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the problems with imports from China, telling all sides of the story and then
expand the discussion to revitalizing Chinatown -
Special Guest: Johnson Choi, MBA, RFC. President - Hong Kong.China.Hawaii
Chamber of Commerce (HKCHcc) and Danny Au, Manager, Bo Wah Trading |
December 29, 2007
China Publishes Second Catalogue of
Products under the Prohibited Category in Processing Trade 2007
China's Ministry of Commerce has officially issued Announcement No. 110 on
details of the Second Catalogue of Products under the Prohibited Category in
Processing Trade 2007 (Prohibited for Export), which will come into effect on 21
January 2008. The newly promulgated catalogue covers a total of 589 products
under 10-digit commodity codes mainly coming from industries such as
resource-intensive products, chemicals and steel products.
For details of the above catalogue in Chinese, please visit:
http://www.mofcom.gov.cn/aarticle/b/c/200712/20071205301279.html
December 18, 2007
Guangzhou Issues Emergency Circular to
Prevent Year-end Massive Layoffs
As the Labor Contract Law is about to come into force, Guangzhou has issued
an emergency circular to prevent companies from rushing to lay off workers ahead
of the implementation of the law. The emergency circular stipulates that any
incident of terminating the employment of more than 20 workers has to be
reported to the labor authorities, even if the termination is due to expiry of
contract.
The Guangzhou labor and social security bureau points out that many labor
contracts signed between employing units and their employees will expire on 31
December. The emergency circular serves to prevent employing units from
circumventing the new law by terminating such employment contracts as they
expire at the end of the year.
According to the Circular on Strengthening the Administration of Massive
Layoffs by Employing Units issued by the Guangzhou municipal government, any
enterprises, individual economic organizations, private enterprises, government
organs, government enterprises and social bodies at or below city level laying
off their employees on a large scale by means of dismissal, suggesting to the
workers that they should resign or change the nature of employment (e.g. change
to secondment or contract-based employment), or altering the terms of the labor
contract, will be subject to special administration¡¨ as from 31 December, no
matter whether the laid-off workers will be re-employed or sign a new labor
contract with a new employment unit.
The circular states that employing units can only carry out lawful massive
layoffs under two conditions: first, the enterprise is on the brink of
bankruptcy and has been ordered by the people's court to undergo reorganization;
second, the enterprise has run into great difficulties as regards production or
operation and falls under the enterprises in difficulty category confirmed by
the municipal government. Other than these, employing units must continue to
honor the labor contracts and may not dissolve the employer-labor relationship.
It is understood that currently many enterprises try to circumvent the Labor
Contract Law by two ways. One is they would not renew the labor contract with
their employees upon expiry in order to avoid signing non-fixed term contracts
with those workers who would have worked for the company for 10 years in the
following year. The other one is they would change the nature of employment to
secondment basis.
According to the Guangzhou labor and social security bureau, as labor contracts
are normally made on a calendar year basis, many of them will expire by the end
of the year. Under the circular, any employing unit terminating the service of
over 20 workers or more than 10% of its staff approaching the end of their labor
contract has to submit a written report to the labor and social security
department in advance.
Within 15 days upon receipt of the report, the labor and social security
department should give written comments to those enterprises found not meeting
the conditions for making massive layoffs. A copy of the comments will be sent
to the social security authorities, which will refuse to handle the application
for stopping payment of social security contributions by the enterprise
concerned. This move of not allowing non-compliant enterprises to stop making
social security contributions testifies to the fact that stringent measures are
adopted by the labor authorities to curb unlawful massive layoffs by employing
units.
For the full text of the Circular on Strengthening the Administration of Massive
Layoffs by Employing Units in Chinese, please visit
http://www.gzlss.gov.cn/newhtdocs/view_zcfg.php?id=2445
December 17, 2007
China to conduct first read draft laws on
food safety, state assets, social insurance
China's legislature is to conduct the first reading of three draft laws on
food safety, state assets and social insurance later this month. The 31st
session of the Standing Committee of the National People's Congress (NPC) was
expected to convene from Dec. 23 to Dec. 29, according to a statement issued
after a meeting of the chairman and vice-chairpersons of the NPC Standing
Committee on Monday. The draft law on food safety has been a hot topic in China
since 2005 due to increasing incidence of food scandal.
China now has a food hygiene law to regulate issues of food safety but many
lawmakers said it does not meet the need of practice. The draft, based on the
food hygiene law, proposed a food safety risk supervision and evaluation
mechanism. This was to provide a "key basis" for constituting food safety
standards and food-born disease control measures and to set up related
institutional systems covering food production, processing, delivery, storage
and sales, according to a statement issued by the State Council on Oct. 31 when
it passed the draft.
Li Changjiang, director of the General Administration of Quality Supervision,
Inspection and Quarantine (GAQSIQ), said last month that the draft law
encouraged supervision from the public and media. It also tightened the penalty
on producers that violated the law and relevant government departments that did
not serve their duty.
A national campaign to improve food safety and product quality was ending in
China on Dec. 25. The four-month action implicating various ministries and
departments had covered the production and distribution of food.
Most of the goals set before the campaign have been fulfilled and the next task
was to prolong the good situation by setting up an effective mechanism, Li said.
Draft amendments to the laws on frontier health and quarantine, the protection
of cultural relics and individual income tax would also undergo a first reading,
the statement said.
China was amending the law on frontier health and quarantine in response to the
International Health Regulations (IHR) 2005 issued by the World Health
Organization (WHO) that took effect in June, according to Zhi Shuping, the
GAQSIQ vice director, on the administration's official website in June. The
regulation, to control the cross-border spread of epidemics, such as plague,
cholera and yellow fever, had added new duties to the government departments.
Domestic laws and regulations also needed amending in line with it, Zhi said.
The WHO said on its website that the revised IHR established an agreed framework
of commitments and responsibilities for states and WHO to invest in limiting the
international epidemic spread. Under the regulations, the states would be
required to report all events that could result in public health emergencies of
international concern.
During the session, lawmakers would continue reviewing the draft anti-drug law
and the draft law on labor dispute mediation and arbitration. They would also
review the draft amendments to the laws on road transport safety, science and
technology progress, and prevention and control of water pollution.
They would also go through a report submitted by the chief executive of Hong
Kong Special Administrative Region (HKSAR) on the outcome of the public
consultation on the Green Paper on Constitutional Development. It also included
whether to amend the methods for selecting the chief executive and for forming
the Legislative Council in 2012.
The State Council, China's cabinet, would submit to the session three reports on
health care system reform, food and drug quality supervision, protection of
legal rights of employees and rural area development.
Guangzhou Launches New Version of Labor
Contract
Guangzhou's labor and social security bureau launched a new version of labor
contract on 3 December 2007 for enterprises to download from its website for
use. Most of the enterprises in the city indicate that they would use the new
version as soon as possible.
A major breakthrough of the new labor contract is that it includes special
provisions for probation period and requires enterprises to clearly state their
place of work and ensure that all employees have signed labor contracts. These
new changes are meant for the better protection of workers. Changes in the
provisions of the new and old versions also reflect a shift of emphasis in the
work of the labor department.
Many provinces and cities have launched new sample labor contracts recently.
Enterprises can choose whether or not to use them, but past experience suggests
that sample contracts are often adopted.
While small and medium-sized enterprises rarely draft their own labor contracts,
large enterprises may prefer using their own. Labor contracts prepared by
enterprises themselves must be examined by the labor departments. Contracts
containing provisions and wording not in compliance with the norm or removing
details to the disadvantage of the employer are considered to be unacceptable
and may not be used.
According to the Guangzhou labor and social security bureau, the time is not yet
ripe to require that all labor contracts be filed with the labor departments for
the record. Labor departments would only inspect labour contracts on a random
basis.
Shanghai Maps Out Three-Year Action Plan for World Expo
Pudong earlier held a roadshow for the promotion of investment in the Sanlin
World Expo Functional Area and announced its three-year action plan in the
run-up to the World Expo.
Ten large projects involving a total investment of Rmb6.5 billion have already
kicked off in Pudong's Sanlin district.
The Sanlin World Expo Functional Area, embracing "one centre, two belts and five
blocks", will have two basic functions, namely modern living and modern service.
The "one centre" is at the core area of the expo park, planned to house
Shanghai¡¦s urban public activities, fully serving the functions of displaying
science and technology and conducting cultural exchanges during the World Expo.
The "two belts" refer to the promenade along the Huangpu River and the Shangnan
Road industrial belt, which runs along the central axis of the World Expo site.
The "five blocks" include a business, convention and exhibition, cultural, and
creative industry block; a riverside ecological tourism block; a comprehensive
trade, commerce and regional headquarters block; a cultural, leisure and modern
living block; and a cultural, commerce and residential block.
According to the 11th five-year program for the Sanlin World Expo Functional
Area and the industrial development plan being drawn up, Sanlin will develop
commercial, cultural, information, intermediary and consultancy services along
the Bailianjing rivulet, Shangnan Road and other areas around the World Expo
Park. Meanwhile, district-level comprehensive commercial, cultural and
entertainment facilities will be built at the heart of Sanlin's Lingzhao
district on both sides of the Middle Ring Road. Industrial projects supporting
the Pudong New Area High-Tech Industrial Park will be developed at the Sanlin
Hengda commercial district, Beicai Urban Industrial Park and the Sanlin Urban
Industrial Site to the south of the Outer Ring Road. Creative industries and the
headquarters economy will be developed in the older part of Sanlin to the north
of the Outer Ring Road, the centre of Beicai district to the south of Gaoke Road
West, and the New Hope site in Zhangjiang to the west of Luoshan Road.
December 13, 2007
State Council Promulgates Implementing
Rules for Corporate Income Tax Law
On 6 December, China's State Council promulgated the Implementing Rules for
the Corporate Income Tax Law, which will come into effect on 1 January 2008.
In March 2007, the National People's Congress passed the Corporate Income Tax
Law of the People's Republic of China, to be enforced on 1 January 2008,
unifying the corporate income tax regimes for domestic and foreign-invested
enterprises on the mainland. The implementing rules were drawn up to explain in
detail the provisions of the Corporate Income Tax Law for its smooth
implementation.
Under Article 57 of the Corporate Income Tax Law, "old enterprises" which were
entitled to preferential tax treatments such as lower tax rates and fixed-period
tax reduction and exemption according to the previous tax law will be subject to
transitional preferential tax policies. In view of the massive content of these
policies and their transitional nature, the State Council will formulate the
transitional measures separately to ensure the stability of the implementing
rules. Therefore, the implementing rules do not provide for any specific details
on these transitional measures.
For details of the Implementing Rules for the Corporate Income Tax Law in
Chinese, please visit:
http://www.chinatax.gov.cn/n480462/n480513/n480902/7163829.html
December 4, 2007
Drive to auto developments in Dalian
 Volkswagen AG held its ground
breaking ceremony in October for Volkswagen Automatic Gearbox Dalian Co Ltd, its
first wholly-owned subsidiary in China, situated in the Dalian Development Zone.
This added another world-renowned auto parts company to the city.
The new company is Volkswagen's latest in the Dalian Development Zone after its
joint-venture engine production project with FAW. Increasing investment in
Dalian has become an integral part of Volkswagen's global strategy.
The new project is slated for building completion at the end of 2008 and the
company is to begin production in 2009. It will produce Volkswagen's latest
DQ200 double-shift automatic gearbox for its two sedan car joint ventures in
China - FAW Volkswagen and Shanghai Volkswagen.
According to Volkswagen global vice president Winfried Vahland, the DQ200
gearbox, which was originally designed for sports cars, makes use of the latest
double-shift gear-changing technology, saving fuel and reducing carbon emission
but still aiming to give drivers a better driving experience.
Dalian is of immense importance to the rejuvenation of this old industrial base
in northeastern China and Volkswagen will give new drive to the development of
car manufacturing and auto parts production in the city.
The ground breaking ceremony for this project is said to be only the start of
further cooperation between Volkswagen and Dalian. Dalian's government says
it'll support Volkswagen's further expansion in the city.
November 27, 2007
Serviced apartment market gains strength -
Lower entrance costs, higher returns and fewer regulations attract foreign
investors By Sandy Li
China's serviced apartment sector is on a strong growth path and the lure of
lower entrance costs, higher rental returns and fewer regulatory restrictions is
drawing foreign investors to the market, analysts say. Property consultant Jones
Lang LaSalle Hotels forecast that 1,380 new serviced apartments would come on
the market in Beijing over the next three years and 3,300 more apartments would
be released in Shanghai over the next five years. Foreign investors entering the
market also had their sights on second-tier cities such as Tianjin, Dalian and
Hangzhou, where the serviced apartment sector was still in its infancy, it said.
Comparatively unscathed by government restrictions, the serviced apartment
sector was becoming a popular target of foreign investors, said Angela Lee, a
Hong Kong partner specialising in property law at legal firm Baker & McKenzie.
Singapore-based Frasers Hospitality has taken on the management of a growing
number of properties on the mainland.
"China is a very important market for us and we are looking to rapidly expand
with the set-up of our new `gold standard' suites in first and second-tier
cities," Frasers chief executive Choe Peng Sun said. The group aimed to manage
more than 4,000 serviced apartments in over a dozen cities across the mainland,
Mr Choe said. Besides Beijing, Chengdu, Guangzhou, Hong Kong, Nanjing, Shanghai,
Shenzhen and Tianjin, Frasers is also talking to property owners in other
gateway cities such as Dalian, Suzhou, Xian, Chongqing, Hangzhou and Wuxi. "We
view second and third-tier cities as viable markets for further expansion as
economic growth is strong and investment costs are lower compared with
first-tier cities," Mr Choe said. Aside from securing management contracts,
Frasers said it was also looking at various forms of investment including
co-investment and acquisitions.
In September, the firm bought a 357-unit luxury residential project at Guanghua
Lu, Beijing's business centre, from Hong Kong-listed Sino-Ocean Land (SEHK:
3377, announcements, news) Holdings for US$130 million. The project is due to be
completed in the first quarter of next year.
Ascott Group, the biggest serviced-apartment operator in Asia and Europe, said
in May it aimed to boost the number of its serviced apartment units on the
mainland to 10,000 by 2010.
Derek Lai Kam-hung, a director of the hospitality investment department at DTZ,
said the operating costs for serviced apartment projects were lower than those
of a hotel since there were no function rooms, banquet halls and restaurants.
"But owners, particularly of properties managed by international operators, are
able to charge higher rates than ordinary residential projects since upscale
developments provide services similar to hotels," Mr Lai said.
David Ma, a director and general manager of Hon Kwok Project Management, a
subsidiary of Hon Kwok Land & Investment, said the company was "definitely"
interested in the serviced apartment sector. Hon Kwok converted 62 units at City
Square in Shenzhen into serviced apartments to cater for expatriates. "Most of
the apartments have been taken up by Japanese expatriates working in Shenzhen
since we put them on the market in June," Mr Ma said.
Rents for the serviced apartments, measuring from 40 to 70 square meters, ranged
upwards from 10,000 yuan per month, he said, compared with rents of 3,000 to
4,000 yuan per month achieved by individual owners in the same development. Hon
Kwok has kept one block at City Square for long-term investment and sold the
remaining five blocks to individual buyers who have also rented out their units.
Mr Ma said the company also planned to expand its serviced apartment portfolio
on the mainland under the Bauhinia brand, which also operates and manages
serviced apartments in Hong Kong.
Karen Li Kan Fung-ling, a director of corporate development at USI Holdings - a
sister company of Singapore-based WingTai Asia - said the company was confident
of the sector in view of growing arrivals of expatriates on the mainland. "There
is a huge demand. We will have five to six serviced apartment projects on the
mainland in the next three years," Mrs Li said.
USI has two serviced apartment projects in Shanghai and Beijing under its Lanson
Place brand. Lanson Place Jin Lin Tian Di Residences is in Shanghai and the
Beijing project is due for a soft opening in the second quarter of next year. Yu
Yang, the Shanghai chief representative of fund manager Grosvenor, said the
company chose to offer its recently acquired Lakeville Regency in Shanghai as
furnished apartments for lease.
In September, Grosvenor bought two 14-storey luxury residential blocks in
Shanghai's Xintiandi, developed by Shui On Land (SEHK: 0272). Sources said the
fund paid about 446 million yuan for the property. Mr Lai said top-end units in
Shanghai managed by international chains could charge as much as US$30 per
square meter per month.
November 26, 2007
 Foreign foraging in
Wuhan's food industry
According to Wuhan's agricultural bureau, foreign capital has captured a
growing share of the Wuhan market. In the first nine months of this year, sales
by 200 or more leading agricultural establishments at district level or above
reached an aggregate of Rmb12.3 billion, more than half of which was
attributable to foreign investment.
Hong Kong's Coland Group invested Rmb60 million in an aquatic products
processing base in Xinzhou early this year. When completed, it will be the
largest of its kind in Wuhan.
Also, letters of intent have recently been signed in Wuhan for cooperation in an
Rmb1.4 billion project involving China Resources Beer and another Rmb700 million
project with Xiamen Yinlu. It has also been confirmed that the Jiangsu Yurun
Group will build a Rmb800 million food processing project adjacent to Dongxi
Lake. Upon completion, this processing base will be able to handle the
slaughtering of two million pigs and deep-processing of 30,000 tonnes of pork
annually.
Existing industrial projects in Wuhan have also expanded their operations. COFCO
invested Rmb80 million to build a cold meat base in Jiangxia in November 2002.
The company has recently announced its plan to increase investment to build a
deep processing base for meat products.
What makes Wuhan's food industry so attractive to foreign capital? Xiao Xiaoqiu,
head of the industrial department of Wuhan's agricultural bureau says the city
is a transportation hub and enjoys advantages in accessibility, market and
financial services. These advantages allow enterprises to organize
industrialized production within the shortest radius for raw materials.
Dong Youxin, head of the foreign trade department of Wuhan's agricultural
bureau, said the arrival of foreign-invested enterprises not only helps increase
the value of local agricultural products and boosts their sale in the country
and overseas, but enriches the local market with a greater variety of foods.
China to tighten rules over investment
The Chinese government will be implementing stricter rules when approving new
investment projects and other new projects. According to a document published by
the State Council on Wednesday, all projects are required to comply with land
use, energy efficiency, market access and environmental protection criteria.
Information of projects requiring an investment of more than RMB 50 million,
will be recorded and updated by relevant departments and sent to upper-level
regulatory authorities. Beginning from January 2008, such projects are required
to disclose their basic information on the website or other means, for public
viewing.
The government will also be strengthening the supervision of approved projects
and retain the authority to halt or penalize projects, that are found to be an
infringement of the guidelines and rules.
According to the document, incompetent management and poor law enforcement have
resulted in excessive investment growth and duplications. As such, China has to
tighten rules over the supervision and management of projects.
The new rule was implemented as a result of growing concerns over the rapid
economic growth. GDP in the first three quarters grew by 11.5% over the same
period last year, while consumer price index (CPI) grew by 6.5% in October,
adding to the government's speculation on inflation.
Apart from growing GDP and CPI figures, increasing urban fixed-asset investment
also raised policy-maker's concern. During the first ten months of the year,
urban fixed-asset investment surged 26.9% year-on-year, while the figure in the
first nine months climbed 26.4% year-on-year.
Chen Jijun, senior analyst at CITIC Securities<600030>, expects the Chinese
government to implement a series of tightening measures to curb the fast
expanding economy, especially in the real estate sector.
China seeks balanced trade
China plans to increase imports from Latin America and Central and Eastern
Europe by introducing more products from these regions through an upcoming event
in Beijing to Chinese consumers.
The director of the trade development bureau of the Ministry of Commerce (MOC),
Feng Hongzhang said the exhibition of Latin American and Central and Eastern
European products is expected to attract more than 150 enterprises from 16
countries from the regions. "As the organizer of the fair, we also invited some
3,000 professional domestic buyers from trading companies and supermarkets,"
Feng said.
The exhibition, which will show case agricultural products, food, alcohol and
equipment during the three-day event, is scheduled to open tomorrow in Beijing.
This move intends to help products from these regions to be better known among
Chinese people, consequently increasing their exports to the country. It is also
is in line with the government's push to reduce its huge trading surplus.
Last year, China's trade with Latin American countries hit US$70.2 billion, up
39.2% from a year earlier, and China's trade with 13 countries in Central and
Eastern Europe more than doubled from two years earlier to reach US$22.6
billion, according to China's General Administration of Custom statistics.
The goal of the campaign is to achieve more balanced trade. Chinese government
expects enterprises from these regions to make full use of all international
fairs, expos and trading events to boost popularity of their quality products
and services in the Chinese market.
November 16, 2007
China Releases New Catalogue on Foreign
Investment in Industry
With State Council approval, the National Development and Reform Commission and
the Ministry of Commerce have jointly released the latest Catalogue for the
Guidance of Foreign Investment in Industry recently. The new catalogue, which
takes effect on 1 December this year, will replace the 2004 version.
In the new catalogue, revisions have been made mainly in the following five
areas:
Expansion of the scope of liberalisation and promotion of industrial structure
upgrade. In the manufacturing sector, foreign firms will be further encouraged
to invest in the high-tech, equipment manufacturing and new materials production
industries. In the services sector, China will, in fulfilling its WTO
commitments, actively and appropriately expand the scope of liberalisation by
adding "service outsourcing", "modern logistics" and other items to the
encouraged category and reducing items under the restricted and prohibited
categories. Meanwhile, foreign investment in traditional manufacturing
industries in which domestic enterprises have already mastered the necessary
technologies and have strong production capacity will no longer be encouraged.
It has also been clarified that the items under the restricted category in the
Catalogue for the Guidance of Industrial Restructuring will also apply to
foreign investment.
Resources conservation and environmental protection. In order to encourage
foreign investment in the development of the recycle economy, clean production,
renewable energy, ecological environment protection and comprehensive
utilisation of resources, relevant items have been added to the encouraged
category in the catalogue. Foreign investment is no longer encouraged in
projects involving important mineral resources that are rare in China or
non-renewable. Also, the exploration of certain important non-renewable mineral
resources is now off-limits to foreign investment, while foreign investment in
high energy consumption, high resources consumption and high pollution projects
will be restricted or prohibited.
Adjustment in export-oriented policy. In view of China's growing trade surpluses
and fast expanding foreign reserves, foreign trade policy that puts lop-sided
emphasis on exports will no longer be implemented.
Promotion of coordinated regional development. In line with the strategies of
developing the western region, boosting the rise of central China and
rejuvenating old industrial bases in the northeastern provinces, the provision
"apply only to the central and western regions" has now been removed from items
under the encouraged category in the catalogue.
Protection of national economic security. Prudence will be exercised in the
liberalisation of certain strategic and sensitive industries with an important
bearing on the nation's economic security. Appropriate adjustments will be made
to the relevant items to strike a balance between domestic development and
opening to the outside world.
November 6, 2007
Reaching for riches - The city of Yiwu is the major production center of
China's small goods, such as these cups, which are exported to the world. Zhou
Xiaoguang worked her way up to become a multi-millionaire. By
Xie Fang
Nearly three decades ago, teenager Zhou Xiaoguang struck it out alone to do
small business in Northeast China. She squeezed into a train with two big
packages full of embroidered goods. The weight of her load seemed to threaten to
put her on the ground. Her face drooped with exhaustion. The worse part was that
the Zhejiang native was too poor to afford a hard berth ticket. So, she spent
the following three days sitting in the corner of a carriage door. The place in
which she stood was so narrow, she couldn't even stretch her legs and the nearby
toilets filled the air with a foul stench. At that point, Zhou would have given
anything to be able to give up and go home.
"I felt as if I was wronged to have to start working as a vendor at such a young
age, and people hardly showed their respect. Instead, I become something of a
spectacle," Zhou recalls, frowning behind her huge desk. Today, her spacious
office takes up a tiny corner of the six-storey building in which she and 28
other family members live and work. The oldest daughter in the family, who had
to work hard to keep her little brother and five younger sisters from starving,
has become a billionaire who owns one of the world's largest accessories
manufacturing bases in Yiwu, East China's Zhejiang Province.
Currently she employs a workforce of 6,000, and her company's annual export
value has reached $30 million over the past few years. Her sales network covers
more than 70 nations. The delegate to the National People's Congress is not sure
how many business trips she has made by now - flying first class and staying in
five-star hotels - but she vividly remembers her early days when she lived as a
vagrant trying to get her business off the ground. "The experience that came
with these hardships is priceless," she says. The 46-year-old mother of two
enjoys having a big family. She and her 28 family members live in the top floor
of the family company's six-storey building in Yiwu's Qing Kou Industry Zone .
Everyone has a private bedroom and shares a huge living room, which is spacious
enough to play basketball. Three maids are responsible for the family's daily
meals, and two big round tables are set up in the dining room: One is for
adults, the other for children. Except for traveling, the chairperson of the
Neoglory China Holding Group (NCHG) seldom eats out and cherishes every chance
to dine with her family. After meals, she goes to her office and works late into
the night. "I am always the pillar of my family, while the family members
provide emotional support and care for me. We have a wonderful relationship,"
she says.
Zhou entered the accessories business in 1986, a year after she married Yu
Yunxin, who also sold embroidery. "What I noticed while making my early sales in
Northeast China was that local women loved colorful hair ornaments," she
recalls.
"I found it inspirational to see that everyone wants to look beautiful, whether
she is rich or not. So, I believed the business potential was huge." The couple
bought a booth at Yiwu's Small Commodity City. Her husband was responsible for
purchasing material, while she and her sisters manned the booth in the day and
processed accessories at night. Sometimes, even her youngest son would make
contributions to the family business. In 1995, they invested several million
yuan in opening an accessories factory in response to a call from the local
government to develop industry.
"The money was all of our savings from a decade of hard work. I could not help
worrying about what kind of life we would face if we failed," she admits. "But
my husband said we could start from scratch, as long as we are diligent and
determined." The company developed dramatically over the following years.
However, the management became a headache for Zhou because of her limited
educational background.
So, in the late 1990s, Zhou and several local enterprisers enrolled in the Party
School of the Central Committee of Communist Party of China, where the
countrywoman first learned about human resources and financial management. Since
then, she continued to invest in education for herself, as well as her staff, to
keep them on the cutting edge.
She invites experts or professors to teach at the company - paying the highest
premiums for the highest quality advice - sometimes for as much as 13,500 yuan
($1,800) per person per day. Currently, there are more than 4,000 accessories
enterprises in the city, 600 of which are run by her former employees. Rather
than reducing prices to remain competitive, Zhou has increased prices to make
room for these small enterprises to survive in the market.
"People of same profession don't have to be enemies," she says.
And she says she doesn't worry about other companies copying her products. "They
follow me so quickly that it only drives me to move even faster," she adds. In
2003, the successful businesswoman was elected as a delegate to the 10th
National People's Congress. She even put up her own money to fund an
advertisement on TV to garnish suggestions from the public so that she could
propose them at the congress. There is no doubt Zhou could enjoy a comfortable
life, especially since her elder son, who will soon complete a master's degree
in business in Britain, has offered to share her burden. But Zhou has no plans
of retiring.
"Running an enterprise is the process of learning and solving problems. From
this point of view, I am still learning," she says.
