Weekly Policy Monitor (Mar 17 to 23, 2012)Weekly Policy Monitor Guosen Securities (HK) Brokerage Co., Ltd. 1 March 23, 2012 Weekly Policy Monitor (Mar 17 to 23, 2012) China is a highly

Weekly Policy Monitor

Guosen Securities (HK) Brokerage Co., Ltd. 1

March 23, 2012

Weekly Policy Monitor (Mar 17 to 23, 2012)

China is a highly policy driven market. Sectors that enjoy government support measures stand to benefit. Each week,

we will compile and share with you a snapshot of the previous week’s policy news and rumours. We hope this serves as

a useful guide for allocating portfolio weightings from a top-down level to generate alpha.

(March 17 to 23, 2012)

Date Related sectors Policy Source

Mar. 23 Property A document drafted by the NDRC and approved by the State Council

declares that the government will speed up reform of China’s fiscal regime

and will expand the property tax reform pilot scheme at an appropriate time.

Industry insiders predict that Shenzhen and Guangzhou may be included in

the scheme. At present, property tax is levied in two cities: Shanghai and

Chongqing.

Tencent Finance

Mar. 22 Coal mining The National Energy Administration (NEA) released a coal industry

development plan for the 2011-2015 period. According to the plan, China

intends to form 10 coal companies with an annual capacity of 100 million

tonnes each, and another 10 with a capacity of 50 million tonnes each by

2015.

These 20 companies are expected to account for over 60 percent of the

nation's total coal output. And China’s annual coal output will be controlled at

around 3.9 billion tonnes during the period.

Xinhua News Agency

Economic planning The government has approved a plan to rejuvenate the economy of northeast

China by 2015.

The northeastern region, once a leading industrial hub, will be built into an

internationally competitive base for equipment manufacturing, raw materials

and energy supplies, according to a statement from the National

Development and Reform Commission (NDRC).

The region, which includes the provinces of Heilongjiang, Jilin and Liaoning,

will also be built into an important base for agriculture and animal husbandry,

according to the NDRC.

China Daily

Anti-dumping The Ministry of Commerce (MOC) announced that it will levy anti-dumping

duties on photographic paper imported from the EU, the US apan, saying the

imports have caused "material damage" to the industry in China.

The anti-dumping measures will last for five years beginning Friday and the

duty rates range from 16.2% to 28%, depending on the dumping margin, or

the difference between the average value of the product in its country of origin

and its export price.

Xinhua News Agency



Electronics The Ministry of Finance announced that China will raise an import tariff on

liquid crystal display (LCD) panels to 5% starting on April 1.

China has previously placed a 3% tax on imported LCD panels of 32 inches

or more (excluding backlight modules) in order to spur development in the

country's booming television manufacturing sector, which is heavily reliant on

LCD panel imports.

The increased tariff comes at a time when several domestic LCD production

lines have gone into operation, changing the market's dynamics.

Sina Finance

Pension fund

investment

It has been announced that the National Council for Social Security Fund has

been entrusted to manage Guangdong provincial pension fund worth around

RMB100 billion.

The National Council for Social Security Fund said much of the fund will be

deposited in banks and invested in the bonds market, rather than in stock

markets as previously rumoured.

Sina Finance

Mar. 21 Agriculture The Ministry of Finance (MOF) said in a statement that it has earmarked

RMB24.3 billion as subsidies for farmers to support the upcoming spring

farming work.

So far this year, the MOF has allocated RMB107.8 billion in subsidies to help

farmers buy agricultural materials such as equipment to plant seeds and

reapers, an increase of nearly 30% y-o-y, according to the statement.

People’s Daily

Mar. 20 Banking People's Bank of China Governor Zhou Xiaochuan wrote in an article that

conditions in China are "basically mature" for interest rate liberalization and

the creation of a deposit insurance system. He said the authorities are

studying the launch of such a system when conditions mature but did not give

a specific timetable for these reforms.

In the same article, he also argued that China should open up its financial

markets, enhance the two-way flexibility of the yuan and gradually open more

channels for outbound capital flows and push forward the opening of the

capital account.

Sinan Finance

Energy China raised fuel prices for the second time this year, hiking gasoline and

diesel by 6.5% to 7%. Prices went up by RMB600 a metric tonne, the biggest

hike since June 2009.

China, the world's second-biggest oil user, raised fuel prices for the first time

this year by RMB300 a tonne on Feb 8.

The prices are set in reference to a basket of crudes (Brent, Dubai and Cinta),

which jumped more than 10% in the past 22 working days.

There's widespread market speculation that China will reduce the

price-adjustment reference period to 10 days, from 22 days, to better reflect

volatile global oil prices. The NDRC hasn't said when it might further reform

the pricing system.

China Daily



Mar. 19 Taxation China’s Finance Minister Xie Xuren said at a forum that China is considering

increasing the proportion of underlying tax, which is smaller compared with

circulation tax under the current Chinese taxation system.

Further, China will expand trials of replacing turnover tax with VAT in a bid to

boost the development of the tertiary industry.

The underlying tax includes income tax of individuals and corporate business

income tax, while the circulation tax covers the VAT, turnover tax, and

consumption tax.

China Daily

(March 12 to 16, 2012)


Mar. 16 Property Banks in Beijing are lowering mortgage rates for first home buyers, and the

best deal currently is a 15% discount to the benchmark rate. However, the

minimum down payment requirement for first-home buyers remains at 30%.

Tencent Finance

Furniture Shen Danyang, spokesman for the Ministry of Commerce, disclosed in a

press conference that the ministry will test run the “old for new” furniture

subsidy programme in selected cities, and could expand the scheme to

nationwide.

People.com

Mar. 15 Energy Liu Tienan, head of the National Energy Administration, said recently that the

upcoming 12th FYP for exploration and development of shale gas is expected

to create a golden period for the development of related industries. China’s

shale gas development strategy during the 12th FYP period will mainly focus

on shale gas exploration, according to Liu.

JRJ.com

Financial Chinese Premier Wen Jiabao said in a press conference that the PBoC and

the China Bank Regulatory Commission are considering launching a pilot

scheme in Wenzhou to regulate private lending and encourage private capital

flow into the financial industry.

Hexun.com

Banking China is easing restrictions on lending capacity at three of the nation’s four

biggest banks after new loans dropped to a four-year low, officials at the

banks with knowledge of the matter said. The regulator is letting the lenders

use more of their deposits to make loans, the bank officials said, after China’s

exports, industrial production and retail sales declined in the first two months.

Bloomberg

Mineral Shen Danyang, spokesman for the Ministry of Commerce said in a press

conference that China’s rare earth export restrictions are justified and are in

accordance with World Trade Organization rules. The policy aims to protect

resources, and realise sustainable development, according to Shen.

China Daily

Mar. 14 Pharmaceutical China vowed to extend drug-price cuts, rankling some of the country’s largest

manufacturers, in an overhaul of its health-care system to trim the cost of

caring for an aging population. The plan will be supported by a tendering

system tested in Anhui province that encourages drug makers to compete on

price and quality for state contracts.

Bloomberg



Property Chinese Premier Wen Jiabao stressed in a press conference that home

prices remain far from a reasonable level and relaxing curbs could cause

“chaos” in the market, indicating no imminent relaxation of cooling measures.

A bursting property bubble would hurt the entire economy, and the

government wants “long-term steady and sound growth” in housing,

according to Wen.

Bloomberg

Mar. 13 Property Seven ministries, including the Ministry of Housing and Urban-Rural

Development, National Development and Reform Commission, etc, said in a

report published recently that they aim to stabilise the first-home mortgage

policies this year. The government should ensure adequate credit for

first-home buyers, while curbing unreasonable housing demands, according

to the report.

Sina Finance

High-tech China will exempt import duties on a wider list of "key technical equipment", in

a further step to shift manufacturing to strategically important industries such

as cleaner and higher-tech sectors in the world's second-largest economy.

The ministry did not elaborate on the value of the tax cut. The new list will

come into effect on April 1.

Reuters UK

Shipbuilding The Ministry of Industry and Information Technology released the 12th

Five-Year Plan for the shipbuilding industry, pursuant to which the

shipbuilding industry will see the total sales revenue increase to RMB1.2

trillion by 2015, nearly doubling from 2010.

