Highlights from the Economic Observer, issue no. 377 July 21 2008

NDRC to Fix Price Fixing?
News, page 3
The EO has learned that the National Development and Reform Commission is currently evaluating whether to loosen price controls for certain products. One source said that if the index of price-fixed products is revised, there would likely be additions and subtractions, with the total number of controled items unlikely to change. Price fixing has been controversial this year as regulators have used it to clamp down on inflation, with some warning that shortages would result. Source told the EO that beyond the adjustments, the Commission was undergoing a more general re-evaluation of its use of price fixing.
Original article: [Chinese]

Ministry of Finance Caught in Catch-22
News, page 3
Small and medium sized Chinese businesses were clamoring for tax breaks just at a time when China's Ministry of Finance is feeling pressure to increase revenues. The snowstorms in Southern China and the Sichuan earthquake combined have cost the Ministry 152 billion yuan this year, and as a result it would be looking to increase revenues. Corporate taxes have become a hot issue due to their high potential to increase the Ministry's revenues, their already steep increase over the past few years, and severe problems with enforcement and tax loopholes. The importance of the issue was relfected by impressive participation by regulators and tax and party officials of a tax conference in Kunming on July 10, where corporate taxes became the focus.
Original article: [Chinese]

Good News for the Markets, but not Good Enough
News, page 4
On July 17, China's statistics bureau released data that put GDP growth at 10.4%, with the consumer price index having decreased between March and June. China's economy has been struck by several disasters this year, leading officials to call such positive indicators "hard won". Stock markets, however, are still waiting for more signals. On the day the data was released, the Shanghai Index rose 2% before tumbling below 2,700 points. Meanwhile, export-regulating agencies have been inundated with emergency reports from the textile industry this year, the growth of which has cooled 20% this year. Critics of any faster appreciation of the yuan cite the already precarious status of exporters, which they say have been unduly hurt by a stronger yuan. Though the health of the Chinese business environment has become hotly debated this year due to the new labor law, corporate taxes, and the yuan's appreciation, there was still no consensus or overarching policy direction dealing with it.
Original article: [Chinese]

The Firing of Run-away Fan
Nation, pages 9-11
A teacher in Sichuan's Dujiangyan was fired after being accused of not saving students during the May 12 earthquake. Fan Meizhong, who was nicknamed Fan Pao Pao (meaning "Run-away Fan"), had met with fierce criticism from both the government and the public. Fan now planned to sue the Ministry of Education, CCTV--China's state broadcaster, and some commercial websites for their insulting remarks. EO reporters talked with Fan and his former employer Qing Guangya.
Original article: [Chinese]

Embezzlement Probe Stalls Sinopec Purchase
Corporation, page 26
Sinopec's buyout plan for Zhejiang's leading oil and chemical providers Juhua Group and Zhejiang Shijian has been suspended due to the latter's president Wang Xianlong being investigated for suspicious embezzlement of state-owned assets. According to plan, Sinopec should have completed the assessment of Juhua before July, which had been in dire need of support from the state magnate due to soaring prices in raw chemical materials. Because the two were going to be bought as a package deal, the purchase of Juhua has been thrown into jeapardy.
Original article: [Chinese]

Palm Oil Thief and his Real Estates
Corporation, page 27
Wang Wei, president of a Tianjin-based food and oil trading company which had recently been charged with stealing and selling its clients' orders, was discovered to have owned several properties in Shanghai, Hangzhou, Ningbo and other cities which he had used to apply for mortgages to pay for margin deposits. The EO learned that the companies under Wang's control all had diversified interests in edible oil, real estate, and marketing.
Original article: [Chinese]

The Shi Yuzhu You Don't Know
Observer, page 33
Observer stole a moment with Shi Yuzhu, a tenacious entrepenuer that came back from bankcruptcy to claim his place among China's wealthiest in 2007. Shi had come under fire as the CEO of online game company Giant Interactive in a country where online game addiction is rampant.
Original article: [Chinese]