SUMMARY

China's consumer price index turned upward to 0.6 percent year-on-year in November, ending a long, calm period for CPI in the negative realm. Inflation risks, however, have mounted to new highs, especially in the economy's retail and food sectors. Fiscal and monetary regulators on a consumer price watch for the past year are now thinking that the time may be right for dramatic measures aimed at driving down expectations for inflation.

Some of China's recently announced regulatory measures have pointed to mild policy fine-tuning, especially in the bubbly housing sector. But the pace of inflation fighting may be slower than what's desirable. Given China's messy management of housing price expectations, a new spate of turmoil for the nation's capital markets could be a likely scenario down the road.

A legal storm has swept a small hospital in Inner Mongolia that provides forensic psychiatric evaluations, rekindling calls for nationwide reform. Using middlemen well-connected to police and the hospital, defendants at local trials for law enforcement corruption found ways to grease doctors' palms to obtain certificates claiming "personality disorders," thus avoiding heavy jail terms.

Experts at the hospital who refused to participate were either forced or kicked out, and complaints to supervisors fell on deaf ears. Three medical experts were convicted. Two were sentenced to nine years in jail and one got two years. Legal scholars are now calling for reforms and forensic institutions capable of professional testing with proper supervision. China's legislature took steps to address the issue in 2005, but a system-wide overhaul is far from complete.

After ten years of hesitation, the deposit insurance system will soon be unveiled. In a recent State Council meeting, a proposal for the creation of the insurance system was verbally approved by senior leaders. According to the proposal, a deposit insurance fund will be set up within the central bank, the People's Bank of China, although the fund has no power to regulate. In a major change to the financial institution system, the central bank has decided to "create a framework first, work on details later."

However, problems linger as there are no laws to guarantee the implementation of the system, no clear timetable and no strong enforcement. The central bank will start to draft laws on deposit insurance from the end of this year, according to a senior official.

Over the past several months, Chinese property developers have competed to pay increasingly high prices for land to supplement their reserves, conjuring a predicament similar to the 2007 market, when the country's real estate sector experienced a boom. Behind the growing appetite of developers, the government's attempt to rein in the potentially overheated market may slacken rising property prices.

The latest measures issued on Dec. 18 from five government agencies requires developers to put down a minimum of 50 percent in land value for future land purchases and repayment period of one year within the sale agreement for land deals from the government. The move followed an announcement by the State Council four days ago that it will adopt various measures to curb the "overly rapid" rise in housing prices.

Perth native Andrew Forrest might be the most controversial figure in Australia's mining industry. Listed by Business Review Weekly as the richest Australian -- with AU$ 7.26 billion in personal assets -- Forrest built his Fortescue Metals Group Ltd. (FMG) into Australia's third largest iron ore producer in only five years. However, the 48-year-old has been criticized by industry leaders and partners. Some say he exaggerates, while others claim he can't keep promises.

In the eyes of Chinese steel partners, Forrest is a tough bargainer who may help them break what's considered a monopoly by the world's three, leading ore suppliers. FMG has the capacity to sell 40 million tons of ore to China annually. Relations between FMG and China's steel industry have been getting closer, but they're also delicate.

Stronger corporate governance at banks was expected after three of China's four biggest banks -- Bank of China (BOC), Industrial and Commercial Bank of China (ICBC) and China Construction Bank - listed in Hong Kong and Shanghai between 2006 and '07. Each bank got new shareholders and directors. But in an apparent backtrack, vice presidents at several state-owned banks were recently transferred. Luo Xi of Agricultural Bank of China (ABC) went to ICBC, Cai Hua of China Development Bank switched to ABC, and Zhu Hongbo, secretary for the Communist Party Disciplinary Committee at ABC, was named BOC's new vice president.Industry insiders say the executives were transferred to prevent corruption and promote experience-sharing among banks.

However, these party- and government-arranged transfers demonstrated that commercialization at state-owned banks is far from complete.