November 2, 2007
 
Regional freight transport market on
growth path - Quayside cranes....the first 6 eRTGs and 1 dual-hoist tandem-lift
were delivered in early August to DCB - Andrew Milliken joined MTL on July 1st
as Managing Director of Da Chan Bay
All signs point to strong growth in China's freight transport sector, across all
modes, according to Business Monitor International's China Freight Transport
Report for the second quarter of 2007. Over the next five years, freight carried
(measured in million tonne-km) is expected to grow at an averae of 15.6% per
annum, placing China at the higher end of BMI's Asia Pacific and world ranking.
The BMI report states that China scores relatively high on the freight sector
competitive environment, primarily because the market has begun to be opened to
foreign companies in rail, road, sea, air and general logistics. A significant
number of foreign companies, including the larger global players, are all
involved in China's freight transport sector.
Another area worth noting is BMI's assessment of China's labor force. The
official census to take place in China was carried out in 2001. The results
(which have been questioned by western demographers) show China had a total
population of 1.28 billion in 2001, an active population of 737 million and an
activity rate of 57.8%. According to official statistics, China's unemployment
rate is just 3.6%, a figure that excludes workers from state-owned enterprises
who have recently been made redundant, and the millions of Chinese peasant
farmers who work only part of the year. The average wage in manufacturing in
China was 917 RMB (US$110.70) per month in 2002, or 12.5% higher than in 2001.
The BMI report continues to say that the China labor force is comparatively
heavily regulated, according to the World Bank's Employment laws index. Its
score of 47 indicates that regulations are tighter than the East Asia and
Pacific average, and a bit tighter than OECD high-income states. Disaggregating
the data, the regulations for hiring workers are more relaxed than those for
firing workers, with scores of 17 and 57 respectively, which suggests a slightly
less regulated workforce than regional peers.
China, the BMI quarterly report concludes, is expected to undergo a massive
program of urbanization in the next 20 years that could see as many as 300
million peasant farmers leave the land in search of work in the cities. The
challenge will be for authorities to create new jobs for these people.
On the microeconomics side, manufacturing centers continue to boom and reinvent
themselves, with stricter environmental requirements--both government- and
privately-driven, ethical production, more socially responsible labor force
relations, and, most importantly perhaps, the greater understanding of the need
for supply chains and logistics. Dr Victor Fung, chairman of the Li & Fung
Group, at a recent seminar held by the Li & Fung Institute of Supply Chain &
Logistics, said that companies can capitalize on the opportunities provided by
China's burgeoning economic growth through redesigning their value chain to
drive efficiency and performance. Dr Fung said that lessons can be learned from
recent product recalls and defective goods coming out of China, as both buyer
and suppliers ensure that the supply chain contains the checks and balances that
could prevent these type of problems.
The shipping and transport of cargo to and from the manufacturing regions of
China continues to rise as the raw materials flow in and the goods head for the
North American and EU markets. There have been interesting trends in these flows
in the past summer months. In the transpacific, for instance, while imports into
West Coast ports for the first quarter this year were still about 2.4 million
TEUs compared to 982,238 TEUs for exports, the growth rate, however, showed that
exports were growing faster at 4.9% than imports (3.7%). For the shipping trade,
this scenario provides an improved balance to the trade even as some exporters
from the US West Coast ports start to feel the pinch of heightened trade with a
lack of empty boxes or not enough capacity on carrier vessels. And with the
lower dollar, the trade is healthier on the transatlantic as well, as the
European market hankers for more imported goods.
Maersk Line, inarguably the world's largest shipping company (see AXS-Alphaliner
graph), have had to improve capacity management to deal with changing trends in
the world's busiest trade lanes. "Maersk Line has more effectively managed our
capacity this year, following the capacity rightsizing done during the prior
slack season. The contracting season allowed us to make advances on a number of
fronts, not least, improved surcharge collection. While we have not yet seen the
end of this year's peak season demands, it has progressed smoothly. Demand is
high for Maersk Line vessel space to both the US East and West Coasts," said
Charles Wellins, Vice President, Sales, Greater China Area of Maersk Line.
Maersk Line, according to another executive, is in the process of instituting
changes to the way they are doing business, in an effort to boost badly hit
financial results in the past year that continued into the first half of 2007.
The carrier's marketing line now is to aim for top dollar, the higher paying
customers that bring in more business, while sacrificing not-so-businessworthy,
smaller shippers. Hence, the remark on "improved surcharge collection." It is
just one of a number of strategies Maersk Line may be deploying to bring the
business up to scale.
In line with capacity management, Maersk Line pulled out tonnage from the
slowing transpacific trade last year and deployed smaller ships on the
transatlantic trade which begun to show signs of life at end-2006.
However, as Wellins explains, "The Transatlantic trade remains affected by the
oversupply of tonnage following a 23% capacity increase in 2006 against a
marginally growing market. The Eastbound volume has improved during 2007 as a
result of the rate of exchange USD/EURO, whereas the westbound trade is
negatively affected by this development and an overall weakening US economy."
Asia Pacific market still tops - But the freight transport markets in the Asia
Pacific region currently offer one of the most attractive business environments
for the industry worldwide, according to BMI China Freight Transport Report. The
region contains two of the four BRIC (Brazil, Russia, India and China) -
powerhouses of future global growth. Between them, the BMI report states, China
and India combine vast geographical size, large populations, globally
competitive labor costs and as yet untapped infrastructure potential. Though the
Asia Pacific region may not be free of tensions and flashpoints that can
adversely affect the freight sector (e.g. North Korea, China-Japan,
India-Pakistan), strong freight transport growth rates are combined with a very
encouraging infrastructure investment picture across most of the region.
By mode, reports BMI, road haulage will grow as road infrastructure and vehicle
density is extended and as the shift to smaller/higher value loads continues.
Rail freight will benefit from long-distance economies of scale, whether from
the opening up of the Australian hinterland or big projects such as the new Silk
Road route. Shipping, said the BMI report, is being lifted by the surge in
transpacific commodity and manufacturing trade routes, while air freight is
growing on the back of liberalization and the budget airline boom.
China's economy continues to make all the 'fastest growing' lists, and BMI names
it as China's 'strength' that its aconomy grew by 10.4% in 1005 and by 10.7% in
2006. As for opportunities, the BMI report says that China's economic growth is
becoming more broad-based, with consumption and net exports contributing more to
growth as show by fixed asset investments.
In the shipping sector, the development of ports in China, while challenging
Hong Kong's supremacy as the world's busiest port and shipping hub for many
years, is nevertheless good news for shippers, traders and manufacturers to are
contributing to China's fast economic growth.
Andrew Milliken, named as the new managing director of the soon-to-be-opened Da
Chan Bay Terminal One operated by Modern Terminals Ltd of Hong Kong, explains
that there is a huge, pent-up demand in southern China that necessitates
greenfield facilities. "Huge volumes of cargo come out of the southern China,
Guangdong, Shenzhen area and it is this pent-up demand for capacity that led us
to open Terminal One in Da Chan Bay," said Milliken, a seasoned container
terminal manager who most recently came from running HPH regional port business
development in Dubai, including South Africa.
"You don't open a terminal to try and 'steal' some business from the existing
market. You open a terminal because there's a pent-up demand for capacity . As
that capacity is brought online, you obviously look at the demand side to make
sure you're not OVER providing and, at the same time, that you're not UNDER
providing.
"The economy in this (southern) part of China is more buoyant. The economy
requires a more direct, efficient, shipping service. For this, the terminals
provide the landside facilities while the shipping lines provide the carriage.
So it's not a quesiton fo just building on spec, we built DCB because we
believed that the demand is clearly there and has shown that it will continue
for some time.
"If you look at the Chinese government's predictions in their Five Year Plan, we
are talking huge volumes (to be shipped). So somebody has to provide facilities,
and the carriage. So who does it? In many economies, it's done by governments
providing the infrastructure; in some countries (like Hong Kong), it's done by
private investment; or it could also be a combination of both private and
public," observes Milliken.
There are different styles of port development in the different regions of the
world. "In the US and Europe, you're dealing with more traditional, quite mature
facilities. These are usually technically built into the city itself, or the
city had grown around the port. Obviously, expansion for these port facilities
would be more difficult. Environmental laws, for one, are very specific. I
visited Yangshan in Shanghai three years ago. It took the Chinese government
three years to build it, including a 30km causeway and bridge. To do that in
Europe or in the US would take at least ten years in the planning process alone,
before you even dug up the first piece of land."
Even the investor base differs from region to region, said Milliken. "There are
different types of investors going into the terminal business now and they have
pushed the price of the assets up considerably. The investment rush into
terminal development that we are seeing now is somewhat different to companies
like MTL or HPH, or APMT. The (new-style) investment rationale is as a means for
these investors to vary their assets in different ways. And in some places, they
are prepared to pay more to get into the terminal business. Their expectations
of return may be less than the traditional terminal operators.
"So it's very much a changing scene, a very different environment than what it
was three to five years ago. But as far as this part of the world is concerned,
Shenzhen and southern China, we're building faciltiies here to cope with
projected demand. We don't look at the PRD or Shenzhen in terms of a single
port. We look at the whole area: Hong Kong, Shenzhen, Chiwan, Shekou, Mawan,
Nansha-this is one collective region." (See Table Southern Ports)
"If you look at the whole area, you're looking at something comprising between
30 to 40 million TEUs. Even the liners look at this as a segregated market. The
likelihood of all cargo passing through Yantian only, or through Hong Kong, or
though Da Chan Bay alone, is nil. So the liners will deploy the ships to pick up
cargo that goes through Hng Kong, or whatever is on that side or this side of
the Delta.
"And Hong Kong (port) is not going to die because Da Chan Bay has started. The
cargo source for DCB would both be from landside and the estuary. It's not a
question of getting business from other terminals in the Delta. The reason we
are building in DCB is because we believe the demand will requrie these
facilities. Now, whether we build them or not build them, is academic. Somebody
will definitely be building capacity for the Delta region.
"Our catchment area for (DCB) business will very much depend on who are the
customers we have taken on board. We don't generate cargo. We provide an
environment for which shipping lines will want to come to Da Chan Bay. The
surroundings provides the volumes and each of the shipping lines have their own
target areas, particularly in terms of geographic areas or types of customers.
And, to a very large extent, they will lead us to what we need to do to
facilitate that volume getting to Da Chan Bay. We work very closely with our
customers on this. The reason we've built in Da Chan Bay is to satisfy the
demand in the area," said Milliken.
October 29 2007
China Merchants plans Shenzhen hub - Group to spend 3.5b yuan on five-berth
multi-purpose terminal to fend off competition By Charlotte So in Shenzhen
China Merchants Holdings (SEHK: 0144) International plans to invest about 3.5
billion yuan to build a five-berth multi-purpose terminal in Shenzhen by 2010.
The expansion aims to capitalize on robust cargo throughput growth in the port
and fend off competition in the Pearl River Delta, the company says. An
application to build the five berths in Qianhaiwan Port - located strategically
at the first exit of the new Western Corridor expressway between Shekou and Hong
Kong - had been tendered to the government, said chairman Fu Yuning.
Outlining the group's ambitious expansion plan at a press conference in Shenzhen
last Friday, Mr Fu said each berth would cost 700 million yuan to 900 million
yuan. The multipurpose terminal, with a quay length of 2,100 metres, could
handle raw materials, agricultural products or manufacturing goods, he said.
Final approvals are still pending, he said.
Construction of the first berth in Qianhaiwan will begin next year. Upon the
berth's completion, China Merchants will relocate its existing bulk terminal in
Jetty One, Shekou, to the new terminal. Jetty One will be redeveloped into a
passenger terminal by China Merchants' parent.
Shekou's Jetty One and Jetty Two handle 35 per cent of total agricultural
product throughput for Guangdong province. They also handle iron ore imports,
recording 4.7 million tons of ore throughout last year from four million in
2005.
China Merchants, which marks its 135th year this year, faces increasing
competition from other new ports in the Pearl River Delta, where up to five new
container berths are due to come on stream each year until 2010 in Nansha,
Dachan Bay, Yantian Port and Shekou.
Since its rival Nansha Port adopted a low-price strategy to attract domestic
cargo, there had been limited room to raise tariffs in Shenzhen, Mr Fu said. In
contrast, Shanghai Port has announced tariff increases of 10 per cent and 21 per
cent in its two ports from January next year.
"In general, port charges in Shenzhen Port are 200 yuan per container higher
than in Shanghai. So it would be pretty good to have a rate increase in Shenzhen
of 6 per cent next year," Mr Fu said.
"We deserve a rate rise because of the investment we have made to optimise the
logistics at the port."
Mr Fu does not expect the new container ports coming on stream in the region to
outpace demand for his firm's services in the near future. "Port operators here
are sensible investors," he said.
The expansion of Dachan Bay and Nansha ports is expected to add 17 core berths
and a capacity of 15.5 million 20-foot containers by 2010. This will raise the
number of core berths in west Shenzhen and Guangzhou to 33 compared with 15 in
Yantian in eastern Shenzhen.
In the west of the delta, where China Merchants is based, competition would
increase.
Economic momentum and productivity in the region would allow the port to absorb
the new capacity by 2010, Citi Investment Research says in a report.
In the first nine months of the year, China Merchants' operations in Shenzhen
handled 18 per cent more containers from a year earlier, while in Hong Kong,
throughput at seven berths operated by its 27 per cent owned Modern Terminal
rose just 4 per cent.
"In the short term, I don't think Hong Kong needs to build Container Terminal
10," Mr Fu said. "Both the government and the local operators are figuring out
methods to further improve productivity of the existing berths."
He said that transshipments were on the rise in Hong Kong but this kind of cargo
required less depot space than direct cargo and therefore building CT 10 was
less pressing.
China Merchants was a nationwide operator with ports in Tianjin, Qingdao,
Shanghai, Ningbo, Zhangzhou, Shenzhen and Hong Kong, Mr Fu said. Nine new berths
held or invested in by China Merchants in Shenzhen, Ningbo, Qingdao and Shanghai
will come on stream next year and a further six in 2009.
October 26 2007
VeriSilicon seeking US listing
By Liu Baijia and Wang Xu
 Shen Guojun (first from right),
president of property developer China Yintai Holdings Ltd, and Chan Yue-kwong
(second from right), chairman of Hong Kong-based restaurant chain Cafe de Coral
Holdings Ltd, at a press conference in Beijing on Friday. Shen and Chan are two
of the 11 winners of the Ernst & Young Entrepreneurs of the Year China 2007
awards.
VeriSilicon Inc, an integrated circuit (IC)
design house backed by Intel VC, plans to list on the NASDAQ within two years
and will seek a new round of investment. Wayne Dai, chairman and CEO of the
Shanghai-based chip designer, said on Friday he has spoken to NASDAQ executives
twice this year about the listing.
"We believe the period between the Beijing Olympics in 2008 and the World Expo
in Shanghai in 2010 might be good," said Dai, after receiving an Ernst & Young
Entrepreneur of the Year China 2007 award, along with 10 other winners. The
company will also get a new round of investment from backers like IBM and Lehman
Brothers in China and semiconductor investor Vantagepoint Partners in the
Silicon Valley.
He declined to reveal further details. But he said nearly 10 venture capital and
private equity firms hold more than 50 percent of the company after four rounds
of investment - including big names Intel VC, IDG Venture, Legend Capital and
International Finance Corp under the World Bank. VeriSilicon is one of the
largest private chip design houses in China. It posted revenue of $35 million
last year.
Dai said his company has doubled sales for the past three years and its gross
margin is 50 percent - high for a Chinese chip designer due to its focus on
intellectual property rights. The firm holds over 50 US patents. Since
Beijing-based chip designer Vimicro raised $87 million in its 2005 NASDAQ
listing, IC design has become a sought-after area for overseas listings and
venture capital investment.
David Sun, chairman and managing partner of Ernst & Young China, said innovation
and globalization were common traits among the rising generation of
entrepreneurs. "All of this year's winners started their own businesses and
successfully turned their dreams into reality, which is going to encourage the
entrepreneurial spirit in China," said Sun.
Cheung Yan, chairwoman of paper-making giant Nine Dragons, Liu Yonghao,
president of agricultural firm New Hope Group, and Xu Hang, co-CEO and chairman
of New York-listed medicinal equipment maker Mindray, also won awards.
It's the second time Ernst & Young has given the awards in China, which are
based on an independent panel of prominent business leaders.
October 26 2007
Shanghai Introduces Online Inquiry for
Cosmetics Safety
Starting from November 2007, Shanghai will take the lead to implement a
cosmetics safety reporting and access system. With this system, consumers will
be able to inquire online which products have passed safety tests and are safe
to use. The first batch of 50-odd cosmetics brands has already applied for
registration. The work of checking the safety of these products is currently
underway. Leading brands such as Wella and Lanace have already been registered.
Under the new online inquiry system, all the registered products will be given a
special bar code to facilitate inquiries by consumers, with information on the
products posted on the relevant websites. Consumers only need to input the
brand, product name or production licence number to access detailed information
about the product, including the three necessary licenses obtained by the
manufacturer, reports on product quality tests, and effectiveness evaluation
reports. Through such information, consumers can find out whether the products
concerned are legal or safe to use. For products purchased from beauty salons or
specialty stores, consumers can also check online whether or not the supply
channels of the products are legal.
The National Cosmetics Quality Control Committee, Shanghai Beauty and
Hairdressing Association and other organizations have jointly set up an office
for the management of cosmetics safety reporting and access. The office will
join hands with the municipal food and drug bureau, municipal industry and
commerce bureau, and municipal consumer rights protection committee in
establishing a centre for the handling of cosmetics-related complaints.
Consumers may also directly lodge their complaints on the website. The office
will be responsible for compensating consumers if the registered cosmetics
products are tested and found to be problematic by relevant technical
departments.
Shanghai Officially Kicks Off World Expo
Licensing Program
Shanghai Sinnsa, one of the senior sponsors of World Expo 2010, has recently
launched its World Expo licensing programme to recruit the first batch of
manufacturers to produce official licensed products for the event.
At the launch ceremony held in Shanghai, manufacturers of the following product
categories were sought: stationery, garment, accessories, headwear, home
textiles and personal care products. To be eligible, the manufacturers must be
registered in the People's Republic of China and whose business scope should
cover items that are listed in the Catalogue of Licensed Products. They should
have a good reputation and positive corporate image, as well as considerable
operation and financial strength. The companies should also have strong
capability in design, production, sales and service, and have openly expressed
their interest in becoming a licensee.
Shanghai Sinnsa is a joint stock company formed on 6 June 2007 by 20 outstanding
private enterprises engaged in textiles, garment and related industries in
Shanghai and the Yangtze River Delta (YRD) region. The initial investment in the
company was Rmb250 million. According to Zhu Zhengping, chairman and president
of Shanghai Sinnsa and former chairman of Shanghai Shengshun Garments Co Ltd,
the recruitment is open to all manufacturers across the country and not
restricted to Shanghai and the YRD.
Speaking at the ceremony, vice chairman of All-China Federation of Industry and
Commerce Wang Xinkui said Shanghai Sinnsa's participation in the World Expo as a
senior sponsor represented an experiment in private sector participation in key
state projects. Through this experiment, a new service platform for modern
enterprises will be formed. The experiment also acts as a catalyst for the
development of the licensing industry, which will in turn drive structural
changes in the textiles industry.
According to the Registration Report of the World Expo 2010 Shanghai China, the
organiser may license qualified domestic and foreign manufacturers to produce
and sell products bearing the name, emblem and mascot of the Expo. The licensing
model is one that combines sponsorship with sub-licensing. The Shanghai World
Expo Coordination Bureau has recruited senior sponsors who act as sub-licensors.
Currently, there are 12 major categories of licensed products most of which are
daily goods such as home textiles, glassware, household ceramic ware and metal
ware, garments, accessories, stationary, gifts, personal care products, toys,
headwear and travel bags, and the list can be expanded in accordance with
changing market conditions. Senior sponsors Sinnsa Group and Juneyao Group of
Shanghai will each be responsible for developing and producing six categories of
products.
Completion of Xiamen-Shenzhen Railway
Scheduled for 2010
Construction of the Xiamen-Shenzhen Railway linking the two special economic
zones of Xiamen and Shenzhen has recently drawn much attention. According to the
Xiamen municipal traffic committee, the master plan for the railway has been
endorsed by the central government and construction work could start this year
as scheduled.
With Xiamen in Fujian province and Shenzhen in Guangdong province as the
starting and ending points, the Xiamen-Shenzhen Railway forms part of the
Shanghai-Shenzhen Rapid Passenger Line, which is one of the verticals in China's
"Four Verticals, Four Horizontals" rapid passenger lines.
The Xiamen-Shenzhen Railway project is a joint venture between the Ministry of
Railways and Fujian and Guangdong provinces, with a total investment of Rmb41.7
billion. The 502.4 km rail line will run from the new Xiamen Station, the hub of
Xiamen's railway network, to the new Shenzhen Station, Shenzhen's railway hub,
passing through Zhangzhou, Zhangpu, Yunxiao, Zhao’an, Shanwei and Huizhou. As
the Shanghai-Shenzhen Rapid Passenger Line, upon completion, will connect the
Fujian Delta, Yangtze River Delta and Pearl River Delta, the travel time from
Shanghai to Xiamen will be shortened from the current 23 hours to about six
hours, while that from Shenzhen to Xiamen will only take three hours.
It is understood that if the construction of the Xiamen-Shenzhen Railway begins
this year, it could be completed by 2010 as scheduled. By then, the
Xiamen-Shenzhen Railway will join the Fuzhou-Xiamen Railway and Longyan-Xiamen
Railway to make D-trains (high speed trains travelling at a speed of over 200 km
per hour) possible in Xiamen. It will also boost the economic strength of
Shanghai, Fujian, Shenzhen, as well as the coastal area west of the Taiwan
Strait and the central and western regions of China.
October 15 2007
 Hermès
makes a style statement in Chengdu
Just as luxury brands like Bentley Motors and Bulgari have ventured into
Chengdu, Hermès has also been drawn to the city by its phenomenal spending
power.
With silk scarves priced from Rmb2,000 to Rmb9,000 or clothes with price tags of
tens of thousands of yuan, this leading French brand shows Chengdu consumers
what a top marque really means.
Hermès had spent more than a year studying and planning the move before actually
venturing into Chengdu, after establishing its presence in big cities like
Beijing, Shanghai and Guangzhou.
The company discovered that Chengdu not only has a fast-expanding economy but
also growing spending power. It resolved to choose Chengdu as the first stop on
an expansion trail into Western China.
Although changes in consumption may be an important factor, high spending power,
based on economic development, is the ultimate key. The arrival of more and more
top international brands lends proof to Chengdu's fast-growing economy over
recent years, as well as the huge potential of its consumer market.
October 15 2007
Shanghai Stock Exchange Strengthens
Monitoring of Abnormal Price Fluctuations
The Shanghai Stock Exchange (SSE) recently issued the Notice on Further
Strengthening the Monitoring of Abnormal Fluctuations in Stock Trading and
Information Disclosure in order to establish a quick response mechanism for the
dynamic monitoring of abnormal price fluctuations and information disclosure.
The new rules took effect on 1 September.
According to an SSE official, there has been an increase in swing trading,
insider trading and ST (special treatment) share speculation as a result of
bullish trading and rocketing of individual share prices on the securities
market since the second half of last year. In order to curb these irregularities
and effectively prevent market risks and maintain market order, SSE announced
the above notice in accordance with SSE Trading Rules and SSE Stock Listing
Rules.
The notice mainly covers three rules: when a stock without trading limit surges
above 100% or drops below 50% of its opening price on a certain day, this is
considered abnormal fluctuation and SSE has the right to suspend its trading for
up to 30 minutes. SSE will announce the time for the resumption of trading.
When an A-share stock with daily price limits hits the maximum (or minimum)
trading limit for two consecutive trading days and if more than 30% of its total
daily turnover comes from the same player but the listed company does not
disclose any significant events, it is considered to be abnormal fluctuation and
SSE has the right to suspend its trading. Shares can only resume trading at
10:30 am on the day after the listed company has made an announcement. The
abnormal fluctuation index will be recalculated from the date of resumption of
trading.
When an ST-share stock, *ST-share stock or S-share stock hits the maximum (or
minimum) trading limit for three consecutive trading days, it is considered
abnormal fluctuation and SSE has the right to suspend its trading until 10:30 am
on the day after the listed company has made an announcement. The abnormal
fluctuation index will be recalculated from the date of resumption of trading.
In respect of shares with abnormal fluctuations, SSE will on the following
trading day announce the names of the five players that have the largest
cumulative buys or sells during the abnormal fluctuations (the day of temporary
suspension of trading) as well as their buy or sell amounts.
SSE will also urge the listed companies concerned to strictly abide by their
information disclosure obligations and promptly make announcements regarding the
abnormal fluctuations of their share trading in accordance with relevant
regulations.
Completion of Xiamen-Shenzhen Railway
Scheduled for 2010
Construction of the Xiamen-Shenzhen Railway linking the two special economic
zones of Xiamen and Shenzhen has recently drawn much attention. According to the
Xiamen municipal traffic committee, the master plan for the railway has been
endorsed by the central government and construction work could start this year
as scheduled.
With Xiamen in Fujian province and Shenzhen in Guangdong province as the
starting and ending points, the Xiamen-Shenzhen Railway forms part of the
Shanghai-Shenzhen Rapid Passenger Line, which is one of the verticals in China's
"Four Verticals, Four Horizontals" rapid passenger lines.
The Xiamen-Shenzhen Railway project is a joint venture between the Ministry of
Railways and Fujian and Guangdong provinces, with a total investment of Rmb41.7
billion. The 502.4 km rail line will run from the new Xiamen Station, the hub of
Xiamen's railway network, to the new Shenzhen Station, Shenzhen's railway hub,
passing through Zhangzhou, Zhangpu, Yunxiao, Zhao’an, Shanwei and Huizhou. As
the Shanghai-Shenzhen Rapid Passenger Line, upon completion, will connect the
Fujian Delta, Yangtze River Delta and Pearl River Delta, the travel time from
Shanghai to Xiamen will be shortened from the current 23 hours to about six
hours, while that from Shenzhen to Xiamen will only take three hours.
October 11 2007
Forbes: Woman, 26, mainland's China richest
A 26-year-old woman worth $16.2 billion is the Chinese mainland's richest
person, topping a list of tycoons whose wealth has soared amid a boom in stock
and property prices, the business magazine Forbes said Monday. The fortune of
Yang Huiyan - also Asia's richest woman - is based on shares in Country Garden
Holdings Ltd, a real estate developer founded by her father, Forbes said. It
said the company's Hong Kong stock market debut this year made billionaires of
Yang and four other people.
In second place was another developer, Hui Wing Mau, with a net worth of $7.3
billion. No 3 was Guo Guangchang, chairman of a manufacturing, retailing and
real estate conglomerate, Fosun Group, with a fortune of $4.85 billion. Their
rise reflects a sharp rise in Chinese real estate prices over the past year.
Yang also represents an unusual case of second-generation wealth in China, most
of whose richest people are self-made entrepreneurs still in their 30s and 40s.
