TO THE POINT: The Chinese central bank governor claimed he was satisfied with the current mainland interest rate, and some took this to mean that another rate hike was not likely in the near future. Following the price hikes of other foods, dairy companies were also forced to raise milk prices due to higher cost. Therefore, next month's consumer price index will remain at a high level, as prices in the food sector continue to rise. The shortage of refined oil on the mainland put pressure on the major oil refineries, which vowed to increase the domestic supply despite losses. China responded quickly to the World Bank report and polluting companies are forbidden from being listed.  By LIU YUNYUN

Interest Rate Satisfactory

The Chinese central bank Governor Zhou Xiaochuan, after five rounds of interest rate hikes, said for the first time this year on November 19 that he was "satisfied with the current interest rate."

People have grown accustomed to expecting another interest rate hike each time after the monthly consumer price index (CPI) has been released since June. Between March and October, the CPI growth rate hovered above 3 percent--a recognized rate indicating inflation, forcing the central bank to raise the one-year benchmark interest rate from 2.52 percent to the current 3.87 percent.

The central bank has encouraged people to put more money into banks rather than blindly investing in the stock market in a bid to curb excessive liquidity.

Zhou said, the central bank "will pay close attention to the future statistics" and the country needn't readjust the interest rate too frequently, but possibilities exist for further rate hikes.

Zhou said, "It is complicated to analyze the economic statistics," and the central bank will correct the sudden change of traditional prices. He also claimed that inflationary pressure next year should not be too heavy. China is transforming from a planned economy to a market economy, meaning the central bank will have to correct the prices of public transportation and facilities, which means that inflationary pressure will rise.

In the future, Zhou said the central bank will further raise the reserve requirement ratio to absorb liquidity. There is still much room to raise reserves that banks must keep with the central bank.

The governor also stated that China supported the idea of a strong dollar and wanted to see dollar grow stronger.

Expensive Milk

Food prices are slowly driving people crazy--the vegetable price surged after the meat price hike; the edible oil price soared when the vegetable price was still escalating. When the other prices are running high, the milk price is starting to catch up.

In the middle of November, Bright Dairy raised prices of some of its milk products by 2-3 percent, following a 10-percent price hike in August.

China Business News quoted people in the know who said the wholesale price of some Mengniu Dairy products will be raised 1.5-2 yuan-about 20-25 percent.

Bright Dairy claimed this round of price hikes covered 30 percent of all products. "The milk, energy, transportation, and human resources costs are on the rise, and we have been striving to cut costs through optimizing the supply chain," the company said, "But we cannot absorb all rising costs, so we have to raise the price."

Affected by rising raw material prices, the listed dairy companies suffered from stumbling stock prices. From November 12 to 16, Mengniu Dairy stock price plummeted 17.4 percent.

Wang Dingmian, deputy head of the Dairy Association of Guangdong Province, said after a period of rapid development, the two dairy giants-Mengniu and Yili--will be confronted with a bottleneck. "It is hard to say when the risk will subside."

Wang previously said that some dairy producers could not make money so they quit raising cows, leading to shortage of milk. The Central Government promulgated measures to encourage farmers to keep cows. "It takes one-and-a-half years to raise a cow, so we are not optimistic about the near future milk price," said Wang.

Safe at Home

China's biggest oil producers, known as Sinopec and PetroChina, planned to boost output and imports to cope with the oil shortage in the mainland market as the international oil price soared above $100 a barrel.

NumberS of the Week 95% China, the world's most populous nation, will remain 95 percent self-sufficient in grain in the future by expanding both output and reserves, according to the National Development and Reform Commission. The department said fodder grain and oil-bearing crops such as soybeans are in short supply and future constraint is unavoidable. 3.3 trillion yuan China Railway Group raised 3.3 trillion yuan ($445.95 billion) in its yuan-denominated A-share market initial public offering--the biggest on record and tantamount to nearly one third of the GDP in the first half of this year.

Mainland oil prices are set by the government and are lower than the international level. Therefore, the two major producers would rather export oil than supply the domestic oil needs. Not long ago, the National Development and Reform Commission ordered the two companies to "strictly control export quantity."

Sinopec claimed that it had suspended refined oil exports to ease the oil pressure domestically.

Analysts say that PetroChina and Sinopec take the leading role in domestic oil supply and export, and it is their responsibility to first satisfy the domestic need rather than seeking profit by exporting oil.

In a video conference held during the emergency, Su Shulin, General Manager of Sinopec, stated that the subsidiary refineries have been ordered to refine oil to their largest capability, perfect the quality of refined oil and stabilize the market supply domestically.

However, if the two companies sell oil in the mainland market, they will suffer huge losses, as the sales price is lower than the cost. It is widely expected that the Central Government will compensate the two at the end of this year, like what it did in 2006.

The oil firms halted imports of refined oil this September and October as domestic oil prices dropped lower than import prices. Quite a number of oil filling stations across the country are suffering from supply shortages.

No Plan to Buy

Rumors have been circulating that three Chinese banks would acquire a 17-percent stake in the Standard Chartered Bank, but senior officials of the Chinese banks denied the report.

Financial Times, a well-known British newspaper, reported earlier that Industrial and Commercial Bank of China (ICBC), Bank of China (BOC) and China Construction Bank (CCB) planned to buy a 17-percent stake which is currently held by the Singaporean Temasek Holdings.

China News Services cited an ICBC official as saying that the bank had "never made such a contract with Temasek." Spokesmen for CCB and BOC said they had no knowledge of any such planned acquisition.

Temasek holds more than 17 percent of the shares of Standard Chartered. Analysts said it was important for Temasek to remain Standard Chartered's biggest shareholder and that the Singaporean firm had no reason to sell its shares.

Chinese banks had made six overseas acquisitions by the end of October, with the total value exceeding $10.7 billion.

No More Pollution, Please

The World Bank warned that air pollution is costing China 3.8 percent of its GDP, causing more diseases and claiming more lives.

David Dollar, the World Bank country director for China and Mongolia, said air pollution poses higher costs than water pollution. The combined health and non-health cost of outdoor air and water pollution for China's economy stands at around $100 billion a year, or about 5.8 percent of the country's GDP.

Air pollution, especially in large cities, is leading to higher incidence of lung disease, including cancer, respiratory system problems and therefore higher levels of work and school absenteeism, said a World Bank report jointly issued with China's State Environmental Protection Administration (SEPA).

Dollar said it would be a cost-effective move to reduce air pollution by moving manufacturing plants out of city centers, replacing coal-burning stoves with liquefied gas-fuelled heating systems, increasing state investment in public transport and limiting the use of private cars.

Despite the pollution challenges, the World Bank has affirmed China's commitment to address the problem. China has put environment protection as its highest priority in its 11th Five-Year Plan and is working to build a "resource- saving society."

To cope with pollution, the SEPA, the top environmental watchdog, said major industrial polluters will be barred from raising capital on the stock market.

"Enterprises found guilty of environmental violations or failing to meet pollutant discharge requirements will not be allowed to list their shares," said Zhou Shengxian, Minister of SEPA.

In addition, starting from 2009, all enterprises which discharge pollutants must obtain environmental permits. "Otherwise, they will not be allowed to continue, or start, operations," Zhou warned.