Issue Wrap No. 430, August 3

Highlights from the EO print edition, issue no. 430, August 3, 2009

Retrospective: Chinese Enterprise - the Past 60 Years
Nation, page 9
~ To celebrate the upcoming 60th anniversary of the founding of the People's Republic of China, the Economic Observer has included a special feature in this week's issue reviewing the development of the country's enterprises over the past sixty years.
Original Article: [Chinese]

What's Behind the Surge in Beijing Property Prices?
News, cover
~ One of the factors that has pushed Beijing prices higher has been the presence of big-name projects that drive up the prices of nearby properties. Beijing's CBD is particularly susceptible to sharp rises and falls in property prices.
~ The other main factor is land supply, as the local Beijing government witnessed a rapid drop off in real estate-related revenue when the market dived, it attempted to invigorate the property market by taking measures like relaxing the deadline for land transfer payments. This tied in well with the loose credit environment.
~ In recent months the Beijing government has also opened up more land for development,
~ However, the government once again finds itself stuck in a dilemma, on the one hand ordinary working people find it difficult to afford property and call on the government to help reduce prices, on the other it is relying on land sales for a large amount of revenue (about 50% of Beijing government revenue is related to the real estate sector) and therefore has an interest in keeping prices high.
Original article: [Chinese]

China Faces Risk of Excess Liquidity and Asset Bubbles in H2
News, page 2
~ An academic has warned of the risk of excess liquidity and asset bubbles in the final six months of 2009.
~ Economic growth in the first quarter has relied on a huge surge in money supply and new loans over the past eight months, but this has aroused concerns of excess liquidity.
~ Liu Yihui, a director at the Chinese Academy of Social Science's Institute of Finance and Banking argued that loose monetary policy when combined with the cyclical rise in the price of pork and a weak dollar, will lead to higher inflation.
~ Liu suggested that the government contain credit growth.
Original Article: [Chinese]

Oil Giants Attempt to Influence Domestic Oil Pricing System
News, page 4
~ The adjustment of domestic oil prices announced on July 28, was a clear sign that the National Development and Reform Commission (NDRC) is keeping to the new oil pricing mechanism introduced in May this year.
~ China National Petroleum Corporation, and Sinopec, China's two state-run oil giants, have complained that the new system is difficult to follow and prone to speculative attack.
~ It's reported that they intend to make three suggestions to the NDRC: alter the amount by which global oil prices need to fluctuate before local prices are affected to a more fuzzy target of between 4 and 10 percent; change the way in which the fluctuations in global oil prices are determined so that it more accurately reflects the areas from which China purchases its oil; make clearer under what circumstances prices will not be adjusted.
Original Article: [Chinese]

Ministry of Finance to Fall Short of Fiscal Revenue Goal
News, page 3
~ Despite positive growth in fiscal revenue for June, officials from the MOF remained less-than-optimistic about the future.
~ Many local budget officials attributed the recovery in fiscal revenues to the large growth in non-tax revenue, but such revenue is unlikely to be sustained throughout the next half year.
~ In the first half year, fiscal revenue amounted to nearly 3.4 trillion yuan, a year-on-year decline of 2.4%.
Original Article: [Chinese]

Lack of Doctors in Rural Hospitals
News, page 4
~ China began introducing a new rural health insurance scheme known as the New Cooperative Medical-care System (NCMS) in 2003. The program aims to reduce out-of-pocket payments and establish a well managed and easily accessible health care system for rural people.
~ However, due to a lack of qualified grass-roots medical workers, the reforms have been far from successful.
~ But the current health reforms are unlikely to help. They're aimed instead at improving the infrastructure of 2000 county hospitals nationwide and ensuring that there is at least one hospital with standardized equipment in every county within three years and the shortage of basic medical workers in grass-roots hospitals is being overlooked.
~ Furthermore, most medical students in China are trained to be senior specialists instead of general practitioners or clinical physicians of the kind needed in local hospitals.
Original Article: [Chinese]

China's Steel Association to Set Uniform Iron Ore Price
News, page 5
~ According to sources attending the recent board meeting of the China Iron and Steel Association (CISA), China plans to limit the number of iron ore import licences that it awards.
~ In the first half year, China imported 297 million tons of iron ores, 44 percent of this amount was bought by dealers who count on reselling to the smaller steel mills without import licences to make a profit.
~ Shan Shanghua, Secretary General of CISA, said that the next stage involves cracking down on iron ore dealers and setting a uniform price nationwide.
Original Article: [Chinese]

The End of High Growth in Exports
News, page 5
~ As the economic downturn hit, China's government started to provide mechanical and electrical products (MEP) with export credit and favorable interest rates under a policy known as 421.
~ According to statistics from the Ministry of Commerce, 71 enterprises  have get the help from the government which have exported goods worth 102.9 billion dollars up to now.
~ China's exports of  MEP declined 21.1 percent in the first half of this year, this compares to an average annual growth rate of 30.9 percent between 1985 to 2008.
~ Officials admit that the high growth of MEP exports is no longer sustainable.
~ Though they remain optimistic that growth in MEP exports will be higher than the rate of GDP growth and the average growth of Chinese exports.
Original Article: [Chinese]

Tonghua Tragedy
Corporation, page 25
~ Details of how Chan Guojun, late general manager of Tonghua Steel Company, was beaten to death on July 24 are only now starting to slowly emerge.
~ Chan died from heavy blows to the head and lack of timely treatment. According to a source close to an officer of the Municipal Public Security Bureau of Tonghua,  the "7.24 case" has been solved and the murderer is believed not to be an employee of Tonghua Steel. 
~ However, the reasons behind the incident are deeply rooted in the ongoing conflict between Tonghua workers and executives of the Jianlong Group.
Original Article: [Chinese]