Highlights from the EO print edition, Issue Wrap No. 477, July 12

Analysis: Why Did Companies Fail to Pass IPO Review?
cover
~ Heading Century Consulting Company compiled a report on why some companies failed to pass the Chinext IPO review and submitted it to the China Securities Regulatory Commission (CSRC).
~The report, which is only allowed to circulate within the CSRC, outlined seven problems that the IPO companies should pay attention to, the EO learned.
~ In 2009, the CSRC reviewed the listing applications of 74 companies, 15 of which failed to pass the review. The companies rejected were found to have problems with their company independence, sustainable profitability, information disclosure, accounting, and planned usage of funds raised by the IPO.
Original article: [Chinese]

China's Finance Ministry Proposes to Establish Financial Assets Watchdog
News, page 2
~ China's Ministry of Finance recently proposed to separate the Central Huijin Investment Corporation from the country's sovereign wealth fund - China Investment Corporation and combine it with the ministry's finance division to form a special watchdog to supervise the country's state-owned financial assets.
~ The State Council is currently deliberating on this proposal.
~ At present, the State-owned Assets Supervision and Administration (SASAC) is in charge of the country's state-owned non-financial assets.
Original article:[Chinese]

Processing Trade to Vanish in China
News, page 7
~ As China determines to upgrade its industries as well as its economic structure, its processing trade, which has dominated China's foreign trade for the past thirty years, has begun to disappear.
~ On June 22, the Chinese government decided to no longer provide an export rebate for 406 products including a large number of items in the processing sector. It is widely rumored that more products will be added to the List of Products Prohibited in Processing Trade issued in 2006.
~ At the working meeting discussing the upgrade and shifting of the processing trade industry held on July 1 in Hangzhou city, an official with the Ministry of Commerce emphasized the significance of the processing trade, but warned foreign investors to pay more attention to establishing companies independently in China or setting up joint venture companies with Chinese counterparts rather than relying on China's processing trade.
*processing trade includes the processing of imported raw materials, processing according to instructions provided by foreign countries and the assembly sector.
Original article: [Chinese]

Grain Giants to Push Grain Prices Up
News, page 5
~ Though the China Grain Reserves Corporation has stopped purchasing wheat in Henan Province, local wheat prices are still higher than previous years, as China Oil and Foodstuff Corporation (COFCO) and China Hualiang Logistics Group (CHLG) are allowed to take part in purchasing and reserving wheat this year. This is the first time companies other than China Grain Reserve Corporation have been allowed access to this field.
~ To gain more wheat, the COFCO has raised the price it pays grain brokers to 8 fen per kilogram, a rate higher than that provided by China Grain Reserve Corporation of 5 fen per kilogram.
~ Aside from China grain companies like COFCO and CHLG, their foreign counterparts, like Yihai Kerry, are also purchasing wheat in China. So far, Yihai Kerry has bought 50,000 tons of wheat this year in Henan Province.
Original article:[Chinese]

Iron Ore Prices Fall
Corporation, page 30
~ After surging for three months from February to May, iron ore prices in China are falling sharply.
~ The cost of refined iron ore had increased from 830 yuan per ton on February 16 to 1,460 yuan per ton on May 11, thanks to the severe property bubble at the time. But, as the Chinese government issued strict policies to curb the speculative property market in April, the demand of steel products and iron ore has gradually decreased, causing the price of iron ore to lower to its current rate of around 1,000 yuan per ton.
~ Now the iron ore market is in a standoff; iron ore traders are unwilling to sell at a price lower than the cost of production while steel companies can not offer a higher price due to the gloomy steel market.
~ As predicted by both Xia Bin, counselor of the State Council and Liu Yuanchun, deputy dean of Renmin University's School of Economics, the growth rate of the Chinese economy will fall in the second half of 2010, indicating a bleak future for the iron ore market.
Original article: [Chinese]

