Highlights from the EO print edition, issue no. 465, April 19, 2010

[Exclusive] More Details on the Geely Deal
News, cover
~ The funds that Chinese private automaker Geely needs to complete its acquisition of Volvo include 8.1 billion yuan (1.2 billion US dollars) of registered capital and 1.5 billion US dollars of funds to be set aside for the development of the car maker, the EO learned.
~ Of the registered capital, Geely came up with 4.1 billion yuan, Daqing Municipal State-owned Asset Supervision and Administration Commission put forward 3 billion yuan and the Shanghai Jia'erwo Investment Company, established by the Jiading District Government and its local State-owned Asset Administration Commission, contributed the remaining 1 billion yuan.
~ Geely has chosen Shanghai as Volvo's Chinese headquarters and Jiading District and Daqing city as the vehicle's production bases.
Original article: [Chinese]

Five State Food and Drug Administration Officials Arrested for Graft
News, cover
~ Five Officials at State Food and Drug Administration including Wei Liang, an investigator at the Drug Registration Department, were arrested on suspicion of accepting bribes.
~ People close to the matter revealed that Wei Liang's bribery case involves some 1.5 million yuan and that the scandal was revealed by a pharmaceutical company.
~ The above source revealed that the amount of bribes accepted by the four other officials were considerably lower than that accepted by Wei Liang, but they did not disclose any figures.
~ The amount of bribes taken by Wei Liang was less than the 6.49 million yuan taken by Zheng Xiaoyu, former head of the SFDA, who was sentenced to death and executed in 2007.
Original article: [Chinese]

NDRC to Make Income Redistribution Push This Year
News, page 3
~ Six years after the reforms were first proposed, the target of redistributing income among Chinese citizens will finally begin this year, according to Zhang Dongsheng, director of the employment and income distribution department under the National Development and Reform Commission.
~ Based on the reform plan, profits from state-owned enterprises will be used to fund public spending and social security, allowing the public benefit from the profits of these state-owned giants.
~ Additionally, they plan to sever the ties that link the salaries of those employed in monopoly industries, often considered too high compared to those working in more competitive sectors, to the profits made by these companies.
~ Statistics show, the total profits handed in by centrally-owned enterprises to the central government exceeded 50 billion yuan in 2009, only one billion of which was transferred to fund the public budget.
Original article: [Chinese]

Will the Surge in Commodity Prices Lead to Inflation?
News, page 4
~ Prices for bulk commodities such as iron ore, copper and aluminum have surged in the first quarter of 2010, and its predicted that this upward trend will continue into the future.
~ This round of price rises has been attributed to the higher cost of raw materials and international speculation in the bulk commodity markets.
~ The National Development and Reform Commission (NDRC) says it is not concerned by the current surge in bulk commodity prices, as producers can pass on these cost pressures.
~ The NDRC also has other options when it comes to curbing the increase in prices
Original article: [Chinese]

Most Economists Predict China Will Raise Interest Rates in Second Quarter
Page 7
~ 58 percent of respondents believe China will raise interest rates in the second quarter of 2010, according to a second quarter economic outlook survey conducted by the EO at the beginning of this quarter.
~ Forty-one economists from investment banks, research institutes and government bodies took part in the survey.
~ 65 percent of respondents predict that China's GDP will expand by at least 10 percent in the second quarter, while 64 percent believe China's exports will surge during the same period.
~ 73 percent of respondents agree that housing prices will continue to rise moderately in the second quarter and 13 percent believe that the recent sharp rises in property prices will continue.
~ Twenty-two out of the forty-one respondents believe that the transformation of the current economic development model is presently the biggest problem confronting the Chinese economy.
Original article:[Chinese]