Sina Finance

Securities The China Securities Regulatory Commission has issued a circular to

domestic securities companies, according to unnamed sources. The

regulatory authority orders various departments within these companies,

including the asset management department, the investment banking

department, etc, to take joint measures to combat speculation in new shares.

Hexun.com

Mar. 12 Defense & Telecom The Ministry of Industry and Information Technology is drafting supporting

rules to guide and encourage private capital investment, especially

investment in the national defense industry and the telecom industry.

Tencent Finance

Retail, Nondurable

goods, Durable

goods, etc

According to a notice issued by China’s Ministry of Commerce, the ministry

will launch a nation-wide Consumption Promotion Programme from April 2 to

May 4. It points out in the notice that expanding consumption is a long-term

strategy Beijing sticks to, and an important measure Beijing takes to cope

with the global financial crisis.

government website

Communication,

Internet, Information

Technology

The 12th FYP for broadband network construction will be issued after the NPC

& CPPCC sessions. China aims to expand average bandwidth to at least 20

MB/s for urban households and 4 MB/s for rural households by 2015. In the

capitals of more developed eastern regions, average bandwidth is expected

to reach 100 MB/s, according to sources close to the situation.

JRJ.com

(March 5 to 9, 2012)


Mar. 9 Property The Ministry of Human Resources and Social Security said that no further

property tightening measures will be issued, but that strict implementation of

existing policies will continue in 2012.

Sina Finance

http://topics.bloomberg.com/home-prices/

http://topics.bloomberg.com/home-prices/

http://uk.reuters.com/places/china



Telecom The government is formulating regulations for private capital to enter the

telecom market. A clear schedule is already in place, and the Ministry of

Industry and Information Technology is now working on the specific

implementation rules.

China Venture

Nuclear China will soon resume the approval and construction of nuclear power

plants, senior officials said during the plenary session of the Chinese People's

Political Consultative Conference (CPPCC) National Committee. Ten

approved new nuclear plants, whose construction were put on hold last year

after Japan's Fukushima nuclear accident, will soon be given permission to

start construction.

China Daily

Mar. 8 Stocks The Ministry of Human Resources and Social Security said that the trail

operation of local pension fund investment will be launched in selected

provinces and cities after the “two meetings”.

The PBoC is assessing the possibilities of quota increase for existing QFII

institutions.

The Shenzhen Stock Exchange issued new regulations regarding new share

trading. New shares with a turnover velocity of over 50% and a fluctuation

range of 10% will be suspended from trading.

The CBRC head says it is formulating regulations for private capital to enter

into the financial area. The standard will be broadly the same as that for

government capital.

Xinhua.net

Macro The Ministry of Commerce and other authorities are drafting new policies to

spur domestic consumption with the expiration of a previous stimulus

package. According to the former assistant minister of commerce, the

government may draft a package of policies to encourage large companies to

engage in direct talks with the owners of foreign brands to benefit the public.

China Daily

Transport, energy To further strengthen energy conservation and emission reduction,

energy-saving vehicles and vessels, and new energy vehicles and vessels,

will receive a 50% reduction or be exempted from vehicle and vessel tax,

respectively, as announced by the Ministry of Finance.

Besides, according to the National Energy Administration, China is now

drafting the control scheme for energy consumption. The power consumption

cap for 2012 may be at 4.1 billion tonnes of standard coal, and 6,400 billion

kw-hr.

Reuters China

Private sector According to the Ministry of Commerce, China will proactively support private

companies to “go global”. The Export-Import Bank of China (one of the three

state policy banks) also represented that it will take active measures to

support the policy, including purchasing some assets from other countries.

Reuters China

Mar. 7 Retail The Beijing Municipal Commission of Commerce announced that this year’s

“Beijing Shopping Season” started on March 8, and will last until March 25,

with Suning Appliance, Suning.com, Beijing Easyhome, Beijing Hyundai,

Wumart, Lohohd, Love Diamond and China Environment International Travel

Service being joint sponsors. 100,000 cash coupons with a total value of

RMB200 million will be issued to citizens during the period.

The Beijing News

Property The government plans to expand the pilot scheme on property tax reform.

Shanghai and Chongqing have already commenced the pilot scheme since

the beginning of 2011.

Tencent Finance



Energy Domestic fuel prices may be linked to the price of West Texas Intermediate

crude, instead of Cinta, under proposed changes to China’s fuel-pricing

system.

Economic Info. Daily

Mar. 6 Property Second home purchases are restricted in some districts of Shanghai, banning

unmarried children with one home registered under their own names from

purchasing more properties.

Meanwhile, the National Development and Reform Commission is working on

a long-term mechanism to regulate the real estate industry. According to the

NDRC, China will stick to its macro-regulation stance towards the real estate

industry, and thus promote a steady and healthy long-term development.

Tencent Finance

SMEs As stated by Xie Xuren, the Finance Minister of China, at the National

People’s Congress, the country will establish a development fund to provide

more support to SMEs.

Hexun.com

Foreign exchange According to Zhao Xiaochuan, the PBoC governor, the RMB exchange rate

floating range can be increased. Premier Wen Jiabao also pointed out in his

work report that China will improve the RMB exchange rate formation

mechanism in 2012.

Sina Finance

Mar. 5 Macro The 2012 Chinese People’s Political Consultative Conference and the

National People’s Congress commenced today. As announced by Premier

Wen at the meeting, this year’s target of GDP growth will be set at 7.5%, while

the CPI growth will be confined to around 4%. This is the first time that China

reduces its target of annual economic growth in 8 years.

Wen also restated that China will push forward its pro-active fiscal policy and

prudent monetary policy, and make moderate and proper adjustments under

certain circumstances.

Xinhua News Agency

Property First-home buyers enjoy preferential interest rates. Starting from Jan. 2012, a

number of banks have gradually reduced the mortgage rates for first-home

buyers. The Bank of China and Citibank offered max 10% discount in interest

rates to selected clients.

China Securities

Banking, non-bank

financials

The PBoC has halted the issuance of central bank bills for 9 successive

weeks. This has sent a positive signal to the capital market. SSE Index has

increased 13.7% during the period. The market is expecting further liquidity

improvement.

Sina Finance

Paper-making The Ministry of Industry and Information Technology, the Ministry of Science

and Technology and the ministry of Finance jointly released the 12th Five

Year Plan for the Promotion of Cleaner Production, pursuant to which new

technology will be introduced in the paper-making industry, which will create

challenges for industry players.

Tencent Finance

Automobile As outlined in the recently released 12th Five Year Plan for Western China

Development, priority will be placed on transport infrastructure construction,

which is believed to benefit the commercial vehicle market.

Meanwhile, the 12th Five Year Plan for the Technological Development of

Electric Cars has been released, pursuant to which, great efforts will be

exerted to develop the technologies related to battery cars.

Hexun.com



(February 27 to March 2, 2012)


Feb. 27 Bank The PBoC released for the first time the tentative schedule for opening China’s

capital account. It stated that the capital account opening process will be

implemented in three stages. During stage one (i.e. 1-3 years) it will loosen

control on the direct investment of companies with a real trading background.

During stage two (3-5 years), it will loosen control on the commercial credit of

companies with a genuine trading background. During stage three, it will

gradually open up the property, stock and bond markets cautiously under

close supervision.

Sina Finance

Automobile The Ministry of Industry and Information Technology released the “2012

government vehicles purchase catalogue”. All 412 brands on the list are

domestic brands, such as Geely, Chery and Great Wall Motor. It also includes

low-end cars and new energy cars. We believe Geely (0175.HK) and Great

Wall Motor (2333.HK) will benefit the most from the new list, as they account

for 20% and 12% of the vehicles included in the list respectively.

NetEase Finance

Coal The 12th Five-Year plan for the coal industry is expected to be released soon

following the meeting of the national coal council on February 24 to discuss

methods for implementing the goals during the five-year period.

21CBH.com

Financing The China Securities Regulatory Commission (CSRC) has entered into

discussions with the Finance Ministry and the State Taxation Administration on

ways to promote the development of the securities market. The CSRC

proposes to reduce the tax rate for individuals on interest earned from

corporate bonds.

JRJ.com

Feb.28 Financing Considering the importance of blue chips in the market, it is crucial for

securities and fund companies to promote the development of blue chips and

make them dominant in the market, according to the China Securities

Regulatory Commission. Six measures will be taken by the Shanghai Stock

Exchange to achieve the goal later.