Her net worth was more than seven times that of last year's richest mainland
person, appliance retailer Gome's Huang Guangyu, who was worth $2.3 billion.
Huang, also known as Wong Kwong-yu, dropped to No 10 on this year's list, even
though his net worth rose by more than 50 percent to $3.6 billion.
Forbes said it compiled its list by looking at shareholdings in public companies
and estimating what holdings in private entities would be worth if public. The
list excludes Hong Kong, home to some the region's richest business people, such
as tycoon Li Ka-shing.
The China list's rankings change sharply from year to year, reflecting the rapid
evolution of the booming economy, which expanded by 11.9 percent in the third
quarter. This year, there were 20 new names among the list's top 40 richest
people, Forbes said.
Yang, who graduated from Ohio State University, was one of 12 real estate
developers among the top 40, Forbes said.
All 40 were billionaires, up from only 15 last year, the magazine said. The
combined net worth of the top 40 also rose sharply, from $38 billion in 2006 to
$120 billion this year.
Yang's father, Yeung Kwok-keung, also known as Yang Guoqiang, grew up in poverty
in Guangdong Province and worked as a bricklayer before becoming a developer in
the early 1990s. In 2005, the press-shy Yeung transferred his shares to his
daughter, who sits on Country Garden's board as an executive director and works
in its logistics activities, according to Forbes.
Forbes said earlier that Country Garden's April IPO was likely to make Yang the
world's second-youngest billionaire, behind Germany's Prince Albert von Thurn
und Taxis. Last year's richest woman, Zhang Yin, founder of Nine Dragons Paper
Co, fell from No 5 to No 11 on this year's list, though her net worth grew by
125 percent to $3.4 billion.
Beijing court hears first
case involving new Property Law
Beijing's first case concerning China's landmark Property Law was put before the
courts on Monday, a week after the law came into effect. A 60-year-old man
surnamed Shen filed a lawsuit to the Beijing Changping Intermediate People's
Court against the Zhongjiaxin auction company for auctioning off this September
six apartments he bought for 1.2 million yuan in 1998 from a Mr. Yan.
Yan was convicted of taking bribes in 2002 and had his property confiscated. The
Intermediate People's Court of Shijiazhuang in Hebei ruled that the houses were
owned by Yan and entrusted the Zhongjiaxin auction company to conduct the sale.
Shen said that if he failed to retrieve his houses, he would sue the
Intermediate People's Court of Shijiazhuang and ask for compensation from the
government.
However the court hearing was deferred because the auction company "didn't
receive the subpoena", according to Li Bing, from the auction house.
"Shen's appeal was in accordance with the fourth and 64th articles of the
Property Law, which ensures an individual's lawful possession of property and
the inviolability," said Wang Liming, head of the Law School of the Renmin
University of China and also one of the drafters of the law.
The law, approved by the national legislature in March after repeated revisions
and an unprecedented eight readings, is aimed to provide equal protection to
both state and private properties
The 247-article law stipulates that no units or individuals may infringe upon
the property of the state, the collective and the individual.
The concept of improving the protection of private property was first brought up
at the 16th National Congress of the Communist Party of China held in November
2002. In March 2004, the NPC adopted a major amendment to the Constitution,
stating that people's lawful private property is inviolable.
October 1, 2007
Landmark property law takes effect October
1 2007
China's landmark Property Law that provides equal protection to both state and
private properties was put into effect on Monday. The law approved by the
national legislature in March after repeated revisions and unprecedented eight
readings is seen as a significant step in the country's efforts to further
economic reforms and boost social harmony.
The 247-article law stipulates that no units or individuals may infringe upon
the property of the state, the collective and the individual. "The law will
inspire people's enthusiasm to create wealth and is helpful for them to fully
enjoy the fruit of reform and opening-up," said Xu Xianming, president of the
China University of Political Science and Law.
To give equal protection to private property by law is in accord with the
Constitution, the proposition of the Communist Party of China and people's
common requests, according to Wang Liming, a professor of Renmin University of
China who participated in the legislation process of the law.
However, the bill had met with doubts and opposition from people who argued
private property should not be leveled with state property.
In response, senior legislator Wang Zhaoguo said during the parliamentary full
session in March that it will be impossible to develop the socialist market
economy or to uphold and improve the basic economic system of socialism if equal
protection is not secured.
"Under China's socialist market economy, all players enjoy the same rights,
observe the same rules and bear the same responsibilities," said the vice
chairman of the Standing Committee of the National People's Congress (NPC),
China's top legislature.
To address public concerns over fraudulent acquisitions and mergers of state
property, the law stipulates that illegal possession, sharing, and destruction
of state property is prohibited. Those who cause loss of state property shall
bear legal liability, according to the law.
The concept of improving the protection of private property was first brought up
at the 16th National Congress of the Communist Party of China held in November
2002. In March 2004, the NPC adopted a major amendment to the Constitution,
stating that people's lawful private property is inviolable.
Sept 22, 2007
Sorry, we screwed up big time!
US-based toy giant Mattel issued an extraordinary apology to China on Friday
over its recall of Chinese-made toys, taking the blame for design flaws and
saying it had recalled more toys for excessive lead than justified. The gesture
by Thomas Debrowski, Mattel's executive vice president for worldwide operations,
came in a meeting with Chinese product safety chief Li Changjiang, at which Li
upbraided the company for maintaining weak safety controls.
"Our reputation has been damaged lately by these recalls," Debrowski told Li in
a meeting at Li's office at which reporters were allowed to be present. And
Mattel takes full responsibility for these recalls and apologizes personally to
you, the Chinese people, and all of our customers who received the toys."
The carefully worded apology, delivered with company lawyers present,
underscores China's central role in Mattel's business. The world's largest toy
maker has been in China for 25 years and about 65 percent of its products are
made in China.
The fence-mending call came ahead of an expected visit to China by Mattel's
chairman and chief executive, Robert Eckert. Following the massive recall,
Eckert told US lawmakers he wanted to see Mattel's mainland inspections first
hand.
Mattel ordered three high-profile recalls this summer involving more than 21
million Chinese-made toys, including Barbie doll accessories and toy cars,
because of concerns about lead paint and tiny magnets that could be swallowed.
The recalls have prompted complaints from China that manufacturers were being
blamed for design faults introduced by Mattel.
On Friday, Debrowski acknowledged that the "vast majority of those products that
were recalled were the result of a design flaw in Mattel's design, not through a
manufacturing flaw in China's manufacturers."
Lead-tainted toys accounted for only a small percentage of all toys recalled, he
said, adding that: "We understand and appreciate deeply the issues that this has
caused for the reputation of Chinese manufacturers."
Sept 21, 2007
 China to determine world economic fate
Former US Federal Reserve Chairman Alan Greenspan predicted in his memoir that
the world's economic fate depends on China and its market economic development
by the year of 2030. "If China continues to press ahead toward free-market
economy, it will surely propel the world to new levels of prosperity，" Greenspan
wrote in "The Age of Turbulence: Adventures in a New World."
"Much of how the world will look in 2030 rests on this outcome," said the
legendary US central bank chief. Greenspan retired in January 2006 after more
than 18 years as chairman of the Fed, the US central bank, which regulates
monetary policy.
He also praised China for creating "a huge change in the world economy" after
shifting toward market economy. "It went into a seriously impressive
disinflation, which brought all interest rates down, made a huge boom in the
economy, a huge increase in assets," Greenspan said in a Fortune interview.
China's economy is enjoying its fifth straight year of double-digit economic
growth, with the growth for the first half of this year hit 11.5 percent,
according to statistics from the National Bureau of Statistics. The country has
soared to be the fourth-largest economy in the world in 2005.
The former chairman emphasized the primacy of markets in his book. The success
of every nation -- big or small -- will depend on the extent to which it allows
free trade and open markets, Greenspan declared. "Even as nations as mighty as
the United States and China vie for economic supremacy in that new world, they
may find themselves partially bending to a force more powerful still: full-blown
market globalization," Greenspan wrote.
Besides China, he also mentioned the UK, France, Germany, Japan, Russia and
India, spending five pages in his final chapter on the outlook beyond America.
Devoting most space to the UK, Greenspan praised the leaderships of Tony Blair
and Gordon Brown, predicting that Britain "should do well." "If Britain
continues its new openness (a highly reasonable expectation), it should do well
in the world of 2030," he wrote.
Russia needs to "fully restore the rule of law" to develop further, and India
has "great potential," he added. Japan's $4.5 trillion-economy may find it hard
to counter the loss of its ranking, given that it has an "even less promising"
demographic future than Europe's, Greenspan said.
Sept 20, 2007
House prices in major Chinese cities up 8.2% in August
House prices in 70 large and medium-sized Chinese cities were up 8.2 percent in
August compared with last year, as the rising trend continues to show no sign of
stopping, according to latest statistics released on Wednesday. The rise
actually hit a new high and was 0.7 percentage points higher than the July
figure, according to a report by the National Bureau of Statistics (NBS) and the
National Development and Reform Commission.
The prices of newly-built commercial housing units were up by nine percent in
August, 0.9 percentage points higher than the rise in July. The prices of
low-cost housing rose 3.1 percent and the prices of luxury housing went up ten
percent.
The cities of Beijing, Shenzhen, Beihai and Urumqi saw price hikes of more than
ten percent, with Beihai the highest at 18.2 percent. The housing prices in
Beijing went up 13.5 percent and the prices in Shenzhen were up 17.6 percent.
Prices of second-hand houses in those cities were up by 7.8 percent.
Rising house prices have been a major concern of the Chinese people in recent
years as new houses are too expensive for most urban residents. Ordinary
consumers are often scared into buying a house for fear that they will pay even
more if they keep waiting as prices continue to rise.
The Chinese government has pledged to tame the wild property market but house
prices have rocketed over the last few years despite round after round of
government measures including restrictions on housing ownership by foreigners.
Speculation by domestic and overseas investors has been blamed as one of the
main reasons for the price hikes. China's real estate investment soared 28.5
percent from a year earlier to 988.7 billion yuan (130.6 billion U.S. dollars)
in the first half of 2007, according to the NBS.
Analysts attributed the rising investment to booming housing demand, excessive
liquidity and robust housing price hikes.
Sept 10, 2007
The role of international managers By You Nuo
The London Financial Times is right in describing the departure of Phil Murtaugh,
former vice-president of Shanghai Automotive Industrial Corporation (SAIC), as a
"blow" to the Chinese company. Murtaugh is joining Chrysler, taken over by
Cerberus Capital management last month, to be the new head of its Asian
operations. The announcement came only one day after Chrysler enlisted Toyota's
former North American head to join its senior management team.
But what about SAIC, China's largest carmaker? What will happen, in particular,
to its ambitious international plans? Business observers are eager to learn from
SAIC's executive team about the necessary adjustments it is going to make.
Rarely does one person's change of job arouse so much interest. It shows how
rules in the world of business have changed. A successful regional operation,
especially in a rapidly growing area of global business, can be more important
for an international company than many of its other operations.
Extensive regional expertise, which Murtaugh gained from heading GM's China
operations in the 1990s and from facilitating SAIC's buying of some of the
assets of the British company, Rover, two years ago, and managing its investment
interests in the South Korea carmaker Ssangyong, will be strategically important
for a company that is considerably weak in its Asian operations.
But what can SAIC learn from this development? It has nothing to regret, of
course. It did the right thing. By hiring a professional it made much progress
in building up its business. As reported widely in the Chinese language press,
it may be close to a merger deal with Nanjing Automotive by relying on the
strength it has gained from its acquisition of Rover's assets.
If the company had one team of international executives, instead of just one, it
would perhaps be doing even better in international expansion. This year has
been an auspicious one, due to capital market fluctuations and the cheap dollar,
for foreign companies, including those from developing countries, to buy assets
in the United States. The Indians and Arabs are doing it.
However, few Chinese companies, especially the private ones, are seen to be as
active as their counterparts in other parts of Asia. One reason is that Chinese
companies do not usually have a team of international managers. Few of them have
high-profile foreign executives as SAIC, a State-owned enterprise, once had.
Indeed, except for Lenovo, China's largest computer manufacturer, very little
has been heard from the companies that are operating overseas about their
international management teams.
The most incomprehensible case may be TCL, one of China's largest television and
home appliance makers with its headquarters in South China's Pearl River Delta.
Ever since its acquisition of some French corporate assets (supposedly useful
for expanding into the EU market), the company has yet to report any progress in
building up its international team. The information that it has given to the
public so far, other than discouraging financial figures, is about frequent
changes to its Chinese executive team.
To compete in the global market, Chinese companies need to learn to keep not
just one or two, but hundreds or thousands of international managers.
Shooting guide: China Written
by Clifford Coonan
China has something for everyone when it comes to making movies -- deserts, rain
forests, stunning lake scenery and bang-up-to-date facilities at studios such as
Hengdian, which houses the sets of ancient imperial cities, 1930s Shanghai and
contemporary scenes.
On the downside, it is heavily regulated, its censors have a heavy hand, and it
is wary of foreign input.
Making movies in China can be a rewarding and financially savvy decision -- the
key is to proceed carefully with both eyes open.
One thing China has no shortage of is labor. China has excellent crews, with
topnotch training in the old Communist studio system; labor and equipment are
cheap and readily available.
China's main production incentives are related to its low cost and sophisticated
infrastructure. There are tax breaks for co-productions -- they are taxed at the
10% corporate tax instead of 25%. There is no restriction on percentage of
co-production sharing, no restriction on filming locations and a 20-day approval
process for a project. However, one-third of a pic's cast must be from China,
Hong Kong, Taiwan or Macau.
"We improve our production facilities every year, especially lighting and
cranes, and I'd say our facilities are as good as anywhere in the world by now,"
says Zeng Yuling, spokesman for Hengdian World Studios.
With 13 shooting bases for a total area of 815 acres, around 50 films are shot
at Hengdian every year as well as scores of domestic TV series.
"Most foreign films cooperate with local producers, such as Huayi Brothers, as
it makes it more convenient to get through the process of examination and
approval," Zeng says. Polybona is local another Chinese production giant that
Western producers can tap into.
War epic "The Children of Huang Shi," starring Jonathan Rhys Meyers and Radha
Mitchell, shot at Hengdian using some 500 extras -- sometimes more. Shooting in
China with a Chinese crew -- indeed, with very few non-Chinese involved at all
-- allowed the producers to make the picture happen.
"We couldn't have done this movie as a Western production," says pic's German
producer Wieland Schulz-Keil.
Bonus: The People's Liberation Army does a great sideline in suiting up and
playing a rampaging horde from the Warring States period.
Shot there: Roger Spottiswoode's "The Children of Huang Shi"; Marc Forster's
"The Kite Runner," in Kashgar, western Xinjiang Province; "Dead or Alive,"
helmed by Cory Yuen; "The Restless," helmed by Jo Dong-oh.
China in the spotlight at MIDEM - China
will be the country of honor at the 2008 edition of the giant MIDEM music
market.
The 42nd MIDEM will be held in Cannes (Jan 27 – 31, 2008). Like VarietyVariety
Asia, owner Reed Midem is part of the Reed Elsevier media conglom. and Organized
in partnership with the Chinese Ministry of Culture, China will host the MIDEM
opening night party, on Jan 27 in the Martinez Hotel and will showcase a
selection of top Chinese talent.
The country’s huge potential for the music industry will be highlighted at
conferences bringing together Chinese government officials and industry execs.
China will also have a dedicated country pavilion at the show.
"We are delighted to honor China at MIDEM’s 42nd edition and to offer insight
into this vast market to our clients," Dominique Leguern, MIDEM Director said.
"Chinese consumers are showing particular interest in mobile-delivered music
products and the potential for growth in China is huge. MIDEM will not only
allow our international clients to deepen their understanding of the Chinese
market and make new business contacts, but it will also provide a showcase for
exciting Chinese talent to the 10,000 music industry executives who attend the
event."
According to recent research the Chinese entertainment and media market,
including the music industry, is expected to grow from $90 billion in 2007 to
$137 billion in 2010.
Sept 9, 2007
 U.S.
computer chip giant Intel Corp. began on Saturday to build its first chipset
plant in Asia, which involves 2.5 billion U.S. dollars in the first stage
investment.
Intel Chairman Craig Barrett attended the ground breaking ceremony of the plant,
which is located in the Dalian Economic and Technological Development Zone in
northeast China. Barrett said at the ceremony that Intel chose Dalian because it
is a perfectly suitable location for the plant. "Intel will use its advanced
equipment and technology to build an environment-friendly computer chip factory
in the city, and promote the semiconductor manufacturing industry in China," he
said.
Steel structures and other framework works have been in place at the factory
covering 160,000 square meters. Kirby Jefferson, general manager of the plant,
said they have started recruiting staff from China and overseas, and are
concentrating efforts on constructing the new plant. The project, which was
announced in March this year, is Intel's first chipset factory in Asia and part
of its network of eight such facilities worldwide. The plant will go into
production in 2010.
The ceremony was also attended by some senior officials including Zhang
Xiaoqiang, vice minister of the National Development and Reform Commission (NDRC),
China's top planning body, and Xia Deren, mayor of Dalian. "The integrated
circuit sector is one of the leading industries in China. The Chinese government
has been furthering the opening-up and technological upgrading of the industry.
I think Intel has made the right decision," Zhang said.
"Intel's Dalian plant is a new breakthrough of economic and technological
cooperation between China and the United States, and it will also be a push for
the development of China's northeast, a former heavy industry base," said Xia.
The city government of Dalian estimates the plant can provide about 1,700 jobs.
The new factory, dubbed "Fab 68", will use 90-nanometer technology, an advanced
chip-making method that measures its work 90 billionths of a meter, the most
advanced technology that the U.S. government has licensed for export, Paul
Otellini, Intel's president and chief executive officer, said at a press
conference in Beijing in March. Intel's investment is part of growing foreign
investment in China's computer and other technological fields.
The Chinese government encourages foreign companies to establish more research
and development centers in China, Chinese Premier Wen Jiabao said at the opening
session of the Inaugural Annual Meeting of the New Champions hosted by the World
Economic Forum on Thursday. China will unswervingly stick to its policy of
opening-up and protect foreign investors' legal rights by improving concerned
laws and regulations, Wen said.
Sept 7, 2007
The Importance of Local Expertise
Baird Capital Partners got a lesson in China's cutthroat business culture when a
plastic-molding company it owned tried to set up a joint venture there. While
reading the fine print of an agreement between Xaloy Inc. and a local
manufacturer, Baird Capital came across a clause indicating that the Chinese
entity planned to set up a sister company with access to Xaloy's proprietary
technology. Baird, a unit of Robert W. Baird & Co., slipped a noncompetition
clause into the agreement and the other party pulled out. According to Baird,
the local company wanted to copy Xaloy's intellectual property and set up its
own operation. Baird says it might not have picked up on the ploy if it hadn't
had a team of investment professionals embedded in the country.
"You can't manage Asia from afar-the laws are evolving, the culture is
evolving," said Andrew Brickman, a partner with the Milwaukee firm. "The most
viciously competitive market in the world is Asia." It's also one of the most
complicated markets. But Asia is increasingly an essential ingredient of doing
business for many midmarket companies. That combination is prompting more U.S.
midmarket buyout firms to open offices in China and help shepherd their
portfolio companies through the tricky process of sourcing goods and
establishing manufacturing sites in the region.
While megafund managers such as Carlyle Group and Blackstone Group LP have had a
presence in China for years, only recently have their midmarket colleagues
followed suit. At least four have opened offices in China in the past year or
so: American Securities Capital Partners LLC, Sun Capital Partners Inc.,
Anderson Group and Hammond Kennedy Whitney & Co. They join a small number of
midmarket firms that have been there for longer, including Baird and Blue Point
Capital.
There's no blueprint for setting up shop, with the new entrants varying in how
they pay for their new branches and how many people they commit to the effort.
Some firms, like Anderson Group, charge their portfolio companies fees to
support the new offices. Others, like American Securities, rely on the general
partners to absorb the costs.
These firms say that expanding overseas is no easy task, as reliable talent is
hard to find and office space in cities such as Hong Kong and Shanghai is
expensive. Becoming global also puts stress on a firm's culture, as lengthy
overseas flights and 6 a.m. conference calls become a day-to-day reality.
But they add that midmarket investors have no choice but to pay attention to
China as U.S. manufacturing shifts overseas.
Having an office in China "gives them a competitive advantage in actually
winning deals in the U.S." said Jim Lawson, managing director and co-chairman of
Lincoln International, an investment bank. "Private-equity firms are trying to
distinguish themselves in some way. This Asian play is a way to distinguish
yourself."
For Anderson Group, its China office represents a major change in strategy. For
most of its 27 years in business, the firm took pains to avoid investing in
companies vulnerable to competition from China, considering the region a threat.
That changed in 2005, when it made a play for TexStyle LLC, a U.S.-based bedding
and curtain maker with facilities in Shanghai. The investment opened the firm's
eyes to the advantages of sourcing goods in the region, prompting it to
establish the office.
"We shouldn't be looking at China as a strategic threat," said Corey Gaffney, a
partner with the firm. "It really should be an opportunity."
Sept 5, 2007
China Allows Customs Duty Deposit Payment
by Letter of Guarantee
On 5 September 2007, the Ministry of Commerce (MOFCOM), General Administration
of Customs (GAC) and China Banking Regulatory Commission issued Announcement
No.71, allowing enterprises engaging in processing trade to pay customs duty
deposits by cash, letter of guarantee or several other methods.
According to Announcement No.44 issued by MOFCOM and GAC on 23 July 2007,
enterprises in the eastern region engaging in the processing trade of products
under the restricted category are required to make "actual payment" of customs
duty deposits. Announcement No.71 further specifies the payment methods of
custom duty deposits.
For details of Announcement No.71 in Chinese, please visit:
http://www.mofcom.gov.cn/aarticle/b/c/200709/20070905062889.html
Sept 6, 2007
Quality Labels Required for Food Exports
from 1 September
Food exports must bear inspection and quarantine labels on their packaging or
else they may not be exported after 1 September. According to an announcement
recently published by the General Administration of Quality Supervision,
Inspection and Quarantine (AQSIQ), all food exports that have passed inspection
and quarantine by the entry-exit inspection and quarantine authorities must bear
the "CIQ" (China Inspection and Quarantine) mark. However, this requirement does
not apply to bulk food or food with packaging that cannot be so labelled.
The packaging must also carry information such as the producer's name, health
registration number, product name, batch number and production date so that any
quality problems can be traced to the source.
The measure applies to food such as aquatic products and their processed
products, animal and poultry, wild animal meat and their products, sausage
casings, eggs and egg products, edible animal fats and oils. Other matters
relating to quality labeling will be handled in accordance with the Measures
Governing the Administration of Entry-Exit Inspection and Quarantine Labels.
With effect from 1 September 2007, all export
food that has passed inspection by China's entry-exit inspection and quarantine
authorities must bear inspection and quarantine labels on their sales packaging
and transport packaging. According to Lin Wei, deputy director of the Import and
Export Food Safety Bureau under the General Administration of Quality
Supervision, Inspection and Quarantine (AQSIQ), the passing rate of Chinese
export food is over 90%. AQSIQ will continue to exercise proper safety control
over export food.
According to statistics compiled by quality inspection departments, the US
imported 89,459, 81,754 and 94,442 shipments of food from China in 2004, 2005
and 2006 respectively. Of these, FDA detained 925, 845 and 756 shipments
respectively, in other words, the passing rate for those three years was 99.0%,
99.0% and 99.2% respectively.
During the same period, China exported 324,245, 279,156 and 275,446 shipments of
food to Japan respectively. Japan's Ministry of Health, Labour and Welfare found
492, 395 and 459 shipments respectively to be below standard, in other words,
the passing rate was 99.9%, 99.9% and 99.8% respectively. China exported 96,988,
87,464 and 91,322 shipments of food to the EU respectively in the three years
from 2004 to 2006. The EU found 151, 71 and 98 shipments respectively to be
substandard, suggesting a passing rate of 99.8%, 99.9% and 99.9% respectively.
Food in Hong Kong mainly comes from the mainland. According to the second food
safety report published by the Centre for Food Safety under the Food and
Environmental Hygiene Department this year, results of two large-scale sample
tests of food conducted by the Hong Kong government this year showed overall
passing rates of 99.2% and 99.6% respectively. In recent years, delegations from
various countries and regions, including Europe, the US, Japan, South Korea and
Southeast Asia, visited China to inspect its export food management system, and
they were all satisfied with the production and processing of Chinese food for
export, the quality and safety of Chinese food products, as well as the
management by the Chinese government.
In order to ensure food safety, AQSIQ has made great efforts to look into
problems that may be present in food for export and devised relevant measures to
tackle the problems. First, inspection of food for export will be tightened at
ports of exit and the inspection rate will be raised. Food products will be not
cleared if discrepancies between the product and the description are found or if
the food has quality and safety problems. Warning will be issued through AQSIQ's
website and the inspection rate of all food declared by the manufacturer,
inspection applicant and agent will be raised. Second, inspection on toothpaste
and other products not subject to mandatory inspection will be tightened and
target-specific control measures will be taken. Third, all export food products
that have passed inspection by the entry-exit inspection and quarantine
authorities are required to bear inspection and quarantine labels on their sales
packaging and transport packaging with effect from 1 September 2007. Fourth,
upon receiving reports from importing countries regarding products found to be
below standard, prompt action will be taken to double-check the products,
conduct analysis, dispose of the substandard goods and exercise effective
control. Fifth, a blacklisting system will be implemented, whereby enterprises
engaged in illegal exports will be punished according to law and blacklisted,
and their names will be announced on AQSIQ's website.
China to Phase Out "National II Standard"
Light Vehicles
In line with the regulations of the State Environmental Protection
Administration (SEPA), China will stop the sale and registration of light
vehicles that barely meet the emission limits of the China II standard
(equivalent to the EU II standard) after 1 July 2008.
In fact, China has stopped approving the production of China II standard light
vehicles after 1 July 2007. In light of this, automobile manufacturers should
make production and import plans with their auto parts suppliers during the
transitional period up to 30 June 2008 to ensure that they stop producing and
importing such vehicles before 30 June 2008.
SEPA approved the promulgation of the China III standard (equivalent to EU III
standard) on vehicle exhaust emission limits in April 2005. The China III
standard has since been enforced nationwide to strengthen emission control.
China is now a leading auto consumer and producer in the world. The rapid
development of its automobile industry has brought tremendous pressure to bear
on environmental protection and energy supply. Making sure that vehicles on the
road are environmentally-friendly and energy-efficient is of great importance to
achieving the goal of saving energy and reducing emission. The implementation of
the China III standard not only helps control car pollution but facilitates the
extensive application of new energy-saving and emission-reducing technology and
advanced engine technology as well as increases the competitiveness of the auto
industry.
In a bid to implement the requirement of "strictly enforcing the China III
standard" put forward in the Notice of the State Council on Printing and
Distributing the Comprehensive Work Plan for Energy Saving and Emission
Reduction, SEPA will tighten inspection of the environmental production by
automotive enterprises and ensure that all vehicles produced comply with
emission standards. Non-compliant enterprises will be punished in accordance
with the relevant provisions of the Law on the Prevention and Control of
Atmospheric Pollution. SEPA will also assist the departments concerned in
promoting the use of low-sulphur fuel.
