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36528 Public Disclosure Authorized Vol. 18 June 16 - July 15, 2004 Recent Business Highlights CPDF organized meeting with National People’s Congress following on the success Of Creditor Rights Protection workshop in Beijing; CPDF signed partnership agreement with Chengdu Rural Credit Cooperatives; EDIS completed due diligence for a local snack food company; TA to CCCB on Asset/Liability Management and Internal Controls Launched; Linkages Team helps local food suppliers improve quality standards; BE China Seminar Circuit reaches out to Sichuan second-tier cities; Corporate Governance team to help Minsheng assess its current practices; CPDF shared its experience in SME development in Western China; and First edition of the CPDF Chinese Newsletter issued. Visitors To IFC-CPDF Ms. Katarina Mathernova, Mr. Allen Welsh, Mr. Everett T. Wohlers, Ms. Su Lin Public Disclosure Authorized Han, and Mr. Wang Shiyong. People Among Us Stewart Hicks, Head of Capacity Building, and Technical Specialist to EDIS. News From The Region Chengdu Government recruits external policy advisers; Yibin rolls out innovative anti-AIDS programs; Changhong, Microsoft to cooperate in multimedia; and First China-made feeder airliner enters production in Chengdu. Coming Up Soon CPDF’s Mid-term Evaluation starts in August; The Creditor Rights Protection project continues with a field trip in Shanghai; and The next Train-the-Trainer sessions for BE Trainers are scheduled for late July. Public Disclosure Authorized Recent Business Highlights CPDF in the Region CPDF shares its experience in West China SME development… On June 16-18, CPDF’s Jinchang Lai and Qiyun Yi presented CPDF projects and experiences at a workshop organized by the World Bank Institute, SME Department of the National Development and Reform Commission (NDRC) of China, and InWEnt – Capacity Development International of Germany. Both government officials and SME representatives showed strong interest in CPDF projects, and useful suggestions to them. This 3-day workshop was the first in a series of Public Disclosure Authorized capacity building events focusing on creating a conducive environment for SME development in China. About 200 participants attended, including senior government officials from the NDRC, other ministries and local governments, along with representatives from the business community, leaders from the banking sector involved in SME finance, local policy researchers, and bilateral donors and multilateral development agencies. (news contributed by Qiyun Yi, Business Development Officer with the CB team) CPDF issues the first edition of its Chinese-language Newsletter… CPDF has issued its first edition of Chinese-language Newsletter at the beginning of July. This quarterly newsletter, named “Xie Shou” in Chinese, aims primarily at informing our targeted market, i.e., SMEs, of what we can offer to help them improve their operations and become more successful. It includes a few examples illustrating the type of projects we have done. In this way SMEs will better appreciate the nature of our work and generate of the same time more assistance on key issues related to SME development. And of course, this Chinese Newsletter would provide an opportunity for CPDF to become even closer to SMEs and the large community involved in SME development. (news contributed by Cynthia Song, the Communications Officer) Business Enabling Environment (BEE) Workshop on Creditor Rights Protection Held in Beijing … A workshop on Creditor Rights Protection was held in Beijing on June 28-29. Over 55 participants took part in this ground-breaking event, which was sponsored by FIAS, IFC-CPDF, and the People’s Bank of China (PBOC) Research Department. Attendees included officials from the National People’s Congress, the Legal Affairs Office of the State Council, other Chinese Ministries, professors and researchers of well-known law schools, practicing lawyers, and bank managers. The workshop marked the official launch of the Creditor Rights Protection Project, which aims to improve China’s movable asset financing system. Participants highly appreciated the presentation and discussion on the best practice in secured transactions, security interest filing and loan covenant practice, and believed that further legal and institutional reforms in China would greatly enhance the efficiency of secured transactions and ultimately improve SMEs’ access to financing. (news contributed by the BEE team) CPDF organized meeting on secured transactions with the National People’s Congress… Following on the success of the workshop, and at the request of the NPC Legislative Affairs Commission, the tripartite team (CPDF, FIAS and PBOC) of the Creditor Rights Protection Project met with a group