Zhejiang: A Case Study in How to Transfer Economic Development Model
Nation, page 9
~ In 2009, Zhejiang's GDP grew by 8.9 percent, placing it fourth from the bottom in the ranking of China's provincial-level economies according to GDP growth. Many economists agree that Zhejiang needs to find an alternative to the old economic model it once relied on.
~ Zhejiang's reform includes a series of measures: accelerate urbanization in central towns, develop a marine economy, promote reform of Yiwu's international business and trade district, strengthen industry clustering, and further develop the private economy.
~ Besides upgrading existing industries, Zhejiang also plans to promote the development of promising new industries.
Original article: [Chinese]

Beijing Representative Offices of Local Governments Prepare to Retreat
Nation, page 12
~ As all the Beijing representative offices of or below county-level governments are required to exit Beijing, many are fighting to retain a foothold while others face problems in relation to how to deal with their current employees and sell-off their assets.
~ Zhang Chengxiang, head of the Beijing representative office of a small county in Hubei Province, has decided to close his office but does not know how to say "goodbye" to the employees who have served it for dozens of years. He also does not know how to price the assets of the office when selling them to a higher level government office selected by the government. His office located in a Beijing courtyard home, was bought at a price of 4.8 million yuan but is now worth near 20 million yuan, a price the designated buyer is unwilling to pay.
~ The main task of the Beijing representative offices of local governments is to prevent locals who come to Beijing to petition the central government from creating "trouble". It's predicted that much of this work will be passed on to selected former employees of the representative offices who will simply change official positions but remain in Beijing.
Original article: [Chinese]

ICBC International Shifts to the Mainland
Market, page 20
~ The Hong Kong-headquartered ICBC International, the wholly-owned subsidiary of the Industrial and Commercial Bank of China (ICBC) specializing in investment banking services, is applying for an operation permit on the mainland.
~ "Although the ICBC's investment bank department focuses its business on the mainland and ICBC International is mainly concerned with the Hong Kong stock market, the two entities face intensive competition with each other" said a source familiar with ICBC International, adding "some operation flow and benefit-distribution mechanisms still needs to be sorted out."
~ CCB International, a wholly-owned subsidiary of China Construction Bank established in Hong Kong which also specializes in investment banking, is also applying for permit to expand business on the mainland, the EO learned.
Original article: [Chinese]

Sinopec Plans to Construct Oil Refinery Base in Singapore
Corporation, page 26
~ Sinopec plans to build a complete petroleum and chemical base on Singapore's Jurong Island. This base will contain oil reserves, refine oil, and produce lubricants.
~ Sinopec plans to develop markets in America, Europe, and Southeast Asia. The construction of the base will lead to a greater presence of the Chinese petroleum giant in Southeast Asia.
~ Singapore is the international hub of oil futures trading, and the largest oil trading market in the world, so the new base may also mean a greater role for Sinopec in futures trading.
Original article: [Chinese]

Suggestions on Reforming China's Education System
Observer, page 49
~ In this week's Observer section, the EO has invited Gu Xin, a professor at Peking University's School of Government, to offer his suggestions for reforms to China's education system.
~ Professor Gu suggests that universities should be given the freedom to manage the recruiting and billing of students. Controllable competition among universities should be allowed and encouraged so as to stimulate them to lift their education quality with government being a supervisor, rule-maker and sometimes, sponsor.
Original article: [Chinese]

Observing China's Internet
Business Review, page 57
~ The Internet has developed dramatically in China since the 1990s, but not many know how it reached its current state and few can tell where it will go from here.
~ Zhang Shuxin, a woman who once headed up one of China's first Internet companies, and Wang Xiangdong, director of the Information Research Center under the China Academy of Social Science, founded a project called 思想@網(wǎng)絡(luò).中國(guó) in 2007. The project aims to record and interpret the history of the Internet in China.
~ Their plan originally consisted of three main parts: creating an oral history of the Internet in China, establishing a periodical devoted to analyzing and discussing the Internet in China and a series of books on the development of China's Internet.
~ Though the first two parts of the plan have already fallen by the way-side, a new book in the series called "Our Firewall" (我們的防火墻) was published late last year and has sold very well in the wake of Google's threats to exit the Chinese Internet search market.
Original article: [Chinese]