What we’ve been reading recently:

Caijing - Goodbye 2008 - Andy Xie looks back at the year that was

Silicon Hutong - 3G in China: ARPU as a Measure Doesn’t Measure Up - David Wolf looks at 3G in Asia for a yardstick on how it might fare in China. Get ready to go geeky.

NPR’s On Point with Tom Ashbrook - China’s Economic Challenge - NPR’s indomitable Tom Ashbrook tackles China’s economy. Ashbrook spent a week last summer broadcasting from Shanghai and is one of the more perceptive American radio hosts when it comes to China.

chinaSMACK - Jiangsu Police Post Lost & Found Notice For 5 Mao - For anyone wondering why China’s savings rate is so high…

Subscribe to our recommended reading feed for things China and business-related, or browse our previous recommendations at del.icio.us

What we’ve been reading recently:

China Daily - Sanlu ex-boss was aware of tainted milk - Tian Wenhua, formerly chairwoman and general manager of Sanlu Group, admits to court that she was aware of the tainted milk problems in May but only notified the authorities in August. Tian could be sentenced to death for her negligence

FT.com - Alstom attacks Chinese train exports - Chief of Alstom Transport gets prickly about Chinese train exports, claiming that they should be subject to the same restrictions the likes of Alstom face in trying to sell trains to China

FT.com - UBS China deal set to be followed by rivals - Dealmakers told the FT that other foreign banks will follow UBS’s lead and sell off their strategic stakes in Chinese banks. Big investors who may bail out include Goldman Sachs, Citigroup, Dresdner Bank, Temasek and Royal Bank of Scotland

WSJ.com - UBS Sells BOC Stake - Cash-strapped UBS unloads its strategic stake in Bank of China for US$808 million (which it originally bought for just under US$500 million). Will other foreign banks follow suit?

WSJ.com - Microsoft Lauds China Piracy Case - Chinese court convicts 11 people for manufacturing and distributing Microsoft software that the company valued at US$2 billion

WSJ.com - Investors Bet Against PCCW Offer - Richard Li’s attempt to take PCCW private appears to be faltering

Subscribe to our recommended reading feed for things China and business-related, or browse our previous recommendations at del.icio.us

On this day last year, you will remember, the SCI closed at 5,272.814 points. In our January 2008 issue, we noted that institutional investors were convinced the market would rebound to 6,000, and maybe go as high as 8,000.

When we entered the market with our purchase of shares in Anhui Conch Cement (600585.SH) on June 3, the SCI was sitting at 3.436.398. Today, the index closed out the year with a snivel, dropping 0.66% to 1,820.81.

It was not a good year to enter the markets at all. The Capitalist Roader Fund was set up as an editorial exercise, but individual investments were made with what in hindsight appears to have been misplaced optimism. We can only say that in a market that has been as driven by sentiment as China’s, our investment seemed better thought out than many.

Faithful readers of the magazine will be familiar with the Red Dragon Fund, the A-share fund (our arch-rival) begun in August 2005 and run by a professional fund manager. We received word yesterday evening that the Red Dragon Fund had decided to end the year by selling a significant chunk of its holdings, based on a prediction of the SCI soon falling to 1,300.

You will have to wait for our February issue to learn more about the specific reasoning behind that forecast, but we at the Capitalist Roader Fund are a touch more sanguine about the prospects for the market. That’s not to say it won’t fall, but we don’t see the bottom falling out of the market so dramatically. In any case, we think it’s too early to make such a gloomy prediction.

As the market stops trading for the New Year’s Day holiday, it’s worth remembering that the government’s stimulus package has yet to properly kick in. If private sector activity fails to pick up in response to government investment as the first quarter progresses, you may see us joining the Red Dragon Fund in liquidating at least some of our holdings. But we like to think there is a light at the end of the tunnel that isn’t an approaching train.

Of course, our optimism has been misplaced before.

The Capitalist Roader Fund ends the year down 40.5% while the SCI has fallen 47% since June 3.

What we’ve been reading recently:

Bloomberg - Rhodia Shuts Europe’s Last Paracetamol Plant as China Prevails - Competition from China and India has led to the closure of the last European production facility for paracetamol (sold as Tylenol and Panadol)

Radio Free Asia - Why China Had to Reform - The other side of Deng. A former party official looks at the reasons behind reform and opening

China Journal - China’s Official News Agency Chooses the Top 10 Domestic Stories of the Year - What state media thinks of 2008

Subscribe to our recommended reading feed for things China and business-related or browse our previous recommendations at del.icio.us

Our friends at Xinhua have published their list of the top 10 domestic news stories of 2008, a translated version of which you can check out here. For the most part the list seems reasonable and serves as a good reminder of how tumultuous 2008 was.

However one story didn’t quite seem to belong on the list: China’s first spacewalk. Leaving aside the moral question of why any nation would fund a space program when tangible down-on-earth things like schools and roads need cash, why all the fuss when China’s “spacewalk” was essentially some guy poking his head outside the craft’s window for a couple of minutes. It wasn’t like he had to deposit a nuclear bomb on an asteroid before it destroyed the earth as American astronauts did 10 years ago. The whole thing seems less newsworthy when you consider that the world’s the first spacewalk was performed in 1965.

