Along with this rapid financial development, the number of financial disputes also grew.

"Most of the time, the law simply cannot keep up with the fast-evolving financial market," said Fang. "Without a transparent and efficient arbitration mechanism, financial innovation will be thwarted."

The arbitration court will involve a team of financial legal experts from home and abroad. The court has hired 78 people, including 14 from the United States, UK, Germany, Canada, Japan, French, South Korea, Singapore and the Hong Kong Special Administrative Region.

Removing Grain Rebates

The export tax rebates for wheat, grain, rice, corn and soybeans and related flour products were removed starting December 20. Altogether 84 kinds of products are affected. The current rebate rate stands at 13 percent, according to the Ministry of Finance.

China is the world's largest grain consumer and also a major exporter. The country exported 4.9 million tons of corn, 1.2 million tons of rice and 400,000 tons of soybeans in the first 11 months, according to figures from the General Administration of Customs.

The government had already stopped corn and wheat exports in the second half of the year to meet domestic demand.

Experts believe the rebate elimination is a bid to ease the nation's rising consumer prices.

China's consumer price index, a barometer for inflation, surged 6.9 percent in November, its highest mark in 11 years, mostly caused by soaring food prices. Food prices, which make up one third of the consumer basket, rose 18.2 percent in November.

Water Prices Up

The National Development and Reform Commission (NDRC),

China's top economic planner, claimed that urban water prices will rise in 2008 at an appropriate time.

Spurred by the news, the stock prices of water-related companies, like Shanghai Municipal Raw Water Co. Ltd., rose considerably-an average 5 percent on December 10.

Officials from the NDRC explained that the costs for upstream water processing companies were rising due to increasing labor costs and environmental protection charges. Currently, the water price in Beijing is 2.8 yuan per cubic meter and 0.9 yuan per cubic meter for sewage processing.

The price of water used for agriculture production will also be raised to a rational level. Meanwhile, the fees for processing sewage will be increased by 1-2 yuan per cubic meter.

Beverage industries will be most impacted by the hike in water prices, said experts.

"All companies will be affected by the water price rise, which will eventually cause serious inflationary pressure," said Chen Wei, a researcher at the Shanghai Academy of Social Sciences.

But Chen said the price hike will be a double-edged sword: The rising water price will add costs to users but can also force companies and individuals to make full use of water and cut waste.

More Foreign Companies Eye Listing

As one of the achievements of the Third China-U.S. Strategic Economic Dialogue (SED), China will allow foreign-invested companies, including banks, to launch yuan-denominated A-share initial public offerings in the mainland stock market. In addition, the qualified listed foreign companies will be able to issue yuan-denominated corporate bonds.

U.S. Treasury Secretary Henry Paulson urged China to establish a sound supervisory system and adopt relevant policies to make sure the implementation is successful.

The Fourth SED will be held in the United States in June 2008.

Investing Muscle Overseas

The China Investment Corp. (CIC), the country's state-owned investment body, stated that it will invest up to $5 billion in the second largest U.S. investment bank Morgan Stanley, despite recent U.S. stock market turbulence.

Morgan Stanley is expected to be the least affected by the devastating subprime mortgage crisis, largely because it was less involved in collateralized debt obligations than other major investment banks like Merrill Lynch.

Earlier this year, the CIC invested $3 billion in the U.S. private equity firm Blackstone Group. This time it will purchase equity units that are automatically convertible into 9.9 percent of Morgan Stanley common shares. The equity units carry a fixed annual interest rate of 9 percent before conversion on August 17, 2010.

"It is a good time to invest in U.S. financial institutions, as many of them are undervalued due to the subprime mortgage crisis," said Li Yang, a financial expert with the Chinese Academy of Social Sciences.