No. 391 Oct 27

Highlights from the Economic Observer, issue 391 October 27 2008

An Unusual 40 Days
Cover
Facing a worldwide financial crisis triggered by the collapse of Lehman Brothers, the Chinese government pushed a series of stimulus policies in the 40 days between September 15 and October 25. Interest rates and the reserve requirement ratio were cut twice, a stamp tax on buying shares was abolished, the individual income tax on savings interest income was suspended, Central Huijin bought shares in three state-owned banks, export rebates were raised, and the tax on real estate trading was lowered. This week's cover reviewed China's response to the Lehman's bankruptcy and compared them with the 1998 financial storm.
Original article: [Chinese]

CITIC Pacific Suffers Heavy Loss in Forex Futures
Cover
CITIC Pacific, the Hong Kong arm of China's state-owned investment company CITIC Group, expected a 1.5 billion-dollar loan from its parent company to ease its financial stress. The company lost HKD1.5 billion after buying a leveraged foreign exchange contract. After the news broke, the company's shares slumped 70% and market value dropped by HKD20 billions. The Hong Kong Securities Institute and the Hong Kong Stock Exchange have begun investigating the case.
Original article:[Chinese]

China to Strive for Growth
News, page 5
Ensuring growth has become a fundamental principle for China in the fourth quarter as its GDP growth hit a five-year low. While the Wall Street crisis spread abraod, inflation which had long been a worry for China now seemed to become weaker.
Original article: [Chinese]

Special: The Health Care Reform
Nation, pages 9 to 15
This week, the EO dedicates a six-page special on China's local health care system reform, recently opened to public comment. The EO reviews and responds to the reform draft, which was unveiled after two years of deliberations. The public comment period is from October 14 to November 14.

Huan Want Want: Can it be Repeated?
An EO case study explores a private hospital where business is booming and patients seem satisfied with better care, but that still battles obstacles in the health care system. Patients have welcomed  thoughtful services such as not having to wait on long lines to make payment, common in public hospitals. However, the hospital must pay more tax and higher utilities fees due to its profitable nature. In addition, patients enjoy less reimbursement credit here than at public hospitals, despite that it has gained the same permit to be an appointed health care hospital.
Original article: [Chinese] 

Wuhu: Independent Drug Sales
Nation, page 11
Wuhu, Anhui province, has set up an independent drug management center to administer all the pharmacies of the city's public hospitals, and thus separate its medical treatment from the drug sales business. In addition, the center's power would be divided into three parts; decision-making, implementation and supervision in order to prevent corruption.
Original article: [Chinese] 

Establish a Medical Service Community
Nation, page 12
Peking University People's Hospital established an online resource platform with two community medical centers in order to integrate medical resources and prioritize treatment time for patients based on the severity of their conditions. However, this project's needs a high-speed bandwidth network before it can be put into effect. Before this project, Beijing municipal government launched a support scheme requiring all big hospitals to dispatch doctors to local community medical centers.
Original article: [Chinese] 

China Railway Loses for Australian Dollar Investment
Market, page 17
China Railway, the country's largest railway constructor, suffered RMB1.9 billion in losses due to the depreciation of the Australian dollar. The EO learned that China Railway's huge loss was caused by interest rate-linked structured deposits, which the company claimed to have expired at the end of September. So far, the company has deposited all of its Australian dollars in banks. Insiders believe the company's foreign exchange risk has been relieved as the possibility of the further depreciation is low.
Original article: [Chinese]

Sinopec Unlikely to Enjoy Global Oil Price Slump
Corporation, page 25
Although Sinopec was expected to enter a period of high profits as international oil prices dropped down to USD63 per barrel, the company will still be hard pressed to make up for losses--it accumulated a large oil product surplus over the past nine months, when prices were still high. Insiders said Sinopec invested large amounts of oil while the price was USD147 per barrel in order to guarantee supply during the Beijing Olympics. Besides this, as international oil prices trended downward, the government may consider suspending subsidies to oil refining businesses or lowing domestic prices for product oil, which will increase Sinopec's earnings pressure further.
Original article: [Chinese]

Steel Businesses' Plight Forced Materials Prices Down
Corporation, page 28
China's steel businesses are in a plight as steel prices have continued to drop since July. Insiders reveal that many large steel businesses with large capacities for product storage are suffering equally large losses, and some middle and small size steel businesses in Heibei and Tianjian have already shut down. Under this condition, steel businesses are making efforts to force suppliers of iron ore and coke to lower materials prices.
Original article: [Chinese]