No. 402, Jan 12

Highlights from the EO print, issue no. 402, Jan 12, 2009

Countermeasures: Chinese Banks' Stakes on Sale
Cover
A recent spate of foreign investors selling off their stakes in Chinese banks has alarmed China's policymakers, who convened a special meeting on the issue on Jan 8 to discuss countermeasures. Since the lock-up period preventing sale of Chinese banks' stakes by foreign owners was lifted on Dec 31, 2008, some 11 billion lots of H shares belonging to Chinese banks were off loaded within 10 days. Fear of a domino effect sparked market panic that further sent the share prices of these banks spiralling down in the Hong Kong Stock Exchange. The special meeting was dominated by a key question: who would pick-up the bulk of shares abandoned by major foreign investors? Names like China's sovereign wealth fund, China Investment Corporation (CIC), and other government investment arms like Central Huijin Investment Company and the National Social Security Fund, were brought up. Some believed that during an uncertain economic period, these candidates could play a crucial role in stabilizing the market.
Original article: [Chinese]

Removing Toll Roads in Stages
Cover
Second-grade roads in some 10 Chinese provinces, mainly those in central and coastal region, would soon be the first batch to remove toll gates. The move would be in line with the Chinese central government's plan to replace various charges imposed on road users with one single fuel tax, which was introduced on Jan 1 this year. Every year, the central government would put aside 26 billion yuan from the fuel tax revenue to subsidize second-grade road maintenance. Depending on debts resulting from road construction, other Chinese provinces would follow suit in toll removal in stages, with the less developed ones in the western region being the last.
Original article: [Chinese]

China's Budget deficit May Reach 650 billion Yuan
News, page 4
China's aggressive fiscal spending this year to stimulate the slowing down economy would likely result a record high budget deficit at 650 billion yuan. The EO learned the new projection, revealed by sources closed to the treasury, was some 150 billion yuan higher than earlier estimations made at the end of last year.
Original article: [Chinese]

Plans to Revamp China's Education System
News, page 6
China has proposed adding pre-school and higher secondary education as part of the country's compulsory education scheme by 2020, on top of the existing six-year primary and three-year lower secondary compulsory classes. The draft on China's medium-long term education revamp was published for gathering public feedback recently, and a refined draft was expected to be issued in March this year.
Original article: [Chinese]

An "Early" Spring Festival
Nation, page 9
The exodus of migrant workers from various Chinese cities to the countryside for the annual Spring Festival has occurred much earlier than previous years. In the past, the outflow usually happened just a few days ahead or on the eve of the lunar New Year; but this year, as many Chinese companies were shut down following a global financial crisis, jobless migrant workers headed home weeks or even months in advance, uncertain if they would secure other jobs in the cities again after the holiday ended.
Original article:[Chinese]

Prominent Broker Jailed for Insider-trading
Market, page 17
A Chinese court sentenced Dong Zhengqing, former president of Guangfa Securities, a major Chinese stock brokerage, to four years in Jail for insider-trading on Jan 9; Dong was also fined three million yuan. Dong was convicted for tipping off his brother on a takeover and listing plan back in 2006, and that allowed the latter to gain millions in profits. After the sentence was delivered, Dong created an uproar in the court room - he sat on the floor, stamped his feet, kicked a microphone nearby, and cried out loud that he was victimized. Dong was later dragged out of the courtroom by the police.
Original article: [Chinese]

Potential Merger of Chinese Companies in 2009
Market, page 18
Market observers have projected that at least 36 listed Chinese companies would seek merger this year to stay competitive. These companies, scattered in nine different industries, included major state-owned ones administered by the central government. Further consolidation of central government's state-owned companies, which number cut from 151 to 143 in last year alone, would strengthen their monopoly in fields like mining, power generation, gas, water, finance and insurance. Other industries projected to see active merger activities included media, real estate, transport and logistic, food and beverages, and machinery production.
Original article: [Chinese]

Agriculture Bank of China Incorporated
Market, page 20
Agriculture Bank of China has become a share holding company on Jan 9 and convened its first board of directors meeting on the same day. During the meeting, the board planned to have the company listed by 2010 and to draw in strategic investors.
Original article: [Chinese]

Chinese Auto Maker Chops Car Making Arm in South Korea
Corporation, page 25
China's SAIC Motor Corp, which successfully acquired 51% stakes in South Korean car maker Ssangyong four years ago, has seen the merger gone sour, as the letter filed for bankruptcy protection last week. SAIC was also being accused for letting go of Ssangyong after obtaining key technology from the latter through the takeover. SAIC, however, maintained that it had tried seeking aid from the South Korean government and banks to revive the ailing South Korean arm of auto-making but in vain. Ssangyong's car sale had dropped by some 30% last year, its cash flow affected and owed its staff some 29 billion won in salaries.
Original article: [Chinese]

China Mobile Leads in 3G Race
Corporation, page 32
The same day as it obtained the 3G operating license on Jan 7, China Mobile has already launched the new service under a fresh logo and slogan. In comparison, its two rivals - China Telecom and China Unicom, would have to wait til mid-year or year-end respectively to have their 3G operation ready, the EO learned.
Original article: [Chinese]

Tribute to Mao Yushi
Observer, page 33 - 36
The EO published a tribute special on Mao Yushi, one of China's most prominent economists, to commemorate his 80th birthday. Mao, a firm believer and advocate of market economy, has authored numerous books to popularize the basic knowledge of western economics and created a private research institute to advocate the market economy. He has also been a social reformist, engaging in helping the poor in China's countryside through micro-credit projects, poverty alleviation fund and other projects.
Original article:[Chinese]