Sale of Small Workshop Food Products
Banned in Supermarkets
The Administration of Quality Supervision, Inspection and Quarantine (AQSIQ)
recently announced a set of opinions on strengthening supervision over food
products made by small workshops. The opinions require operators of small
workshops to declare that their "products will not enter shopping malls or
supermarkets for sale".
The opinions underpin three basic supervision systems for food products in
China. First, a new set of basic requirements in terms of quality, safety and
hygiene will be enforced. Small workshop operators failing to meet the new basic
requirements within the specified time limit will be banned from production.
Second, operators of small workshops engaged in food processing are prohibited
from selling their products outside of county-level administrative districts and
at shopping malls and supermarkets. Third, small workshop operators must make
pledges that: non-edible substances or recycled food will not be used as
ingredients, additives will not be used excessively, their food products will
not enter shopping malls and supermarkets for sale, their food products will not
be sold outside of their permitted districts, and their food products must meet
basic safety and hygiene standards.
The opinions provide a definition for small-scale food processing workshops and
stipulate that supervision over these workshops should be handled as a
dedicated, location-specific task focusing on four areas. First, operators
making and selling counterfeited, poor quality food products and using
non-edible substances as ingredients will be strictly dealt with. Second, active
support will be given to qualified small-scale food processing workshops to help
them obtain food production licence. Third, small-scale food processing
workshops which have developed certain strengths will be consolidated to form
regional clusters. Fourth, food processing enterprises that are without health
licence, business licence or food production licence will be closed down
resolutely. The target is to reduce the number of small-scale food processing
workshops by 50% by 2009 and to stamp out all unlicensed food makers in China by
2012.
According to an AQSIQ official, so far inspection has been carried out on
448,153 enterprises across 30 provinces, autonomous regions and municipalities
(except Tibet). It was found that among these, 78.7% (or 352,815) of them have a
workforce of less than 10 people; 49.8% (or 223,297) do not possess all the
required licences; and 36.6% (or 164,149) do not have any licence at all. Major
food products include soya products, rice, wheat flour, rice wine and edible
vegetable oil.
Following the rectification campaign in the past few years, a total of 19,424
small-scale food workshops have ceased operation or switched to other
businesses; 8,814 were ordered to stop operation; 19,317 were reorganised
through merger and acquisition; and 206,739 have signed food quality and safety
pledges. In addition, 5,385 have managed to meet market entry requirements after
rectification and have obtained or applied for food production licence. Another
5,631 were closed down after failing to rectify within the specified time limit.
Among workshops located in the remote rural areas which do not meet the market
entry requirements but are producing food products that are closely related to
people's lives, after the local government authorities and quality inspection
departments at various levels have jointly evaluated their situations taking
into consideration measures such as stricter supervision and geographical
restriction on sales, 36,699 small workshops were tentatively allowed to stay
on. Meanwhile, 26,726 small workshops that were without production licence and
had violated rules and regulations were clamped down.
Sept 5, 2007
 Two-way street -
As the mainland boom continues, its key role as a driver of western exports is
often overlooked By John Leicester
The argument that China is stealing jobs from the west is lost on French
entrepreneur Jean-Louis Desjoyaux. He is focused on meeting orders piling up
from wealthy Chinese for his swimming pools, which are made in France. Mr
Desjoyaux's 210 employees in France have 800 pools to produce for private
Chinese clients, and sales are up 90 per cent this year. Mr Desjoyaux opened his
first outlet in Beijing in May and expects the mainland to rival Europe as a
market within a decade - buying 10,000 of his pools each year. "It gives me
shivers, seeing our name on a store in Beijing," he said. "It's just
extraordinary."
The image of newly minted mainland millionaires lounging in pools
machine-pressed in the French industrial town of Saint-Etienne pokes a hole in
the belief that China poses mostly a threat to workers in the west and that
almost everything may one day carry a "Made in China" label. The fear of China
comes largely from its startling growth. This year, for the first time, the
mainland will be the largest contributor to global economic growth, the
International Monetary Fund says. And by the time of the Beijing Olympics next
August, the mainland's economy is expected to zoom past Germany's to become the
world's third-biggest, after the US and Japan.
To detractors, these accomplishments are reminders that the mainland boom is
putting western workers out of work and polluting the environment, as it floods
the world with cheap goods made with cheap labour. Recent scares about tainted
food and substandard toys have further hurt China's image.
"There have been more negatives as a result of trade with China than positives,"
said John Sweeney, president of the AFL-CIO, the largest US labor federation. "Globalisation
as it exists is not working for working people."
Yet leading economists, chief executives, independent experts and even some
labour leaders suggest that there's another side to the China story that is
being overlooked amid the alarm about China's rise. Although it is a massive
exporter, the mainland imports a great deal - creating a growing market for
western companies. And despite growing concerns about quality, China's
low-priced goods can still make life better, or at least cheaper, for consumers
elsewhere.
For generations, western entrepreneurs dreamed of the wealth that China's
millions seemed to offer. And yet, for generations, China's poverty and, later,
Mao Zedong's xenophobic communism turned those dreams sour. One reason Britain
sold opium to China in the 1800s was because Chinese weren't interested in much
else the west had. "I set no value on objects strange or ingenious, and have no
use for your country's manufactures," Emperor Qian Long wrote to Britain's King
George III in 1793.
Today, China is buying up everything from western nickel and expertise to Airbus
aircraft and US$200,000 made-to-order gold watches from Louis Vuitton. The
French luxury label has 16 stores on the mainland and plans for five more this
year. Those long-held western get-rich dreams are being realised from the
world-shaking economic takeoff unleashed by Deng Xiaoping's decision in the
1970s to throw open China's doors.
The mainland is now the world's third-biggest importer, behind Germany and the
US, according to the World Trade Organisation, with the mainland's imports
rising 20 per cent last year to US$792 billion.
The mass migration of mainland farmers to cities is also creating a promising
market for western companies that provide the building blocks of urban
infrastructure - cement, trains, telephone networks, electricity plants, water
treatment and the like. About 21 million Chinese now get water treated in plants
managed by France's Veolia Water or run with Veolia technology.
"Clearly, for some sectors, competition from China is going to be terrible,"
said chief executive Antoine Frerot. "But for others, the Chinese market will be
fabulous. You can't contest the Chinese desire to no longer be poor."
Poverty is already just a memory for millions of well-heeled mainlanders. In the
next 20 years, the mainland's consumer market will become the third-biggest
after Japan and the US, with the world's largest middle class of 612 million
people, according to consultants McKinsey & Co. China has surged past Japan to
become the world's second-largest vehicle market after the US. Rolls-Royce this
year added 50 staff at its car assembly plant in Britain in large part to meet
demand from the mainland.
China imports not just to feed its consumer market but also to keep its
production machine rolling. Consider sophisticated machine tools, used to
transform metal into products such as cars that the mainland is churning out by
the container-full. One in five machine tools produced in the world ends up in
China, according to industry newsletter Metalworking Insiders' Report. That has
meant multiple trips to Chinese trade fairs for Gerhard Hein, economic chief of
the German Machine Tool Builders' Association.
In China, "they do not think about people, they do not think about the
environment," Mr Hein said. "They only think of increasing material welfare,
increasing production, increasing incomes, increasing, increasing. It is a kind
of hyperventilation. That frightens me a little bit. On the other hand, the mere
size of the market impresses me."
It is the staggering speed and scope of China's growth that worries many in the
west. Chinese growth has outstripped that of Britain during the Industrial
Revolution and that of the US during the 1800s, according to the World Bank.
"Even though China is not the dominant force in the world's economy, the shock
it is administering to the world is unprecedented," the bank said in a January
report.
One of the places that shock is felt most is among workers making products that
the Chinese manufacture more cheaply, such as the 169 employees - almost all
women - laid off from the Arena swimsuit factory in southwestern France. The
factory closed in March, with production shifting to China and Tunisia. British
fashion house Burberry and US sweet maker Hershey joined the parade of companies
closing western factories and shifting production to China.
It didn't matter that many of Arena's seamstresses had worked there for decades
and had no other skills, or that they made suits for France's Olympic swim
champion Laure Manaudou. The simple fact was that mainland workers cost less.
"They are sucking everything away," said Francisca Bouquey, who had worked at
the factory for 35 years. "All trades. It's not just clothes. That scares us."
Ms Bouquey noted that if she retaliated by boycotting Chinese goods, there would
be little left to buy.
Labour leaders say western working conditions are being dragged down by
competition from unprotected, often poorly paid mainland workers. About 465
million mainland Chinese still live on less than US$2 a day.
"There are winners, there are losers, but the overall effect is that China is
dragging something down in terms of decent work," said Guy Ryder, general
secretary of the 168-million-member International Trade Union Confederation.
But studies in Europe and the US suggest that actual job losses are not as
severe as many think. The US Congressional Research Service said 2004-05 figures
suggest that no more than 12,000 to 20,000 US workers per year - a tiny share of
the US labour force of 149 million workers - lose jobs because their work is
sent outside the US. Even if one assumes that all those jobs went to China, when
balanced against jobs created by trade with China, "it is reasonable to believe
that the impact is either a very small net job loss or a net job gain", the
report said.
A big factor in the China debate is that it is easier to track job losses than
gains. It is not easy to prove that shifting jobs to China can help western
companies become more competitive, saving them money they can plough into
developing products that create growth and new jobs. "You can't so easily find a
group of women and say, `Ah, ha, here are the winners'," said OECD employment
expert Paul Swaim.
Similarly, it is easy to point to China's drawbacks as a source of consumer
goods, with scares about tainted food and, recently, a furore about toys made
with lead paint or flawed parts. Yet China also supplies millions of western
consumers with shoes, electronic goods and toys that only seem to get cheaper.
"Lower-income folks in America probably benefit to the tune of a 7 per cent
increase in their income from the availability of cheap goods from China," said
William Overholt, director of the Centre for Asia Pacific Policy at the Rand
Corporation, a US think-tank. "That's more than you can ever imagine any welfare
program contributing."
Aug 31, 2007
Toymakers angered by claims of labor abuse
By Chen Hong and Li Wenfang
SHENZHEN: Toy manufacturers have dismissed recent criticism of "brutal working
conditions" leveled by a US-based workers' rights group. "The foreign
organization does not understand how difficult it is for us to find and keep
skilled workers because of stiff competition.
"We have tried every means to improve the living and working environment of
workers," Mark Yi, Hong Kong owner of a toy factory in the Chenghai District of
Shantou, Guangdong Province, said. "My company now offers at least 30 to 50
percent higher salaries than it did three or four years ago, but we simply do
not have enough workers during peak seasons."
China Labor Watch said on August 21, that following several months of
investigation, it found "brutal conditions" and labor violations at eight
Chinese factories that produce toys for big multinationals, including Walt
Disney, Bandai and Hasbro.
"Wages are low, benefits are nonexistent, work environments are dangerous and
living conditions are humiliating," it said.
Cai Fang, director of the population and labor institute of the Chinese Academy
of Social Sciences (CASS), said it was not right to make such a judgment.
"Workers' wages are based on market demand and the country's economic
development. Making a comparison between countries at different development
stages, like China and the United States, does not lead to a reasonable
assessment," Cai told China Daily.
"We cannot neglect the fact that many Chinese cities have set a minimum income
level for workers and that level has been improved year by year." Workers are
totally free to choose their employment, Cai said.
"If they are not satisfied with their wages, working or the living conditions,
they are free to seek other employment," he said. Zhang Shuhua, a senior
researcher with the CASS Guangzhou, called on international buyers not to
squeeze the profits of toy manufacturers too much.
"Profits are already very low. Chinese toy manufacturers are forced to lower
their costs on raw materials," Zhang said.
Ronald Ng of Global Sources, a US company that hosts events in China for Chinese
suppliers and foreign buyers, said the profit margin of most toy companies was
not more than 10 percent. "In fact, 10 percent means a very good performance,"
he said.
The Guangdong Federation of Trade Unions said it was difficult to increase
workers' wages substantially given the low-profit margins, and price bargaining
by overseas buyers. However, the working environment and welfare of workers in
the province has improved, the union said.
Today the industry is governed by better supervision, a tightening of work
safety regulations and adherence to workers' rights, the union said.
Guangdong is China's largest toy export market. Exports last year totaled $14
billion.
Aug 28, 2007
Product safety flap has
upside for mainlanders By Wang Xiangwei
For years, mainlanders have been resigned to the fact that commodities
manufactured for export are synonymous with higher quality and better design,
with some shops even doing a roaring trade in rejected clothing. Indeed,
authorities have long exercised tight control over the quality of exports, not
only for commercial reasons but also to maintain the mainland's reputation. By
comparison, quality control over commodities for domestic consumption is
considerably more lax. It is not uncommon for factories that manufacture the
same products to have double standards - with higher quality for exports.
While this may sound politically incorrect or even outright cynical, the truth
of the matter is that consumers will have to thank Americans for the improving
quality of their domestic products.
Following a spate of embarrassing product recalls and contamination scandals
involving mainland products in the United States and other countries, Beijing is
launching a four-month nationwide crackdown on unsafe food and substandard
products.
Vice-Premier Wu Yi , who headed a hastily established national taskforce on
product quality and food safety, called for a "special war" to safeguard the
mainland's reputation.
In a speech on Thursday, Ms Wu outlined eight tasks and 20 goals to improve
product quality and safety, including a comprehensive licensing system and
tougher punishments for transgressors.
But those measures are not only aimed at exports, they cover all products.
While overseas media and foreign consumers may still need to be convinced,
mainland consumers have every reason to be thankful. They have been by far the
biggest victims of substandard or fake products and will be the biggest
beneficiaries.
Food safety has long been a major domestic concern, with the official media
filled with reports of food scandals and scares - duck eggs contaminated with
carcinogenic dyes, turbot treated with banned antibiotics and bean curd sheets
containing cancer-causing chemicals. The worst case occurred in 2004, when
mainlanders were shocked by revelations that a group of unscrupulous businessmen
had manufactured and sold fake baby formula that led to dozens of children dying
in Anhui province . None of those outrages appeared to cause much concern for
the leadership in Beijing, nor did they lead to a comprehensive crackdown like
this one. Ironically, the international concerns over product safety were first
ignited by reports that dogs in the United States had died after eating pet food
tainted by a mainland-made ingredient.
Producers put under close
watch
By Zhao Huanxin
The quality watchdog Monday vowed to come down hard on producers of substandard
goods while insisting that different national standards and inaccurate data have
also led to a large part of exports being pegged as "defective". "We endorse
enterprises' recall measures. We'll strictly scrutinize producers and punish
(those churning out shoddy or unsafe products)," watchdog chief Li Changjiang
said on Monday in Beijing.
Li, head of the General Administration of Quality Supervision, Inspection and
Quarantine, said the agency had carefully studied the quality and safety
concerns about Chinese products, some of which have been recalled.
"We take these problems very seriously, " he told a press conference held by the
State Council Information Office yesterday, the second time he has attended such
an occasion in five weeks. "We've penalized exporters which flout standards."
For example, the two firms whose chemical tainted pet food had been exported to
North America were stripped of licenses, and their chief executives face
criminal prosecution, Li said.
The plants which had produced toys for Mattel for many years had sustained huge
losses because of the recent massive recalls of their products, and the owners
are under "great pressure", according to Li.
Altogether, the US toy behemoth has recalled 20.2 million China-made toys
because of hazards from small magnets and fears over lead in paint. But Li made
it clear that the Chinese side is not the only one to blame. "Of all the
recalled products, 85 percent were manufactured in line with US designs and the
requirements of US importers," Li said, adding the remaining 15 percent
contained excessive levels of lead according to US standards.
"I've checked a few problematic toys myself and I think there do exist serious
design defects, so serious that they would be recalled in any country, because
they could harm children."
The producers in China have taken responsibility, but what kind of
responsibility should the US importers and designers assume, the minister asked.
Overall, Chinese toys are safe, the official said. Li also said China and the US
have varying standards for some products, so there are differences in defining
product safety.
Aug 25, 2007
China's first anti-monopoly
law to be put for vote
China's first anti-monopoly law, which requires foreign purchases of Chinese
companies to go through national security checks, is expected to be put to a
vote later this month after being 13 years of deliberation.
The draft law was "ready for adoption", the Law Committee of the National
People's Congress (NPC) told the ongoing session of the NPC Standing Committee
on Friday when submitting the bill for consideration.
The draft states: "As well as anti-monopoly checks stipulated by this law,
foreign mergers and acquisitions of domestic companies or foreign capital
investing in domestic companies' operations in other forms should go through
national security checks according to relevant laws and regulations if the cases
are related to the issue."
According to official statistics, the number of foreign mergers and acquisitions
only accounted for five percent of all forms of foreign direct investment in
China annually before 2004. The proportion rapidly increased to 11 percent in
2004 and almost 20 percent in 2005.
Foreign companies have also begun to acquire major state-owned enterprises or
companies with famous brands in recent years, arousing concerns about China's
economic security.
China has already established a basic national security check system for foreign
mergers and acquisitions.
Foreign investors should apply for approvals from the Ministry of Commerce (MOC)
if their purchases of domestic companies affect national economic security, take
place in key sectors or cause a transfer of the operating rights of famous
domestic brands, according to a regulation issued by the MOC along with five
other government organs last year.
Before that, only mergers and acquisitions worth more than 100 million U.S.
dollars needed MOC checks and approvals.
The government will strengthen examination and supervision of foreign merger
operations affecting major enterprises in sensitive sectors and issue policies
to improve the system for admitting foreign-invested industries by the end of
2010, according to the National Development and Reform Commission (NDRC).
The draft also added a provision, saying, "Companies that can provide evidence
to prove they have no dominant status in the market should be cleared of
monopolistic charges."
According to the draft, a special anti-monopoly commission, which consists of
officials and experts, will be set up under the State Council to deal with
anti-monopoly issues.
The draft bill, which aims to protect fair competition, prevent and check
monopolistic behavior and maintain a regulated market place, was first drafted
in 1994 and submitted for the first review in June 2006, for the second review
in June 2007.
More than 80 other countries also have anti-monopoly laws.
Lawmakers have said China's socialist market economy had matured, and the
current market circumstances made the introduction of an anti-monopoly law is
imperative.
Besides the draft anti-monopoly law, the week-long session will also discuss
draft laws on emergency response, employment promotion, labor dispute
arbitration and the recycling economy, and the draft amendment to the Law on the
Administration of the Urban Real Estate, the Law on Science and Technology
Progress and the Law on the Prevention and Control of Water Pollution.
Aug 23, 2007
 China's Quality labeling aims to curb
illegal food exports
Foreign food importers will be able to tell certified Chinese food products from
fake ones thanks to a "CIQ" mark that all legal food exports are required to
carry on their packaging from next month.
The mark stands for China Inspection and Quarantine, which guarantees that the
exports have passed quality tests, according to a regulation unveiled by the
General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ).
The packages should also carry information such as the enterprise's name and
address, batch number and production date so that any quality problems can be
traced to the source.
The measure is aimed at guaranteeing the quality of Chinese food exports and
curb illegal exports, according to the AQSIQ.
The move is necessary although it may increase costs for Chinese food exporters,
said Huo Jianguo, president of the China Chamber of Commerce of Import and
Export of Foodstuffs, Native Products and Animal By-products.
Inspection and quarantine agencies in Dongguan, Guangdong Province, said the new
regulation is expected to affect some 20,000 shipments worth $100 million each
year.
Some widely reported cases concerning the quality of made-in-China food products
actually involve illegal exports that have not gone through any inspection and
quarantine, Huo said.
The measure is part of the efforts by the government to safeguard the reputation
of Chinese products following safety worries ranging from additives, toothpaste
and seafood to toys.
Direct Airfreight between
Chengdu and US/Europe to Launch in end August
The pace of direct airfreight from Chengdu to the US and Europe will soon be
expedited. On 26 August 2007, US-based 3E Airlines, which has completed a
thorough study on the airfreight market in Chengdu, is going to launch direct
international air cargo services from the city to the US and Europe. Chengdu
will be positioned as a port of transit for air cargoes destined for the US and
Europe as well as a distribution hub for domestic and international air cargoes.
The three air routes to be launched on 26 August are Chengdu-Shenyang-Los
Angeles-Shenyang-Chengdu, Chengdu-Shenyang-Chicago-Shenyang-Chengdu, and
Shenyang-Chengdu-Frankfurt-Chengdu-Shenyang.
Prior to the launch of the Seoul-Chengdu-Delhi-Brussels airfreight route by
Korean Air on 6 March 2007, no direct international airfreight service was
available in Chengdu. Cargoes destined for Chengdu had to transit in other
cities such as Beijing, Shanghai, Guangzhou and Hong Kong. This did not only
mean longer time but also higher logistics cost. With the launch of the three
new routes, an "international channel" will be provided for cargoes from Chengdu
to be flown direct to Chicago and Los Angeles, leading logistics hubs in the
eastern and western parts of the US, and Frankfurt, the major transit centre in
Europe. This will bring about a lot of time saving, and Chengdu is bound to
further integrate with the global air cargo market.
A Chengdu transport official pointed out that the new routes will play a
significant role in Chengdu's plan to develop into a logistics centre, boosting
the city's international profile, improving its investment environment, and
facilitating the development of related industries. With the opening of the new
routes, Chengdu will not only offer local enterprises more direct airfreight
service but also serve as a "gateway" for Europe-bound air cargoes originating
from the central and western regions of China such as Chongqing, Guiyang and
Kunming. The new routes will provide more time-efficient air cargo transport
from Chengdu, Sichuan and the western region at large to Europe and the US. At
the same time, more international cargoes bound for western China may enter via
Chengdu. The position of Chengdu as a hub in the airfreight logistics market is
set to be further enhanced.
Aug 22, 2007
China's Safety scheme aims
to stop dangerous exports
A "China Compulsory Certification" safety mark scheme has been launched in the
mainland, requiring mainland-produced toys to bear the safety label before they
go on sale or are exported. The scheme, which came into force on June 1, was
introduced by the State Council's General Administration of Quality Supervision,
Inspection and Quarantine to ensure the safety of toys.
As of June, toys cannot be exported or sold in the mainland without the required
certificate and logo on the products.
According to Sebastian Zeller, a product and environmental analysis technical
manager at TUV Rheinland Hong Kong - a Germany-accredited laboratory that has
been conducting toy safety tests for 18 years in Hong Kong - the mainland scheme
is a good and natural move that is in line with the practices of a developing
country. The standards set are also in line with international standards, but
with an extra requirement of factory inspection.
Zeller, a German specialist stationed in Hong Kong to introduce European toy
safety standards, said his laboratory is an official agent for the "CCC" scheme.
The laboratory will check samples submitted by factories and carry out tests
concerning mechanical and stability requirements. The laboratory will then
verify quality control every six months or once annually with a follow-up
factory inspection.
The "CCC" mark covers six categories of toys and can be divided into two types -
vehicle toys, namely cycles, ride-on vehicles and similar products for young
children; and non-vehicle toys, including electric, plastic, metal, projectile
and doll toys. Once the products have passed tests, the laboratory will arrange
an initial assessment of the factory involved, with checks on various aspects of
its operations.
Aug 21, 2007
 Family fabric
By Liu Weiling and Diao Ying
When Zhou Haijiang, a 22-year-old graduate, quit his job as a university
lecturer and returned in 1987 to his then-obscure family factory, life did not
seem rosy at all - his mother cried, his girlfriend left him and neighbors
suspected that the boy was fired because of some "serious mistakes".
Today, as chairman of Hongdou Group, one of China's largest textile companies,
Zhou said he is most happy that he had made the choice. "I knew teaching wasn't
my dream," he says. "I wanted to go out and create something." He did. His
company now employs over 20,000 workers - among the largest employers in
privately owned companies in the nation. Sales revenue of Hongdou reached 14.3
billion yuan (US$1.88 billion) in 2006 and he was recently elected a delegate to
the 17th National Congress of the Communist Party of China scheduled for this
autumn. And before all that happened, his college sweetheart became his wife and
gave birth to two children.
Competition first - Unlike many private businessmen in China who barely have a
formal education, 41-year-old Zhou holds a doctorate degree in business
administration and has had a wide-ranging education, ranging from a Party school
to overseas studies. He enrolled in a university in Shenzhen in 1984, a city
that later became famous for Deng Xiaoping's "southern tour" and a long-time
testing field for China's reform and opening up policy. "Once an economist from
Beijing came to our school and predicted that the liangpiao will finally be
cancelled," Zhou recalls, "We all laughed because we had stopped using it in
Shenzhen for quite a while."
Liangpiao was a rice coupon used under the grain rationing system. Beijing
residents did not stop using it until 1993.
 But the most important lesson that he
learned there was competition, which he later instilled in his own management.
Most enterprises in the 1980s were State-owned and inefficient. Workers were
comfortable with their "iron bowl" - a job for life under the planned economy -
and never worried about unemployment. But Zhou as a student was impressed that
an old friend from his hometown was fired for poor performance in Shenzhen.
Today in Hongdou, he sets up sales teams from two apparel factories with the
same product and has them compete within the enterprise. "It is difficult to
raise a single child," he explains. Some might think the strategy increases
costs, but Zhou notes "we need competition within the enterprise to face with
the fierce competition on the outside".
Party school - Zhou's grandfather started a cotton-processing operation in 1957,
employing three workers in a rented space. Later the small factory was asked to
merge with two others into a collective operation. It was during the days when
China was stricken with poverty and natural disasters, and business was tough
for the enterprise. His grandfather died in 1964 after years of inhaling cotton
dust.
In 1983, shortly after the reform and opening up began that would later spread
throughout China, Zhou's father, Zhou Yaoting, a local Party secretary, took
over the company, which Zhou joined in 1987. Zhou helped his father privatize
the company through a management buyout.
In 1992 the family and 50 others gained over half ownership in the company.
Later the family strengthened its hold, and the government sold its last shares
in 2004.
Education has been important in building Zhou's career and networks. In 1994, he
was sent by his father to the Party school to study with officials from various
provinces. Zhou, a Party member himself, was impressed with his classmates and
admitted that he learned a lot from them.
"They are very hard working and very moderate," Zhou says, "although moderation
sometimes does not fit into my business strategy."
But today the Party committee remains an important organization in his company.
"The committee doesn't interfere with the operation, but it is the political
core of the group," he says. Zhou furthered his studies in the United States in
1997, where he had the chance to visit multinational corporations such as
Wal-Mart. There he learned the importance of giving everyone equal opportunity
and access to information. At Hongdou, he now asks a fresh graduate student
selected through elections to hold an important position in his factory. He has
also set out a mailbox to encourage workers in the factory to send their
opinions directly to him.
While China is still seen as the manufacturing base for most overseas
enterprises, Zhou's textile-dominated company has gradually moved up the value
chain. Outside the factory in his hometown in East China's Jiangsu Province and
in neighboring Zhejiang Province, he has outsourced manufacturing jobs to over
40,000 workers. The main market of the company's major brand, Hongdou, is now in
second-tier cities, but still has a low profile in the rising large urban
centers. Zhou invests money in design and employs designers from Paris to give
his products a new look.
