Highlights from the EO print edition, Issue Wrap No. 485, September 6
Central Government Completes Spending of its Component of Four Trillion Yuan Stimulus Plan
Cover
~ Investment by China's central government, as part of the country's four trillion yuan stimulus package, is coming to an end.
~ The EO has learned from the National Development and Reform Commission that most of the 1.18 trillion yuan earmarked by the central government for stimulus spending has already been allocated to local governments.
~ In October, an investigation group will be sent by the central government to inspect the implementation of the various investment projects at the local level.
~ During previous inspections, the central government has discovered various irregularities.
~ For example, though the financial bureau of Zichang County in Shanxi Province already received 5.55 million yuan of central government funding on December 23, 2009, local supporting capital was delayed for almost five months. After work on the project eventually began, inspectors discovered that local officials had cut corners and failed to tender out contracts for the project.
Original article: [Chinese]
Proposed New Environmental Tax Will Not Increase Tax Burden on Chinese Companies
News, page 3
~ Many analysts believe that a new environmental tax is a matter of not if but when. A more important question is whether Chinese companies are already paying too much in environment-related tax?
~ A report from the Peking University Lincoln Center revealed that revenue from environment-related tax totaled 595.6 billion yuan in 2007, 12.04% of total tax revenue, a ratio two to three times that in the UK or America.
~ Sources told the EO that the latest proposal being considered by the Ministry of Finance would result in a tax of 43 yuan being placed on each ton of coal.
~ According to reports, the central government is working on the principle that Chinese enterprises should not have their tax burden increased with the introduction of an environmental tax.
Original article: [Chinese]
Plan to Reform Income Distribution to be Completed by October
News, page 4
~ The reform of the income distribution system is going to dominate China's 12th Five-Year Plan; the draft of the reform project may be completed in October.
~ The financial and economic commission of the National People's Congress, along with the central committee of the China Democratic League, the All-China Federation of Industry & Commerce and the National Development and Reform Commission (NDRC), have drafted a plan to reform China's income distribution system.
~ The plan is focused on reforming the financial and tax system, transferring more fiscal revenue to public projects, reforming the income distribution system of industrial monopolies and improving the social security system.
~ According to an anonymous source with the NDRC, the reform project has been delayed because too many government agencies are involved.
~ Another unnamed source with the All-China Federation of Industry and Commerce told the EO that private enterprises may be the main target of the reforms.
Original article: [Chinese] 
Labor Unions to be "Independent"?
Nation, page 9
~ Though labor unions are supposed to speak for the labor force, they cannot do so in Chinese enterprises because all union workers are paid by the companies they are employed by.
~ However, this situation is going to change in Beijing. The municipal federation of labor has recruited 1,013 professional workers to be employed in nearly 1,000 grass-root labor unions; these new workers will be paid by the federation, but participate in already existing unions.
~ But problems remain. With the federation of labor paying much lower salaries than companies,those workers will prefer to be paid by the companies and thus will continue to speak for the companies rather than for employees.
~ Currently, the municipal federation of labor offers a subsidy of 1,400 yuan per month for labor union assistants with a bachelor degree and 700 yuan per month for workers without a degree.
Original article: [Chinese]
Four Big Banks Collect a Combined 120 Billion Yuan in Fees and Commissions in First Half
Market, page 19
~ China's four large state-owned commercial banks (Bank of China, Agricultural Bank of China, ICBC and China Construction Bank) made a combined net profit of almost 256 billion yuan in the first 6 months of 2010.
~ However, as much of this profit is still made on the basis of the spread between the very low interest rates the banks pay depositors (about 2.3%) and the higher rates they charge those who lend, the bank's capital adequacy ratios has continued to fall as profits soar due to the banks having such a huge incentive to lend.
~ Banks are looking to diversify their sources of revenue and the four banks collected a combined total of 120 billion yuan in fees and commissions in the first half of 2010, which averages out to about 20% of total operating revenue.
~ But this has also left the bank open to charges that it is "ripping off" customers by charging excessive fees.
~ Some analysts and academics argue that interest rates should be determined by the market rather than set by the central bank and that the banking sector should be opened up to more competition from abroad.
Original article: [Chinese]
Tracing the Jinhao Camellia Oil Recall
Corporation, page 25
~ As public demand for information got louder and louder, on the afternoon of September 1, Jinhao Camellia Oil admitted that in March and April nine batches of camellia oil were recalled, with levels of benzopyrene, a carcinogen, surpassing national standards.
~ On September 3, Zhou Yiping, the deputy director of Jinhao Camellia Oil disclosed that the recall was kept secret because he was nervous that the news would harm company sales.
~ In recent years, due to a drain in labor force and a high occurrence of drought, flood, and fire there has been a decrease in the surface area of Camellia forests.
~ The cultivation of high quality varieties of Camellia crop has also met with financial difficulty. It costs 1,500 yuan in order to grow one mu (.0667 hectares) of Camellia crop; recently the government has agreed to provide a 400 yuan subsidy for this process.
~ Oil processing companies and Camellia crop growing companies are apprehensive about undertaking new ventures due to the high costs, the amount of time it takes to grow high quality Camellia crops (3-5 years), and the possibility of natural disasters.
~ With the lack of high quality Camellia crops, Jinhao Camellia Oil has been obtaining Camellia oil from smaller processing companies. Some of these companies use oil seed cake, a byproduct of seed pressing, to produce more oil by combining it with solvents. This process has been known to leave cancer-causing carcinogens in the oil.
~ On September 2, the EO attempted to contact Jinhao Camellia Oil in order to gain a further understanding about its production process, but was met with no response.
Original article: [Chinese]
Gates and Buffett Seek Givers Among "A Select Group" of China's Wealthiest
Corporation, page 27
~ Some of China's business elite have received personal invitations from Bill Gates and Warren Buffett to attend a private party.
~ Three months ago, Bill Gates and Warren Buffett issued a "charity donation pledge" in the US. Forty of the country's billionaires and executives promised to donate half their wealth to charity; two promised to donate everything.
~ 50-60 of China's wealthiest were selected to join Gates and Buffett in their charity pledge. The guests came from three categories, the moderately wealthy but charitable, the enormously wealthy, and CEOs capable of donating on behalf of a company.
~ Guests will not be required to donate. Gates hopes the event will initiate an ongoing "dialogue."
~ Forbes 2010 list of "The World's Richest People" includes 64 billionaires and executives from mainland China.
~ Ye Lei, an organizer, says the event will not match the US in donations but is a "beginning."
~ The event will take place in September of this year.
Original article: [Chinese]