Sina Finance

Electricity

The China Electricity Council has proposed a 10-year blueprint to help develop

a more market-oriented electricity industry. Based on the blueprint,

restructuring will start in some provinces first and will be gradually promoted to

the rest of the country. Guizhou has been selected to conduct a pilot

programme to reduce electricity prices but specific prices have not been set

yet.

QQ Finance

Healthcare According to an official of the Health Ministry, the 12th Five-Year Plan on

healthcare will be released soon. However, medical payment reform is

complicated as different provinces have different problems. The plan is

expected to promote the development of basic healthcare and hospitalisation

healthcare, but still needs future discussion due to the anticipated difficulties in

implementing the plan.

JRJ.com

Energy

The Ministry of Industry and Information Technology released the 12th

Five-Year Plan for industrial energy saving. The government targets to reduce

coal consumption by 670 million tonnes by 2015, according to the new energy

saving standard. Nine energy saving projects valued at RMB590 billion will be

launched and relevant measures will be taken to ensure success.

Sina Finance

Feb. 29 Energy A National Development and Reform Commission official said within this year Hexun



quotas for using renewable energy will be set in accordance with the macro

objective of adjusting the energy consumption structure. The quotas will be

mainly distributed to power producers, large corporations investing in power

generation and local governments.

Food & Beverage &

Pharmaceutical

The Ministry of Industry and Information Technology unveiled the 12th

Five-Year Plan on the meat industry. It is also working with the Agriculture

Ministry to determine development plans (2011-2020) for the grain processing

industry. The government targets the total value of the grain processing

industry to reach RMB 3.9 trillion in 2015 and grow to RMB6.9 trillion by 2020.

The government also hopes to incubate a number of established grain

processing companies.

JRJ.com

Culture, Media and

Entertainment

The Ministry of Culture released details for the development for the culture

sector under the 12th Five-Year Plan period (2011-15). The government

targets the value-added of the sector to grow by 20% pa to reach RMB800-900

billion by 2015, doubling from the 2010 level of RMB400-430 billion. The plan

includes details on the government’s developing objectives and approaches

covering 11 sectors such as games, entertainment and Internet culture.

JRJ.com

Infrastructure The NDRC plans to delay the approval of new highway projects as the

debt-to-asset ratio for previous highway projects reached more than 70%. The

delay will make it more difficult for companies to secure financing from banks.

QQ Finance

Mar. 1 Industry The Finance Ministry and Work Safety Administration launched regulations to

improve production safety standards, covering more sectors, such as

metallurgy machines, machinery manufacturing and development of new

weapons.

Hexun

Bank As the RMB currency is being gradually accepted overseas, the PBoC will

continue to expand cross-border RMB business, which will further boost the

use of RMB in cross-border trading and investment. Two measures will be

taken to support the expansion: 1) enhance the liquidity of RMB; and 2)

promote commercial banks to offer excellent financial service on cross-border

RMB. The PBoC will also strengthen cooperation with other central banks.

Xinhua net

Energy The Ministry of Industry and Information Technology released the 12th

Five-Year Plan for the solar photovoltaic industry, pointing out clearly that it is

necessary to support the development of competitive companies, and promote

resource integration and merger and recombination among key corporations.

Hexun

Food & Beverage &

Pharmaceutical

A new plan to reduce the price of drugs on the national healthcare catalogue

will be released. Four major categories of drugs will lead the reduction first,

including antineoplastic drugs, immunity drugs, blood products and drugs for

digestive disease.

JRJ.com

Energy According to the NDRC, residential electricity prices will be divided into three

tiers across the country within this year. The first tier is to meet the basic

electricity demand; the second is to satisfy the reasonable electricity demand,

while the third is to meet the power demand to improve living conditions.

Sina Finance

Mar.2 Financing Seven ministries including the PBoC, the Ministry of Finance and the NDRC

launched a report to reform and develop the water industry. The seven

ministries pledged support for IPOs of water companies to issue equity and

debt in the open market. The report also points out that it is necessary to

attract diversified investments through local governments’ and financial

JRJ.com



institutions’ joint effort.

Financing China may announce QDLP (Qualified Domestic Limited Partnerships) this

month, allowing overseas hedge funds to raise onshore RMB. The first batch

will be US$5 billion. In accordance with QDLP, a fund may be registered in

Shanghai to raise onshore RMB. After that, the fund will be permitted to invest

in overseas markets through other overseas registered hedge funds.

JRJ.com

External trade Ten ministries including the Ministry of Commerce and NDRC launched a

report to promote transformation of external trade growth. The report points

out that the objective of external trade is to make products and corporations

more competitive, enhance the cooperation among different industries and

improve the government’s competence in establishing international trading

rules. To achieve the objectives, relevant policies concerning tax and financial

services will be released.

Hexun

(February 18 to 24, 2012)


Feb 18 Banking China's central bank announced to lower banks' reserve requirement ratio

(RRR), underling its efforts to ease the short-term credit crunch and secure

growth.

The cut, the second of its kind in three months, will lower the RRR by 50 basis

points to 20.5% for large commercial banks and 17% for medium- and

small-sized banks.

The move became effective on February 24 and released an estimated

RMB400 billion in capital into the market.

Sina Finance

Feb 20 Media &

Entertainment

China and the US have reached an agreement concerning issues related to

films. Although the agreement does not change the annual quota of 20

revenue-sharing foreign films in Chinese theatres, it allows 14 premium

format films, such as 3-D and IMAX movies and similarly enhanced format

films, to be exempt from the quota.

Also, the US studios' share of their films' grosses in the Chinese market will

rise to 25%, from about 13.5% to 17.5% now.

China Daily

Feb 21 Infrastructure &

Building Materials

The State Council has approved a plan aimed at accelerating development in

the western regions through the end of 2015.

According to the plan, about 15,000 km of railways will be opened in the

western regions in this period. Energy-saving and resource conservation will

also be given an emphasis. The government targets the western regions to

achieve a 15% cut in energy use per unit of GDP from that of the end of 2010,

and to reduce water consumption by 30% per unit of industrial output growth.

Xinhua News Agency

Manufacturing Zhong Shan, Deputy Minister of Commerce, said at the 2012 China Imports

and Exports Work Conference that China will "at the appropriate time”,

increase tax rebates on specific categories of goods, including

“labour-intensive products". The move, if implemented, will be the first

increase since 2009.

China Daily



Feb. 22 Food & Beverage &

Pharmaceutical

Tong Min, a senior official from the State Food and Drug Administration

(SFDA) has vowed to implement higher standards for the registration and

production of health food products.

He said some companies, especially those that sell products intended for

weight loss and blood sugar reduction, use illegal additives and exaggerate

the effects of their products in advertisements.

According to Tong, the SFDA will revise its regulations to adjust the permitted

scope and usage of health food products and adopt new methods to evaluate

the products.

China Daily

Feb 23 Financial regulation The China Securities Regulatory Commission issued a statement saying it is

formulating policies to curb speculative investments, especially for IPOs and

inferior stocks that drive share prices to irrational highs. The measures may

include improving the delisting mechanism and a more efficient risk-warning

system for private investors.

Xinhua News Agency

Healthcare &

Insurance

China will raise government subsidies for health insurance offered to farmers

and non-working urbanites to more than RMB360 a year by 2015.

The 80% increase was announced after a State Council meeting on

Wednesday where new health reform targets were set for the 12th Five-Year

Plan (2011-15) period.

Major reform targets include the expansion of basic health insurance

coverage, improving the country's essential medicine system, as well as

community-level clinics and public hospitals.

Sina Finance

Feb 24 Tourism Beijing city hopes to boost tourism by providing financial incentives to travel

agencies. According to the Beijing Tourism Development Committee, the

municipal government will provide bonuses ranging from RMB300, 000 to

RMB500,000, according to the length of time foreign tourists stay in the city.

People’s Daily



Feb 17 Metals & Resources China raised the resources tax on six minerals, including iron ore, tin and

molybdenum, to help conserve reserves in the world’s second-biggest

economy. The tax on iron ore production was raised to 80 percent of a base

rate, from 60%, effective from February 1, the official China Taxation News

said in a report, citing a joint circular from the Ministry of Finance and State

Administration of Taxation.

