No. 386, Sept 22

Highlights from the EO print, issue no. 386, Sept 22, 2008

Why the United States?
Cover Story
The financial woes plaguing the Wall Street currently has been observed closely by policymakers, industry players and scholars in China. Some suggested that the crisis might create new opportunities for Asian markets, where funds would be flowing to as the US tightened controls; however, the pre-condition for Asian markets to seize the chance depended on sound regulations for asset ownership protection and low taxation. Some cautioned that China should learn from the crisis and not to liberalize its financial sector too quickly.
Original article: [Chinese]

Joined Interests Cause Supervision Weakness
Editorial, cover
Mixing politics with commerce was the backdrop to many industrial scandals that had hit China in recent years. Our editorial said at times, a combination of supervisory system, judiciary process and media scrutiny still failed to reign in unscrupulous businesses, partly because local grassroots officials had joined hands with local business interests.
Original article: [Chinese]

Possibility of Further Interest Rate Cut
News, page 2
The financial storm sweeping the Wall Street has quickened the pace for Chinese policymakers to relax its tight monetary control measures imposed since last year. Analysts believed China would cut interest rates further after last week's move to lower both the loan interest rate and deposit reserve ratio. This year alone, the key direction of China's macro controls had changed course three times, from "double prevention of inflation and an overheating economy", to "maintaining stable and fast economic growth while controlling prices", and now, finally down to "ensuring economic growth".
Original article: [Chinese]

Impact of US Financial Crisis on China
News, page 7 & 8
In the fallout of the US financial crisis, majority of market observers have projected Chinese exports would decline further as American consumers tightened their belts for leaner days; however, some also held that consumers under spending pressure would opt for cheap made-in-China products, thus limiting risk of a big drop in demand. In addition, China's huge foreign reserve in US dollar would depreciate in value. Chinese think tanks were against China in rushing in to buy ailing US financial institutions, instead, they suggested targeted acquisition on those with mining resources portfolio or extensive financial services network, adding such investment should be gearing for a seat in the board of director or some form of management control.
Original article: [Chinese][Chinese]

Safety in Milk Supply Chain
Nation, page 9 & 10
The raw milk supply chain – from the farmers to the middlemen and finally delivered to the dairy firms - is a key factor in ensuring dairy products' safety on the shelves. The EO has learned that Milk coming from contracted farmers serving one company was usually safe; and the more one dairy firm acquiring raw milk from middlemen, the higher the chances of pollution. A saturated dairy market and steep competition had led to dairy companies fighting over milk sources, and provided rooms for middleman business to thrive.
Original article: [Chinese]

Chinese "Trainees" Recount Unfair Treatment in Japan
Nation, page 12 & 13
A group of repatriated Chinese female "trainees" claimed they were underpaid, overworked, and mistreated by a Japanese employer. The case had drawn the attention of foreign affairs officials of both countries. The women - three were sent home and three remained behind in Japan, with one nursing an arm injury - had gone to Japan under a scheme called foreign trainee program. The scheme allowed citizens of poorer countries to go to Japan and learn skills they could not acquire back home. Instead, the group of Chinese trainees had ended up as cheap labor at a laundry shop. The women had gone through an intermediary agency to arrange for the "job opportunity" in Japan, and had paid huge deposits and other fees.
Original article: [Chinese]

China's Hua An Fund Managing Fallout from Lehman Brothers Collapse
Money & Investment, page 19
Though still three years from its maturing date, China's first Qualified Domestic Institutional Investor (QDII) program - which allows mainland Chinese to invest abroad - launched by Hua An Fund Management Co. has come under threat. The Huan An's QDII scheme was guaranteed by US-based Lehman Brothers, which had filed for backruptcy protection last week. Hua An had announced to assume responsibility for payment to avoid an immature liquidation of the QDII scheme.
Original article: [Chinese]

Chinese banks Taking Stock of Potential Losses
Money & Investment, page 20
Major Chinese commercial banks have disclosed their exposure to the collapse of Lehman Brothers through holding bonds issued by the latter. As of Sept 18, Industry and Commercial Bank of China (ICBC) held some 151 million dollars worth of bonds issued or linked to Lehman Brothers. Bank of China (BOC) still had some 50 million dollars outstanding loans to the failed US investment firm and held 75.6 million dollars of bonds in the latter or its subsidiaries. Meanwhile, China Merchants Bank held some 70 million dollars of Lehman Brothers bonds.
Original article: [Chinese]

China Telecom Launches Largest Corporate Bonds
Money & Investment, page 21
China Telecom has launched its promotional roadshow for the largest corporate bond issuance in the country on Sept 18. The 20-billion-yuan corporate bond would be released in two batches by the largest fixed-line carrier in China. A few other Chinese companies were waiting in queue to issue multi-billion-yuan corporate bonds, including PetroChina and Daqin Railway Co.
Original article: [Chinese]