Nonetheless, here are a couple of stories that I think should have made the list in its place, though of course this is hardly exhaustive. Sadly neither Gong Li, Huang Guangyu or even the release of Chinese Democracy made the cut (sorry Axl).

- China’s looming healthcare funding crisis: Some truly disheartening research about the cost of health care.

- Land use rights reform: This could be on the magnitude of Deng’s original economic reforms 30 years ago, though its implementation will be unbelievably complicated.

- Censorship alive and well: Just in case you thought anything would change after the Olympics… Another reminder of the anti-climax that was Beijing’s 2008 Summer Games. Yeah Fuwa!

- Greens may have teeth after all: Some new environmental laws and the news that SEPA blocked 10 IPOs (though most were later approved) may be a good sign for huggers of trees globally.

- China’s manufacturers/exporters feel the pain: ‘Nuff said.

What we’ve been reading recently:

China Comment - China Cleantech: 2008 in Review - Useful round-up of the important cleantech numbers from the first nine months of 2008

China Law Blog - Is China Going Green, Part XVIII: It Is, But Damn It’s Tough To Make A Buck On China GreenTech - Why greentech plays in China fail (apparently more often than many others)

China Hearsay - Obama, Labor and China - Protectionism shows its ugly head in the US and Chinese labor’s policies are the target. Why pick on China and not the rest?

The China Beat - Coming Distractions: Postcards from Tomorrow Square - Kate Merkel-Hess interviews Atlantic correspondent James Fallows before the release of his new book

Danwei - 37 years in China: CNN Beijing bureau chief Jaime FlorCruz - Jaime FlorCruz tells Danwei about his journey from working on a state farm in the 1970s to heading CNN’s Beijing bureau

bezdomny ex patria - recycled water - “By the end of the year the amount of recycled water used in Beijing should surpass that taken from the Miyun Reservoir,” according to state media report (translated by Beijing-based blogger)

Imagethief - A brief chat with Imagethief in City Weekend - Imagethief (who is rumored to be a columnist for China Economic Review) bids farewell to blog anonymity

Wall Street Journal - The Weekend That Wall Street Died - An excellent account of the collapse of major Wall Street firms in September

Subscribe to our recommended reading feed for things China and business-related or browse our previous recommendations at del.icio.us

Like a petulant boy whose parents bought him the wrong-colored truck for Christmas, the Shanghai markets threw a tantrum this week, falling once again below 2,000. Wednesday saw the steepest fall - by 4.55% to 1,897.225 - as investors digested (and spat out) news of another interest rate cut - not the wrong color, but rather smaller than investors had hoped for. The SCI closed today at 1,851.52, its lowest close in more than a month.

Bad news for the market has historically meant bad news for Anhui Conch Cement (600585.SH), and that was no less true this week. Falling almost 10% over the week, Anhui Conch is now trading at a 55% discount from its June 3 price. Disappointment over interest rates presumably trumped any lingering optimism over a stimulus package boost.

Industrial and Commercial Bank of China (601398.SH) fell a bit more than 5% this week, and is down 28.43% from June 18. The fund is down 41% since June 3, while the SCI is down about 46%.

What we’ve been reading recently:

chinaSMACK - Netizen Satire Defends Nanjing Commissioner Zhou - Chinasmack on “cigarette-gate”

NYTimes.com - Chinese Pockets Filled as Americans’ Emptied - The New York Times on US economic dependence on China

chinaSMACK - 1,300 Graduate Students Compete to Sell Pork - Chinasmack shines a light on the employment situation

Subscribe to our recommended reading feed for things China and business-related or browse our previous recommendations at del.icio.us

Welcome to the land of rumor, hearsay, speculation, lies damn lies (well, hopefully not that). Was chatting to a friend the other day, who told me that she, in turn, had a friend doing some PR-related work for the Chinese government.

Apparently the real gravity of economic situation won’t even be clear until we pass through the year marking the anniversary of China’s economic reform. The anniversary is important for symbolic reasons, and government has put all hands on deck from a PR standpoint so as to put a brave face on the current economic situation. But eventually the chickens will come home to roost, and some are whispering that 2009 and 2010 will be even worse than 2008.

What we’ve been reading recently:

FT.com - China’s ‘warp-speed’ industrial revolution - Thirty years after landmark economic reforms, the government’s unspoken mantra still - more or less -holds firm: “We’ll give you growing prosperity if you don’t question our right to absolute power.”

The Associated Press - Scholars, lawyers call for release of China critic - Rushdie, Gordimer, others call for release of rights activist Liu Xiaobo

The New Republic - Losing Lhasa - A bit on China’s new Tibet strategy from The New Republic

Bloomberg.com - Ex-Japan Leader Sought U.S. Nuclear Attack on China, Asahi Says - Newly declassified documents show a less dovish side of Nobel Peace Prize-winning Prime Minister Eisaku Sato

Subscribe to our recommended reading feed for things China and business-related or browse our previous recommendations at del.icio.us