Bloomberg

Infrastructure The Ministry of Railways intends to give local governments more power to

decide on their railway construction projects, according to an unnamed

government official.

cnstock.com

Communication,


Technology

The Ministry of Industry and Information Technology plans to carry out a

“Broadband China” Strategy aimed at higher Internet connection speed at a

lower price this year, Qin Hai, vice chief of the ministry’s promotion

department said. China aims to expand average bandwidth to at least 20

MB/s for urban households and 4 MB/s for rural households by 2015. In the

capitals of more developed eastern regions, average bandwidth is expected

to reach 100 MB/s.

JRJ.com




Technology

Eight ministries, including the Ministry of Commerce and the Ministry of

Finance, jointly issued a document to promote the sound and rapid

development of the electronic commerce industry. The eight ministries will set

up an expert consultative committee to help develop national E-commerce

model cities, and launch a pilot project on E-invoicing, according to the

document.

cnstock.com

Tourism & Travel,

Food & Beverage

Seven ministries jointly issued a document requesting financial support for

the tourism sector. Financial institutions should create innovative financial

products to facilitate the sound development of the tourism industry,

according to the document.

China daily

Feb. 16 Metals & Resources The State Council pledged to expand the pilot programme of VAT reform and

advance resource tax reform, according to a statement released after a

government meeting presided over by Chinese Premier Wen Jiabao.

People’s Daily

Banks, non-banks

financials

The People’s Bank of China said in its fourth-quarter monetary policy report

that, it will flexibly use interest rates and other price-based tools to maintain

the overall stability of the economy and price levels. It will also use interest

rates to adjust the demand for capital, as well as saving and investment

decisions.

Sina Finance

Internet The Chinese government intends to regulate and continue censoring social

networking sites on the mainland for the foreseeable future, the State Council

said in its revised outline for China’s 12th Five-Year Plan on Cultural Reform

and Development.

Forbes

Feb. 15 Property According to an unnamed source, the Ministry of Housing and Urban-Rural

Development is mulling an expansion of the pilot programme of using local

property pensions to support social housing construction.

Tencent Finance

Pharmaceuticals China plans to expand its list of essential drugs this year to 800 to cover

diseases such as cancer, and prices for pharmaceuticals may fall further,

Health Minister Chen Zhu said. China may have 500 Western products and

as many as 300 traditional Chinese medicines on the new list, according to

Chen.

Bloomberg

Information

Technology

The Ministry of Industry and Information Technology announced the 12th

Five-Year Plan regarding the “Internet of Things”. According to the plan,

China aims to build a complete Internet-of-Things industry chain, develop 10

industrial zones and over 100 key enterprises by the end of 2015.

JRJ.com

Feb.14 Macro Chinese Premier Wen Jiabao said the nation needs to start “fine-tuning”

economic policies this quarter, the first indication of a timeframe for an

adjustment he has pledged since October. Economic circumstances in

January and the first quarter deserve attention, Wen told business executives

in Beijing as he sought opinions on a government report. “We have to make a

proper judgment as early as possible when things happen and take quick

action,” Wen was cited as saying.

Bloomberg

Banks China’s regulatory authority is mulling a revision of the commercial bank

capital regulations, and the revised version is expected to come into effect as

early as July, according to an unnamed source. The revised regulations may

allow banks to include loan-loss reserves as their Tier-2 capital.

Sina Finance



Media China told its television broadcasters to limit the number of imported

television series they show, China’s State Administration of Radio Film and

Television said on its website. Domestic television channels will not be

allowed to broadcast foreign TV series during prime-time hours, and no

imports can exceed 50 episodes, according to SARFT.

Xinhua news agency

Feb. 13 Property Wuhu’s new property measures were stopped three days after they were

announced. The eastern Chinese city of Wuhu said it will delay

implementation of planned subsidies for apartment purchases, a striking

reversal demonstrating that national authorities are not yet ready to allow a

loosening of controls on the key sector.

Wall Street Journal

Property Chinese Premier Wen Jiabao said at a meeting that, China’s property

tightening policies should serve two goals: 1) to cool down the red-hot

property market, and bring property prices down to reasonable levels; and 2)

to ensure the sustainable, steady and healthy development of China’s

property market. The central government will maintain its property regulation

polices until home prices return to reasonable levels.

Sina Finance

Infrastructure Chinese Premier Wen Jiabao said private capital should be introduced to

railway construction. The government plans to take several measures,

including introducing private capital, to solve funding shortages for various

railway construction projects, Wen said at a meeting held in Beijing

Tencent Finance

Banks China's banking regulator has drafted rules to stop banks from charging their

customers excessive fees, which have become a focus of rising frustration.

The new rules, issued recently by the China Banking Regulatory

Commission, said all fees must be set by banks' head offices and not local

branches, that banks must be more transparent when setting prices, and that

they must give three months' notice before raising fees.

Wall Street Journal



Feb.10 Property Wuhu, an industrial city in Anhui province, is launching policies to support tax

reduction and hukou transfers, according to a statement aimed at improving

residents’ housing and living conditions published by Wuhu’s municipal

government on its website. It is believed that Wuhu’s measures have the

potential to be replicated by other cities. This might finally break the central

government’s policy deadlock regarding the property sector.

Shanghai Securities

News

Tourism The US Ambassador to China announced that the US will simplify travel visa

application process and increase visa processing speed by 40% in 2012,

which is believed will boost tourism both in China and the US.

Beijing Business

Today

Feb.9 Financing Zhejiang province will now allow small loan financing companies to increase

capital from their shareholders, to provide additional sources of funding for

these companies.

Sina Finance



Feb.8 Employment The State Council issued a job-creation and wage-growth plan for the 12th

Five-Year period, pursuant to which, during 2011 to 2015:

45 million new jobs will be created and urban unemployment rate will be

maintained within 5%;

China also plans to create jobs for 40 million people in the rural surplus labour

force; and

The government also pledged to maintain a minimum 13% annual growth in

the nation’s minimum wage standards and to keep the standard in most

regions higher than 40% of the average wage of local urban employees.

State Council

Petrochemicals The National Development and Reform Commission raised processed oil

prices. Prices of petrol and diesel for national reserves will be revised up by

RMB300/tonne to RMB8,580/tonne and RMB7,730/tonne, respectively, while

adjustments will be made to the prices of petrol and diesel for other uses.

NDRC

Banks The Administrative Measures on Capital of Commercial Banks is expected to

be officially implemented from July 1, 2012, which will directly affect the

refinancing programmes in the market.

Sina Finance

Property The PBoC will provide credit support to first-home buyers. This is seen as a

signal of relaxing credit terms relating to first-home purchases. What’s more,

as released by the National Development and Reform Commission, the

investment budget of the central government for 2012 has been increased by

RMB20 billion approximately, which will mainly be used in the construction of

social security housing projects.

Sina Finance

Feb.7 Construction As announced by the Ministry of Finance, local governments’ income from

government bonds, property tax etc will be used to build security housing

projects.

Sina Finance

Feb. 6 Auto The legislative Affairs Office of the State Council issued the draft recall

policies for automobiles, pursuant to which responsibilities and scope for car

manufacturers and tire manufacturers were defined.

Sina Finance.

Agriculture The National Development and Reform Commission has raised the minimum

prices for 2012 of early indica rice, middle-season and late indica rice to

RMB120, RMB125 and RMB140 per 50 kgs, or by RMB18, RMB18 and

RMB12 compared with 2011, respectively.

NDRC

Aviation Pursuant to a notice recently released by the Ministry of Transportation and

Communications, unless approved by relevant government authorities, no

aviation company that is involved in the European Union Emission Trading

System is allowed to raise freight charges or add fee items for this reason.

Reuters China

Stocks The China Securities Regulatory Commission will strengthen the regulation

on IPO pricing. It is planning to authorise third-party research institutes to

analyse the industry PE ratios of all listed companies, and release the results

for public inspection. For those IPOs whose prices deviate significantly from

the relevant industry PE, its issuer and underwriter will be requested to

provide explanations on the basis for their pricing.

Reuters China

(January 30 to February 3, 2012)

Date Related sectors Policy



Jan. 30 Finance The National Development and Reform Commission (NDRC) and the

Shanghai Municipal Government jointly issued a plan to make Shanghai a

global centre for innovation, transaction, pricing and clearing of

RMB-denominated financial products by 2015.

The plan also aims to make the government-backed Shanghai Interbank

Offered Rate (Shibor) the benchmark for RMB credit everywhere and targets

to more than double the annual non-forex financial market trading volume to

RMB1,000 trillion by 2015.

