TO THE POINT: China's Central Economic Work Conference was held on December 3-5, raising eight major tasks for the country. It stated that the decade- long prudent monetary policy will be replaced by a tighter one as of 2008. China and India vowed to work closely on their financial markets to safeguard the development of the two largest developing countries. At the same time, Chinese stocks showed signs of recovery. The government strove to lower food prices by auctioning off national food reserves. It promised subsidies to oil companies if they keep domestic oil supplies stable. Computer giant Lenovo will stop sponsoring the Olympic Games after 2008. By LIU YUNYUN

Stock Market Revival

After nearly two months languishing in its darkest period in history, the mainland stock market has shown signs of rebounding as the benchmark Shanghai Composite Index grew slowly from 4,803 points on November 28 to 5,042 on December 5.

Meanwhile, trade volume in the Shanghai stock market reached 81 billion yuan on December 5, signaling resumed confidence in the market. During the darkest days the trade volume was only around 50 to 70 billion yuan.

From October 16 to November 28, the Shanghai Composite Index took a swan dive from its peak of 6,124 points down to 4,803 points, its steepest drop ever. The bearish performance of the mainland stock market drove investors away and mutual fund managers came under heavy pressure from large-scale redemption.

Frank Gong, Chief Economist of JP Morgan (Hong Kong), said in early December that the readjustment period in the mainland stock market was close to completion. He said investors could start to buy A shares and the bull might continue to run at the end of this year.

Meanwhile, the government also showed its commitment to sound development of stock market. It has allowed social security funds to enlarge their investment in the stock market, and clearly stated that the social security funds must keep their eyes on long-term investment instead of short-term "in-and-out" games.

Statistics showed that the stock market had a net money inflow, which also boosted investor confidence.

A Neighborly Embrace

China and India, the two biggest developing countries in the world, vowed to deepen financial cooperation on bond and capital market development, as well as on financial supervision. The two signed a joint statement on December 4.

Both sides have realized potential threats posed by the spreading subprime crisis, high oil and commodity prices, global economic imbalances and rising trade protectionism.

The neighbors agreed to develop their bond markets and expand channels for direct financing, gradually open domestic capital markets and boost financial supervision to guard against risks brought about by short-term cross-border capital flows.

The two countries also pledged to improve macroeconomic controls, promote renewable and clean energy development and usher in more sustainable resource-saving and environmentally friendly production and consumption models.

By drawing on each other's development experience, the two countries can deal with the challenges and play their role in maintaining a steady world economic growth, said Indian Financial Secretary D. Subbrarao.

"The financial cooperation between China and India will not only help them realize sustainable development, but also help stabilize the Asian financial market," said Sun Shihai, Deputy Director of the Institute of Asia-pacific Studies of the Chinese Academy of Social Sciences.

Baosteel's Headache

Baosteel Group's Chairman Xu Lejiang denied reports that Baosteel had plans to bid for the Rio Tinto iron ore company.

"Media reports that Baosteel plans to buy Rio Tinto are untrue," said Xu, as quoted by the official China Securities Journal. Public data showed that Rio Tinto's market value was around $150 billion, while that of Baosteel was about 290 billion yuan, or equal to $39 billion. The value gap is so huge that it is almost impossible for Baosteel to swallow the company.

But Xu said the company "is examining the impact on the possible acquisition conducted by BHP Billiton, which approached Rio Tinto with a $125-billion all-share takeover proposal.

BHP Billiton and Rio Tinto are the biggest iron ore suppliers in the world. The combination of the two would control three fourths of the iron ore market. It might create a dominant position in upcoming iron ore price negotiations, putting iron and steel companies at a disadvantage.

Chinese experts argued it might be possible that large Chinese companies and banks would join together and buy Rio Tinto shares to prevent the merger of the two iron ore giants. "The acquisition would have a huge influence on the iron and steel industry as well as non-ferrous metal industry," said Xu.

Xu said Baosteel is paying close attention to the negotiations, but it did not mean Baosteel would bid for Rio Tinto.

Oil Firms Get Pumped Up

Domestic oil companies will be subsidized by the government to offset high international oil prices since domestic oil prices are much lower than the cost.

The National Development and Reform Commission (NDRC), China's top economic planner, said that the effort was to ensure market supply. The government will offer oil firms some profit rebates and cut oil import duties to compensate for losses at their refinery units, said the NDRC.

Many gas stations across the country are experiencing shortages, with refineries unwilling to raise output due to the low, government-controlled domestic fuel prices.

China raised the prices of gasoline, diesel oil and aviation kerosene by 500 yuan per ton, almost a 10-percent rise, starting from November 1.

The losses at oil refineries are still huge despite the fuel price rise and many local refineries have halted or reduced output, the NDRC stated.