Issue Wrap No. 452, January 11

Highlights from the EO print edition, issue no. 452, January 11, 2010

China Development Bank's Faces Difficulties in Transition to Commercial Bank Status
Cover
~ China Development Bank, formerly one of China's three policy banks, has been caught in a dilemma just one year into its transition to a commercial bank.
~ The bank took its first step to becoming a commercial bank in December 2008 when it registered as a joint-stock entity and convened its first shareholder meeting at which it outlined a three-year transition plan.
~ At present, the bank is facing difficulty in issuing financial papers. This is due to its gradual loss of its status as a state policy bank and therefore is no longer able to sustain the high credit rating its financial papers once enjoyed.
~ The bank will also face large challenges in repaying the 1.8 trillion yuan, plus 600 billion yuan worth of interest, that it raised in the issuing of financial papers. It has 5 years to repay the principal and interest on the funds raised.
~ In order to ease this pressure, the bank has put forward a proposal to the relevant regulatory bodies seeking permission to extend the transition period and the back of its financial paper and credit rating.
Original article: [Chinese] - subscription required

Influence of Grain Prices on CPI Exaggerated
News, page 5
~ The influence of grain prices on the Consumer Price Index (CPI) has been exaggerated, Zeng Liying, Deputy Minister of the State Administration of Grain claimed, rebutting claims that the recent rise in the CPI has been influenced by the central government's decision to raise the minimum price of grain.
~ Zeng went on to say that one of the reasons the CPI has increased is the strengthened expectation of inflation. She went on to argue that increased production costs is one of the fundamental reasons behind the new round of grain price increases.
~ The government's decision to raise the minimum price of grain was also made in an attempt to protect farmers' interests.
Original Article: [Chinese] 
 
Commerce Ministry Confident about Outlook for Exports in 2010
News, page 6
~ Despite China registering a year-on-year decline of 16.5 percent in exports last year and an increase in trade friction, the Ministry of Commerce was optimistic about the country's export sector in 2010.
~ An official at the ministry said "The situation in 2010 is much better. We project that the export will grow at around 10 percent even higher in 2010."
~ The EO learned that in 2010, the ministry would focus on dealing with the increasing trade frictions and enlarging imports in order to ease pressure on RMB appreciation.
Original Article: [Chinese]

Rio Tinto's Spy Case Enters Critical Period
News, Page 7
~ Rio Tinto's spy case entered a critical period on Monday as some 200 days had passed since Shanghai prosecutors approved the arrest of the mining giant's four employees on suspicion of obtaining business secrets and taking bribes.
~ According to Chinese law, the investigations should be wrapped up within two months of an official arrest by Chinese prosecutors, but in special circumstance, the investigation period can be extended to five months.
~ As five months have now passed since the four Rio Tinto employees were officially arrested, it's now time for Chinese prosecutors to deliver a statement.
~ According to Chinese criminal law, if the case involves a possible sentence of over ten-years imprisonment, the investigation can be extended an additional two months further to a total of seven months.
~ According to the law, the maximum sentence for the crime of obtaining business secrets is no more than seven years imprisonment.
~ Following the publication of this article, both Chinese and Australian authorities announced that the case has indeed now been passed to Chinese prosecutors. The court now has to decide if it is willing to accept the case.
Original Article: [Chinese]

High-speed Rail's Hidden War
Nation, page 9
~ Following the opening of the new Wuhan to Guangzhou high-speed railway line last month, Chinese authorities have pledged to complete 91% of their 40,000 km national high-speed rail construction plan before 2012.
~ High-speed rail offers many opportunities to cities that are able to connect to the newly constructed lines. Therefore there is fierce competition among people living along the proposed lines to have the railway to go through their cities.
~ Currently, Chenzhou and Hengyang, two cities located in Hunan Province, are battling each other to become one of the cities that the proposed Kunming-Taiwan line will pass through.
Original Article: [Chinese] - subscription required
 
Chinese Stock Market Enters New Era
Market, page 17
~ China's State Council has approved  a plan that will allow securities companies to introduce margin financing services and for the China stock exchanges to launch index futures, China Securities Regulatory Commission (CSRC) announced in a press conference on January 8.
~ The CSRC said it would select securities brokers with a history of strong performance to spearhead the margin financing project and after that would gradually expand the scope of the scheme.
~ The move would allow investors to borrow cash from securities brokers to buy securities or borrow equities from securities brokers in an attempt to profit by short selling.
~ Officials from the CSRC said it would take the commission three months to unveil the new services.
Original Article: [Chinese]

World-famous Luxury Brands - Made in China, Despite the Tag
Corporation, page 25
~ With relatively cheap labour and loose labour law environment, China is attracting more and more world-famous brands to move their factories to the country during the economic crisis. 
~ However, afraid of being tarred with the brush of being cheap products of bad quality, most of these "Made in China" products are still labeled with "Made in Italy" or "Made in Paris".
~ Although some brands such as Armani and Burberry acknowledge that their products are indeed manufactured in China, others like the Prada, Camper and Timberland products produced at the Dongguan Xing Xiong Shoe Factory (东莞兴雄鞋厂) in Guangdong mislead customers by claiming that the products are made elsewhere.
Original Article: [Chinese]

More Details About Geely's Vovlo Acquisition Emerge
Automobile, page 33
~ An informed source revealed to EO that details of Chinese automaker Geely's acquisition of Volvo were becoming clearer.
~ Geely would buy the Volvo brand, nine car models, three new production platforms, 2,500 auto dealers around the world and important suppliers.
~ The nine series of cars included in the deal are the: S40, S60, S80, C70, C30, XC90, XC60, V50 and V70.
Original Article: [Chinese]