worldwide. Currently, more than 90 percent of KFC's China products are localized, and KFC has promised there will be more.

Mark Chu, KFC Brand General Manager with Yum! Brands Inc., said KFC has had its eye on Mengniu for many years. "Its explosive growth, high-quality products and brand popularity among Chinese consumers are more impressive than its counterparts."

Mengniu was set up in 1999 and has quickly grown to be one of the leading players in the dairy industry. According to its financial report, Mengniu's profits in the first half of this year surged 41 percent and sales increased 32.8 percent, up to 10 billion yuan.

KFC did not state why it dumped the multinational Nestle, which has been KFC's dairy supplier in China for the past two decades. Whatever the reason, this decision by KFC will damage Nestle's presence in the Chinese market.

KFC's rival McDonald's has been in partnership with Chinese dairy producers like Sanyuan since 1992, when it first entered China, as part of its strategy to localize and cut costs.

Small Developers Feel Winter Chill

Smaller Chinese real estate developers are feeling icy bite of winter long before it arrives.

First, the Chinese Government had made the most audacious step ever in cooling the nation's ballooning property market by raising the down payment on second homes to over 40 percent. At the same time, the mortgage rate on second homes is subject to no less than 1.1 times the regular loan rate.

On October 9, the Ministry of Land and Resources issued a notice known as Circular 39, requiring property developers to pay land-use fees in a lump sum instead of in installments. Analysts said the move was aimed at squeezing the cash flow from the hands of developers and works as a warning to land speculators.

Originally, developers could secure loans from banks once they acquired the first certificate. Sales from the first block were then used to finance the development of the remainder, which meant they could embark on several projects with limited capital.

Newspapers in Beijing have repeatedly reported that middle- and high-end houses in Beijing are "high in price but low in demand."

However, worries of land monopolies are on the rise. Pan Shiyi, a real estate tycoon in China, said the circular is actually "good news" for his company, Soho China.

"The number of our competitors will reduce sharply," Pan said with confidence. "We now have to pay a bulk of billions of yuan to acquire a piece of land. That's not something a small company can do." Pan said that there are currently more than 50,000 real estate developers in the country, but many of them are small and incapable of competing through these changes.

Zhou Tianyong, economic professor with University of Science and Technology Beijing, said the circular would damage small developers but enhance the big developers' status as well as their pricing rights.

Aircraft Taxes to Be Axed?

The Chinese Government is considering cutting taxes on the import and leasing of aircraft to bring the country into line with international standards, Xinhua News Agency quoted a senior official with the General Administration of Civil Aviation of China (CAAC) as saying.

"China's tax on the import and leasing of aircraft is higher than most countries in Europe and in the United States," Sha Hongjiang, Deputy Director of CAAC's Planning and Development Department, said on October 24. "Many European countries, such as Germany and UK, levy no taxes on aircraft imports, so we are considering cutting the tax."

Tariffs and value-added tax on aircraft imports range from 5.04 to 22.85 percent. Buyers must pay 5.04 percent of the price for an aircraft with a dead weight of more than 25 tons and 22.85 percent below 25 tons.

The withholding tax on aircraft leasing ranged from 7 to 10 percent, while the value-added tax on aviation materials was 17 percent, said Sha, without giving details on the tax cut plan.

By the end of September, the total number of commercial aircraft in China was 1,099.

Buffett's New Move in China

Though the stock market guru has been quoted as saying the Chinese mainland stock market is too hot, Warren Buffett has a special interest in the country's industry.

Warren Buffett's company Berkshire Hathaway has invested in IMC Dalian, a wholly-owned unit of Israel's Iscar International Metalworking Cos. It is the first company in China that Buffett has invested in.

Buffett said the Chinese economy has a huge development potential and hoped to gain the profit of the fast-growing economy.

Buffett made the investment after selling all his PetroChina shares in the Hong Kong market, but regretted that he had "sold it too soon," and said he "left a lot of money on the table."