The recent removal of tax rebates on textiles - still the company's core product
- has brought new challenges.
So Zhou is investing in Cambodia. Hongdou recently acquired a 70 percent share
of an economic zone in Cambodia, and plans to open factories there for further
expansion to cut costs and avoid trade barriers. Well aware that textiles always
have a narrow profit margin, Zhou has been diversifying his business. In 1995,
he acquired a motorcycle company in Shanghai and has gradually developed
holdings in real estate and the medical industry. Textiles now contribute about
half of overall sales by the company. His plan is to build Hongdou into an
enterprise with sales of 100 billion yuan in 10 years and become one of the
top-500 corporations in the world.
Zhou Haijiang answers:
What kinds of employees do you like the most? I like people who are willing
to learn and who are ambitious to reach their goals in life and work.
What is the entrepreneurship that you value the most? A good entrepreneur
should have a broad mind to understand the market and control the overall
situation. He also needs to have good insight into his own industry.
What books do you read? I spend at least an hour reading every day. I mainly
read the biographies of successful entrepreneurs.
If you have time, what do you want to learn further? I want to learn more
about law, especially laws related to economics and international trade. It is
my interest and is related to my business, but it is a shame that I haven't
found enough time to learn that yet.
What is your motivation for building your business? At first it is very
simple. I only wanted to help my father and find a job for myself. But now it is
to build my company into a more successful enterprise.
Father and son - He is a good kid, excellent at schoolwork. That is the way Zhou
Haijiang describes his own child, although his son has barely graduated from
kindergarten. Self-disciplined, working seven days a week, Zhou said he
inherited the characteristic from his father, and that is the way he teaches his
own son.
Zhou's family is typical for a privately owned business in East China's Zhejiang
and Jiangsu provinces. The second generation is born with the natural mission to
be future leaders of their family enterprises.
Zhou was elected president of the company in 2004, in which he took pride:
elected, that is, not inherited.
But businesses in the towns where the factories are located make it a complex
issue to choose a president: over 70 percent of families in Donggang town, where
Hongdou is located, have members working in the factory. A company often
contributes to over half of tax revenue in a town and the owner of the company
is often the head of local government. Hongdou hired a Chinese Canadian as a
general manager in 1998, who worked for a year and left. So it is a family
business. Zhou would not admit that he is himself the second generation running
the enterprise because he has been with the company since the 1980s. But his
educational background sets him apart from his father's generation. And he is
well aware of that difference.
"In making decisions, my father's generation is more bold, and they have very
strategic vision," he says. "But I tend to wait until I feel totally confident."
They certainly have one thing in common: Both worked to ensure their children
are disciplined and well prepared for their future roles. Just like Zhou
remembers - the times when he had to stand up for the entire night for doing
something wrong.
Zhou also remembers the day when his father called the brothers together and
told them that only one of them could continue their education. His younger
brother, who "is smart too, and was a good student himself" volunteered to quit
school and Zhou went on to university. That is why he came back after
graduation, knowing and believing in the responsibility to his family.
Aug 18, 2007
 Bottoms up in Qingdao, China
It seems a bad idea to pair a beer festival - where the drinking of copious
amounts of alcohol is encouraged - with an amusement park. But this is China,
after all, where children often come first.
The now well-established Qingdao International Beer Festival kicked off 16 days
of hearty brew swilling last Saturday in the grounds of a massive amusement
park. Strip-lit beer tents hulk under the neon glow of roller coasters, ferris
wheels and a gut-wrenching pirate ship ride. Many Chinese who brought a ticket
to the event at Qingdao's Beer City - 10 yuan (HK$10.30) to 20 yuan per day -
bring the family. While parents knock back the steins, children drink Coke or
water, play with glow sticks and dance in the aisles.
The mascot is another example of the festival's, perhaps, inappropriate melding
of booze promotion with child-focused attractions. Benben is a chubby cartoon
pig in white gloves and a natty blue sailor suit. He carries a beer barrel like
a schoolboy with a satchel. The piggy mascot has nine bizarre postures including
"be drunk," "drink my fill" and "academic exchanges" according to local media.
The festival, now in its 17th year, is the last one before this eastern coastal
city plays host to the 2008 Olympic Games' sailing and windsurfing events.
Organizers told The Weekend Standard that next year's beerfest will be held as
normal in the second week of August even though it will clash with the Olympics. So while all
eyes are focused on Beijing, Qingdao is using the festival and its annual
sailing regatta as a way to put itself on the world map ahead of the games. Even
the beer festival's motto this year stresses the city's international
aspirations - "Qingdao - ganbei with the world!" Ganbei is Chinese for bottoms
up or cheers (literally dry glass).
So how does it compare with the big international beer festivals, such as
Germany's Oktoberfest?
Harald Stegman, a Bavarian businessman who sells machinery in China, says:
"Well, it's not the same as in Germany where everyone dances up on the tables,
night and day. Everywhere is packed."
It's mid-afternoon on the first day of the Qingdao festival. Outside, the rain
is pouring; the ground by now flooded and muddy. Inside the tent there are maybe
several dozen people sitting quietly; some drinking beer but most eating
barbecued meats and snacks.
"We are happy. OK it is raining but here we have beer," Stegman smiles. He is
drinking a 5.7 percent proof Weihenstephaner brew.
"We only drink Bavarian beer," he says. "It's stronger than Chinese beer. And we
want to drink a lot!"
According to the festival organizers there will be 45 different beers on sale,
including China's own Tsingtao, first brewed in the city by German settlers 104
years ago, Budweiser from the United States, Japan's Asahi and Denmark's
Carlsberg. The bulk of the other beers, though, appear to come from Germany. As
well as Weihenstephaner, the world's oldest brewery, Munich's Paulaner and top
selling brewer Bitburger are also represented.
Despite the strong German presence there's no mistaking the Qingdao Beer
Festival for anything but a Chinese affair. The entertainment - each beer tent,
roughly one per brewer, has a stage - is heavily geared towards a local
audience. Most popular are the crooners who belt out Chinese love and pop songs,
transforming the tents into giant karaoke parties as the evening wears on.
There are also lucky draws, magic performances, auctions, bikini fashion shows
featuring dispirited models, Michael Jackson impersonators, and the most
spectacular - a whirlwind acrobatic Shaolin kung fu dance. Attendance is also
heavily local. In the first weekend, only a smattering of Westerners could be
seen. Staff are almost all Chinese, with the occasional busty Bavarian barmaid
spilling out of her bodice collecting glasses.
Locals are proud of their festival and proud of their beer. So much so that some
said they would only drink Tsingtao at the event.
Yang Kai, a 25-year-old vendor serving barbecued squid at the festival, says he
won't be drinking anything but the local brew: "It's got to be Tsingtao," he
laughs. "My grandfather drank it. My father drank it. My whole family drinks it.
So of course that's the beer I'm going to drink here."
Gu Xiagang, a local taxi driver also says he prefers Tsingtao to famous German
brands. "I like Tsingtao beer because I'm used to it," he says. "It's a great
beer."
Last year 1,300 tonnes of the liquid amber were swilled at the festival,
according to organizers. It's another sign that China's beer market is growing
rapidly as incomes rise. Even though Chinese per capita don't drink much beer -
local rice wine or baijiu remains the tipple of choice - China's immense
population has made it the world's largest consumer, with some 35 million tonnes
of beer drunk in the country last year. And that trend is growing - sales rose
16 percent year-on-year in 2006. Some big international players have also
invested heavily in the mainland's beer market in recent years. The US'
Anheuser-Busch has a 27 percent share in Tsingtao, while SABMiller controls 49
percent of China Resources Snow Breweries, now the mainland's largest brewer by
sales volume and production.
Despite the drink's growing popularity nationwide, festival-goers were not
knocking back the pints en masse during the festival's opening weekend. Many
groups bought a single stein, sharing it out in plastic cups. Lots of families
weren't even drinking beer, instead opting for soft drinks and munching down on
snacks. The festival also wrapped up early, with most of the tents turning off
their lights by 10.30pm.
Briton Helen Pink says it was not what she expected at a beer festival. "It's
more like a carnival. And I think more people aren't drinking beer than are
drinking beer," she says. "It's all a bit strange."
One reason could be the cost. Local Tsingtao beer can be bought as cheap as 2
yuan a glass of draught outside on the street, but the least expensive German
brew was going for 30 yuan a liter at the festival, with many brands pricier
than that. While Qingdao is a relatively wealthy city compared with the rest of
China, according to state media, the average per capita income of the city's
residents is still only about 12,920 yuan - meaning a 40-yuan bottle of
Weihenstephaner would set them back almost a day's salary.
The vast army of waiters and waitresses working the tents, many of them
university students, would also struggle to afford a glass. Zhao Chuan Hai, a
20-year-old IT university student from Shandong province says he earns just 30
yuan a day for dishing up barbecued meats and snacks at the festival. "At night
I sleep here with all the other student workers," he says, gesturing to the
wooden benches inside the beer tent. "It's really hard work." He says he took
the job because most employers won't hire students because they are only
available to work during the summer holidays.
But the festival is a great money- maker for some. Organizers told The Weekend
Standard that the festival earned 623 million yuan last year from 4.28 million
ticket buyers and estimated the city also raked in 3.3 billion yuan because of
the event. The festival is good publicity and a certain money- spinner for the
city's tourism industry - hotels generally hike their room prices up by anything
from 100 to 500 yuan for those 16 days.
Qingdao is a pretty, coastal city with beaches, a German old town and the nearby
mountain resort of Laoshan, oft- called China's "Switzerland." Even non-locals
exploit the opportunities. A Uigher ethnic minority from Urumuqi in China's
Xinjiang region said his kebab stall inside the festival grounds makes about
15,000 yuan during the event. He says he comes here every year to sell food
because the money is so good.
While mass binge drinking doesn't seem to be a problem at Qingdao's beerfest,
the message to festival-goers is certainly drink more and drink fast, with
organizers billing it as a "Crazy Summer Spree." Televised shows at a central
amphitheatre in the festival grounds hold speed drinking competitions,
performers encourage the audience to scull their beer or pour it over their
heads. By 8pm, some of the tents are quite rowdy. Men and women are on the
tables dancing, shirts are ripped off and whirled about heads; others climb on
the stage to dance and sing with the performer, or present them with beer and
flowers. Even later in the evening, the more boisterous shake up bottles of beer
and spray the crowd. At one point an obviously drunk mother and father - both
red-faced and staggering - are on the stage jousting each other, using their
children mounted on their shoulders as battering rams. A security guard
intercepts after the children have been head- butted several times.
It's around 9.30pm on the opening night and Ji Renshen, a 34-year-old fashion
designer from nearby Yantai district, says he is having a great time. "It's
pretty good! Lots of fun," he shouts above the music. "It's a great place to
meet people and be happy together. Although, it's not as good as last year
because of the rain."
Outside the tent the ground has been churned into a swamp.
There is a heavy police presence at the festival. Organizers refused to say
exactly how many officers were recruited but said the security force included
both uniformed and plain clothes police. There was little evidence of much
trouble; organizers said there were no reported injuries last year. "This year
the atmosphere is crazy, but not chaotic," they said.
So, at the end of the day, perhaps the Chinese interpretation of a beer festival
as a family event is safer than the binge drinking orgy of Munich's Oktoberfest.
Last year German media reported 137 dangerous assaults - about half caused by
flying beer mugs - at the event, the world's largest beer festival.
At least in Qingdao, while a hangover is still a good possibility, you're less
likely to wake up needing stitches.
Aug 8, 2007
US candidates discuss China
'to get votes' By Su Qiang
Is China an ally or an adversary of the United States? The question, raised
at seminars and US congressional gatherings all the time, dominated the
televised public debate among Democratic presidential candidates in Chicago on
Tuesday. At a time when context is more important than the issue, almost all the
speakers made tough-sounding speeches on China.
Those who followed the public debates between George W. Bush and Bill Clinton
eight years ago might have been shocked by the present US president's verbal
attack against his predecessor for his "too soft" policy toward China.
Today, Bush himself draws flak despite being quite successful in dealing with
China.
That is what politics is all about in the US, or more specifically during the
presidential campaign.
In Chicago, China came under fire from Democratic candidates who debated before
an audience consisting largely of organized labor.
Asked whether China is an ally or adversary, seven Democratic hopefuls for the
White House described it differently, as a leading competitor, a leading US
creditor, a human rights violator, an exporter of dangerous products and a
potential military adversary in the coming decades.
"I really doubt they (Democratic presidential candidates) were talking their
minds in public. They just wanted to politicize issues related to China so that
they can win more votes," said Shi Yinhong, professor of International Relations
and director of the Center for American Studies in Renmin University of China in
Beijing.
As the presidential campaign is heating up, it's becoming more like a political
game and politicizing such issues seems to be a safe way of playing it, Shi said
yesterday.
"Under such circumstances, their words don't necessarily mean what they were
thinking or what they will do after winning the game, whether it is (Barack)
Obama, (Hillary) Clinton or (John) Edwards or someone else because the context
is more important than the issue itself," Shi said.
Making China an issue during the presidential campaign also means the country
has developed rapidly in the past few years, whereas the US has been
experiencing one of its hardest times in history, said Yuan Peng, director of
the Institute of American Studies of China Institute of Contemporary
International Relations.
"With no end in sight to the Iraq war and its anti-terror strategy consuming its
national resources and patience, the US is passing through its most difficult
period," Yuan said.
"Its domestic problems have amplified the influences of China, a country that
has had an excellent economic record in recent years," he said.
Aug 6, 2007
 The rise of female
consumerism By Tu Lei
According to estimates by Mastercard, the total purchasing power of younger
women in China living on their own or in married households with no children is
likely to rise to US$260 billion in 2015 from US$180 billion in 2005.
The figures are included in a report entitled "The Rise of Female Consumerism in
China." Released by Ernst & Young, the report shows that Chinese female
consumers have become a distinctly major force in consumption. Chinese women,
not necessarily the main bread winners in most households, have a substantial
say over how pay checks are spent. An estimated 78 percent of married women make
the decisions for grocery and apparel purchases for the family.
When it comes to big ticket purchase items such as a house, a car or various
luxury items, around 23 percent of married women indicated that they have the
ability to make independent purchase decisions, while the remaining 77 percent
of women let their husbands be decision makers. However, their personal
preferences remain a major influence over the final decisions made.
Modern Chinese women subscribe to the concept of holding their own purse strings
to their wages with only 2 percent relinquishing all financial decision-making
power to their spouses.
Saving less, spending more - Many Chinese working women today are living
consumption centered lifestyle, choosing to spend now and put off savings for
the future. Some 65 percent of female consumers spend 60 percent or more of
their monthly wages.
In addition, the proportion of savings is not directly related to the level of
wages or the position a women holds at work.
A poll by human resource portal cjol.com found that the more women make and the
higher position they hold, the less likely they are to save.
Conversely, women who earn less and hold lower ranks have better saving habits.
According to the Report on Chinese Women's State of Life (2006), home purchases
(20 percent), white goods (19 percent), children's education expenses (17
percent) and investments (13 percent) top expenditures for married households,
with home purchases ranking as the top expenditure for childless families.
The potential spending power of Chinese female women is estimated to grow to
enormous proportions in the next decade.
Elderly women living in "empty nester" households, where their children have
grown up and left home, are expected to have a purchasing power of US$150
billion in 2015, up from US$100 billion in 2005.
For women in elderly single households where they live alone, spending power is
likely to rise from US$50 billion in 2005 to US$115 billion in 2015, more than
double in a decade.
Aug 4, 2007
Page turners and video excitement in
Hangzhou
Hangzhou's comics, animation and games have
witnessed both quantitative and qualitative growth over recent years and it's
not hard to see why: people there love to spend on entertainment. Some may think
that comics and animated games are only for kids, but this is actually not the
case. Many adults watch animated films and the number who play animated games is
on the rise.
In Japan, large numbers of middle-aged and old people, as well as white-collar
workers, watch animated films and play games whenever they have the time. In
Hong Kong, comics also find favor with numerous households.
A random survey of more than 30 passers-by in Hangzhou's busy downtown area (Yanan
Road and Fengqi Road) revealed that 80% of respondents watch animated films when
they have the time. About 40% of respondents have played online games and 30%
bought comics and animation related products such as toys and T-shirts. The
respondents included primary and secondary school students, office workers and
mature people aged over 50. Mr Zhang, one of the respondents, joined the work
force two years ago. He says his favorite pastime is playing online games and he
would play "The Legend of MIR" and "World of Warcraft" whenever he has time, to
relieve pressure from work. Many of his colleagues also love to play online
games. One avid follower, Zhang, says he and his wife fell in love with
animations because their grandson so enjoys watching them. Apart from watching
cartoons on TV, Zhang also buys animated VCD films from audio-visual shops, so
he can watch with his grandson.
Hangzhou-produced animations such as Wonder Boy with Divine Eyes, Magic Tiger
with Divine Eyes, Gold-Haired Monkey's Journey to the Kingdom of Animals, The
Mad Monk, Anna's Story, Little Anti-Japanese Aggression Soldiers and Long March
of Little Red Army Soldiers are all favoured by cartoon "addicts". These
cartoons are shown on CCTV and are popular throughout the country.
Comics and animation are popular among secondary school students. Many have
their favorite cartoon characters. Basically, they all have cartoon T-shirts,
rings worn by cartoon characters and swords used by heroes in comics and
animated games. According to Xie, public relations manager of Zhejiang's
Showker.com, the company sold more than 200,000 rings featured in cartoon films
and the company had a turnover of more than Rmb10 million from sales of comics
and animation products last year. Turnover this year is expected to exceed Rmb20
million. T-shirts, lighters, pillows, desk calendars and other comics and
animation products produced by Showker are always in great demand. Animated
movies, comics and animated games produced in Hangzhou have already found their
way onto the international market. Original animated products created by
Hangzhou companies such as Dongfang Guolong, Prodigious Drawing Co and Geora
Technology Corp have entered the mainstream markets in over 20 countries and
regions.
The Divine Eye series produced by the Zhejiang Zhongnan Group is on sale in more
than 20 countries and regions, including Singapore, South Korea, Thailand and
the Middle East.
The Mad Monk created by Azure Studio is on sale in Vietnam and other countries,
while Dukou Game's Tianji Online is available in Malaysia, Thailand and
Indonesia.
Comic toys reminiscent of the cartoons are produced by Hangzhou Manshantang Mega
Toys Co Ltd and have found their way to Japan and Southeast Asia.
It seems the international market for Hangzhou-produced comics and animated
games just keeps growing.
Hangzhou animations rank third in China -
Hangzhou's comics, animations and games industry has been making excellent
progress locally too.
In 2004, there were fewer than 10 comics, animations and games enterprises in
the city. By the end of 2006, the number had grown to 85, including 43 animation
companies, two comic book production outfits, 22 games production companies and
18 related product development firms.
Total registered capital of these enterprises exceeded Rmb500 million, employing
over 10,000 people. In 2005, Hangzhou produced 14 original animations in 752
episodes with a total running time of 8,100 minutes, accounting for a fifth of
the national total. Divine Eye and six other outstanding comics, animation and
games won national awards. In 2006, the city produced 21 animations in 585
episodes with a total running time of 11,000 minutes, ranking third in the
country after Hunan and Guangdong.
China produced 81,000 minutes of animations a year, with Hunan producing 19,305
minutes and Guangdong producing 18,121 minutes.
Hangzhou owes its achievements to its rich cultural endowment, which include
Kuahuqiao, Liangzhu, Wuyue and Southern Song cultural strains. Xu Xian and Lady
White, The Butterfly Lovers, Yang Naiwu and Cabbage Girl and other classic love
stories provide rich resources for animation. Hangzhou's flourishing economy and
ample private capital provide strong backing for the animation industry. The
city's advanced computer network, digital TV network, IP broadband network and
mobile communications network also render good technical support to the
industry's development.
Courses on animation, artificial intelligence, graphics and art design offered
by eight universities and colleges in Hangzhou are among the best in the country
and help lay a solid foundation for the training of top animation personnel.
Animation industry lacks genuine creativity - Hangzhou's animation industry is
growing rapidly but it is not without its problems. It's basically lacking
"masterpieces" of great influence at home and abroad. These are necessary if
Hangzhou is to make a name for itself in the industry.
The lack of top creative personnel is also a problem confronting the industry.
According to relevant surveys, full-time creative, production, marketing and
administrative personnel in the industry account for 16.2%, 47.0%, 19.3% and
17.3% respectively.
There is a dire shortage of top- and middle-rank creative and marketing
personnel. The current situation is that there is an abundance of production
forces but not enough top creative artists. The shortage of top and
middle-ranking personnel has become a hurdle inhibiting the growth of Hangzhou's
animation industry. Some of Hong Kong's better creative talents would certainly
be welcome.
Aug 3, 2007
China Foreign trade grows
steadily with wider opening-up
China's foreign trade volume for the first half of 2007 totaled 980.9 billion US
dollars, up 23.3 percent, with exports growing 27.6 percent to 546.7 billion
dollars and imports up 18.2 percent to 434.2 billion dollars. The Ministry of
Commerce (MOC) forecast the country's trade volume would increase by around 20
percent in the year to reach more than 2.1 trillion dollars. In the first six
months of the year, China's foreign trade showed five following salient
features:
First, stable growth attained in total foreign trade volume. China recorded an
average annual rise of 28 percent in its foreign trade since its accession to
WTO and, in the first half year, this momentum retained. Trade with major
partners showed a sound trend and, according to a relevant report, it realized
158.4 billion dollars with the European Union (EU), 140.6 billion dollars with
the United States, and 110 billion dollars with Japan, or up 27.3 percent, 17.4
percent and 14.7 percent respectively.
Second, new progress scored with pluralistic markets. China's export to Russia,
India, South Africa, the ASEAN (or the Association of Southeast Asian Nations)
and the Republic of Korea (ROK) rose 71.9 percent, 64 percent, 40 percent, 32.8
percent and 31 percent respectively in the first half of the year, a rate
obviously much faster than that for its major trade partners such as the U.S. EU
and Japan. Moreover, the ratio of its trade to ASEAN, ROK, Russia, India, Africa
and Latin America in the country's trade volume increased to 24 percentage
points from 21 percentage points during the same period in 2006.
Third, trade mix keeps optimizing. Apart from iron and steel products, there has
been a marked drop in the export commodities of other categories and a negative
growth in the export of minerals and fuels. There has been a hefty rise,
however, with the export of machinery and electrical products, high-tech
products and farm produce, and the export of air conditioners, DVDs, cameras,
notebook computers or laptops, mobile phones, color television sets, containers,
shoes, toys, suitcases, bags and luggage packs continue to rank the first in the
world.
Fourth, an apparent improvement has recorded with the quality of growth. The
increase range for the export of color TV sets, automatic data processing
equipment and accessories, cars, chasses and containers exceeds 15 percent, and
the qualification rate of foods exported to the U.S., EU and Japan surpassed the
99 percent mark.
Fifth, certain effects have attained in the work done to spur the growth mode of
external trade. Since early this year, a number of relevant departments have
adopted a serial measures in compliance with requirements of the State Council,
or the central government, to adjust the export refund rates for some export
commodities and import/export tariff rates, readjust processing trade policies,
and sort our or regulate some outdated policies, so that the export of a few
heavy energy-consuming, highly-polluting and resources-related products have
been contained to some extent.
July 31, 2007
China Releases its First 3G Industry Standard
China Communications Standards Association has recently issued China's first 3G
industry standard, the video phone standard. The standard provides an important
technical basis for the development, manufacturing, testing, sourcing and
operation of equipment for video phone services.
According to China Communications Standards Association, it has commissioned
industry experts to complete a research on the technical specification (YD/T
1511-2007) and measurement method (YD/T 1512-2007) for video phone services. The
standard provides for the general features, functions, protocol structure, media
coding/decoding and re-use, business process, certification, charging,
statistics, service quality and terminal requirements for video phone services.
At the present stage, the standard is only available for communication between
mobile terminals, but is expected to be expanded to cover communication between
mobile terminals and PSTN and ISDN in the future.
Taiwanese Investment on Mainland Slows
Taiwanese investment on the Chinese mainland has slowed during the first half of
this year due to changes in the mainland investment environment and measures
such as tax concession cutbacks, according to Taiwan's Ministry of Economic
Affairs (MOEA). It remains to be seen whether this will become a long-term
trend.
Statistics from MOEA's investment commission show that the approved Taiwanese
investment on the mainland totalled US$3.106 billion in the first five months of
this year. The year-on-year growth of 8.02% represents a downward trend.
According to the commission's latest statistics, 100 applications for investment
on the Chinese mainland involving US$472 million were approved in May 2007.
During January-May 2007, a total of 420 applications were approved, down 1.41%
compared with the same period of 2006, with the amount of mainland investment
involved standing at US$3.106 billion, an increase of 8.02% over the same period
in 2006.
A commission official attributed the slowing, single-digit growth during the
period to the falling number of large-scale investment projects, which was
caused by changes in the mainland investment environment, the gradual phasing
out of tax concessions, as well as water, electricity and labour shortages in
some regions. Rising operating costs on the mainland are driving some Taiwanese
investors away to other countries such as Vietnam.
Differential Treatment Between Coastal and Inland provinces for Processing Trade
Restrictions
The Ministry of Commerce and General
Administration of Customs announced that another 1,853 products under 10-digit
commodity codes will be added to the list of restricted exports with effect from
23 August. Together with the existing list of 394 restricted imports, a total of
2,247 products are now placed under the restricted category.
Existing enterprises in eastern China (including Beijing, Shanghai, Tianjin,
Liaoning, Hebei, Shandong, Jiangsu, Zhejiang, Fujian and Guangdong) may continue
to engage in processing trade of products under the restricted category but must
pay customs duty deposit. Categories A and B enterprises have to pay a deposit
equivalent to 50% of the imported-related taxes, while Category C enterprises
are required to pay a deposit equivalent to 100% of the taxes payable. New
enterprises granted foreign trade rights after 23 July may not engage in
processing trade of products under the restricted category. Enterprises that
have undertaken commissioned processing activities before may be regarded as old
enterprises and may continue to engage in processing trade of products under the
restricted category if they apply to the local commerce department for
conversion into enterprises with foreign trade rights before 23 October.
In the central and western regions (i.e. provinces outside eastern China),
Categories A and B enterprises engaging in processing trade of products under
the restricted category are subject to "nominal payment" of customs duty
deposit, while Category C enterprises are subject to 100% "actual payment".
The above administrative measures for products under the restricted category do
not apply to export processing zones, bonded zones and other special customs
supervision zones. Neither are they applicable to processing trade involving
deep processing transfers outside special customs supervision zones.
July 30, 2007
"Green" trend is the color of business
By Selina Lin, Guangzhou
Office
A sewerage system worthy of a "green" rating.
