Issue Wrap No. 519, May 16, 2011

Highlights from the EO print edition, No. 519, May 16, 2011

Challenges Facing Small and Medium-sized Enterprises
News, cover
~ On May 4, the Ministry of Industry and Information Technology issued an announcement asking local bureaux at various levels to make an investigation into the challenges facing the country's small and medium-sized enterprises (SME), requesting that feedback be returned by May 14.
~ The National Association of Industry and Commerce recently conducted a 2-month survey into SMEs operating in 16 provinces, including Guangdong, Zhejiang and Jiangsu. The survey results, which will be submitted to the State Council, indicated that SME are currently experiencing difficult times, with conditions even more severe than those during the financial crisis of 2008-2009.
~ The operation of middle and small-sized enterprises is, in the first place, restricted by factors such as a shortage of available labor and energy, these companies are also being forced to deal with increases in the cost of raw materials and losses associated with a currency that's appreciating against the US dollar.
~ Another dilemma is the availability of credit. For example, in Wenzhou, 42.9% of the enterprises are faced with the tightening financial situation. Similarly, banks can only provide 57% of the funds required, driving many enterprises to turn to private underground banks and financial operations.
~ In addition, some enterprise owners finding it hard to make money by operating their business, choose instead to invest the money they do have into real estate or to operate private lending operations themselves.
~ If SME are having a hard time, then, before too long, this will begin to affect the business of larger enterprises. Some measures should be taken to make help well-run businesses to survive this difficult time.
Original article: [Chinese]

Push to Commercialize GM Crops Appears to be Weakening
News, cover
~ The EO has learned that in April this year, the State Council's Food Safety Commission began to assemble a team of experts drawn from the Ministry of Agriculture, Science and Technology, Health, Environmental Protection and other departments devoted to investigating the safety of GM crops.
~ The team has already completed its investigation into the on the ground situation in Shanxi, Shandong, Jilin, Heilongjiang, Guangdong and other provinces and the members are currently engaged in writing up their final report.
~ A source close to the investigation team told the EO that their work had focused on examining the research, administration and promotion of GM crops. They also investigated the success of attemtps to detect the imports of GM soybeans and corn and the development potential for a domestic GM seed industry.
~ The same source told the EO that although the findings of the research group are unlikely to be made public, indications suggest that there might be a shift in the pace of the development of a commercial GM staple crop industry.
Original article: [Chinese]

China to Unveil Domestic Iron Ore Price Index in June
News, page 3
~ Two months after a change in leadership at the China Iron and Steel Association (CISA), the new leaders are finally making their first decisive move.
~ The EO has learned that CISA is currently preparing to launch an authoratative Chinese iron ore price index.
~ The index, which is expected to be introduced in June, will monitor the price of domestic iron ore. After that. CISA also has plans to launch another index that will chart the price of imported iron ore.
~ A source close to CISA told the EO, that representatives of the National Development and Reform Commission (NDRC) had encouraged CISA to push ahead with the establishment of the iron ore price index during internal CISA meetings earlier this year, in order to strengthen China's "bargaining position" in price negotiations with iron ore suppliers.
~ CISA delegated the task of designing the new indicies to the Metallurgical Mines' Association of China, representatives of which also attended earlier meetings at CISA.
~ The central government has been pushing CISA to establish a price index for over two years and it's only recently that the industry body has been persuaded of the merit of establishing such a price index. This could be the first step in a process of introducing more complicated financial instruments such as futures and derivatives to the iron ore market.
Original article: [Chinese]

Central Government Seeks to Retain Amount of Arable Land
News, page 4
~ The EO has learned that the three central government ministries charged with carrying out annual inspection of how well provincial-level governments have implemented policies aimed at protecting the amount of arable land, will be joined by the National Audit Office (NAO), The Ministry of Supervision and the Organization Department of the CPC for an audit of how policies were implemented in 2010.
~ Previously the annual inspections were carried out by the Ministry of Land and Resources, the Ministry of Agriculture and the National Bureau of Statistics. The addition of these other powerful government and party bodies will mean that officials will face serious consequences if serious misdeeds are violations are discovered.
~ The results of the review will be submitted to the State Council at the end of May before being made public.
~ Under the central government policy of "No Reduction in the Amount of Cultivated Land," adopted as part of the country's 12th Five-Year Plan, local governments are required to engage in land reclamation, in order to make up for the decrease in available cultivated land caused by the expansion of urban areas. The central government also has introduced the priniciple of first finding additional land to replace the arable land that slated to be built upon.
Original article: [Chinese]

Tencent Takes Stake in Huayi Brothers
Corporation, page 30
~  Tencent Holdings Ltd., the internet company that runs China's leading internet service portal, is speeding up its pace of investment. After recent aquisitions, the company now holds a 4.6% stake in Huayi Brothers Media Corporation (300027) (HBMC), becoming the largest institutional investor in the film distribution company listed on ChiNext, Shenzhen's growth enterprise board.
~ The move represents a good opportunity for Huayi Brothers as Tencent's investment in the company, could provide the company with a wider advertising platform, as well as strong financial support.
~ Furthermore, the cooperation will likely provide opportunities for the two companies to develop synergies related to online video, one of Tencent's key future business prospects.
~ A source close to Tencent told the EO that Tencent's Microblog platform could serve as an advertising platfom for future HBMC's films in the future.
~ Tencent has also bought a 16 percent stake in online travel company ELong, to expand beyond online games and social networking.
Original article: [Chinese]