Issue Wrap No. 456, February 8

Highlights from the EO print edition, issue no. 456, February 8, 2010

Hangzhou: An Example of China's Urban Development Model
News, cover
~ Over the past decade, housing prices in Hangzhou, the capital of Zhejiang province, have multiplied by nearly ten times. At present, the average price of housing in the downtown area of the city hovers at above 20,000 yuan per square meter.
~ An official from the Hangzhou finance bureau told the EO nearly all the city's fiscal spending earmarked for urban construction and development relied on revenue from land transfers.
~ The amount of revenue the local government can collect through land transfers is closely related to the city's development prospects, and once land auction prices begin to plunges, the city will lose the single most important source of funds for its urban construction drive.
~ In 2009, the Hangzhou municipal government collected 120 billion yuan of revenue from land transfers, overtaking Shanghai and Beijing to claim the record for the most money made by any city government in the country from land transfers.
~ At present, Hangzhou is almost like a patient that is reliant on the transfusion of land transfer revenue in order to live and develop.
~ However, Hangzhou is not an isolated case and is an example of the urban development model being carried out across the whole country.
Original article:[Chinese]

Tibetan State-owned Enterprise Pursues Privatization Via Leasing
News, page 2
~ Privatising state-owned enterprises (SOE) has long been perceived as the only way to reform them. Another option is to lease the enterprises out. Up until now, the leasing of SOE has not been common in China, one of the reasons being that it's difficult to agree on a reasonable price.
~ Lhasa Department Store, a local medium-size SOE, however has decided to try the leasing model.
~ The Lhasa State-owned Asset Supervision and Administration Commission has a 70 percent stake in the store. The commission has leased the business to a group of 116 employees who also hold the other 30 percent stake in the company.
~ The group of employees have agreed to pay five million yuan per year, the average annual net profit over the past three years, to the commission. Any additional profit, is split 50-50 by the two parties.
Original article:[Chinese]

China's Tax Reform Timetable for 2010
News, page 3
~ The EO learned that a resource tax and an urban maintenance and construction tax are all likely to be released in 2010. Reform of the current educational surtax, which adds an extra 3% to the tax burden of those paying value-added, consumption and business tax, is also likely to be implemented.
~ The resource tax will be applied to the exploitation of crude oil, coal, natural gas, mineral metal products, non-metallic mineral products and salt.
~ In addition, the introduction of a property tax and environmental tax is not likely to take place this year.
Original article: [Chinese]

BHP Billiton Strengthens Potash Push
News, page 6
~ Aside from its iron ore business, BHP Billiton is now strenghtening its hand in the global potash trade. Potash is a mineral used primarily to fertilize crops
~ On Jan 28, BHP Billiton signed an acquisition agreement with Canadian Athabasca Potash Inc, the second largest potash producer in Canada, gaining development rights to a potash mining area of over 4,000 square km.
~ The company potash developments in Canada now exceed 10,000 square kilometers and they also possess another 17,000 square km in Ethiopia.
~ With a forecast annual production capacity of ten million tons, BHP Billiton accounts for 25 percent of the world's potash market.
~ Currently, China has to import over 50% of the potash it needs, somewhere between 5 and 7 million tons per year.
Original article:[Chinese]

Uncertainty About Port Statistics Cloud Export Outlook
News, page 7
~ The prospects for China's export sector in 2010 remains uncertain and concerns about the quality of statistics relating to port movements across the country cloud analysts ability to make reliable forecasts.
~ A source from a port said that there are two major statistics that reveal a port's performance: one is the real freight traffic (吞吐量 in Chinese); the other is a revised version for reporting to higher authorities. There was a marked gap between the two version, the source added.
~ A source from Tianjin port said the port's container traffic and dry bulk traffic reflected two different market trends. The former reflected the country's foreign trade, while the latter was more closely related to domestic trade.
~ Worryingly, the growth momentum for ports' loading and unloading traffic in terms of containers, has begun to ease, indicating a possible slowdown in export growth.
~ Despite container traffic across the country remaining steady in the fourth quarter of 2009, according to official statistics, its monthly indicator in December rose 1.4 percent from November.
~ Several researchers interviewed by the EO held that the country's export situation in January was not optimistic.
Original article: [Chinese]

Kunming: A Bright Outlook
Nation, page 9
~ 2010 marks the tenth year for the Chinese government to carry out the policy of encouraging the development of the western regions. This article examines the changes that have occurred in those areas over the past ten years?
~ As the first part in a series about the development of the major cities in western China, the EO takes a look at Kunming, capital of Yunnan Province.
~ Kunming hosted the International Horticultural Exhibitions in 1999. Now it is home to the largest fresh flower market in China.
~ The city has also invested heavily in infrastructure development since 2007.
~ Moreover, Kunming is currently constructing what will become China's fourth largest airport.
Original Article: [Chinese]

ABC to Welcome Strategic Investors as Part of Reform
Nation, page 17
~ The scheme of welcoming strategic partners to invest in the Agricultural Bank of China's reform plans is likely to be officially announced after Chinese New Year
~ People close to the matter told the EO that the bank was planning to introduce between 6 amd 8 strategic investors as part of its shareholding reform process.
~ The EO learned that the social security fund and an agricultural industry fund were likely investors.
Original Article: [Chinese]

CIC to Invest in Italy
Market, page 17
~ The China Investment Corporation (CIC) is currently seeking to diversify its investments to non US dollar-denominated assets and Italy, with its high deposit ratio is a likely target.
~ Gao Xiqing, deputy chairman and general manager of CIC, met with Fulvio Conti, managing director of Enel, the largest power producer in Italy during a recent trip to the country.
~ Enel has now received CIC's formal application to take part in the Enel Green Power project, led by a subsidiary of Enel.
~ In addition, CIC is also said to be setting up a fund for small and medium-sized enterprises with CDP (Cassa Depositi Eprestiti).
Original article:[Chinese]