China to Reshape Fuel Pricing System

China will likely kick-start fuel tax reform soon, according to the nation's top economic planner, the National Development and Reform Commission (NDRC). The government is expected to introduce a fuel tax to replace the road maintenance fee, a flat fee levied on automobile users regardless of how much gasoline or diesel they use. Emphasis will also be put on establishing a more transparent and flexible fuel pricing system, so that fuel prices on the Chinese market can move more in sync with the global market. Currently, the NDRC sets the fuel prices periodically. This has created various supply and demand distortions in China's fuel consumption.

Talks of the reform have been ongoing for quite some time, as China is trying to encourage more efficient energy consumption. The significant drop in oil prices has also created a favorable environment for the government to carry out the long-awaited reforms. Similar reform measures were proposed earlier, but aborted due to concerns the fuel tax would create too much burden for fuel users.

Market Recap
Concerns that a deepening global recession will crimp demand led the Chinese stock market to retreat later in the week, erasing earlier gains. The Shanghai Composite Index declined by 0.86% to close at 1,969, while the Shenzhen Composite Index dropped 0.67% to 6,711.35.

Financial
China Has Become Largest Foreign Holder of U.S. Treasuries
China surpassed Japan for the first time in September, adding $44 billion to bring its U.S. Treasury holdings to $585 billion. For the past seven months, it reported net increases in U.S. Treasury holdings in all but one month. Meanwhile, Japan's holdings slid to $573 billion. Since July 2005, China has doubled its position in U.S. Treasuries.

China's Central Bank to Deposit $7.3 Billion with Commercial Banks
The funds from China's treasury will be deposited for six months until next May, to make more capital available for lending and improve returns on the money, according to a statement from the central bank.

 China Life  Eyes International Acquisitions
China's largest life insurer recently made public its interests in overseas assets, but it did not give details about its selection criteria yet. The firm will likely focus on small and medium firms, although there are speculations of its interests in the Asian assets of  AIG (AIG) and  Prudential (PRU).

Home Sales and Land Purchases Contract in China
According to the National Bureau of Statistics, the floor space of homes sold in the first 10 months declined by 16.5% year over year to less than 5 billion square feet, while the value of home sales dropped by 17.4% to $260 billion. For the same period, the land purchased by property developers dropped by 5.6% year over year, another indication that demand is cooling.

Technology
China Mulling 3G License Issue Ahead of Schedule
A top official from China's second-largest telecom operator  China Unicom  this week indicated that China will likely issue 3G licenses by the end of 2008. Previously, the license issuance was widely expected to take place sometime in 2009. Many believe the Chinese government is keen to encourage more telecom infrastructure investment as part of its efforts to stimulate the economy.

Huawei to Launch 3G Smart Phones in 2009
Huawei's new smart phones will be based on the Symbian operating system and  Google's (GOOG) Android platform. These smart phones will not carry Huawei's brand but will be marketed and distributed through telecom operators. So far, Huawei has made only one smart phone, which is powered by Windows Mobile.

Consumer
China's Ministry of Commerce Approves the Inbev Acquisition
After the acquisition, the beer giant will not be allowed to increase its stake (currently at 27%) in China's best-known Tsingtao Brewery or its stake (currently at 28.6%) in Zhujiang Brewery in south China. In addition, the new company cannot seek to own stakes in two other major breweries, Beijing Yanjing Brewery or China Resources Snow Brewery. Inbev is required to seek approval for its acquisition, according to China's newly adopted antimonopoly law, because both Inbev and Anheuser-Busch have operations in China.

Iris Tan, Peter Liu, and Feliz Li contributed to this article.