administration to keep a close watch on inflow of foreign capital, especially hot money.
Original article: [Chinese]

Weaknesses Remain in New Rules on Toll-Highway
News, page 5
A regulation on ways to manage the transfer of toll-highway concession rights was announced by the Chinese central government recently and would come into effect on Oct 1. The ruling was aimed at curbing rampant concession transfers that led to extended period of toll collections. In Guangdong province, where a total of 52 concession right transfers took place between 1991 and 1999 with over half arising from local governments' projects being privatized, some highways' toll collection periods were extended from the initial 15 years to over 50 years upon transfer. Legal experts, however, claimed the new rule lacked real bite -- as not only would it not reverse some of the old dealings, it also failed to cover "transfer of rights" of a highway management company through share acquisition.
Original article: [Chinese]

Beijing Court Rejected Antitrust Law Suit Against Quality Control Authority
News, page 7
An intermediate court in Beijing had on Sept 4 rejected an antitrust law suit filed against the State Administration of Quality Supervision, Inspection and Quarantine (SAQSIQ). The reason given was that the filing of the case failed to comply with the active timeframe for suing. The case was filed this year on Aug 1, the day when the Anti-Monopoly Law came into effect, by four enterprises, accusing the SAQSIQ had used its administrative power to force companies to join an electronic supervision system. Under the system introduced in 2005, nine types of enterprises and 69 kinds of products, including food items and home appliances, must pay 600 yuan annual fee to register with a supervision company, which the SAQSIQ had a stake but had on Aug 29 this year announced a withdrawal from. Companies that fell under the requirement must register and obtain electronic quality control bar codes for the products before sales.
Original article: [Chinese]

Competition to Win Funding for Industrial Park
Nation, page 11
The Guangdong provincial government had allocated 1.5 billion yuan in annual funding to help underdeveloped localities develop their industrial parks between 2008 and 2012. However, only the top three winners through a "competition" – which include an impressive multimedia presentation, a convincing speech, intense questions and answers session, and strong submissions – would qualify to receive 500 million yuan each. The first competition was held in early August for six contesting cities, and later the winners were announced as Meizhou, Zhaoguan, and Heyuan. Provincial officials said winning the allocation was only the beginning, as the cities would be placed under assessment in stages and would have to comply with the strict standard, budget management and environmental conservation to keep the funding flowing.
Original article: [Chinese]

Rebuilding a "Ghost" Town
Nation, page 13
Fengdu county, a place known for nearly a thousand years for its many ghostly legends, had been planning to spend 700 million yuan in rebuilding a Ghost Town theme park to replace historic sites and relics that would soon be submerged in water after the Three Gorges Dam is completed. Located in the Chongqing municipality, Fengdu was considered a poor county with limited resources for development, thus promoting tourism based on its "ghost culture" was seen as an outlet. Most of the heritage sites related to ghost legends and voodoo culture were located in the county's old city, which would go under water once the water level reached 175 meters. Local authorities estimated that the Ghost Town theme park would generate 5,000 job opportunities directly and up to 12,000 others indirectly.
Original article: [Chinese]

Shanghai State-owned Firms Reform
Nation, page 15
The Shanghai division of State-owned Assets Supervision and Administration Commission (SASAC) came up with guidelines recently to further consolidate some 70 Shanghai-based state-owned firms (SOEs) to around 30 enterprises in three to five years. The guidelines stated that capital and enterprises outside the municipality, such as SOEs under the central government and other local governments, foreign and private companies were also welcomed to participate in the restructuring process. The move was a first in SOEs reform, and would allow these Shanghai-based firms to move beyond their local boundary.
Original article: [Chinese]