of senior officials of the Commission on July 2, to brainstorm on the issues related to secured transactions. The Commission is in the process of drafting the Property Law which will have a section on secured transactions. The team provided written answers to a list of pre-prepared questions. During the discussion, it was highlighted that: 1. A good secured transaction framework should meet the commercial needs of modern economy while avoiding unnecessary government intervention in private transactions; 2. A broad and generic definition of security interest would greatly increase the efficiency of secured transactions; 3. A central, consolidated and web-based security interest filing system would best serve the interest of creditors and reduce the cost for borrowers; and 4. A good secured transaction framework promotes growth and prosperity by expanding access to credit. (news contributed by the BEE team) Enterprise Development and Investment Services (EDIS) EDIS completed due diligence for a local snack food company… The EDIS team has signed another mandate to deliver an IEP to Chengdu Pioneer Food Co., Ltd. This pioneering company specializes in the production, marketing and sales of local ethnic snacks, some of which originate from the Qing Dynasty (1636-1912)! Mr. Chen Guiliang, company CEO and Chairman left his career in Government in 2001 to take over management of this company, originally a State-owned Enterprise. Under his guidance, this company has developed quickly and expects to post revenues of around RMB 50 million this year, an increase of over 30% on 2003. The company’s growth has a very direct positive impact, as over 80% of its staff hail from rural areas and were previously unemployed. (news contributed by Will Beloe, BDO with the EDIS team) CPDF signed partnership agreement with Chengdu Rural Credit Cooperatives… CPDF inked a partnership agreement with Chengdu Rural Credit Cooperatives (CRCC) on June 22nd. CRCC is a local financial institution with a business focus on SME lending. According to the agreement, CPDF will conduct co-due diligence with CRCC on six SME projects. This will enable CPDF to get first- hand experience on the issues and challenges faced by CRCC in its SME lending business, which will be an important input for CPDF to tailor its future TA programs for CRCC. (news contributed by Liu Hui, BDO with the EDIS team) Financial Sector (FS) TA to CCCB on Asset/Liability Management and Internal Controls Launched … Sponsored by NORAD, CPDF launched a TA project for Chengdu City Commercial Bank (CCCB) to improve its asset/liability management (ALM) and internal control system. The first three weeks of work started on June 21, undertaken by CPDF’s Financial Sector Team, PriceWaterHouseCoopers Norway and Shanghai and two working groups specially set up by the bank. This first phase of assignment entailed assessment of existing system, round-table training on theories and practice and formulation of recommendations. The concept and methodologies of ALM and internal controls were introduced to the bank’s managers and officers, including a number of jointly-developed tools for measuring risks and producing management reports. The findings and recommendations were also shared with the senior management for confirmation and eventual implementation. (news contributed by the FS team) Capacity Building (CB) Linkages Team helps local food suppliers improve quality standards... CPDF provided training on hygiene and food quality to 11 managers from 3 selected local food suppliers on July 5. The overall aim is to increase the quality standards of Auchan’s local suppliers. Following the training, CPDF will also provide a series of on-site coaching sessions over the next 6 months to further assist these local SMEs in building a sustainable and more profitable business relationship with Auchan. Many local suppliers have serious quality and hygiene issues adversely impacting their operations, and Linkages aims to create a strong demonstration effect among local producers through its work with these companies. (news contributed by Lei Wei, BDO with the CB team) BE China Seminar Circuit reaches out to Sichuan second-tier cities… During mid-June, working with the Sichuan Employment Bureau, BE China held large-scale one day seminars in the cities of Yibin and Luzhou, and also in remote Nanjiang County. Each seminar attracted over 200 SME General Managers and micro-entrepreneurs, with overall satisfaction scores of over 4.4 out of 5. Participants repeatedly noted that such high-quality management training is simply not available in these areas. (news contributed by Godfrey Firth, Market Coordinator with the CB team) Corporate Governance team to help Minsheng assess its current practices... The Corporate Governance team is initiating