Yet the NDRC's plan did not specify how quickly China would liberalise its

capital account, a crucial step in Shanghai's attempt to become a global

money hub.

Reuters

Feb. 1 Water-conservation,

machinery, seed trade

A document publicised by the Central Committee of the Communist Party of

China and the State Council said China will step up efforts to construct

water-conservation facilities and continue to increase funding for the projects

to boost agricultural development.

China will promote new technologies and equipment for water-saving

irrigation, expand the purchasing subsidies and offer tax breaks for

equipment.

The document also said that China will push for agricultural mechanisations in

the country by boosting credit support for the purchase of large and

medium-size machineries.

This government document gives emphasis to scientific innovation in seed

production, saying China will support the cultivation of new varieties of seeds

and promote commercialisation of the industry by encouraging large

enterprises to enter the seed market through mergers and acquisitions as well

as equity participation.

Xinhua News Agency

SMEs, finance A statement released after a State Council executive meeting presided over

by Premier Wen Jiabao announced that China's central government will

earmark RMB15 billion to establish a development fund for small and

medium-sized enterprises, particularly focusing on newly-formed ones.

The country will relax restrictions on the usage of private capital, foreign

capital and funds from international organisations in setting up small financial

institutions.

Xinhua News Agency

Feb. 2 Public finance A proactive fiscal policy is a "feasible and indispensable" option to allow

China to maintain steady development amid the global economic downturn,

said Finance Minister Xie Xuren on Wednesday.

In an article for the latest issue of Qiushi, a journal of China’s Communist

Party, he also wrote "the domestic and global turmoil has not changed the

fundamentals of China's economy, and fiscal policies will have to continue to

play a vital role in maintaining steady development".

Xie said that further expenditure is needed in areas such as key projects

under construction and those in the planning stage. Other areas include

improving people's livelihoods and bolstering the upgrading of smaller

businesses.

Xinhua News Agency



Feb. 3 Oil & Chemicals The Ministry of Industry and Information Technology announced the 12th

Five-Year Plan for the oil and chemicals industries. The ministry vows to

devise a mechanism to ensure the stable supply of some important raw

materials such as crude oil, coal, kalium, sulphur and natural rubber that

China’s manufacturers are heavily dependent on. It also states the intention

to assist qualified manufacturers in venturing overseas and to support their

joint exploration efforts with foreign partners.

Government website

(January 23 to 27, 2012)


Jan. 27 Real estate Jiang Weixin, China’s Minister of Housing and Urban-Rural Development,

said recently that the central government would accelerate the establishment

of its personal housing information system, and 40 major cities will be able to

share personal housing information online by the end of June. The system will

allow housing authorities at all levels to know the exact housing status of

every individual in their area, and thus help the government combat property

speculation.

Sina Finance

Jan. 26 Auto, Clean energy Beijing will implement the national vehicle V emission standard in 2H12,

according to the Beijing Municipal Environmental Protection Bureau. The new

standard is similar to the Euro V Standard on vehicle emission in Europe and

targets lower sulphur content. NOx emission from existing vehicles in Beijing

is expected to be reduced by 10% following introduction of the national V

standard.

Sina Finance

Jan. 25 New energy,

Environment

protection

A programme to curb the increase in greenhouse gas emission in Guangdong

Province will probably be the largest of the nation’s seven test

climate-protection systems, according to Bloomberg New Energy Finance.

Guangdong is seeking to cut the amount of carbon emitted per unit of

production in its economy by 19.5% in the five years through 2015. Other

regions have lower targets, with Chongqing and Hubei setting reductions of

17%.

Bloomberg

Real estate, Internet A second-hand property transaction platform will be built in Beijing, through

which buyers and sellers will be able to sign contracts online. According to the

Beijing Municipal Commission of Housing and Urban-Rural Development,

Beijing citizens logging on to the platform will be able to access reliable

property sales and leasing information.

Sohu Focus

Food & Beverage Zhang Yong, head of China's State Council Food Safety Commission, said in

a food safety forum that China will work to further boost food safety through

legislation, and eliminate regulatory loopholes and supervisory blind spots.

Sina Finance

Logistics The major channel of the “North-to-South Grain Transfer” project, a key

project aimed at boosting China’s grain storage and promoting the

construction of logistics infrastructure, will be opened up during the 12th Five

-Year Plan period, according to Nie Zhenbang, head of China’s State

Administration of Grain.

Xinhua News

http://topics.bloomberg.com/new-energy/



Jan. 24 Paper making China will cut over 10 million tonnes of outdated paper-making capacity by

2015 and enhance recycling in order to reduce pollution during the 12th

Five-Year Plan period, the NDRC announced recently. Mergers and

acquisitions will also be promoted to realise production expansion and energy

conservation.

National Business

Daily

Jan. 23 Agriculture China will continue to strengthen policy support for agriculture, Chinese

President Hu Jintao said during a tour of rural areas in Beijing during the

Spring Festival holiday. President Hu said that considerable attention has

been paid to the work related to agriculture, rural areas and farmers, and he

believes that the living standard of Chinese farmers will improve with support

from the government.

Tencent Finance

(January 16 to 20, 2012)


Jan.20 Stocks According to the Ministry of Human Resources and Social Security, several

pilot provinces have officially authorized the National Council for Social

Security Fund to manage their pension funds. A maximum of US$57 billion

would be injected into the A-share market once the relevant approval is

granted by the central government.

Reuters

Jan.19 Consumer goods,

service sector

The Ministry of Commerce intends to issue policies to stimulate

consumption, pursuant to which fiscal measures may be taken to promote

the sales of energy saving home appliances, e.g. solar products for home

use.

Sina Finance

Light industry, textile,

pharmaceutical,

chemicals, consumer

staples

China has released its industrial restructuring plan for the 12th Five-Year

Plan period (2011-15). The plan has set the following targets:

Light industry: technology innovation will be enhanced to meet the

increasing requirements for consumer goods.

Textile industry: The annual growth of industrial value added is targeted at

8%. By 2015, total exports within the industry are expected to reach

US$300 billion, with an annual growth of 7.5%.

Pharmaceutical industry: The target of annual growth in total output during

the period from 2011 to 2015 is set at 20%, and the adjustment of the

industry structure will be strengthened, to promote rapid development.

Chemical fibre industry: energy conservancy and pollution reduction will be

further promoted.

Sugar manufacturing industry: Annual sugar production for the relevant

period should reach 16 million tonnes.

Hexun

Jan.18 Energy The approval of new nuclear energy projects will be resumed in 1Q2012.

China has suspended approval of projects in order to revise safety

standards following the nuclear disaster in Japan in March 2011.

People’s Daily

Auto The second draft of the car warranty policy is being reviewed. The return

policy may be lengthened from the current 30 days to 60 days, while

guarantees for repairs, replacements or compensation on faulty products

will be strengthened.

Xinhua News Agency



Jan.17 Service sector,

transportation

Following the success in Shanghai, several cities, including Beijing and

Shenzhen, have filed applications to the Ministry of Finance for a pilot

programme to replace turnover tax with a value-added tax (VAT) in the

transportation sector and some services industries. The VAT reform is

expected to reduce the tax burden and promote the development of the

related industries.

China Daily

Stock market Local pension funds of RMB100 billion will be injected into the market in 1Q

2012. The funds will be managed by the Social Security Fund. A large

portion of the fund is expected to be invested in fixed-income assets, while

around 30% to 40% in stocks.

The report also mentioned that an improved version of the Dutch Auction

IPO system is expected in the A-share market, and that there’s no timeline

for the launch of Shanghai’s international board. In traditional auctions, the

price rises until one bidder is left. In a Dutch auction, the auctioneer sets an

extraordinarily high price and lowers it until someone bids on the item.

The report added that China’s Securities Regulatory Commission will

reduce the overseas listing threshold of Chinese companies.

Sina Finance

Jan. 16 Heavy industry, new

energy

Seven cities and provinces, including Beijing, Shanghai, Shenzhen, Tianjin,

Chongqing, Guangdong and Hubei, will conduct trial programme of carbon

emission trading to accelerate the national economic restructuring.

Sina Finance

Real estate The pilot programme for property tax may be expanded to more cities, but

will not be implemented nationwide in 2012, as indicated by the Ministry of

Housing and Urban-Rural Development and the Ministry of Finance, after

having assessed the effectiveness of the pilot scheme.

