Issue Wrap No. 482, August 16, 2010

By English Edition Staff
Published: 2010-08-16

Highlights from the EO print edition, Issue Wrap No. 482, August 16

Four Ministries Investigate Debt Held by Local Financing Platforms
Cover
~ China's Ministry of Finance, National Development and Reform Commission, People's Bank of China (PBOC) and China Banking Regulatory Commission (CBRC) jointly issued a notice indicating that they plan to once again audit the debts owed by financing vehicles controlled by local governments.
~ The notice is currently being circulated through other central ministries.
~ According to the notice, local finance departments, local development and reform commissions and local branches of the PBOC and CBRC will work together in order to investigate the level of debt held by local financing platforms.
~ The Ministry of Finance and the CBRC have already conducted numerous separate investigations but came to very different conclusions.
~ The CBRC has estimated bank lending to local financing platforms totaled 7.66 trillion yuan by the end of June, whereas the finance ministry did not disclose its findings.
Original article: [Chinese]


COEs Fear Losing Out on Local Government Investment
News, page 3
~ Centrally-owned enterprises (COEs) that have invested in local-level construction projects are beginning to worry that they will not be able to get their money back from some of their investments due to the debt risks facing some local authorities.
~ The ratio of account receivables to sales of the Metallurgical Corporation of China Ltd increased from 16% at the end of 2008 to 18% at the end of last year. Analysts said the sales situation would be even worse this year.
~ The ratio of accounts receivables to sales is a significant indicator used by the State-owned Assets Supervision and Administration Commission in their evaluation of how the COEs whose business is focused on infrastructure construction are performing. A higher ratio indicates that a company has more receivables and thus poorer business performance.
Original article: [Chinese]

China to Revise Government Investment Regulations
News, page 4
~ The department of law and regulation and the department of investment at the National Development and Reform Commission (NDRC) recently summoned local officials from 14 provinces to discuss the revisal of the Regulations on Government Investment.
~ A participant at one of these meetings revealed to the EO that the NDRC intends to concentrate the power of approving some government investment projects, which is currently scattered across various ministries, in the hands of the NDRC and local development and reform commissions.
~ In addition, the NDRC plans to revoke the municipal and county government's power of approving local government investment projects and move it to the provincial or national level.
Original article: [Chinese]

China to Fine-tune Export Policy Settings in Second Half
News, page 7
~ Though China's export volume as well as its total volume of imports and exports in July reached their highest monthly total since July 2008, the growth rate of exports is actually slowing down.
~ An indicator of this trend is that the growth rate of exports in processing trade, an index of foreign demand, has been slower than that of ordinary trade in the first seven months this year. While the later has been 35.6% growth, the former only registered growth of 32.4%.
~ To maintain its export growth rate, the Chinese government will resume its efforts to stabilize trade through foreign policy over the next five months. But, there will be some small adjustments. For example the Ministry of Commerce will add some energy-intensive and high carbon-emission products to the Catalogue of Restricted Commodities.
Original article: [Chinese]

Questions Remain Regarding Leak from Zijin Mining Group Smelter in Fujian
Nation, page 9
~ Several questions still remain after the company officially announced it was cutting back on production after independent tests showed that a river close a smelter of the Zijin Mining Group, a well-known bronze mining company based in the county of Shanghang in Fujian province, was found to have been polluted by run-off from the plant.
~ The first is why local residents have refused to drink the tap water supplied by local water processing plant.
~ The second is why so many fish were found dead in the Ting river in June. Local people suspect it was caused by the pollution produced by the Zijin Mining Group's smelter.
~ The third is whether this is the first time that Zijin Mining discharged pollutants in to the Ting River or is it a more serious problem that has existed for a long time.
Original article: [Chinese]

Outlook for China's A-Share Market Unclear
Market, page 22
~ China's A share market rose 300 points or 15.6% from a low of 2319.74 points in early July to a recent high of 2681.79 points in early August, the biggest upswing this year.
~ However, the A-share market has since dropped a little and analysts predict that it's unlikely to either rise or fall too much over coming weeks
Original article: [Chinese]

International Board to be Launched Late This Year or Early Next
Market, page 21
~ The EO has learned that the China Securities Regulatory Commission (CSRC) recently held a meeting to solicit the opinions of big investment banks regarding the launch of a Chinese international board. While older investment banks, including China International Capital Corporation, CITIC, Guotai Qunan Securities, and Galaxy Securities are prepared to embrace the new board, emerging investment banks like Guoxin Securities and Pingan Securities are more hesitant about the launch.
~"Confined by restricted resources, investment banks will be unable to do business with the international board in the short term." said an anonymous source present at the meeting.
~ Despite the unwillingness of emerging investment banks, the CSRC is tipped to be planning the launch of the international board for either late this year or early next year.
Original article: [Chinese]

Search Engine Competition Heats Up
Corporation, page 30
~ Alibaba Group, China's leading online B2C and B2B business platform, has purchased a 16% stake in Sogou, a search engine owned by Sohu, which bills itself as China's largest online portal. Alibaba is now the Sohu's second largest shareholder.
~ Sohu is China’s fourth most-visited portal behind Baidu, Tencent Holdings Ltd. (who run popular messaging system QQ) and Sina, according to China Websites Ranking, a site run by the Internet Society of China that compiles Web traffic information.
~ Alibaba's purchase of Sogou sets up Sohu's search engine as a potential competitor against Baidu, the company that operates China's dominant search engine. Prior to the deal Tencent, China's biggest online communication service provider, also developed its own search engine, Sousou.
~ An anonymous source stated that the search engine is going to guide future consumption in China. Baidu, Alibaba and Tencent will be rivals in the B2C business field.
Original article: [Chinese]