Highlights from the EO print edition, issue no. 466, April 26, 2010

2010 Iron Ore Price Negotiations Break Down
News, page 2
~ Shan Shanghua, general-secretary of China Iron and Steel Association (CISA), said that BHP Billiton's decision to raise the price of iron ore by 90 percent over last year's contract price is "unacceptable" and he's also refused to switch to quarterly instead of yearly contracts. This has led to the breakdown of this year's iron ore price negotiation between China's steel mills and the three international mining giants, BHP Billiton, Rio Tinto and Vale.
~ The EO has learned that, while continuing negotiations with the CISA, BHP is also holding talks with Chinese steel companies, including Bao Steel, aiming at founding a quarterly pricing mechanism for iron ore.
~ Currently, Chinese steel enterprises are not being prevented by CISA from importing iron ore from the three international mining giants, which has caused the price of ore in the foreign commodity market to rise to 200 US dollars per ton, which is 80 US dollars higher than the price BHP is asking for.
~ The annual iron ore price talks are usually concluded by April 1.
Original article: [Chinese]

Real Estate Tax to Replace Property Tax and to be Issued This Year
News, page 4
~ The Chinese government plans to change the property tax (物業(yè)稅) into a real estate tax (房產(chǎn)稅) and impose it on both commercial properties and certain residential properties. The new policy will take effect within the year.
~ The real estate tax was previously only imposed on commercial apartments. To some degree, real estate tax and property tax both impose a tax on property-owners. The difference is, to implement a new tax item such as a property tax, approval from the National People's Congress, which is a long process, is needed. Conversely, to revise real estate tax regulations only requires State Council approval.
~ Based on the current tax ratio of real estate tax, the owner of a house worth one million yuan will be required to pay 8,400 yuan per year. If it is rented out and the rental price is 100,000 yuan per year, then the tax will be 12,000 yuan.
~ Though the revised real estate tax will raise the cost of owning property and force some property owners to sell their assets, it's believed it will have a small impact on curbing the swift rise in housing prices in China; as bank loans are said to have more of an influence on the property market than property tax.
Original article: [Chinese]

Starting from 2011 Defense Industry Enterprises to Transfer Profits to SASAC
News, Page 5
~ From 2011, defense industry enterprises will have to hand in part of their profits to the State-owned Assets Supervision and Administration Commission (SASAC), and other state-owned enterprises will be required to start returning more profits to the commission than they have previously, a source from the SASAC said.
~ In 2007, to support military enterprises, the Chinese government decided to exempt such companies from passing their profits to the SASAC for three years. The other state-owned enterprises were divided into two categories. Resource-oriented enterprises, such as Sinopec and PetroChina, were in the first category and required to pay 10 percent of their profits to the SASAC; the second category was made up of ordinary competitive enterprises required to give 5 percent of their profits to the SASAC.
~ Enterprises working in the defense industry gained a profit of over 50 billion yuan in 2009, which means, they would have had to give 2.5 billion yuan to the SASAC if the required ratio was set at 5 percent.
Original article: [Chinese]

A Quick Look at Today's Shanghai
Nation, page 9-14
~ With the cost of maintaining a business in Shanghai constantly increasing, more and more enterprises are moving to surrounding cities for cheaper land and labor which is of greatly concern to the Shanghai government.
~ Aside from investment leaving the city, Shanghai is also suffering from a slow upgrade of its manufacturing sector. In 2001, the output value of its service industry exceeded 50 percent for the first time, but eight years later, the ratio only slightly increased to 59 percent in 2009 and most of its high-end manufacturing enterprises are from abroad.
~ Shanghai planned to develop seven key industries in 2004, but now only the real estate sector has become prosperous.
~ Though it is believed the World Expo will not contribute as much to Shanghai's development as expected, it has brought a better public transportation system.
~Local officials are also expected to learn how to behave as service providers and negotiators instead of merely governors because of the World Expo.
Original article: [Chinese]

Focus on the New Generation of Migrant Workers
Nation, page 15
~ The Chinese government will launch specific measures to resolve problems for a "new generation" of migrant workers from the countryside.
~ Unlike previous migrant workers, this "new generation" of workers are better educated, tend to live in cities and spend more on goods, but their city lives are restrained by the "hukou" system.
~ The new policy will try to remove restraints on these migrant workers, help expand their abilities as consumers and will ensure their rights.
Original article: [Chinese]

Decline of Foreign Banks in China
Market, page 17
~ In April, the People's Bank of China (PBOC) released the "Report of the International Financial Market in 2009". This report indicated that the market share of foreign banks in China has fallen from 2.16 percent in late 2008 to 1.71 percent at the end of 2009.
~ The decline in market share has been put down to the financial recession and financial products producing losses. Furthermore, foreign banks cannot attract large enterprises to the same extent as domestic banks.
~ Foreign banks will focus their business on non-lending aspects of banking such as investment and intermediary services.
Original article: [Chinese]

State Council Launches New Real Estate Policy
Market, page 19
~ On April 17, the State Council of China launched a new policy aimed at curbing the surge in housing prices in certain cities. This policy includes stricter loan requirements and grants permission for local governments to control real estate transactions in some special cases.
~ The new policy has already led to a decline in the amount of housing loans being issued by banks. The number of real estate transactions in Beijing has also begun to fall.
~ Although the State Council is determined to curb the high price of housing, people in the real estate sector still expect that housing prices will continue to rise.
Original article: [Chinese]

Price of Industrial Products to Rise
Corporation, page 7
~ The trade situation for Small and medium-sized enterprises (SME) in Wenzhou City, Zhejiang Province, is improving both at home and abroad, thanks to the recovering world economy and China's stimulus package.
~ But difficulties remain, with increased costs, more expensive land and less profit are the three largest difficulties. Another difficulty lies in the lack of employees, a problem which exists despite employer promises to raise salaries.
~ With greatly increased costs, the Wenzhou enterprises are considering raising the price of their products in the second quarter of this year.
Original article: [Chinese]