China Daily

Bonds, stocks China’s Securities Regulatory Commission may expand its RQFII pilot

programme in a bid to further open the country’s capital market. It is also

considering allowing some institutions under the RQFII programme to issue

exchange-traded funds (ETFs) made up of A-shares, citing an unnamed

official close to the commission. The total investment quota is approximately

RMB20 billion. He also indicated that the proportion of institutional investors

in IPO subscription may increase to over 20% in 2012.

Meanwhile, Dai Xianglong, the head of the Social Security Fund, said at the

Third Annual Economics Conference that China should remove QFII quota

restrictions step by step, to create more channels to promote the

internationalisation of the RMB.

Xinhua News Agency

Foreign trade According to Zhang Xiaoqiang, the Vice Minister of the National

Development and Reform Commission, China’s target for foreign trade

growth for 2012 has been set at around 10%, due to the challenging

economic conditions.

Sina Finance

Construction, steel The Ministry of Housing and Urban-Rural Development issued the guidance

on speeding up the application of high tensile reinforcement steel. High

tensile reinforcement steel (Grade 500 MPa) will be promoted in

construction projects for environment protection purpose.

MOHURD

(January 9 to 13, 2012)




Jan. 10 Bonds, stocks Guo Shuqing, chairman of the China Securities Regulatory Commission,

said the watchdog plans to launch several new products, including

high-yield corporate, municipal and government agency bonds, in order to

boost direct financing. He revealed that the authorities are also working to

further open the securities market to foreign investors by raising the

investment quota for Qualified Foreign Institutional Investors (QFII) in the

A-share market.

Xinhua News Agency

Foreign exchange rate In an interview with the People’s Daily, PBoC governor Zhou Xiaochuan

said at present the RMB is allowed to fluctuate as much as 0.5% on either

side of the central bank’s reference rate. He said China could expand the

floating range of the RMB when a balance is reached between capital

inflows and outflows, and when conditions are ripe to widen the floating

range. He stressed that an enlarged floating range does not mean the

average RMB exchange rate will take an apparent upward or downward

trend.

People’s Daily

Energy, taxation The National Energy Bureau said it is exploring the possibility of imposing

fossil-fuel tax in the future and that it will levy resource tax on crude oil,

natural gas and coal on the basis of prices.

Xinhua News Agency

Agriculture, IT The No. 1 central government document for 2012 is to be formally released

soon. A vice-minister revealed that this year’s document revolves around

the primary industry. The document emphasises on taking advantage of

technology to promote innovation and entrepreneurship. Information

technology is expected be brought to the fore, as the Ministry of Science

and Technology has embarked on a pilot scheme in seven provinces to

promote the use of information technology in agriculture in rural areas.

Xinhua News Agency

Jan. 11 Export & Import China's exports and imports grew at their slowest pace in more than two

years in December as foreign and domestic demand ebbed. A source told

the 21st Century Business Herald that the Ministry of Commerce is

considering measures to stabilise China’s exports, including channeling

credit to three kinds of exporters, namely manufacturers with stable orders,

exporters of daily necessities and businesses exporting to emerging

economies. Policies on tax rebates and foreign exchange rate will remain

stable.

The 21st Century

Business Herald

Entertainment China’s film watchdog indicated plans to cap movie ticket prices in a move

to create more access to cinemas. The State Administration of Radio, Film

and Television (SARFT) may impose a price cap on tickets and may require

theatres to show more half-price screenings, according to a Xinhua report

earlier this week. The report didn’t say when regulators plan to implement

pricing changes or offer additional details, adding that the SARFT plans to

issue pricing guidelines for theatres this year.

Shenzhen Daily

Jan. 12 Banks, non-banks

financials

In an interview with the China Daily, Zheng Xinli, deputy head of the

economic sub-committee of the National Committee of the Chinese

People's Political Consultative Conference, called for the quick launch of a

deposit insurance system, which he said would reduce potential default

risks and help drive market-oriented interest rate reform for commercial

banks.

China Daily



Renewable energy Liu Tienan, Minister of the National Energy Bureau, said that China will start

work on its second installment of wind power projects for the 2011-2015

period, aiming to add a total installed capacity of 15-18 million kilowatts.

Meanwhile, China will also implement the first installment of solar power

projects, which will add a total installed capacity of 3 million kilowatts. The

government is increasingly cautious about giving approvals to new solar

power projects.

Business China

Jan.13 Railways An informed source revealed that China’s Ministry of Railways plans to

spend RMB80 billion to purchase locomotives and carriages, an amount

lower than that spent in previous years. The 2010 budget for locomotives

and carriages was RMB126 billion.

Sina Finance

(January 2 to 6, 2012)


Jan. 06 Oil & Gas The Ministry of Finance increased the threshold for the nation’s oil windfall

tax to US$55 per barrel from US$40 effective Nov. 1, 2011. This is positive

for the Chinese oil giants as it will boost earnings. Our 2011E earnings

sensitivity to the tax adjustment is: 22% for PetroChina, 14% for Sinopec

and 11% for CNOOC.

Bloomberg

Auto Global auto makers are scrambling to size up the impact of China's decision

to stop encouraging growth among foreign companies, a move that appears

to give domestic car companies greater protection from outside rivals.

China last week said it would no longer promote investments from foreign

auto makers through policies such as preferential tax treatment and

streamlined approval processes.

Wall Street Journal

Media The Chinese authorities are clamping down on the type of content being

broadcast on the airwaves and websites within the country, aiming to

promote Chinese culture and reduce outside influences. The order, which

came into effect January 1, restricted the number of entertainment

programs that satellite channels can broadcast each week to two, with a

maximum of 90 minutes of content defined as entertainment allowed during

prime time -- between 7:30 p.m. and 10 p.m.

CNN

New energy, Internet,

Tourism

The Chinese government is studying policies to encourage spending on

energy-saving products, and will take other measures including the

promotion of online shopping and tourism, as it strives to meet challenges

posed by a global slowdown, Commerce Minister Chen Deming told the

ministry’s annual works conference, according to a statement posted on its

website.

Bloomberg

Jan. 05 Postal industry The State Postal Bureau of China recently issued targets for the express

courier service industry under the 12th Five-Year Plan. The government

aims to boost the revenue of domestic courier companies to RMB143 billion

by the end of 2015, 1.5 times higher than 2010, with an annualised growth

of 20%. At the same time, the government aims to develop more than five

large and highly competitive domestic courier companies with annual

revenue of over RMB10 billion each.

People’s Daily

http://topics.bloomberg.com/chen-deming/

http://www.mofcom.gov.cn/aarticle/ae/ai/201201/20120107915368.html?2211793026=50175321



Consumer goods China’s Ministry of Commerce has set the targets for growth in retail sales,

exports and imports under the 12th Five-Year Plan. China targets retail

sales of consumer goods to grow by about 15% annually, and for exports

and imports to increase by about 10% per annum.

Ifeng Finance

Waste treatment The Ministry of Industry and Information Technology issued the utilisation

target for industrial solid waste treatment under the 12th Five-Year Plan.

According to the plan, the rate of utilisation will reach 50% by 2015, which

will stimulate investment in the solid waste treatment industry.

Hexun.com

Jan. 04 Banks, non-banks

financials

China’s central bank said at the monetary policy meeting that it will

implement prudent monetary policy. It stressed the need to fine-tune

policies to steer a course between economic restructuring and managing

inflation.

Sina Finance

Home appliance, Auto A former official of China’s Ministry of Commerce hinted in an interview that

the proposed government stimulus measures may include subsidies for

families living in affordable housing to buy appliances and for consumers

planning to change their cars. The Ministry of Commerce said last week that

new consumption stimulus policy will be announced.

China Daily

Macro policy Chinese Premier Wen Jiabao reiterated that Beijing is focused on

fine-tuning both monetary and fiscal policies for individual sectors and

warned of a difficult first quarter during a tour of heavy machinery factories

in Hunan Province over the New Year's holiday. The authorities have made

clear they will stay on the path of "prudent" monetary policy with a priority on

ensuring stable growth, Wen said in a government report on the visit. China

will tighten and loosen different policies according to the needs and

situations of different sectors, he added.

Wall Street Journal

Jan. 02 SMEs The Ministry of Finance said government departments will make at least

30% of their purchases through small and medium-sized enterprises

starting from the start of 2012.

