Highlights from the EO print edition, Issue No. 472, June 7, 2010
State Administration of Taxation to Intensify Collection of Land Appreciation Tax from Property Developers
News, Cover
~ China's State Administration of Taxation (SAT) recently issued two circulars in succession ordering local tax collection bodies to intensify their inspection of property developers' payment of land appreciation tax.
~ The move is considered as yet another in a series of policy measures being introduced to rein in the recent surge in housing prices.
~ At present, the tax administration usually requires property developers to pay a "down payment" on the land appreciation tax - calculated at 1 percent of the total value of the land being developed - and then only calculates the actual amount of tax owed only after the property has been sold on to home buyers.
~ The SAT has issued 8 circulars over the past five years announcing the launch of similar special inspections of the land appreciation tax paid by property developers, but each inspection has produced little in the way of results.
~ According to the calculations from World Union Properties, a consulting firm that focuses on the real estate sector, if calculated on the basis of 30 percent tax rate, then property developers still owe at least 187.8 billion yuan in unpaid land appreciation taxes from 2009.
~ China imposed a land appreciation tax on property developers of 30 to 60 percent, depending on the amount of appreciation, in the mid-1990s but many local governments haven't implemented the tax effectively because of a lack of detail.
~ Owner-occupied properties that are sold five years after they were first purchased are exempt from the tax.
Original article: [Chinese]
Top Five Power Companies Compete to List New Energy Assets
News, cover
~ Following the rush of investment into wind energy, China's five large electricity producers are now suffering a severe shortage of capital and are therefore seeking to list their new energy assets, or related subsidiaries, on either domestic or international markets
~ Datang Group, has a wind power capacity of three million kilowatts and has also co-founded new energy subsidiaries with companies from both Japan and South Korea, is planning to list its new energy assets on an overseas stock market.
~ China Power Investment Corporation has established a new energy company called China Power New Energy Development Company Limited. The company's shareholders include Citi Bank, EDMI Limited, Winnington Capital and Wealth Success Limited and has become an effective financing platform for China Power Investment Corporation.
~ The outlook for wind energy companies is starting to improve as State Grid devotes resources to solving the problems associated with connecting wind power to the existing grid and the announcement of central government policies that offer support to companies in the sector.
Original article: [Chinese]
Energy-rich Provinces Advocate National Roll-out of Resources Tax
News, Page 3
~ The Xinjiang Uyghur Autonomous Region's move to pilot a new-look resources tax has attracted the attention of resource-rich provinces.
~ China's Ministry of Finance announced on June 2 that the Xinjiang Uyghur Autonomous Region had begun levying a 5 percent resource tax, calculated according to the value of resources extracted, as of June 1 this year.
~ Officials from several provinces including Inner Mongolia, Heilongjiang and Qinghai interviewed by the EO, said there is no technical problem in the resource tax reform and it's unnecessary to try it out in selected places and that it should be rolled out across the whole country as soon as possible.
~ However, the main impediment to a nation-wide introduction of the new resource tax is the heft of the large centrally-owned enterprises that dominate the energy and resource sectors. These powerful companies are opposed to the new tax on the basis that it will squeeze their profits and warn of the increase in the price of energy and resources that is likely to follow the introduction of the revised tax
According to a number of unnamed scholars, the central government is likely to first allow the tax to be implemented in Xinjiang for at least six months, before a possible national roll-out in 2011.
Original article:[Chinese]
State Council to Publish New Foreign Trade Strategy
News, page 3
~ The State Council is in the process of drawing up a new foreign trade strategy document that will outline how the central government plans to shift the country's economic development model, lift China's international competence and balance its trade relations with foreign countries. The new strategy document will likely be formally released by the State Council at the end of June or in early July.
~ This strategy will be based on an earlier report published by the Ministry of Commerce at the 107th China Import and Export Fair held in Guangzhou in April this year. That report laid out a road-map for the government's determination to accelerate the shift of China's foreign-trade dependent development model and the restructuring and advancement of industry.
~ On drafting the new strategy, the government plans to require enterprises engaged in foreign trade to consider reducing their carbon emissions and devote more attention to protecting the environment rather than focusing exclusively on GDP growth.