Industry experts in China are into a
complex but forward-looking approach to pollution. They say the momentum of
rapid economic growth implies levels of energy consumption and pollution which
are themselves dependent on industrial structuring and technology. Indeed, as
China accelerates its pace of industrialisation and urbanisation, the share of
tertiary industries to GDP has dropped for three years consecutively, from 41.4%
in 2003 to 39.5% in 2006, which should see tangible results against atmospheric
pollution.
Also, due to the rapidly rising levels of energy consumption and pollutant
emission by the industrial sector in the past two years, China appears
determined to place greater emphasis on technology in its efforts to conserve
energy and reduce pollution over the next five to 10 years. China's
environmental protection industry, which has already taken shape with an annual
output value of over Rmb200 billion, is expanding at an average 17.5% a year and
keeps growing. Currently, the total output of the environment protection
industry accounts for 1% of China's GDP, compared to 5% in developed countries.
The environmental protection industry is still very much an emerging one in
China. There are only a few state-owned enterprises in the sector and the
majority of industry players are private enterprises.
Some of these private environmental protection enterprises started from scratch,
developing from "importation" in the beginning, to "standing on their own feet",
and reaching the stage of "going out" today.
Guangzhou currently ranks top among Chinese mainland provinces and cities in
terms of the overall energy efficiency level in its industrial sectors. However,
in the city's 40 industrial sectors, 16 exceed the national average for energy
consumption levels, including agricultural and sideline produce processing,
textiles and furniture.
In turn, this sectoral problem has become a major bottleneck hampering
Guangzhou's economic development and energy conservation efforts. So, the city
has introduced an energy saving target in the energy consumption audit report on
enterprises: those failing to achieve the target will face restrictive measures.
Such measures include electricity rationing. Companies may even be forced to
exit the market.
In May 2007, the National Development and Reform Commission issued an urgent
circular which banned local authorities from offering their own preferential
policies to promote development of high energy consumption industries against
the laws and regulations of the state.
Such preferential policies that have already been implemented must be revoked
immediately. This stipulation sent a clear message to enterprises, which is that
meeting energy efficiency and lower consumption targets have become issues that
must be addressed in long-term growth and development plans.
According to figures from the Guangdong Association of Environmental Protection
Industry, private enterprises and FIEs have become key players in the
development of Guangdong's environmental protection industry.
Among the various cities, Guangzhou, Shenzhen, Foshan and Dongguan are leaders
in this development, together accounting for 80% of the annual turnover of the
province's environmental protection industry.
The "green" movement is drawing growing numbers of private enterprises and FIEs.
Private enterprises now make up the majority of Guangdong's new grade A
environmental engineering design projects.
These private enterprises are playing the role of intermediary and social forces
entrusted with the vital task of reducing energy consumption. Hong Kong
companies in the environmental protection sector should use their expertise to
develop opportunities to expand in this burgeoning Mainland market.
July 25, 2007
Ion network
 3i is a
leading private equity business with a history of 62 years. Established in 1945
with funding from the Bank of England, UK clearing banks and the City, seasoned
entrepreneur William Piercy (later Lord Piercy) was appointed to manage the
initial fund. 3i Group listed in London in 1994 and remains the only FTSE 100
Private Equity business, with five different asset classes and $14.3 billion
under management.
The company has invested over $250 million in many well-known Chinese companies,
such as: Focus Media, Chinas largest multi-channel advertising media company;
D.Phone, one of China's earliest mobile phone retailers; PCD, established by
Ports CEO, a high-end department store; and Inner Mongolia Little Sheep Catering
Chain Co, China's leading retail hotpot restaurant chain.
3i is currently invested in more than 500 businesses worldwide. At least 60 of
these businesses operate in Asia, of which more than 35 are in China. Lily Jin
was voted the best venture capitalist in 2006 by Forbes for her investments in
Mengniu Dairy and Suntech Power.
Art of investment
 Profile of Li
Jianguang - 2000: Vice-President and Partner of IDGVC; 1999: Assistant General
Manager, Tintic Trust & Investment; 1994: Manager, Crosby Group, Beijing
Representative Office; 1987: Research Fellow, Chinese Academy of Social
Sciences; 1987: Graduated from Peking University, Economics Department
IDG Technology Venture Investment (IDGVC Partners) is one of the most
prestigious venture capital firms in China. Since it was first established in
1992 with offices in Beijing, Shanghai, Guangzhou, Boston and the Silicon
Valley, the organization has invested in a group of unknown start-ups in the
country that later became big names - like Baidu, Focus Media, Sohu, Tencent,
EachNet, Dangdang and Ctrip. One of the earliest US venture capital firms to
enter the Chinese market, IDGVC Partners invests in early to growth-stage
companies and is focused on hi-tech sectors like the Internet,
telecommunications, wireless communications, digital media, IC (integrated
circuit) and life science. It manages over $800 million in capital and has an
investment portfolio of 100 start-up companies, 30 of which have completed
public offerings or successful mergers.
Earlier this month, IDG Partners announced it had successfully raised $510
million in investment for its IDG-Accel China Fund II in just 45 days.
On the eve of the company's new round of investing, Li Jianguang, vice-president
and partner of IDGVC Partners, sat down with China Business Weekly reporter Wang
Xing to talk about the art of investment.
July 23, 2007
Focus on Shanghai - Hawaii filmmakers get the celebrity treatment at the home of
Chinese cinema
By Gary C.W. Chun /
gchun@starbulletin.com
Henry Mochida, a student with the University
of Hawaii's Academy for Creative Media, above, snaps a photo at the Shanghai
Institute of Visual Arts at Fudan University.
"SHANGHAI is not China." It's a curious but revelatory observation by the
president of the American Chamber of Commerce in Shanghai, Brenda Lei Foster,
who is also a part-time Hawaii resident. It's made during a breakfast meeting
with a delegation from the Hawaii International Film Festival and the University
of Hawaii's Academy for Creative Media. Five filmmakers from the academy who
participated in last month's 10th Annual Shanghai International Film Festival
learn that the bustling financial and cultural port city -- the largest city in
the largest country in the world -- is very much a vibrant entity, at the
forefront of development. Here you'll come away with impressions of a lively,
cosmopolitan city, far different from most of China.
In Shanghai, growth is obvious in the construction of spectacular high-rises
that dwarf older buildings that represent the China of old. It's in the press of
taxis, trucks, buses, scooters and bicycles fighting for space on congested
city's roads. It's in the crush of 17 million people, a significant number
immigrants from outlying provinces. "You can see how hard they're pushing
forward," said filmmaker Henry Mochida.
 Jay
Hubert is held aloft by Roger Nakamine, left, Russell Blanchard, Brian Makanoa
and Mochida in front of the Shanghai Grand Theatre. The student filmmakers
participated in last month's Shanghai International Film Festival.
And it seems only right that the Hawaii
delegation continues to strengthen ties with the city that is the birthplace of
Chinese cinema. The group of select student filmmakers even had their films
screened at a special showcase at the film festival, along with projects by
Shanghai University students. "The opportunity of an international screening of
one's film is a milestone for any young filmmaker," said assistant professor and
producer Anne Misawa, "and some of our ACM students ... had never even ventured
out of the country before, much less with a film of their own expression
showcased in such a public, international forum. This was a tremendous
experience." The experience included being treated as celebrities, walking the
red carpet past Chinese paparazzi at the opulent Shanghai Grand Theatre. "They
mistakenly assumed we were actually big film stars," said filmmaker Jay Hubert,
talking about enthusiastic fans lining the walkway. "One group of young female
admirers even managed to get their hands on poor Henry and pin him to the fence,
but he didn't seem to mind so much."
The Shanghai International Film Festival presents unique opportunities for
cultural exchange and collaboration - Consider this scenario: Future relations
between China and Hawaii hinging upon how well their college students
collaborate on film projects. Chuck Boller and his staff at the Hawaii
International Film Festival did the groundbreaking work in 2002, establishing
ties with the Shanghai International Film Festival. That outreach now includes
the SMART (Student Media Art) exchange program between the University of
Hawaii's Academy for Creative Media and Shanghai University.
"This is an invaluable opportunity not only
for the students, but, dare I say it, also for China and Hawaii as well," said
Anne Misawa, assistant professor and producer at the Academy for Creative Media.
"It's an opportunity for planting seeds in a potentially powerful exchange that
is interpersonal, cultural and economic."
Last year, student filmmakers traveled to and from Shanghai and Honolulu as
guests of the respective universities, where their short films were showcased at
HIFF and SIFF. This year, five films by Hawaii students were showcased at the
10-year-old festival in Shanghai, and one in particular, Jay Hubert's "Dao," was
screened in international competition. Last month's festival placed Hubert's
film among student work from China, Korea, Germany, the United Kingdom and such
prestigious U.S. film schools as the University of Southern California and the
University of California at Los Angeles, chosen from among 300 submissions.
The other Hawaii student films shown were "A Birthday with Grandpa" (Russell
Blanchard), "Chopsticks" (Henry Mochida), "Sore Shoulder and Aching Jaws" (Roger
Nakamine) and "Eva" (Brian Makanoa).
The students who took the trip to Shanghai all found the experience rewarding.
"The Shanghai International Film Festival really seems to embrace the positive
effects film can have on people, both locally and cross-culturally," said
Nakamine. "It reminded me a lot of HIFF in that respect, which was nice. You can
travel over 5,000 miles, step off the plane and meet people with the same
sensibilities as yourself."
The shopping was good, too.
A tour of the Shanghai Institute of Visual
Arts included this sweeping view of the expansive Songjiang University Town.
"Being able to haggle (over the cost of goods
there) turned out to be incredibly addicting," Nagamine said. "I have to fight
the urge now that I'm back home -- like walking into Circuit City and be like,
'How much for the DVD? 20? I give you seven.' "Now I've got some kind of
postpartum depression thing going on. I really want to be back in Shanghai. Last
week, I dragged my girlfriend to Chinatown on a Sunday afternoon just so we
could walk around and take pictures. It was nice but not quite the same."
Blanchard and Makanoa had never traveled outside of the United States before.
"Visiting Shanghai -- first time in a big city -- it was fun because taxicabs
were so cheap, and the traffic so crazy, it was like a carnival ride every we
went, like bumper cars. Me and Roger always had video cameras ready for the
accident, ready for us to hit somebody, but it never happened."
Makanoa was impressed with the size of the festival and particularly the
opportunity to walk the red carpet, outside the opulent Shanghai Grand Theatre,
with the delegation. "We'd get out of the minibus, make a little turn, and
there's a wall of people taking pictures. It was a once-in-a-lifetime
experience. It was one of the highlights of the trip for me, and to have it all
broadcast on national TV ..."
Blanchard said he thought the Hawaii films "played very well. It was a great
sense of comfort to see such a full house. ... I thought the audience was great
the way they soaked in our films and (sincerely applauded) at the conclusion of
every one."
The Shanghai trip also included a 90-minute drive to the expansive suburban
Songjiang University Town and to Fudan University's Shanghai Institute of Visual
Arts.
The visit "really cemented my thoughts on Shanghai as a whole," Blanchard said.
"It is a city on the edge of great things. They are emerging from a period where
Western contact was forbidden, and you can see it in the architecture and
attitudes around the city. The Chinese were very friendly throughout the city,
and they are on the path to modernizing their society for the next generation."
Representatives of the University of Hawaii's Academy for Creative Media walk
the red carpet on closing night of last month's Shanghai International Film
Festival. Professor and Chairman Tom Brislin, left, escorted student filmmakers
Russell Blanchard, Roger Nakamine, Jay Hubert and Henry Mochida; Hawaii-born
actor Keahi Chun, who lives in Shanghai; and Ann Misawa, assistant professor and
producer.
FUTURE partner in the exchange program
could be the Beijing Film Academy, which Hubert entered after graduating from
UH. The blue-eyed Texas native speaks fluent Mandarin, which never failed to
impress the Chinese.
This was Hubert's third straight visit to the Shanghai festival. "Every year, I
feel like I love the festival and the city even more than the year before," he
wrote via e-mail from Beijing.
Especially after nine months in the Chinese capital, Hubert said, Shanghai
seemed lively, colorful and very enticing.
"Part of me really wanted to pack my bags when I got back to Beijing and head to
Shanghai in search of a job. But that's the problem. While there are plenty of
TV programs and even a number of films shot in Shanghai, Beijing is still the
center of the Chinese film world. That's odd, considering Shanghai is where the
film industry first started to take off in China, but perhaps the establishment
of the Beijing Film Academy had a lot to do with that."
Out of the group of student filmmakers, only Hubert and Mochida have done any
kind of filmmaking outside of Hawaii. In fact, Hubert was Mochida's director of
photography on "Chopsticks," which was shot in Tokyo.
"I would have an idea of what shots I wanted," Mochida said, "and sometimes we
would end up arguing about a shot while we're on the streets of Tokyo. But Jay
has really shaped how I look at films." The two also worked on another short of
Mochida's, "Layover in Hong Kong," which Mochida hopes will be screened in
October at the Louis Vuitton Hawaii International Film Festival.
Besides finishing editing that film, Mochida participated in the 48 Hour Film
Festival, with the two-day shoot just finishing yesterday. "I don't want to end
up lazy and lose my edge. I'm hooked." And the philosophy that drives his art? "P.Y.P.
-- pursue your passions," he said with a laugh.
July 11, 2007
'China's Minor property right' - better than
none?
by Li Qian
In Beijing's heated real estate market,
300,000 yuan can buy no more than a 20-square-meter apartment within the second
ring road. And, with a bit luck, you might be able to buy a 40-square-meter
place inside the fifth ring with the same amount of money. However, you can
afford a 100-square meter home in some residential complexes near the fifth ring
but with a vague property right. With an amazingly low price of about 3,000 yuan
per sq. m., the apartment complex named Tai Yu Yuan on the outskirts of Beijing
attracted quite a few potential home buyers from the city and even neighboring
cities and provinces when sales of a new phase started in late May. This is the
so-called "minor-property right" apartments.
An old woman surnamed Li who had bought a flat there last year at 2,500 yuan per
sq. m. came to the agency's office to buy another for her son. " If you decide
to buy one, there's no need to think too much," she said. "I sold four flats
just today," said a broker, saying that some of his clients were from Huhhot,
Inner Mongolia Autonomous Region in North China. The affordable price was so
attractive that many of the property buyers, mostly young people and the
elderly, overlooked the main crux of the problem. In fact, what they bought is
not the ownership of the apartments, but only the right to live in there.
Unlike typical property projects in China which are constructed on the land that
is owned by the government, the land on which Tai Yu Yuan was built is owned
collectively by the villagers' committee of the Zhangjiawan Village, Tongzhou
District in the eastern suburb of Beijing. The committee is also the developer
of this residential community. This significant difference means these people
are illegally buying property that should be for the villagers to live in, not
others.
In China before a property development is built, the government reclaims the
land and then sells it to developers. The China Economic Weekly found out that
Tai Yu Yuan was built with the government's permission as a renovation project
for local villagers, which forbids any public sale, but the villagers' committee
changed the blueprints to add more complexes to sell to the public. As
developers of Tai Yu Yuan -- the committee and villagers involved - don't have
to pay a hefty tax to governmental departments as other developers do, they
benefited the most from selling the unauthorized apartments.
"Minor-property right" projects have bloomed in the last five years amid a
nationwide price hike for homes. For buyers, the biggest selling point of these
apartments is the surprisingly low price in a red hot property market in China,
especially in Beijing and other large cities where housing prices can rise by
double digits monthly. The strong demand for affordable property fuelled the
illegal development of such projects, Hu Jinghui, deputy director of 5I5J
property managing company told China Youth Daily.
Among the 400 residential developments currently on sale in the Beijing market,
18 percent are "minor-property right" projects of this kind. In late June the
country's Ministry of Construction warned that properties built on collectively
owned lands are not under legal protection, saying the so-called "minor property
right" is actually "no property right" to their owners, who will have
difficulties and disputes in selling or getting heritage status to avoid
demolition. But the agency didn't make it clear whether or how the property
rights of these apartments will be resolved.
But the alarming signal seems ignored by the hot market, and still, many buyers
believe "the law won't punish the mass of people," calling on the government to
legalize their existing property right on their apartments.
July 9, 2007
Ban on Use of State Leader Images in
Commercial Promotions
In view of the widespread use of party and state leader images in commercial
promotions recently, the State Administration for Industry and Commerce (SAIC)
has issued a circular banning the practice.
According to the circular, some unscrupulous manufacturers and merchants have
been using the images of party and state leaders in their sales promotions for
quite some time. For example, some of them use the images on product packaging,
others hire look-alikes of state leaders to endorse their products, such as
using an actor resembling the late Chairman Mao to act as the ambassador for a
wine factory, and yet some others alter the verses in Quotations from Chairman
Mao for promotional purposes or display state leader photos to boost sales.
The circular stipulates that the use of the images, inscriptions and names of
party and state leaders (including former and deceased ones) in any form on
products and product packaging is prohibited. The use of the names and images of
party and state leaders in any form in commercial and sales promotions is
banned. The use of the images and inscriptions of party and state leaders
(including former and deceased ones) or the use of "state leader look-alikes" to
promote products and services is also prohibited.
In September 2006, SAIC already issued a circular calling for inspections
against the illegal act of using the names of party and state leaders in
advertising. This circular stipulates that shopping malls, specialty stores,
franchised stores, eateries and all other types of sales outlets must not
display the inscriptions or photos of party and state leaders, and the use of
the names of party and state leaders for advertising and publicity purposes is
also prohibited. The circular also calls on all local industry and commerce
administration departments to carry out prompt inspections against any illegal
acts of using the names of party and state leaders in advertising.
July 3, 2007
Emerging middle class develops a sweet tooth
for luxury goods
Beijing's Privileged Classes are willing to
pay a high price for chocolates preferred by royalties
Self-confessed chocoholic Cai Xiao, 26, used
to travel far afield from her Beijing home for her favorite fix. The search took
her to Nanjing, Jiangsu province , last year, where celebrated French
chocolatier Debauve & Gallais had its only presence on the mainland, at a sales
counter in a swanky hotel.
The prices were outrageous: 100 yuan to 180 yuan for a chocolate bar; 1,000 yuan
for eight white chocolate golf balls; and 2,100 yuan for a box of truffles.
Ms Cai spent 360 yuan for an 80-gram box of pistoles - coin-shaped dark
chocolates bearing the name of Parisian aristocrat Marie Antoinette, a fan of
their wares. The cocoa content was up to 99 per cent, indicative of the highest
grade.
"You can't possibly find the true dark chocolate in any other place in China,"
said Ms Cai.
Her second trip to acquire the chocolate of choice for French kings Louis XVIII
and Charles X and literary giants like Marcel Proust was a lot closer to home
after the 207-year-old Parisian chocolatier set up a booth on the ground floor
of Beijing's World Trade Centre in December.
That time Ms Cai bought ecrin - a box of 24 assorted chocolates - for 1,200
yuan.
On her third visit, she plunked down 2,200 yuan for incroyables - a box of 40
pieces of dark chocolate mixed with nougatine, roasted almond grains cooked in
caramelised sugar. Napoleon was so infatuated with their bitter-sweet flavour
that he once ordered 2,000 boxes, but production is now limited, with only 1,000
sold globally each year.
"Mine was No302," Ms Cai said. "I felt I belonged to a very special club and had
a great sense of satisfaction."
Ms Cai offers a glimpse of the mainland's emerging middle-class, which is
choosing to consume upmarket goods and cultivate expensive hobbies. Their shared
consumption patterns are a key part of an evolving elite culture in the
nominally communist country.
Unlike their parents' generation, in which consumer choices are guided by
practicality, the new middle-class urbanites are more concerned about the
invisible values their purchases represent.
"A lot of prestige- and honour-buying is going on in China," said Guo Liang ,
assistant professor of marketing at the Hong Kong University of Science and
Technology.
"What to buy and not to buy is imbued with social meaning. Consumer goods become
a kind of social currency that is transacted in middle-class life."
For the mainland's emerging middle-class urbanites, you are what you consume.
They own their own home and car, travel abroad, and show an unabashed preference
for top brands and luxury goods.
Yang Qingshan , president of the China Brand Development and Strategy
Association, said that about 13 per cent of the mainland's population, or 170
million people, bought top-tier brands.
Ms Cai, a designer whose annual household income amounts to around 400,000 yuan,
said she rarely hesitated when purchasing Debauve & Gallais chocolates.
"I simply cannot put supermarket chocolates into my mouth any more. They taste
too sugary and awful," she said.
"Their prices are a little staggering but, hey, I can allow myself a few hobbies
and indulgences and that's what life is all about."
The mainland's newly rich are relaxed, fun-seeking and lapping up luxury goods
fast. A recent report from US investment bank Goldman Sachs found the country is
the world's third-largest consumer of luxury goods, accounting for 12 per cent
of global sales, behind Japan's 41 per cent and 17 per cent for the US.
The report predicted that the mainland would become the world second-largest
purchaser of luxury goods by 2015, commanding 29 per cent of such sales.
Debauve & Gallais director Bernard Poussin is one foreign investor who says he
is "totally confident" about the mainland's luxury market.
"Larger and larger social inequalities are generating a pyramidal market
structure," Mr Poussin said. "At the top, elite members of society can afford
the most expensive stuff, while the bottom ranks are anxious to copy their way
of life."
The chocolatier is so confident its pricey chocolates will get gobbled up by
rich Beijingers, even at 4,000 yuan a kilogram, that it upgraded its World Trade
Centre sales booth into a boutique the end of May, and decided to open a second
shop in Beijing's Financial Street - the capital's answer to Wall Street - in
October.
The family business, where techniques and recipes have been handed down through
the generations, has opened six overseas shops so far, and Mr Poussin said the
Beijing shops were in a key strategic position.
"China is the open door to Asian markets, our ambition is to become the
reference point," he said.
Mr Poussin sees his chocolate as having everything to offer for an aspiring
mainland urbanite who has just learned to work for the enjoyment of life, and is
willing to pay a premium for it.
Zhao Hong , general manager of Debauve & Gallais' Beijing operations, said the
company's market was the rich and the successful few who understood and
appreciated arts, culture and the finer things.
"Most of our customers are around 35 years old, work for foreign companies or
own their own business," she said. "They're definitely the elite class of the
country."
Its business strategy of instilling cultural elements into the marketing
campaign is apparently working. Chic social events like chocolate salons are
routinely hosted where chocolate history and French culture are discussed over
the tasting of fine chocolates. Participants are usually members of Beijing's
top clubs or people living in upmarket residential areas.
"We've got great feedback on our social activities," Ms Zhao said.
Ms Cai says she's addicted to Debauve & Gallais chocolates, and as a regular
consumer of one of the most famous chocolates in the world, she feels she's not
"one of those common people".
"There's probably an iceberg tip of the world's population that can buy and
taste those chocolates and I'm one of them," she said. "I feel we're a special
group, different from everyday, ordinary people."
Mr Poussin echoed her sentiments. "Of course, only the elite can enjoy and will
enjoy our products. Because of rarity and costs, these chocolates have always
been reserved for the elite. These chocolates will never be mass product and
will always be the privilege of a few."
Professor Guo said that in a country where increasing income disparities
translated into stratified consumption patterns, consumption had increasingly
become a mark of legitimate membership in - or exclusion from - certain social
groups.
"Luxury goods can readily convert into markers of social status," he said. "They
make middle-class urbanites able to feel effective as elite members of the
society."
June 29, 2007
China's Labor Contract Law Clarified Economic
Compensation
The Standing Committee of the National
People's Congress (NPC) adopted the Labor Contract Law of China on 29 June 2007.
The new law will come into effect on 1 January 2008.
The law has clarified the method of calculating economic compensation made to
workers, which is an issue of great concern to Hong Kong companies. Under
Article 46 of the law, an employer should make economic compensation to an
employee if it revokes or terminates the labour contract under certain
circumstances. The amount of the economic compensation should be calculated
according to the duration of service and wage of the employee concerned (Article
47).
Article 97 stipulates that the starting date for the calculation of the economic
compensation should be the effective date of the new law (i.e. 1 January 2008).
Before the implementation of the new law, any employer making economic
compensation to an employee should do so in accordance with the relevant rules
at that time.
For the full text of the Labor Contract Law in Chinese, please visit:
http://www.npc.gov.cn/zgrdw/common/zw.jsp?label=WXZLK&id=368169&pdmc=110106
June 28, 2007
Beijing poised to launch US$200b global fund
- Mainland seeks better returns for US$1.2 trillion reserves
by Guo Aibing and Cary Huang in Beijing
Beijing has moved a step closer to
launching its huge state investment company, detailing plans for a US$200
billion reserve fund that could bankroll the nation's efforts to become a key
force in international financial markets. The Ministry of Finance yesterday
formally submitted a proposal for the bond issue to the National People's
Congress, signalling the authorities want better returns for the country's
US$1.2 trillion in foreign exchange reserves and at the same time raise "China
Inc's" profile.
While Beijing is increasingly moving to bring its rising economic power to bear
on global markets, it is also trying to tame a flood of liquidity and runaway
growth that has sent domestic stock markets soaring. The top legislature is
today expected to endorse a bill that would scrap or reduce tax on interest
income from personal bank savings to deter funds flowing into the equity
markets.
To fund the new investment company, the finance ministry will issue 1.55
trillion yuan of tradable special treasury bonds to buy US$200 billion of
foreign reserves. The bonds would have a 10-year term or longer.
Beijing already used US$3 billion of foreign exchange reserves to buy about 10
per cent of US-based investment firm Blackstone Group shortly before the
company's initial public offering in New York.
China, whose foreign exchange reserves are the biggest in the world, wants to
invest a portion of its money in higher-return assets to avoid losses caused by
a weaker US dollar. Analysts say the corporation might also lift the global
profile of Chinese companies, emulating ventures such as the Government of
Singapore Investment Corporation.
"The devaluation of the US dollar makes it less and less preferable to invest
there," said Zhuang Jian, an economist with the Asian Development Bank. "China
has to find alternatives to maintain the value of its hard-earned foreign
exchange reserves."
Reuters reported that Dubai and mainland officials had started talks on
co-operation between their respective state investment agencies.
Frank Gong, managing director of JP Morgan (Asia Pacific), said concern that the
special treasury bond would not appeal to the market was overstated. "Bank
interest is still very low and long-tenure treasury bonds are very appealing to
conservative investors," Mr Gong said. "China has 36 trillion yuan in bank
accounts but they are only going to issue 1.5 trillion yuan in debt. I don't
think there will be a demand issue."
Leo Liang, manager of US-based private equity fund WI Harper Group, said he
would welcome investment from the body if it abided by market rules. "I don't
think people will think too much about its government background," Mr Liang
said. The Standing Committee of the National People's Congress will today
consider authorising the cabinet to remove or cut the 20 per cent tax on
interest income, Xinhua reported yesterday.
Large sums of money have flowed from deposit accounts into stock trading
accounts as inflation outpaced after-tax gains on bank deposits. Mainland
household deposits posted the largest monthly drop in May, falling by 278.4
billion yuan, according to central bank statistics.
Mainland stocks rebounded yesterday as investors shrugged off Beijing's latest
market-cooling measures and hunted for bargains after two consecutive days of
losses.
June 27, 2007
M & A activity heats up in
China
Mergers and acquisitions in China has soared to a record high in the first half
of this year demonstrating the Mainland's budding affinity with investors and
bankers.