China Daily

Jan. 01 Taxation The Chinese government said it will continue to offer value-added tax (VAT)

refunds to the animation industry 2012 in its effort to boost cultural

development. For companies that develop their own animation software

products, a 17% VAT will be levied, but the portion of VAT actually collected

that exceeds 3% of the taxpayers' tax base will be refunded upon tax

collection, the Ministry of Finance said in a statement on its website.

China Daily

(December 26 to 30, 2011)


Dec.30 Foreign investment According to a guideline recently released by the National Development

and Reform Commission and the Ministry of Commerce, which will take

effect on January 30, 2012, China will ease its restrictions on foreign

investments and it will encourage foreign investments in emerging

industries and the service industry, especially in the central and the western

regions of China.

Sina Finance



Banking, non-bank

financials

The People’s Bank of China (PBoC) did not issue 3-month bills on

December 29, 2011. The PBoC usually issues 3-month bills each week.

The suspension on December 29 was viewed by the market as another

signal that the PBoC will lower the reserve requirement ratio next year to

ease the tight market liquidity condition.

Sina Finance

Retail, onsumption Minimum wages in 24 cities increased by 22% on average in 2011. Starting

from January 1, 2012, minimum wage in Beijing will rise to RMB1,260, up

RMB100 or 8.6% compared to the current level.

Hexun.com

Dec. 29 Rare-earth exports China unveiled an initial cut of 27% in its quota for rare-earth exports for

2012. According to the Ministry of Commerce, China has set the first

tranche of rare earth export quotas at 10,546 tonnes for 2012, which only

includes export quotas for enterprises that have already passed stringent

environmental inspections.

The Wall Street Journal

Agriculture The central government is estimated to have injected over RMB1 trillion into

the agricultural sector in 2011 to support development of the rural area. This

represents a huge increase compared with that of 2009 and 2010.

Hexun.com

Dec. 28 SMEs China will promulgate favourable policies for small to medium-sized

enterprises (SMEs) in 1H 2012. Policies include establishing public service

platforms for SMEs and providing a favourable environment for innovative

and high-tech SMEs, to achieve a growth of 11% in industrial value added

and to create new job opportunities. The basis of taxation for SMEs will be

revised upwards from RMB30,000 to RMB60,000 for the period from

January 1, 2012 to December 31, 2015.

Sina Finance

Environment

protection

Twelve ministries and commissions, including the National Development

and Reform Commission, the Ministry of Education, the Ministry of Finance,

the Ministry of Housing and the Urban-Rural Development and the Ministry

of Commerce etc., have jointly issued an energy conservation plan, which is

designed to restrict the carbon emissions of more than 17,000 enterprises

with annual energy consumption of over 50 million tonnes of standard coal.

NDRC

Retail, consumption Starting from Dec. 2011 to Jun. 2012, the Ministry of Commerce, the

National Development and Reform Commission, the Ministry of Police, the

State Administration of Taxation and the State Administration for Industry &

Commerce will actively rectify the irregular charging activities in the retail

sector.

Sina Finance

Auto The State Administration of Taxation released the measures for

Administration of Tax on Vehicle Purchases. Several fees and procedures

have been cancelled to ease the tax burden and to simplify the process for

second-hand car buyers.

China Securities

Journals

Auto China released four national standards on electrical vehicle (EV) charging

ports, which will come into force on March 1, 2012. These standards are

designed to promote a unified market and the long-term development of the

domestic EV industry.

China Securities

Journal

Consumption According to Xiao Jie, the Director of the State Administration of Taxation,

China will further improve preferential tax policies in 2012. In terms of

consumption tax reform, the range and structure of consumption tax will be

adjusted to promote environment protection, energy conservation and

rational consumption.

Tencent Finance



Dec. 26 Energy The National Development and Reform Commission announced that

starting from December 26, 2011, China will initiate the trial of pricing

mechanism reform for natural gas in Guangdong province and the Guangxi

autonomous region, where the pricing mechanism will change from the

“cost-plus” approach towards market driven. The reform will gradually move

to other provinces.

China Securities

Journal

Banking, non-bank

financials

Ms. Wu Xiaoling, a former vice-governor of China’s central bank said at a

forum in Beijing that the People’s Bank of China will resort more to reserve

requirement ratio (RRR) as a tool to pursue a prudent monetary policy. She

told her audience that if funds outstanding for foreign exchange grow by a

small margin or even drop, the central bank will have to offer more liquidity

by adjusting the RRR.

China Securities

Journal

Taxation Xie Xuren, China’s Finance Minister, unveiled the roadmap of how the

structural tax reduction programme will be conducted in 2012. According to

him, the tariffs on some products will be lowered in 2012 to facilitate the

import of energy, natural resources, technically advanced products and key

components. Small businesses with an annual leviable income of less than

RMB60,000 will receive tax concessions and will be entitled to have their

leviable income halved to calculate income tax at a rate of 20%. The current

pilot scheme of replacing income tax with valued-added tax (VAT) for

transportation businesses and sophisticated service business based in

Shanghai will be expanded gradually. Resource tax reform will be

implemented more widely, shifting towards price-based taxation. He also

vowed to push ahead with property tax reform on a trial basis. In addition,

the VAT levied on the wholesale and retail of vegetables will be removed in

2012.

Xinhua News Agency



Dec.19 Banking, non-bank

financials

The regulation of China’s credit rating industry will be centralised with the

People’s Bank of China, a PBoC vice-governor revealed at a forum. At

present, in addition to the PBoC, the National Development and Reform

Commission, the China Banking Regulatory Commission and the China

Insurance Regulatory Commission also act as watchdogs in different

market segments. The PBoC is expected to harmonise regulations and cut

red tape with a view to facilitating development of the industry. The news is

welcome by China’s credit agencies, as they will be regulated primarily by

the central bank in the future rather than by more than three government

agencies currently.

Sina Finance

Macro-economy,

taxation

A director of a research institute affiliated with China’s Ministry of Finance

hinted that there would be a high probability that environmental tax would

be introduced during the 12th Five-Year Plan period, i.e. 2011-2015.

Corporate income tax is also likely to be reduced as part of a structural tax

reduction programme.

Sina Finance



Dec. 20 Pension, equity Dai Xianglong, chairman of the National Council for Social Security Fund

and former central banker, indicated the central government is considering

allocating a portion of the pension funds managed by provincial and

municipal governments for long-term equity investment.

Xinhua News Agency

Real estate The Information Office of the Shanghai Municipal Government vowed to

continue to enforce property purchase limits next year. A number of major

cities, including Beijing, Xiamen, Haikou, Fuzhou and Qingdao, had made

similar commitments. China’s policymakers suggested at the Central

Economic Work Conference, which concluded last week, for the property

tax to be introduced more widely on a pilot basis next year. Currently,

property tax is only levied in two cities, Chongqing and Shanghai.

Sina Finance

Dec. 21 Banking, non-bank

financials

The Financial Supervisory Commission in Taiwan issued a statement,

saying that mainland Chinese banks can hold stakes in Taiwan’s local

banks starting from January 2, 2012. Mainland banks will be allowed to

have a maximum of 5% holding in a Taiwan bank. And the combined

holding of mainland investors in a Taiwan bank is capped at 10%. Mega

Financial Holding Co. and Cathay Financial Holding Co., in which Taiwan’s

government is a major shareholder, have expressed intention to sell shares

to mainland investors.

Caijing Magazine

Dec. 23 Railway, Construction,

Steel, Machinery

Sheng Guangzhu, the minister of China’s Ministry of Railways, revealed at

an industry conference that RMB500 billion will be deployed for investment

in fixed assets for railway construction in 2012. RMB400 billion of this

amount will be spent on infrastructure and a total of 6,366 km of new

railways is expected to be put into operation.

He stressed the need to complete projects that are currently under

construction, construct indispensible new railways and improve support

facilities.

Rapid railway construction slowed down after the fatal train crash in July

2011. Since 2008, China’s railway construction has gone through a peak to

a trough. Mr. Sheng’s speech signaled that China’s leadership intends

spending on railways to return to the norm in the coming years.

Xinhua News Agency,

Caijing Magazine




financials

Guo Shuqing, chairman of the China Securities Regulatory Commission,

suggests to invest RMB4 trillion of pension funds into the domestic equity

market. Endowment security and housing security should also be invested

into the equity market to derive profits, following the success of investment

of social security funds. The social security fund currently manages

RMB800 billion and has an annual compound return of 9.17%. Domestic

securities companies will benefit from the development of the national social

security system.