~ To realize the strategy, the government needs to transform the current economic development model and promote the development of both service industries and high-end manufacturing.
Original article: [Chinese]
China to Put Forward New Offer to Join WTO's Government Procurement Agreement
News, page 4
~ The Chinese government will submit a list of conditions that it is willing to accept in order to joint the Agreement on Government Procurement (GPA) to the WTO at the end of June.
~ This will be the second time that the Chinese government has submitted such a list to the WTO since China began talks aimed at finalizing the country's accession to the GPA in December, 2007.
~ The EO learned that the Ministry of Finance and other ministries and commissions are discussing what should be included in the list.
Original article: [Chinese]
Quarterly Pricing of Iron Ore Triggers Price War Among Domestic Steel Makers
News, page 6
~ The three global mining giants dominating world trade in iron ore, BHP-Billiton, Rio Tinto and Vale, have indicated that the price of iron ore is likely to increase by between another 30 and 35 percent on current prices (which are already up 90% on the previous quarter) in the third quarter of 2010. Chinese steel enterprises therefore seemed to be faced with the choice of either cutting back on output or lifting the price that they charge for their steel.
~ In fact, domestic steel companies are instead cutting prices as a price war between steel producers trying to maintain market share drives down domestic steel prices as the price for imported iron ore continues to soar.
~ Many state-owned steel companies are caught in a bind as they're under pressure not to reduce output as local governments often rely on them as both a major source of tax revenue and also to maintain local GDP growth rates.
~ Privately-owned enterprises are also under great pressure, as in order to compete with their state-owned competitors, they're forced to sell their steel at a loss. To avoid this, some of them have chosen to switch to trading in iron ore rather than the production of steel.
Original article: [Chinese]
Domestic Commercial Banks Suffer Shortage of Capital
Market, page 19
~ Domestic commercial banks have been complaining about a lack of capital. A number of factors have led to the drying up of liquidity, including recent open market operations by the central bank aimed at withdrawing liquidity, slow growth in new deposits and a rise in the inter-bank lending rate.
~ On June 2, the weighted average interest rate of overnight interbank loans rose to 2.74 percent, the highest it has been in nearly two years.
~ The fact that the Bank of China issued 40 billion yuan of convertible bonds last Wednesday and that the Agricultural Bank of China plans to list next month makes the commercial banks pessimistic about the availability of being up to raise money in the already tight capital market.
~ According to some analysts. the central bank is acting with considerable restraint when it comes to managing liquidity. The People's Bank of China has to weigh fears that the hot money that exited the system when the likelihood of an imminent rise in the nominal value of the RMB subsided in May might lead to another downturn against what appear to be growing signs that the CPI figures for June and July will exceed 3 percent.
Original article: [Chinese]
Agricultural Bank of China Plans to Raise 111 Billion Yuan of Funds in Dual IPO
Nation, page 19
~ In early June, the Agricultural Bank of China released a statement saying that the China Securities Regulatory Commission would review its initial public offering report on June 9.
~ According to rough calculations based on a price to book ratio of 1.6, the bank can raise a total of between 96.7 billion yuan and 111 billion yuan through listing on both the domestic and Hong Kong stock exchange.
~ According to a China Business News report, the bank has made a preliminarily decision to list on the Hong Kong stock exchange on July 16. Hong Kong New World Development Company has confirmed that it will subscribe to 300 million HK dollars worth of ABC shares.
Original article: [Chinese]
Former Head of Beijing Capital Airport Detained
Corporation, page 25
~ Zhang Zhizhong, the former general-manager of Beijing Capital International Airport Co. Ltd, was detained by Beijing prosecutors on May 22, on suspicion of engaging in unspecified economic misconduct, the EO learned.
~ This is the fifth high-ranking official in the aviation sector to been investigated in relation to economic issues in the past two year. Before Zhang was detained, Li Peiying, former chairman of the Capital Airport Holding Company, Huang Dengke, former head of Civil Aviation Administration of China (CAAC) North China Regional Administration, Yu Renlu, former vice director of CAAC, and Huang Gang, former vice general-manager of Capital Airports Holding Company, had all been detained.
Original article:[Chinese]