According to Thomson Financial, M & A deals have witnessed a surge in 58.3% to
US$39.1 billion, slightly more as compared to the second half of last year.
Despite a busy launch, the M&As in the first half of 2007 is still lagging
behind its highest ever semi-annual figures of US$44.7 billion that was
witnessed in the second half of 2000.
Violet Chung, a senior portfolio manager at Pacific Capital Management,
speculated that the M&A rise and fall cycle will be powered by a combination of
low interest rates, especially in Japan, as well as high liquidity.
A combination of factors such as a thriving stock market and a clamor for stakes
in Chinese firms have made China into Asia's most dazzling platform for
investment banking. China also radiates a growing allure for share sales,
trailing behind the U.S. in global equity issuance in the first half of this
year.
Some of the largest money-making deals this year include the Rowsley purchase of
solar energy company Perfect Field Investment, the Chinese government's US$3
billion investment in Blackstone Group as well as Dongfang Electrical Machine's
US$2.8 billion offer for Dongfang Boiler.
Marco Mak, the head of research at Taifook Securities, expressed confidence that
the situation would remain upbeat for as long as companies are still in the
process of restructuring and purchasing assets from parent firms.
It is revealed that the technology sector is a haven for foreign investors,
while the preferences of Mainland companies lie with foreign operations in the
business sector.
Mainland companies are also scrambling for IPOs. China CITIC Bank Corp's US$5.9
billion dual listing in Hong Kong and Shanghai was the world's second-largest
initial public offering so far this year. This has propelled China to own 15.2%
share of the global market, runner-up to the US in terms of IPO activity.
To top it off, an icing on the cake is the number of Mainland firms going public
on U.S. exchanges. With 10 companies raising US$2.2 billion on the New York
Stock Exchange and Nasdaq Stock Market, a new record high has been set, doubling
last year's full-year total.
June 26, 2007
Foreign-invested Real Estate Enterprises
to File Records with MOFCOM
The Ministry of Commerce (MOFCOM) and the State Administration of Foreign
Exchange (SAFE) have jointly issued a circular on further strengthening and
regulating the approval and supervision of foreign direct investment in the real
estate sector. The circular calls on all local commerce departments to strictly
regulate and manage foreign investment in the real estate sector. It also
reiterates stringent control over foreign investment in luxury property.
The circular states that foreign investors applying to set up real estate
companies must first acquire the land-use right and real estate ownership, or
they must first sign agreements with land administrative departments, land
developers or property owners on the transfer or purchase of land-use right or
real estate ownership.
In the past, in order to circumvent the approval and supervision procedures as
well as to evade taxes, many foreign investors acquired real estate projects on
the mainland through buying out the companies which owned them.
However, according to the latest circular, strict control will be exercised by
the state over the M&A of or investment in mainland real estate enterprises by
foreign investors in the form of ¡§reverse investment¡¨. Offshore investors must
not circumvent the approval procedure for foreign investment in real estate by
replacing the person actually in charge of the mainland real estate enterprise
concerned.
The circular also stipulates that any approval of the establishment of
foreign-invested real estate enterprises by local authorities must be promptly
reported to MOFCOM for record filing. Foreign exchange administration
departments and designated foreign exchange banks must not process any capital
account settlement requests for foreign-invested real estate enterprises which
have not completed record-filing with MOFCOM or passed the joint annual review.
Local authorities which violate rules and regulations in approving
foreign-invested real estate enterprises will be investigated and rectified by
MOFCOM. Foreign exchange administration departments will not process forex
registration applications by foreign-invested real estate enterprises that are
established in violation of rules and regulations.
June 20, 2007
China Lowers VAT Rebate Rates for Certain
Exports
On 19 June, the Ministry of Finance and State
Administration of Taxation issued a notice on the adjustment of VAT rebate rates
for certain exports, including the removal of export VAT rebates for 553 types
of high energy consumption, high pollution and resource-type products, and the
reduction of VAT rebates for 2,268 types of products which can easily trigger
trade conflicts, including bags and luggage, clothing, footwear and headgear,
umbrellas, furniture, watches and clocks and toys. The adjustment measures will
come into force on 1 July 2007.
For details of the above VAT rebate adjustment in Chinese, please visit:
http://www.mof.gov.cn/news/20070619_3077_26825.htm.
June 19, 2007
China to Clean Up High
Pollution and High Energy Consumption Industries
The National Development and Reform Commission recently announced a nationwide
ad hoc inspection exercise aimed at putting high pollution and high energy
consumption industries in order.
The inspection is organized and implemented by the National Development and
Reform Commission, Ministry of Finance, Ministry of Land and Resources, State
Administration of Taxation, State Environmental Protection Administration,
National Bureau of Statistics, China Banking Regulatory Commission and China
Electricity Regulatory Commission. Eight to 10 inspection teams are formed to
carry out field inspections to curb the excessive growth of high pollution and
high energy consumption industries, expedite economic restructuring and change
of economic growth mode, and promote the work of conserving energy and reducing
pollutant emissions.
The industries under inspection include steel, copper, lead and zinc, cement,
electric power, calcium carbide, coke and ferro-alloy, as well as other high
pollution and high energy consumption industries. The inspection takes place in
three stages: between late May and mid-June, local inspection and rectification;
at the end of June, completion of inspection by the State Council inspection
teams; the third stage, summary of the ad hoc inspection exercise.
The content of the inspection covers: implementation of the control policies for
high pollution and high energy consumption industries; implementation of the
policy of differential pricing for electricity; cleaning-up and rectification of
concessions in land price, taxes and other fees illegally granted to high
pollution and high energy consumption industries; progress in enforcement of
market access requirements and elimination of backward production plants;
emission reduction efforts and new projects of high pollution and high energy
consumption industries; implementation of the policy of restricting the exports
of high pollution and high energy consumption industries.
In the first quarter, high energy consumption industries rebounded as a result
of price hikes for certain products, the easing of power shortage and
preferential policies illegally granted by some localities. The value-added of
six major high energy consumption industries registered a year-on-year increase
of 20.6%, 2.3 percentage points higher than the overall industrial growth during
the same period. Among these, alumina showed a 53.7% growth, the export of steel
increased by 120%, and investment in the non-ferrous metals industry expanded by
56.5%, or 40.4 percentage points higher than in the same period last year.
Building Construction Must Comply With Energy Efficiency
Standards
According to the newly promulgated Acceptance Standards for Energy-Efficient
Building Construction, building projects that fail to comply with energy
efficiency requirements will not pass acceptance test after 1 October this year.
As a set of national standards, the acceptance standards clearly identify energy
efficiency as an integral part of building construction projects and provide for
whole-process management by taking the documentation of energy efficiency
designs, the quality of materials and equipment used, quality control over the
entire construction process, and system debugging and operational testing as key
areas in construction and acceptance testing. The 20 mandatory provisions in the
standards are technical measures that embody the state's energy efficiency
requirements which must be strictly enforced in building construction.
The standards, compiled, examined and approved by the Ministry of Construction (MOC)
and jointly promulgated by MOC and the State Administration for Quality
Supervision, Inspection and Quarantine, will take effect on 1 October this year.
According to vice minister of construction Huang Wei, the standards provide
unified technical codes for the implementation of building energy efficiency
laws and regulations, the fulfillment of energy efficiency designs, the conduct
of acceptance tests on energy efficiency projects, and the assurance of quality
and performance of energy efficiency in building construction.
Huang urged all local governments to conscientiously conduct training on the
promotion of building energy efficiency standards, exercise supervision over
their implementation, and promptly revise and fine-tune local standards and
implementing rules. He also called for positive efforts to promote technological
advancement in building energy efficiency while strengthening the implementation
of compulsory building energy efficiency standards with whole-process
supervision and incorporating supervision over the implementation of
energy-efficiency standards in administrative law enforcement.
June 16, 2007
Chinese travelers changing
the world's tourism pattern
In 2006, the number of Chinese tourists who traveled abroad reached 34.52
million, a record high in history. From January to March of this year, the
number already reached 9.7 million, 14.5% higher than in the same period last
year.
Wu Wenxue, vice chairman of the China Tourism Association, said at a forum on
tourism in Beijing, that China has become the fastest growing source of tourists
in Asia. The fast growth of Chinese travelers going abroad has gained much
attention from many destination countries throughout the world. Chinese tourists
traveling abroad are changing the tourism pattern in the Asia-Pacific region, as
well as the pattern throughout the world.
The history of Chinese tourists traveling abroad is quite short. A decade or so
before, people only traveled to Hong Kong and Macau to see their relatives. In
1992, only 2.93 million Chinese travelers went abroad, and most of them were
part of government delegations. Civilians began traveling abroad just ten years
ago and the rate of travel has been growing rapidly. Whenever golden weeks
between May 1st and 7th and October 1st and 7th occur, there have been more
people who want to travel abroad, according to a manager in the China
International Tourism Agency. Currently traveling abroad has become an important
part of the Chinese tourism industry. According to the State Tourism Bureau,
Chinese who travel abroad share the following aims:
First, Asian countries are the first choice as tourist destinations. Southeast
Asian countries were the earliest destinations open to Chinese tourists. In
recent years, more and more people have chosen to go to South Korea and
Kazakstan on holiday. Secondly, Europe has become a hot destination. With their
splendid cultures and civilizations, European countries have attracted many
Chinese tourists. Last year, Chinese citizens made 1.9 million visits to Europe.
The number of people going to Great Britain has also increased- now 20% more
than in the previous year.
In addition, a holiday tour has become a new way of travel, as people's quality
of travel is increasing. The latest survey shows that more and more tourists
like to choose one country, region or island on which to have a leisurely and
high quality holiday. This is in stark contrast with previous holiday tours,
such as ten days of traveling within eight European countries, which became very
tiresome. Now people can choose to travel in the French countryside, a place
along the Rhine River in Germany, or on an island in Thailand for a week.
With the fast development of Chinese tourism, there are also some issues worth
noting. Xu Jing, director of the Asia Pacific Bureau of the World Tourism
Organization, pointed out that Chinese traveling abroad face many problems; for
example, there is not such a broad range of travel destinations since tourists
are still traveling within the Asia-Pacific region. Travel time is still limited
to the three long national holidays in China. A real holiday with salary is
still a dream for the Chinese.
Another underdeveloped aspect of Chinese travel abroad is the behavior of some
tourists. People believe that some tourist behavior affects the image of Chinese
people abroad. Therefore, the Chinese government launched a program to
popularize travel knowledge among Chinese tourists. In addition, this program
was well-executed in many relevant agencies, such as airline companies and
tourism agencies. Tourists can receive training before boarding, so that they
felt better prepared during the trip and with a sense of responsibility.
In addition, current travel service is still not sufficient for many tourists.
China now has many millionaires who seek a higher quality tourist experience and
would like to receive personalized service. On the other hand, getting a travel
visa is still a very complicated issue. China still cannot provide such a
service.
To get a visa in a timely manner is a precondition for traveling abroad.
Currently, only the Australian embassy gives a green light to some Visa-credit
card holders in Beijing and Shanghai, when applying for a visa. "This is our way
of attracting rich Chinese tourists. It is an attempt," one embassy officer
explained. Managers in the China Tourism Agency and the Kanghui Tourism Agency
said they hope European countries will also make such attempts, so that more
tourists will be able to travel abroad and enjoy a great holiday in Europe. They
also hope embassies can relax their visa policies when issuing a tourist visa
for Chinese tourists.
June 6, 2007
Hangzhou has unique private label
- New brand revealed
Hangzhou's Intime Department Store has
produced its first - and the city's first - private label with the launch of
Justin Time counters in early April 2007. The store later opened special
counters at Ningbo's Intime store, with turnover rising in response to the
display of the new branded women's wear.
This private label, offering mix-and-match options, was jointly established by
Intime Department Store and Shenzhen's Esuo Co, with Intime providing the brand
name and funds, with Esuo providing designers and in-house expertise on the
opening of the sales counters.
Compared with other Esuo labels, Justin Time products are priced on the cheaper
side. The bulk of its summer items is priced at between Rmb400 and Rmb1,000. The
marketing strategy is similar to that of Esuo.
A big selling point for the clothes is that they are in fact easy to mix and
match up. Sales assistants at the store offer ideas on how to match different
pieces of clothing and products are often sold in matching sets. Sales volumes
are high, as might be expected from reasonably cheap garments which allow women
to put together several different ensembles from limited purchases.
Actually, many other domestic department stores, such as those in Shanghai, had
tried out the private label idea, but have had to call off their experiments
because their house brands failed to galvanise interest and recognition - hence
attracting poor returns.
It is too soon to say whether or not Justin Time will succeed, but it enjoys an
advantage in the commercial value of its overall brand name. Thanks to the
performance of the store, Justin Time has begun to resonate with Mainland
consumers, at least from the evidence of sales so far.
Because Intime Department Store has a mature marketing platform made up of a
network of chain outlets in Zhejiang, Justin Time doesn't have to face the same
struggle for recognition as other brands and can gain access to Intime store
customers.
After opening its first counters at Hangzhou's Intime Department Store, Justin
Time extended its business to Ningbo's Intime store. If business performs well
the store plans further ventures into Nanjing, Beijing and other cities.
As a private label produced in its own factory as OEM products, Justin Time
doesn't have to pay entry fees like other brands when it is offered in Intime
stores. It also doesn't pay agents for ordering goods or share profits with the
store.
Private labels have been lucrative around the world, complementing the store
brand itself. For example, the UK's 170-year-old Harrods Department Store has
its own brand of Harrods' clothing, while Wal-Mart markets its own clothing
under the Metro 7 label. This is also the case with Lafayette of France and
Marks & Spencer of the UK.
That a similar approach can be launched with early success by a Hangzhou store
says a lot about the growing sophistication of retailers in the city.
June 2, 2007
Smoke-free Restaurants in Beijing for 2008
Olympics
In the run-up to the 2008 Olympic Games, all
restaurants and eateries in Beijing are required to launch anti-smoking
campaigns under a circular issued jointly by the Beijing municipal health
bureau, Beijing municipal commerce bureau and Beijing tourism administration on
25 May 2007. All large and medium-sized restaurants in famous scenic spots and
cultural heritage parks, designated hotels of the Games, and restaurants in all
competition venues and the Olympic Village should fully ban smoking by June
2008.
Restaurants which are unable to implement total smoking ban should designate 75%
of their floor area as non-smoking zone and 25% as smoking zone. The smoking
zone should be kept in a closed environment with air quality meeting stipulated
health standards.
According to Jin Dapeng, director of Beijing municipal health bureau, large and
medium-sized restaurants in famous scenic spots and cultural heritage parks in
Beijing which are unable to ban smoking completely due to special circumstances
should use the zoning system. For small restaurants with a floor area of less
than 500 sqm where zoning is impracticable, they are required to strengthen
anti-smoking publicity and adopt various anti-smoking measures.
The municipal authorities called on all restaurants offering Chinese, Muslim as
well as foreign cuisines to actively pursue anti-smoking and serve as role
models to other industry players in the capital city by offering a healthy and
comfortable dining environment.
As Wang Yunfeng, deputy secretary general of Beijing municipal people's
government, pointed out, a smoke-free Games is part of the concept of "Green
Olympics". He said the capital city has already started preparation work for
realising a smoke-free Beijing Olympics.
June 1, 2007
Satisfy China’s Demand for
Money -
by Hugo Restall - Editor of the
FAR EAST ECONOMIC REVIEW
As the audience at the Asia Society’s May
gala dinner in Hong Kong sips their coffee, the moderator allows one more
question from the audience for Nobel economics laureate Robert Mundell. A
Chinese gentleman stands to ask how much longer the U.S. dollar would remain the
world’s reserve currency. The query seems like the perfect set-up for the
world’s foremost expert on monetary policy and a well-known “friend of China” to
predict the rise to preeminence of China’s currency.
Prof. Mundell bats the question away without hesitation. China, he explains, is
still far behind the U.S. in terms of economic strength and stability. “I think
the dollar era is going to last a long time … perhaps another hundred years.”
The answer is a fitting end to an evening in which the conventional wisdom has
been set on its ear. The high U.S. trade deficit, widely supposed to be
unsustainable, is not only sustainable, Prof. Mundell argues, it is necessary to
the functioning of the global economy. China’s high balance of payments surplus
and pressure on the yuan could be resolved quite easily by ending the central
bank’s sterilization—the practice of following up its interventions in the
foreign-currency market by issuing bonds, thereby preventing the money supply
from increasing too fast. And no, this wouldn’t lead to a big jump in inflation.
On this last score, Prof. Mundell has a few economists in the audience
scratching their heads. Is the economist known as the “father of the euro” for
his work on optimal currency areas just being provocative? After all, he has a
bit of a reputation as what the Chinese would call a lao wan tong, a playful old
child. The 74-year-old Columbia University economics professor has appeared on
the television show Late Night With David Letterman to tell “Yo Mama” jokes and
recite hip-hop lyrics. He owns a 12th-century castle in Siena, Italy, once
occupied by Pandolfo the Magnificent, and his nine-year-old son attends
international school in Florence.
So the next day I meet with Prof. Mundell in the coffee shop of his hotel to try
to get to the bottom of this last point. The standard economic theory tells you
that if the money supply rises, so should inflation. And the professor had a big
hand in writing that theory, so what gives?
First a brief explanation. Without sterilization, China would essentially be
running a currency board system, much like in Hong Kong. When people want to
convert more foreign currency into Hong Kong dollars than the other way around,
the government stands ready to make the trade, creating new Hong Kong dollars
and depositing the foreign currency into reserves. The money supply increases,
and if this outstrips the growth in the economy, the usual outcome is too much
money chasing too few goods—inflation. For instance, in the mid-1990s inflation
in Hong Kong ran much higher than in the U.S.
Prof. Mundell himself pioneered the explanation for this, the “impossible
trinity.” In its simplest form, no economy can have free capital flows, a fixed
exchange rate and control over its own monetary policy, i.e. stable interest
rates or stable prices, all at the same time. Economies with a currency board
like Hong Kong enjoy the first two, but can’t regulate the local economy
separately from the one they have pegged to, and so may suffer bouts of
inflation and deflation through the business cycle.
But, he poses, what if extra yuan did not send consumption of Chinese goods into
overdrive, but merely satisfied the desire to hold yuan and yuan-denominated
assets? China’s domestic economy is becoming wealthier and its citizens are
saving in record amounts, wealth that cannot easily go abroad because of capital
controls and so is invested in production capacity far beyond the needs of
domestic consumption. Meanwhile, the largest portion of the increase in reserves
is driven not by the trade surplus but by inward investment. The upward pressure
on yuan has become self-perpetuating, especially since the shift to a slowly
appreciating peg in 2005. Holding the yuan has become a one-way bet.
In other words, look at the yuan as a commodity, and China’s balance of payments
surplus as a case of demand outstripping supply: “If you create money in an
equilibrium situation, the additional money makes disequilibrium, and people
spend more and that involves more imports, and potentially inflation. But if you
print money to fill an excess demand for money, there is no inflation that comes
from that.”
By sterilizing, the central bank prevents the supply from rising fast enough to
satisfy the demand, perpetuating the imbalance. Raising the required reserve
ratio of the banks has the same effect. Ease off the sterilization and monetary
tightening, Prof. Mundell predicts, and the demand for yuan will soon be sated.
As in an equilibrium, one result would be increased domestic demand and imports,
reducing the trade deficit. But with no shortage of problems on the horizon,
it’s unlikely that domestic prices would rise across the board, and prices of
some goods might actually decrease as companies achieve greater economies of
scale. Since the trade surplus will decline, political tension with the U.S.
will also ease.
There is precedent to justify such optimism, Prof. Mundell explains. In the
early 1980s, after Paul Volker’s Federal Reserve tightened interest rates and
vanquished the runaway inflation of the 1970s, the U.S. economy passed through a
sharp recession and then began to recover. When confidence in growth prospects
and the value of the dollar was restored, the desire of Americans and foreigners
to hold the currency increased. The money supply began to grow at a phenomenal
rate, and some, including Milton Friedman, predicted on this basis that
inflation would reappear. But Prof. Mundell diagnosed it differently: “What was
happening was the expectation of disinflation was increasing the demand for
money.” And in fact not only did inflation fail to re-emerge, but disinflation
continued through the 1980s.
So is China in the same boat today? Consider that the People’s Bank of China is
already not doing a very good job of sterilization. One standard measure of
money supply, M2, is growing at 17%, compared to GDP growth of about 11%. And
yet inflation remains very low. In fact, in recent periods when growth has
slowed, deflationary pressures have emerged.
This fact is obscured by a lot of blather about the Chinese economy
“overheating.” Yet the hallmark of overheating, as Prof. Mundell observes, is an
excess of demand leading to bottlenecks in many markets. If anything, China
still suffers from weak domestic demand. And while there are a few isolated
bottlenecks in the economy, in general there are plenty of inputs available to
increase production.
This confused terminology is not the only way in which the experience of
developed countries is misapplied to China. In the U.S., for example, the
Federal Reserve usually regulates the economy largely by setting the interest
rate at which banks lend to each other and through the buying and selling of
bonds, and practically never by administrative means or intervening in the
foreign-currency markets. In China, it is the opposite; the management of the
exchange rate is the central bank’s chief impact on the economy. Setting
interest rates is mostly for show, and has little meaning.
So what about China’s stock-market bubble, should the People’s Bank try to pop
it? China could include asset prices in its index of prices if it wanted to
target price stability. But the problems with the market require deeper reform.
As long as the international monetary environment is stable, pegging the yuan to
the dollar offers the opportunity to target the broadest possible index of
prices, effectively the goods of the whole world. It’s difficult to improve on
that, even if China had its own Alan Greenspan.
Full convertibility is not on the cards as long as the primary objective of the
Communist Party is maintaining power, not the welfare of China’s citizens, Prof.
Mundell admits. But he advises the Party bosses to progressively relax the
controls to help take the pressure off the balance of payments.
However, in the unlikely event that the yuan were suddenly made fully
convertible, Prof. Mundell predicts that the value of the currency would fall,
not rise. That’s because many Chinese savers would naturally like to have the
security of keeping at least some portion of their wealth in foreign currency.
The incentive would be to move this money quickly, in case the government
slammed the door shut. As with the experience of the United Kingdom in 1947,
when the Bank of England saw its reserves evaporate in a matter of weeks, this
becomes a self-fulfilling prophecy, and capital controls have to be reinstated.
The movement to full convertibility is fraught with danger and must be
approached cautiously.
Even the abandonment of sterilization would have to be undertaken gradually,
Prof. Mundell advises, in order to avoid scaring the markets: “I wouldn’t
suddenly change what they are doing, just slow it down and phase it out over a
year or so period.” Policy makers don’t have to be transparent in their
thinking. “Even if you have gotten on to the wrong theory, you can’t just
reverse course, you have to find another reason for changing.”
Given Prof. Mundell’s many trips to China, and the fact that he is on the same
wavelength as the leadership on keeping the value of the yuan stable, it would
appear that he has some influence within the leadership. He was given a “green
card” by the government two years ago which gives him the permanent right to
live and work in the country. And he says he is considering buying an apartment
in Beijing and shifting his son to a school there.
But at the same time he remains skeptical of the quality of China’s top
economists, choosing to focus more on the next generation. He has lent his name
to a business school in the capital, as well as a financial magazine. And he’s
working on getting a screenplay set in China produced. One senses that, even
though he helped found the supply-side school that informed the policies of
Ronald Reagan, Prof. Mundell is too much of an independent mind to ever become a
government’s go-to economist. He’s having too much fun as a lao wan tong.
Chinese bankruptcy -
Euthanasia for companies - China's troubled businesses can now legally go bust
THERE is a good chance that on June 1st, shortly after The Economist goes to
press, at least one Chinese company will declare bankruptcy, or have bankruptcy
thrust upon it. In most economies such an announcement would be cause for alarm.
In China it is something of a triumph. After over a decade of contentious
debate, China has finally enacted a law that allows worthless private companies
to die.
Capitalism without bankruptcy is like Christianity without hell, observed Frank
Borman, who watched the American airline he had once run go deservedly bust in
the 1980s. Liquidations are not as nasty as they sound: assets that would
otherwise be locked up in endless disputes can be recycled and put back to work.
They can also reveal lies: because many Chinese companies are functionally dead
but legally alive, their debts remain as receivables on the balance sheets of
other Chinese companies, creating an accounting nightmare.
Euthanasia may first claim the true basket cases, for which the risks of testing
a new law are justified by the impossibility of otherwise sorting out claims.
These fatalities may pass without a stir. Later cases, though, may get
contentious.
The very notion of bankruptcy—of breaking financial commitments—is touchy in
China. Debt obligations were traditionally passed from father to son. An early
legislative attempt to break this chain was enacted at the beginning of the last
century and then hastily repudiated. Under communism, the idea of bankruptcy was
troubling because everything, from assets to employee welfare, was in the
state's hands.
In 1986 a law was passed for state-owned companies, allowing only their
government supervisor to put them into bankruptcy. First claim to any remaining
assets belonged to the workers. No explicit provisions existed for private
companies. Defaults were worked out in the light of conflicting provisions of
contract law and rules put out by government agencies, says Helena Huang, a
bankruptcy lawyer for Kirkland & Ellis. It was, in short, a maze.
The shortcomings became glaringly apparent during two big defaults in the late
1990s, one tied to the Guangdong International Trust & Investment Corporation,
and the other Guangdong Enterprises (Holdings) Ltd. The billions of dollars each
owed to domestic and foreign creditors could be resolved only with costly state
intervention. Writing a new rule, however, was hindered by the possible
consequences for workers, who could be left with nothing.
In the future, the claims of workers will take precedence only over unsecured
creditors. Whether that creates social upheaval will depend on how many
companies go bust (probably many); whether new jobs are available; and whether
the government intervenes with emergency subsidies (it has in the past).
Workers will fret; but foreigners should too. The new bankruptcy law will apply
to Chinese companies overseas—and to many foreign companies operating in China.
Some of these have their actual business assets in China, but have retained
their headquarters in Hong Kong or Taiwan, or perhaps used intricate off-shore
structures, so as to enjoy a more predictable legal regime. In the past, it was
safe to assume that corporate distress could be handled outside China when
foreign investors were involved. A company cannot, however, contract itself out
of the law, notes Mark Fairbairn, a lawyer at White & Case in Hong Kong. With
its new bankruptcy law, China has asserted jurisdiction over who, in the last
analysis, controls company assets. This could be a step backwards, increasing
state influence. All the more reason for companies to stay on the right side of
their creditors.
May 31, 2007
U.S. Commercial Service
Focuses on China’s Second-Tier Cities - Barry Friedman, minister counselor for
commercial affairs, inspects the Apple booth at SINOCES 2006.
Fourteen of China’s second-tier cities account for 8 percent of China’s
population but 53 percent of its total imports, which is why the untapped
markets of China’s emerging cities provide some of the most exciting and
lucrative opportunities for U.S. exporters.
by Nicholas Monsees - To help U.S. exporters reach China’s emerging markets, the
U.S. and Foreign Commercial Service (USFCS) has expanded the scope of its
operations to include several of China’s fastest-growing second-tier cities.