Sina Finance

Import and export,

Domestic

consumption

According to the Ministry of Commerce, China is adjusting foreign trade

policies to maintain steady growth as the trading environment will be very

tough in the first quarter of 2012. The government is also discussing new

policies to stimulate consumption as the home-appliance subsidies will

expire soon.

Sina Finance



Domestic

consumption

Chinese Vice-Premier Li Keqiang said expanding domestic demand has

been set as the top priority for 2012. Regulations on commodity prices will

be enhanced, while economic restructuring will be further promoted.

Reuters China

Dec.15 Import The Ministry of Commerce said that China will cut its import tariff rates on

over 730 commodities to boost imports. The provisional tariff rates will

average 4.4%, which is much lower than the current most-favoured-nation

rate.

Sina Finance

Dec.14 Import, Automobiles The Ministry of Commerce announced that China will impose anti-dumping

and countervailing tariffs on high-emission vehicles imported from the US in

the following two years. Auto producers affected include GM, Chrysler

Group, Mercedes-benz, BMW and Honda of America, etc.

Reuters China

Dec.13 Pharmaceuticals The 12th “Five-Year Plan” for the pharmaceutical industry will be released.

According to the plan, the industry expects to achieve an average annual

growth of 20% in terms of total output, and 16% in terms of value addition.

Hexun

Real estate As pointed out at the 2011 Central Economic Work Conference, China’s

regulation over the real estate industry has entered a crucial stage where

the results are still unstable. Thus, austerity policies must be maintained to

further reduce housing prices to a more reasonable level.

People’s Daily

Foreign investment To regulate approval of establishing foreign invested enterprises and

foreign exchange control, the Ministry of Commerce and SAFE (State

Administration of Foreign Exchange) have issued a notice, stipulating that

no loans granted by domestic institutions to foreign invested enterprises can

be used for reinvestment purpose in China.

Reuters China

Dec.12 Export and import,

technology, clean

energy

President Hu Jintao says China targets to expand the country’s exports to

exceed US$8 trillion over the next five years in order to balance trade.

China will continue to open its market to attract more advanced technology

and bolster higher-valued products to become more competitive. China’s

industries of the future will be cleaner, more technological, more value

added and be able to create more jobs. Hu added that China will lower

import costs and make trading systems more efficient for importers.

China will also continue to welcome foreign investment, encouraging

higher-end projects such as the establishment of research and

development centres in coastal cities, and factories in central and western

areas to make the entire industry structure more complementary, Hu said.

Shanghai Daily

Automobiles China’s State Council released a draft regulation on school bus safety.

Premier Wen Jiabao pledged central and local government funds to provide

and improve school bus services in the wake of the traffic accident that

killed 19 pre-school children and sparked national outrage.

School bus and coach manufacturers in China are expected to benefit from

government purchases of more school buses that meet safety

requirements.

China Daily

Banking, non-bank

financials

As pointed out at the 2011 Central Economic Work Conference, which

commenced on December 12, 2011, proactive but moderate monetary

policies, which are subject to constant adjustments, will be adopted to cope

with the complexity and uncertainty of the current economic conditions.

Proactive fiscal policies will be adopted in 2012 to promote economic

growth.

Sina Finance






financials

The Central Economic Work Conference will be delayed until December

12-14. This is the first time the meeting has been postponed in the past six

years. A media report claims postponement of the meeting is to give the

leadership extra time to deliberate and reach a consensus on next year’s

strategy given the challenging global economic conditions. Stabilising

growth is expected to become China’s top policy priority.

Sina Finance

Banking, non-bank

financials

The vice minister of the Ministry of Finance said that China will continue to

implement the structural tax cut policy. The cut has so far reduced tax

burdens of corporate and individuals by around RMB500 billion. The official

added that proactive fiscal policies and moderate monetary policies will be

further promoted in the future.

Sina Finance


financials

The macro-economic policy is expected to be more flexible and pro-growth

next year as the market has formed a consensus 2012 GDP growth will be

less than 9% but within the government’s tolerance level.

Tencent Finance

Dec.5 Real estate The Ministry of Housing said home purchase restrictions will continue after

they were originally supposed to expire by the end of this year. According to

an officer, the purchase restrictions are unlikely to loosen in the foreseeable

future.

Sina Finance

Import & Export Chinese Vice Premier Wang Qishan said taxes for import and export

enterprises will be cut. According to the vice premier, the tax liability should

be reduced to maintain consistency and stability in China's foreign trade

policies.

Sina Finance

(November 15 to December 2, 2011)



financials

The China Securities Regulatory Commission released a notice to ease the

requirements for listing IPOs by quality brokers, effective from January 1,

2012. Instead having “strong market competitiveness” and “promising

development space”, brokers who only meet one of these requirements can

now be granted permission for listing IPOs. The criteria for both terms have

been reduced as well.

Reuters China


financials

The People’s Bank of China announced a 50 basis points cut in banks'

reserve requirement ratio, effective from December 5, 2011.

PBOC

Healthcare The National Development and Reform Commission promulgated the

Relative Price Rule on pharmaceuticals to enhance the scientific level and

transparency of government pricing and suppress extravagant profits.

Sina Finance



Nov. 30 Healthcare Vice Premier Li Keqiang said that reforming the healthcare system will be

the sector’s focus under the 12th Five-Year Plan. Three initiatives will be

taken: (1) establish a protection mechanism to address serious diseases

and develop corporate health insurance; (2) fine tune the system for

regulating basic drugs, and expand the scope to villages and grass-root

non-governmental health organisations; and (3) accelerate reform of public

hospitals and retain their non profit-making nature.

Sina Finance

Nov. 29 Banking, non-bank

financials

According to a media report, the State Administration of Foreign Exchange,

the People's Bank of China and the China Securities Regulatory

Commission have reached a consensus on the so-called "small QFII",

known as RQFII (RMB Qualified Foreign Institutional Investor programme).

Implementation of RQFII will be accelerated and targeted to be launched at

the end of this year.

Sznews.com

Media & entertainment According to The State Administration of Radio Film and Television, starting

from 2012, advertisements will be banned during the broadcasting of TV

dramas to improve the viewing experience for audiences. TV stations fear

this will seriously affect profitability and the quality of their programmes.

SARFT

Agriculture & forestry Details for fine-tuning of the valued-added tax on agriculture and forestry

residues, and its recycled products were announced. Measures including

tax rebates, tax waivers and business permits will be used to encourage

companies to support the scheme.

Ministry of Finance

Nov. 28 Banking China has commenced renminbi trading against the Australian and

Canadian dollars. The market believes this is an important step towards

internationalisation of the renminbi.

JRJ.com

Real estate Austerity measures for the Chinese real estate sector will continue, Chinese

Vice-Premier Li Keqiang said.

Sina Finance

Nov. 28 Machinery Details of the 12th Five-Year Plan for the machinery and industrial

engineering sector were announced. The bearing industry has been

particularly emphasised, and a 12% annual growth rate is required.

Sina Finance

Healthcare,

agricultural, new

energy

The Ministry of Science issued the 12th Five-Year Plan on biotechnology

development, focusing on the bio-pharmaceutical, bio-agricultural,

bio-manufacturing and bio-energy sectors. The government will release

RMB10 billion in special funds and RMB30 billion of supporting funds for

subsidising the development of 30 new medicines, 200 technological

improvements and 20-30 key techniques for industrialisation.

Ministry of Science

Nov. 26 Cement Details of the 12th Five-Year Plan for the cement industry were announced.

It encourages merger and acquisitions in the industry to boost the sector's

competitiveness and improve product quality.

Sina Finance

Banking, non-bank

financials

Securities margin trading and related policies were officially announced to

transfer this from the testing stage to a regular basis.

Sina Finance

Nov. 24 Banking China's Banking Regulatory Commission chairman says regulations for

"systematically important banks" will be strengthened.

Sina Finance

Nov. 23 Banking, non-bank

financials

The People's Bank of China says the RRR cut for rural cooperatives in

Zhejiang is a “normalisation” process.

Hexun.com



Nov. 15 Technology China’s ministries have decided to actively develop e-commerce. Twenty

one major Chinese cities, including Beijing and Shanghai, will act as the

model cities for the policy.

NDRC

Sales Contact Dan Weil Global Head of Institutional

Sales and Trading

Managing Director

+852 2248 3588

[email protected]

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+852 2899 7281

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Chris Berney Managing Director

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