Tencent's Risk
Corporation, page 25
~ At present, Tencent has undoubtedly grown to be China's leading Internet giant, which is reflected by three performance figures:
~ The first is Tencent's single quarter revenue which exceeds the amount of 4.2 billion yuan, an amount almost equal to the total of the other listed Internet companies' quarterly revenues. The second figure is Tencent's market value which has exceeded 250 billion Hong Kong dollars, equivalent to over 100 times the value of Sina Corporation, China's largest portal, and 3 times the value of Alibaba Company. The third performance indicator is the extensiveness and size of Tencent's industry which nearly overlaps the business operations of its other Internet rivals.
~ A market manager in Sohu, one of China's largest portals, said, "Marketing by bundling is the key to Tencent's success. Tencent has massive amount of instant messaging users, and can push its new products to its users."
~ Now, its key to success will likely become a risk to the company. Tencent runs the risk of being charged with violating anti-monopoly laws similar to Microsoft who also used bundling sales measures to sell its products.
Original article: [Chinese]

Did Tang Jun Falsify his PhD?
Corporation, page 28
~ Tang Jun, COE and president of the New Huadu Industry Group Company, is suspected of falsifying his PhD diploma.
~ Fang Zhouzi, China's most well-known crusader against fraud in academia and the public sector, recently questioned the authenticity of Tang Jun's PhD diploma received from the California Institute of Technology (Cal Tech) which is described in Tang's autobiography, My Success Can Be Copied, published by CITIC Publishing House.
~ Later on, the publishing house published an apology to readers and Tang, saying Tang Jun had pointed out the errors in his PhD degree description, but the editor failed to fix the error.
~ Meanwhile, in an interview with China National Radio, Tang Jun made clear that he never said he received a PhD degree from Cal Tech. He revealed that he got his PhD diploma from Pacific Western University (PWU).
~ However, Fang Zhouzi continued to question Tang Jun's credentials and alleged that PWU is a fly-by-night university where Tang could purchase a PhD diploma.
~ As of press time, the debate over Tang's diploma continues to be discussed heatedly online.
Original article: [Chinese]

Hot Money Retreats From China
Market, page 19
~ The latest statistics from China's central bank show that the country's foreign exchange purchases in May fell by 50 percent since April.
~ This signals that hot money hidden in China has begun to retreat.
~ Li Youhuan, researcher at the Guangdong Provincial Academy of Social Sciences, who has been following the hot money trend, thought the main reason for the withdrawal of foreign capital from China is that there is no longer an expectation of a high rate of RMB appreciation.
*Hot money refers to short-term speculative funds
Original article: [Chinese]

AMC Starts to Undertake Commercialized Transformation
Market, page 19
~ Cinda Asset Management Corporation, one of four asset management companies established in 1999 to deal with the toxic assets of state banks, unveiled its planned commercialization-oriented transformation.
~ Recently, China's State Council approved Cinda's shareholding reform scheme and allowed the Ministry of Finance to inject 25.1 billion yuan into Cinda.
~ In addition, Cinda Asset Management Corporation will likely be renamed "Cinda Shareholding Corporation".
~ In 1999, four asset management corporations (AMC): China Cinda Asset Management Corporation, China Huarong Asset Management Corporation, China Orient Asset Management Corporation and China Great Wall Asset Management Corporation were established to deal with 1.4 trillion yuan worth of toxic assets that had been expunged from the books of China's state banks in order to complete their market-oriented reform.
~ In order to finance the project, the four AMCs issued 811 billion yuan of bonds at the time and attained loans worth 1.2 trillion yuan from the central bank at a fixed interest rate of 2.5 percent per year. However, these four AMC are now insolvent.
Original article: [Chinese]

Rental Prices to Rise as Beijing Dismantles Old City Districts
Property, page 37
~ As the Beijing government plans to redesign the old districts of the city, many villages and residential buildings are being pulled down, causing the home owners and renters of the former buildings to move out and seek a new place to live and contributing to the rise of rental prices in Beijing.
~ Tangjialing is one of the demolished villages which used to accommodate around 50,000 college graduates who could not afford a better quality place to live. Now all of its previous 50,000 tenants along with Tangjialing's 3,000 registered residents have to look for new homes.
~ Other factors causing the rise in rental prices includes the increase in college graduates and policies prohibiting people granted government-subsidized housing from renting out their homes. The gloomy property market is also forcing property agencies to raise rental prices to gain more profits.
Original article: [Chinese]