No. 421 June 1

By English Edition Staff
Published: 2009-06-01

Highlights from the EO print edition, issue no. 421, June 1, 2009

Inflation Around the Corner?
Cover story
>> Chinese businessmen, especially those from Wenzhou - the cradle of China's private capital, have been actively seeking investment opportunities in real estate and mining resources, hoping such purchases would buffer them from eventual yuan depreciation.
>> The business community said they expected the Chinese currency to shrink due to excessive money supply, and that inflation would be approaching, contrary to scholars' projection.
>> Such expectation was said to have stemmed from the size of credit expansion in recent months - 5.17 trillion new loans released for the first four months of 2009.
Original article: [Chinese]

China May Issue More Treasury Bonds
Cover, second lead
>> Some senior officials from China's Finance Ministry have recently asked local governments to introduce local bonds in the first half of the year to avoid clashing with treasury bonds issuance.
>> Such statement prompted speculation that the Chinese central government was planning to release additional treasury bonds in the second half of the year.
Original article: [Chinese]

Company Bankruptcy Rate Unnaturally Low
News, page 3
>> For the whole of last year, 3,500 Chinese companies filed for bankruptcy.
>> However, another set of records for the same period showed that 800,000 Chinese companies exited the market by way of canceling their business registration.
>> Legal scholar Li Shuguang - who took part in drafting China's Bankruptcy Law that came into effect in June 2007 - believed the relatively low bankruptcy rate last year was partly due to insolvent companies avoided filing for bankruptcy, instead, they opted for terminating business licenses.
>> By skipping bankruptcy filing, the companies were no longer bound by the law to settle debts and repay creditors in accordance to proper procedures.
Original article: [Chinese]

Projecting China's Near Future Credit Policy
News, page 7
>> Five prominent Chinese economists were invited by the Economic Observer to give a talk on China's Credit Policy on May 26.
>> The scholars warned of credit risk for banks, which were driven by government policy to issue huge loans and side-step stringent loan approval process.
>> The scholars projected that new loans released for the whole of 2009 would be within the range of six to eight trillion yuan.
>> They also expected the central government to further promote agricultural related loan policy and might set up special loans for cash-strapped small and medium sized companies.
Original article: [Chinese]

Driving License An Obstacle for Car Sales in Rural China
Nation, page 13
>> Despite attractive subsidies, China's latest consumption stimulus scheme of encouraging rural residents to trade in old automobiles for new ones have been hampered by conflicting regulations in some regions.
>> The stimulus scheme stipulated that one must produce a driving license issued by the traffic police department to qualify for the subsidies worth some 8,000 yuan per trade in.
>> However, farmers in the countryside have long enjoyed holding a permit issued by agricultural administrative agencies for their agri-used vehicles; thus, many rural residents do not have a driving license certified by the traffic police. As a result, these farmers were disqualified under the scheme.
Original article: [Chinese]

Soybean Futures Rebounce
Market, page 19
>> China's soybean Futures price reached 3,686 yuan on May 26, hitting an eight-month high.
>> Industry Analysts attributed the rebounce to three reasons: a surge in the US soybean export, a decrease in output in the main soybean production countries like Brazil and Argentina and fund speculations.
>> Analysts said that despite facing a downward pressure in the short term, price for soybean futures still had room to rise.
Original article: [Chinese]

QFII Favors Withdrawal from the A Share Market
Market, page 23
>> QFII (Qualified Foreign Institutional Investors) operators appeared to be withdrawing from China's A share stock market, despite the stock index climbed to 2700 points by May 31, hitting a ten-month high.
>> In April, registration accounts for QFII fell nearly 70% as compared to March, according to data from Chinese Securities Depository and Clearing Company.
>> Judging from recent QFII investment records, oversea institutions appeared to be less interested in the A-share market, a senior manager at UBS Securities told the EO.
>> A chief researcher in a foreign bank warned that the recent rally in the A-Share market might not be sustainable.
Original article: [Chinese]