Forex reserves

China is not deliberately pursuing expansion of its foreign exchange reserves or any particular level of reserves, the People's Bank of China said last week.

Wu Xiaoling, vice-governor of the central bank, said that an excessive trade surplus, the source of much of China's reserves, was not desirable and needed to be addressed through policies.

The central bank was looking to increase access for individuals and corporations to foreign exchange trade to make it less dominated by the government, she said, offering no details on how that would be done.

China's forex reserves at the end of February totalled US$853.6 billion, exceeding Japan's for the first time, which stood at US$850.1 billion at the end of February.

Mine closures

China will close small-scale coal mines, with production capacity of less than 30,000 metric tons a year, by the end of 2007 to improve work safety.

The government also wants the small coal mining companies to merge with larger ones to better utilize the country's resources of the fuel, improve technologies for mining, and boost training of workers and management, the State Administration of Work Safety said last week.

China is trying to reduce industrial accidents that have killed thousands in mines and chemical plants. Authorities are cracking down on poorly managed, privately-run pits that are kept open to meet rising demand for fuel and iron ore.

Oil tax

China's windfall tax on oil production will apply to crude pumped within the country's land and sea borders, the Ministry of Finance said last week.

All companies engaged in exploring and selling oil in Chinese territory and within its sea borders would be subject to taxes ranging from 20 to 40 per cent on any oil sold for more than US$40 a barrel.

Oil companies had to pay the new tax to the finance ministry on a quarterly basis, it said. Details of the new taxes were posted on the websites of the Shanghai National Accounting Institute and major domestic oil companies last Tuesday.

The move was aimed at promoting the country's healthy economic development and oil price reform.

Improving order

China issued a regulation last week on how to deal with irregularities arising from securities issues in an attempt to improve order in the securities industry and on the stock market.

The regulation, issued by the China Securities Regulatory Commission, said the commission has the right to freeze and close down an institution's illegal cash, securities, property and anything that might be important evidence relating to an illegal securities case.

The new regulation, based on the new Securities Law in force since January 1 this year, will come into effect immediately.

Pandemic 'unlikely'

The avian influenza virus is unlikely to cause a pandemic among humans, it has been claimed.

Zeng Guang, chief epidemiologist of the Chinese Centre for Disease Control and Prevention, said last week although the virus has killed more than 100 people around the world, it is not spread easily between people.

So far 16 cases of human infections have been reported in China.

"We have found that some of the patients had immune deficiencies and two were pregnant," Zeng said.

The reason why they were infected is still unclear, but "we know that human beings are not generally susceptible to the virus," he said.

Overseas turnover

China's turnover in overseas project contracting is expected to reach US$50 billion by 2010, the China International Contractors Association said last week.

It said the volume is likely to increase by 15 per cent year-on-year in the country's 11th Five-Year Plan (2006-10).

The association said it expects that Chinese contractors will not only gain access to more countries but also enter more business sectors. If added Chinese firms enjoyed great potential in contracting in the electricity, petroleum chemical and communications sectors. Chinese contractors signed more than US$29.6 billion worth of overseas projects last year, an increase of 24.2 per cent from 2004.

Derivatives development

China plans to speed up development of derivatives to help companies and financial institutions hedge risks as the country moves toward a more market-oriented exchange rate system, the China Banking Regulatory Commission said last week.

The ending of the yuan's decade-old peg to the dollar last year has led to a "significant increase" in foreign currency risks, Zhang Guangping, a deputy director of the commission said.

The Shanghai-based foreign-exchange interbank market should accelerate the pace of development of China's derivatives market, central bank deputy governor Xiang Junbo said.

A derivative is a financial obligation whose value is derived from interest rates, the outcome of specific events, or the price of underlying assets such as debt, equities and commodities.

Announcement anger

The China Iron and Steel Association (CISA) last week criticized the world's leading iron ore supplier for its move to unilaterally announce its annual price while international negotiations are continuing. A spokesman for Companhia Vale do Rio Doce (CVRD) of Brazil announced on March 29 that it will raise its 2006 iron ore price by 24 per cent over last year's price. The CISA regards the move by CVRD to be "extremely ill-considered and in violation of the rules of the international iron ore price negotiation." An official with the CISA said that the iron ore price proposed by CVRD is "unacceptable." He said following the international rules of ore price negotiation, price information should only be released to the media after at least one ore provider has made a pricing agreement with a steel plant.

Land protection

China has vowed to take a firmer stance on the protection of arable land. Its farmland area stood at 122 million hectares last year, 8 million hectares less than 10 years ago.

Sun Wensheng, minister of land and resources, said last week China should strengthen administration over land resources and adhere to strict protection mechanisms on farmland.

Rapid industrialization and urbanization and the large-scale restoration of farmland for other purposes, are regarded as the main reasons behind the shrinking farmland.

(China Daily 04/10/2006 page2)

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