USFCS now offers its services in 14 key regional hubs and emerging markets
across China through its American Trading Center (ATC) program. With access to a
broad cross-section of contacts, including potential agents and distributors,
major end-users, and key government officials, the new initiative by USFCS has
been helping U.S. companies meet the right people at the right levels to expand
their businesses.
China’s Real Economic Engine - China’s unprecedented growth and the
opportunities it presents are no longer a secret in the business world. Although
megacities, such as Beijing and Shanghai, have long captured much of the
spotlight, it is behind the scenes, in second-tier cities, where one can witness
the real source of China’s economic growth. Contrary to expectations, the
majority of China’s imports are not ending up in Beijing, Guangzhou, or
Shanghai. Rather, a select group of 14 second-tier cities—Chongqing, Dalian,
Hangzhou, Harbin, Kunming, Nanjing, Ningbo, Qingdao, Shenzhen, Tianjin, Wuhan,
Xiamen, Xian, and Zhuhai—account for an astonishing 53 percent of China’s total
imports, almost double the amount of the three Chinese megacities combined.
Local entrepreneurs in those emerging cities are not the only ones reaping the
benefits. Those cities have become importing havens, and they present lucrative
opportunities, especially for U.S. companies. Perhaps the critical question for
U.S. firms is not whether there is a second-tier city market, but which city is
best for a particular industry or product.
On-the-Ground Assistance - One of the ways that the USFCS is helping U.S.
companies meet potential buyers from emerging markets is by assisting them in
promoting their products at trade shows in China. The USFCS offers preshow
marketing assistance and briefings, as well as access to prime locations on the
exposition floor as part of a “pavilion” of American companies. A spokesperson
for Vweb, an exhibitor in the U.S. pavilion at the China Consumer Electronics
Show (SINOCES) 2006 in Qingdao, describes how the USFCS helped introduce the
company’s products into the Chinese market. “The connections, press coverage,
and customer visits from SINOCES are producing good results for us, and our
sales in China are growing very fast. We expect our sales in China will grow
more than 100 percent next year.”
Information Technology Imports on the Rise - Success stories such as Vweb’s are
not uncommon, especially for U.S. firms involved in China’s booming information
technology (IT) sector. As China strives to diversify its manufacturing base and
to move its way up the value chain, few industries show more potential for
growth than IT. Much of this explosive growth is happening in the second-tier
cities, with some even surpassing that of Beijing, Guangzhou, and Shanghai. One
emerging city in particular, Shenzhen, has become a leading importer of IT
goods.
Shenzhen: A Leader in IT Imports - Shenzhen, located in the southern Pearl River
delta just across the border from Hong Kong’s New Territories, has been one of
the fastest-growing cities in the world since its opening in the late 1970s.
Once a small fishing village, Shenzhen is now the largest manufacturing base in
the world and the hottest market for IT goods in China. Shenzhen’s growth in the
sector is phenomenal, dwarfing that of Beijing, Guangzhou, and even Shanghai.
The city now imports more integrated circuits and electrical components than any
other city in China. Since 2000, Shenzhen’s annual imports of foreign electrical
components and integrated circuits have grown by an astonishing 520 percent and
720 percent, respectively.
Sustained Growth Foreseen - Experts forecast that growth in the second-tier
cities will remain strong in the coming years. What makes those emerging markets
even more attractive for U.S. exporters is that they have a lower level of
saturation and competition than their first-tier counterparts. Moreover, as the
ranks of the middle class in those emerging markets continue to swell, so will
the demand for foreign goods. The combination of those factors will continue to
make second-tier cities one of the best opportunities for U.S. companies to
expand their businesses in China.
For more information - Through a partnership between USFCS and China’s national
trade promotion organization, China Council for the Promotion of International
Trade, ATCs put a network of China trade experts at your fingertips. More
information on ATCs and the Chinese market can be found on the Web, or send an
e-mail to beijing.office.box@.mail.doc.gov.
May 30, 2007
EU intensifies co-operation
with China on dangerous goods
Improved EU-wide cooperation between customs authorities has led to notified
dangerous consumer goods being removed from the EU market in 2006, with
China-based goods representing 48% of all cases.
The European Commission has intensified its co-operation with China with a
Memorandum of Understanding and a "roadmap" for safer toys in an effort to
increase regulatory criteria.
The annual RAPEX report on dangerous consumer goods (which was produced by the
European Commission) shows that toys took over from electrical appliances as the
sector most often notified by member countries last year.
Dangerous goods from China represented a substantial increase in 2006 over the
previous year - showing 440 of a total 924 products from outside the EU were
dangerous - with notification presenting a serious health and safety risk for
consumers. The information in the report is shared among surveillance
authorities in 30 European countries, where dangerous goods are banned.
Over 40% of all notifications, primarily from Germany, Hungary and Greece,
followed by the UK and Spain, related to voluntary measures taken by European
businesses. That was a considerable increase on 2005 and a clear indicator of
growing safety awareness in the EU.
The most frequently notified products besides toys (representing 24%) were
electrical appliances (19%), motor vehicles (14%) and lighting equipment (11%).
Cosmetics represented 5% of total notifications.
Risks that were subject to notification included injuries (25%), electric shocks
(24%) and fire risks or burns at 18%. There were also choking or suffocation
risks at 14% and chemical reaction risks at 9%.
Compulsory Certification
for Six Categories of Toys Comes into Force
Effective from 1 June this year, children's vehicles, battery-operated toys,
projectile toys, dolls, plastic toys and metal toys must pass compulsory
certification and be affixed with the China Compulsory Certification (CCC) mark
before they are allowed to leave factory and be sold or imported. The move aims
to safeguard the health and safety of young children.
According to Zhu Guangpei, deputy director of the National Regulatory Commission
for Certification and Accreditation (NRCCA), quality inspection agencies across
the country will conduct inspections on compulsory certification for toys with
effect from 1 June. The forgery and counterfeiting of CCC marks and other
violations will be severely dealt with.
The General Administration of Quality Supervision, Inspection and Quarantine and
NRCCA began implementing the compulsory certification system on the above six
categories of toys starting from 1 March 2006 because the quality of these
products has a direct impact on children's health and safety. Up to May 2007,
635 Chinese and foreign toy manufacturers have received 1,485 compulsory
certifications for toy products. By now, over 80% of toys in the mainland market
are certified.
NRCCA chief engineer Liu Weijun noted that China is the world's largest importer
and exporter of toys. Compulsory certification for toys is an effective means
for safeguarding children's health and safety, regulating market order,
improving the quality of toy products and increasing the competitiveness of
Chinese toys.
At the press meeting announcing this policy change, three certification agencies
and 15 inspection and testing centres designated by NRCCA made the pledge to
strengthen self-discipline and ensure the quality of compulsory certification
for toys.
May 29, 2007
EU chocolatiers chase
Chinese market - By Duncan Freeman
BRUSSELS - China's growing taste for "Western" luxuries is attracting an
increasing number of foreign companies determined to satisfy the market. Luxury
chocolate is a product that caters to these new demands, and one that EU
companies are relatively well placed to exploit. After all, Europeans are among
the highest per capita consumers of chocolate in the world, Europe is the home
of many leading chocolatiers, and the ranks of chocolate exporters are headed by
several European nations.
The growing number of relatively affluent consumers in China is an attractive
market segment for luxury goods makers, but China is still far from being a
major consumer of chocolate. According to Chinese figures, the average annual
per capita consumption is around 0.7 kilograms. The average for the 15 EU member
nations in 2003 was 5.7 kilograms, while the Swiss ate 9.6 kilograms per person
per year, the highest in the world. The Chinese level of consumption ranks it
roughly the same as other developing markets such as Brazil, where consumption
was 0.8 kilograms per head in 2003. Even in Japan, a significant market in Asia,
consumption was only 1.8 kilograms per capita. As with every other "Western"
food product newly entering the Chinese market, consumption is mainly
concentrated in cities, where people who have acquired such tastes and the
incomes to support them mostly live.
The overall chocolate market in China has been growing steadily, but not
spectacularly. According to one recent estimate by the China Food Industry
Association, growth in the market was projected to be 10-15% per year in the
near future. The market is actually dominated by foreign brands, including Dove,
the market leader; Cadbury; and Hershey, all of which have invested in
production facilities in China. Only a few local producers have a relatively
strong brand presence, and they occupy a small part of the market. In this
market, the perception that foreign brands equate to quality and value still
remains strong.
The main chocolate exporters in the world are all European, with the four
largest, according to World Trade Organization statistics, being Germany (US$1.5
billion exports in 2003), Belgium ($1.4 billion), France ($856 million) and the
Netherlands ($821 million). But until now, little of this has gone to China.
Despite the size of China, its growing affluence and changing tastes, it remains
a relatively small market for imports. According to WTO figures, chocolate
imports grew from $17.7 million in 1999 to $49.2 million in 2003: impressive
enough, but still leaving China roughly equivalent to countries like New Zealand
and Slovakia in terms of import market size. For the moment, this hardly
indicates enormous levels of business.
Europe's exporters to China, as opposed to those who produce there, tend to be
concentrated at the top end of the market. For these producers, China is
considered a market of great potential. This was demonstrated recently at the
Beijing Hyatt hotel, which hosted the city's first-ever "salon de chocolat" (a
kind of chocolate fashion show with models draped in confectionery) with the aim
of promoting high quality chocolate products. Some producers, such as Ferrero
Rocher of Italy, Lindt of Switzerland and Leonidas of Belgium have been in the
market for a number of years, and many others are now rushing in.
There are dangers in trying to go too far too fast. Some exporters have already
had to learn that quick growth can lead to disappointment in China. For example,
there was a boom in exports of pralines to China around 2000, largely as a
result of speculative importers trying to cash in quickly on perceived demand in
China's booming economy. The result was huge oversupply, leading to discounting
and high levels of returns. Many exporters got burned, and European exports of
pralines have still to fully recover from this boom and bust.
Whether China will live up to expectations remains to be seen. Stephen Candries,
export and duty free director at Guylian, the largest maker of pralines in
Belgium, predicts that his firm will see up to 100% annual growth in its China
exports in the next few years. Pralines, a Belgian invention, account for a high
percentage of European chocolate exports to China. But unlike some newcomers,
the company, which has an annual turnover valued at 60 million euros, 95% of
which is exported, has been in China since 1992 and has spent many years
developing the market.
In China, as elsewhere, the travel and duty free market is a primary target for
luxury chocolate companies. This, however, offers only a limited level of
growth. Eventually, in order to truly break into the local market, producers
will have to get out of the hotels and airports. Guylian, although it regards
itself as a premium brand, also sells in domestic retail outlets throughout
China. According to Candries, the strategy of Guylian is not to give in on
quality or taste, but to provide a premium product at an affordable price. Other
companies adopt a different strategy, focusing only on exclusive outlets.
The market for luxury chocolate is highly seasonal and depends on a gift giving
culture. Success depends on exploiting this culture. In Europe this focuses
around Christmas and Easter. In China the peak is the Lunar New Year, and also
around Christmas, when expats as well as Chinese eager to follow new trends give
gifts. While expats are still a significant part of the market, more and more
Chinese are buying the products. It is increasingly the new generation of
affluent young, who are curious to try new products and can often afford them,
who will carry the future of these brands.
Although domestic competition is limited, one danger foreign producers face is
various types of knock-offs. According to Candries, these may be copies of
distinctive Guylian designs, or local manufacturers attempting to trade off the
reputation of Belgian chocolate. Although today these products are unlikely to
claim to be made in Belgium, their packages often assert that they are the
"Belgian style" or "Belgian recipe". Defending not only the company reputation
but also the Belgian name is important, Candries says, since failing to do so
will ultimately destroy the market for legitimate products. Ferrero Rocher,
which has been highly successful in China, has also been plagued by imitations.
Those with experience in China's chocolate market believe that realization of
the potential will require a long-term educational effort. According to Candries,
although expats may be familiar with the Guylian brand, most locals do not yet
know it or what quality means in terms of chocolate. To Westerners it might seem
that chocolate is self-evidently desirable, perhaps too desirable for the good
of those who eat it. In China, this is less self-evident. Like many other newly
arrived products in the China market, chocolate has had to break down barriers
of taste and culture.
Unlike Europe, where it has been prized for several hundred years, China, whose
traditional confectioneries have been very different, has only recently
discovered the delights of chocolate. This difference in tradition, combined
with more modern concerns over health, notably bad teeth and obesity, mean that
chocolate has not necessarily been the easy sell in China it might appear at
first sight to Westerners. Some Western producers have resorted to changing the
recipe of their chocolate to suit Chinese tastes, while others believe in
educating the consumers. Ultimately, the success of luxury chocolate in China
will depend not only on the growth in incomes, but also making the product
acceptable to Chinese.
Duncan Freeman is a writer and consultant based in Brussels. He
can be contacted at
duncanfreeman@skynet.be.
May 25, 2007
Guangdong's First
Private-Invested Expressway Opens to Traffic
The Jiangmen-Zhuhai Expressway, the first expressway invested and built by the
private sector in Guangdong, opened to traffic on 16 May. As the first private
expressway in Guangdong, its opening will shorten the travel time between
Jiangmen and Zhuhai by about an hour.
Built by Zhuhai's Xinchangjiang Construction Investment Co Ltd, a private
enterprise, with a total investment of Rmb3.067 billion, the 53.3-km
Jiangmen-Zhuhai Expressway which started construction in August 2003 is the
first freeway in Guangdong built with private capital using the BOT model. It
starts from Sicun in Jiangmen and ends at Hezhoubei in Zhuhai.
As an integral part of the outer ring of the transportation network in the PRD
economic zone, the Jiangmen-Zhuhai Expressway provides a shortcut linking the
eastern and western shores of the Pearl River with the pan-PRD area. Travelling
eastwards from the northern end of the Jiangmen-Zhuhai Expressway, one can reach
Dongguan, Shenzhen and eastern Guangdong via the Jiangmen-Zhongshan and
Guangzhou-Zhuhai Expressways and the Humen Bridge. Westwards, it leads to
western Guangdong and Hainan via the Jiangmen-Heshan and Guangzhou-Zhanjiang
Expressways. The middle section of the Jiangmen-Zhuhai Expressway connects with
the coastal expressways and provides another shortcut to western Guangdong.
Connecting with the Jiangmen-Zhaoqing Expressway, which is still in the drawing
board stage, to the northwest, it will join the network of expressways in the
three provinces of Guizhou, Yunnan and Sichuan via expressways in Wuzhou and
Guilin of Guangxi. Southwards it leads to the Zhuhai Port and Zhuhai Airport,
even Macau via the Zhuhai Bridge and eventually Hong Kong when the Hong Kong-Zhuhai-Macau
Bridge is completed.
Industry Relocation in Guangdong Produces Results in Two Years
The Guangdong provincial government recently held a working meeting on industry
relocation parks to sum up the achievements made during the past two years and
to make deployments for further accelerating the construction of these parks.
The finance department of the provincial government has so far allocated Rmb330
million in subsidies and pooled social investment amounting to Rmb625 million to
support the construction of industry relocation parks. Today, industry
relocation parks have been built in development zones and high-tech zones
approved by the central and provincial governments in the five PRD cities of
Guangzhou, Shenzhen, Foshan, Dongguan and Zhongshan, and in the nine prefectural-level
cities of Shaoguan, Meizhou, Heyuan, Huizhou, Zhaoqing, Zhanjiang, Maoming,
Yangjiang and Yunfu in the mountainous areas and eastern and western wings of
Guangdong. A total of 287 projects (enterprises) have signed letters of intent
to enter these parks, with contracted investment amounting to Rmb17.98 billion.
Upon completion, these industry relocation parks will be able to generate an
annual output of Rmb260 billion, equivalent to 42.7% of the industrial output
value of the 14 larger-scale cities in the mountainous areas and eastern and
western wings of Guangdong in 2005.
The industrial value-added of five of the larger-scale cities in the mountainous
areas increased by 33.1% in 2006, or 14.8 percentage points above the provincial
average. Among these cities, the performance of Heyuan is particularly
outstanding. Thanks to its positive efforts in developing industry relocation,
Heyuan ranked first in the province in total industrial output growth in a tie
with Qingyuan. It also came first in the province in foreign trade growth and
came second in its growth rate in six major economic indicators.
Guangdong will give priority to the following six areas in the building of
industry relocation parks: 1) strengthen the planning of park construction; 2)
devote greater efforts to infrastructure construction ; 3) energetically attract
investment; 4) actively foster leading industries in the parks; 5) strive to
build up own brands; 6) step up labor training and deployment.
May 22, 2007
American Chamber of Commerce
(Beijing China) Releases Annual Report on Business Environment in China
The American Chamber of Commerce in Beijing
recently issued its annual white paper, which includes a detailed review of the
business environment for U.S. companies in China. The paper stresses the
importance of keeping markets open to trade, competition and foreign investment
and notes that the rule of law and transparency in regulations and standards
remain crucial to companies wishing to do business in China. The paper affirms
that full recognition and effective enforcement of IPR is critical if China
wants to develop a technology and innovation-based economy. China will also need
to create a competition law system that gives consumers and companies sufficient
confidence that their interests will be protected.
The ACCB's most recent survey of member companies shows that there is a general
consensus that business conditions in China are improving and will continue to
get better in the future. Ninety-one percent of surveyed members reported that
their five-year business outlook in China is "optimistic" or "cautiously
optimistic," while four percent had a "neutral" outlook and only five percent
expressed pessimism. Seventy-three percent of respondents reported that their
operations were profitable or very profitable in 2006, compared to 64 percent in
2005, and 60 percent noted an increase in operating margins in 2006, roughly the
same as in 2004 and 2005. In addition, 37 percent of respondents said that
margins in China were higher than worldwide margins, 35 percent said they were
comparable and 28 percent reported lower margins in China.
Respondents indicated that increases in profit margins have been driven by a
number of factors, including shifts in product mix and changes in economies of
scale, while factors negatively influencing margins included salaries and wages,
marketing and sales expenses, market prices, commodity prices and other input
costs.
A clear majority of surveyed companies (57 percent) ranked China as their top
priority in near-term global investment plans, compared to 33 percent in 2006,
29 percent in 2005 and only 24 percent in 2004. As to their fundamental purpose
for having a presence on Chinese soil, 42 percent of respondents noted that
their objective is to serve the local market while only 16 percent said they use
China as a manufacturing base for exporting to the U.S. This evidence continues
to dispel the notion that U.S. firms move to China with the primary objective of
producing cheap goods for export to the U.S. market.
A majority of companies surveyed (64 percent) continue to believe that the
Chinese government is willing to implement China's WTO obligations, although
this figure is somewhat lower than in 2006 (73 percent) and 2005 (66 percent).
Most companies that saw a positive attitude on the part of Chinese authorities
think China is prepared to carry out the necessary reforms, but a minority of
companies argued that, while willing, China is unprepared or ill-equipped to put
those reforms into practice. Twenty-six percent of respondents asserted that
China is only willing to follow the letter of its WTO accession requirements,
while another 26 percent said Chinese officials are actively seeking loopholes
to avoid those requirements. Overall, the survey shows that a clear majority of
companies (60 percent) believe that China has benefited from WTO accession.
China's recent economic reforms are widely regarded by ACCB members as having
improved the overall business climate in the country. Forty-nine percent of
respondents consider that these reforms have ameliorated business conditions
only to some extent, while 39 percent believe that there have been great
improvements since 2005. An overwhelming majority of respondents (89 percent)
also see a strong link between the quality of the U.S.-China commercial
relationship and their business activities in China, which is not surprising
given the critical issues with concrete business repercussions that currently
define bi-lateral relations (including IPR, subsidies and China's exchange rate
regime).
The report contends that U.S. companies in China continue to wrestle with an
inconsistent and opaque regulatory system that suffers from a lack of
transparency, inconsistent regulatory interpretation, unclear regulations and
excessive bureaucracy. Most companies surveyed said they have seen little to no
progress in these areas over the past two years. Among other things, China still
lacks a central depository for all published laws and regulations related to
commercial activities and the opportunity to comment on draft regulations, while
welcomed, is not established by law and lacks standard guidelines.
Companies also remain concerned with IPR enforcement efforts on the part of
Chinese authorities. In fact, 56 percent of respondents said China's IPR
policies either seriously impede or limit the scope of their business
activities. Twenty-seven percent countered that those IPR policies are actually
supporting their businesses while 17 percent reported no impact. Major IPR
concerns for ACCB members are in the areas of copyrights, trademarks,
miscellaneous IPR laws and design patents. Respondents said U.S. and Chinese
officials should craft a "comprehensive road map" to improve and strengthen
China's IPR enforcement at the upcoming meetings of the U.S.-China Joint
Commission on Commerce and Trade and the Strategic Economic Dialogue. The ACCB
believes that China's senior-most leadership recognises the importance of IPR
not only as a key issue in bi-lateral relations but also as a steppingstone to
achieving China's goal of becoming a more innovative and technology-driven
economy.
While the ACCB appreciates the increased attention given to U.S. visa policies
by the Bush administration and Congress and the efforts made by U.S. consular
authorities in China to improve the efficiency and transparency of visa
issuances, it contends that U.S. visa policy still unnecessarily impedes travel
to the U.S. In fact, 57 percent of ACCB companies surveyed claimed that they
have lost significant sales or business relationships due to U.S. visa issues
and 86 percent considered it more difficult for Chinese employees to travel to
the U.S. than to other regions. Some of the measures that could be adopted to
streamline U.S. visa policies include: (i) extending the term of a business visa
to at least two years; (ii) waiving the finger scan requirement for Chinese
officials at the director general level and higher; (iii) realigning the finger
scan requirement so that it coincides with visa renewals, thereby eliminating
the need for a new finger scan for each travel occurrence; (iv) pre-clearing
travellers from sectors that typically face security advisory opinions; (v)
retaining and renovating the existing embassy facilities to help address
projected additional visa needs and demands; and (vi) waiving interviews for
low-risk applicants even if they do not have a prior U.S. visa of the same type
expired for less than a year.
In the area of export controls, the ACCB believes that certain provisions
included in the proposed China export control regulation would have a negative
impact on U.S. businesses. Among other things, ACCB members urged the
administration to base export controls on an improved and balanced assessment of
benefits to national security against the damage done to U.S. companies,
including those essential to supporting the U.S. defence-industrial base, and to
continue consultations with private industry for input on the control list based
on dynamic market changes.
Looking to the future, ACCB members consider a potential slowdown in China's
economic growth as the primary risk for the next several years. Other risks
include increased Chinese protectionism, a deterioration of Sino-U.S. relations
and increased labour costs. The ACCB believes that the presence of U.S.
companies in the Chinese market could be enhanced in the years to come if the
U.S. government agrees to pursue four inter-related objectives in its
relationship with China: (i) ensuring China's compliance with its WTO
commitments, especially in the areas of transparency, standards, market access
and IPR; (ii) building a foundation that contributes to long-term sustainable
economic growth for both economies; (iii) refraining from legislation that
attempts to change the terms of trade with China by currency re-alignment or any
other similarly drastic measure; and (iv) supporting U.S. companies with the
necessary resources to reap the benefits of these efforts, including
business-friendly export controls, visa policies and trade promotion.
The report also makes a number of recommendations to the Chinese government so
that it can successfully pursue its core objective of balancing domestic
economic and social development. These recommendations include (i) embracing the
"global stakeholder" mindset and recognising China's newly achieved regional and
global leadership; (ii) deepening China's commitment to the WTO's fundamental
principles of transparency, national treatment, non-discrimination and market
access in order to continue to improve the quality of economic growth; and (iii)
developing an innovative society based on open markets, protection for inventors
and originators, respect for the rule of law, and sound financial infrastructure
in order to move up the value chain.
China to Adjust Tariffs of
Selected Commodities
According to an announcement by the Ministry of Finance, the import and export
tariff rates of certain products will be revised with effect from 1 June 2007.
Under this round of adjustment, the export tariffs of 142 types of products will
be increased, among which the export tariff rates of more than 80 types of iron
and steel products will go up by 5-10%. Meanwhile, the tariff rate for primary
iron and steel products such as steel billets, steel ingots and pig iron on
which export tariffs were imposed last year will be raised from 10% to 15%.
To encourage import, lower provisional tariffs will apply to 209 types of
imported products. Among these, key parts and components such as positive
displacement pumps, seals, parts for roller bearings and valves, compressors and
parts for air-conditioning machines and refrigerators, parts for engineering
machines, parts for cameras, parts for television sets, and lenses for video
cameras, will be subject to provisional tariff rates of 2-6%. Certain products
for daily use will also enjoy lower provisional import tariff rates of 6-17%.
These mainly include baby food, kitchen utensils, tableware, food processors,
corrective lenses, building materials, ornamental ceramic articles and household
appliances.
For details of the above tariff adjustment in Chinese, please visit:
http://www.mof.gov.cn/news/20070521_1500_26483.htm
May 19, 2007
China Travel market set to
fully open - 4 months ahead of November 11th deadline
China is to fully open its market to foreign travel agencies from July 1, about
four months ahead of the November 11 deadline set by the World Trade
Organization (WTO), said a senior official. This means foreign-funded travel
agencies can set up subsidiaries in China without restrictions, and requirements
on the registered capital of foreign-funded travel agencies will also be eased.
Shao Qiwei, head of the China National Tourism Administration, told China Daily
the full opening-up of China's tourism industry will further boost the
industry's overall quality and improve its competitiveness in the world. "We
welcome the entry of the world's big tourism companies and well-known brand
names into China. It will help enhance the competitiveness of Chinese tourism
enterprises," he said.
Although as agreed with the WTO, joint-venture and solely foreign-funded
agencies cannot operate outbound tours, the full opening-up is still good news
for overseas investors. China has the largest domestic tourism market and is the
world's fourth most popular destination. Official statistics show the number of
domestic travelers last year was 1.39 billion, and the administration forecasts
the number will be 1.78 billion by 2010. Attracted by the lucrative market, 25
solely foreign-funded travel agencies have been set up in China in the past five
years.
Large Chinese travel services are confident they will be able to compete. Yao
Yuecan, president of the China International Travel Service Head Office, told
China Daily the further opening-up "will not influence our business". "The
profit that travel agencies in China make is rather limited. It will not be easy
for foreign-funded travel agencies to survive in China's market," he said.
To register a travel agency in China to operate domestic tours costs only
300,000 yuan ($39,000), and there are many small agencies that cut prices to
compete against the State-owned agencies. This sort of competition has
restricted the development of large travel agencies. Yao said he believes the
entry of foreign investors might be able to curb the "unruly" competition, since
foreign agencies might merge or take over the smaller local ones.
China joined the WTO in November 2001. It has fulfilled some WTO commitments
regarding the tourism sector ahead of schedule or on time, including allowing
foreign investors to hold major stakes in joint-venture agencies in 2003, and
giving the go-ahead to establish solely foreign-funded travel agencies in
December 2005.
Early access to China's domestic tourism
market will allow foreign travel agencies to better prepare themselves for the
country's tourism boom in the years to come. At the same time, the introduction
of foreign competitors also benefits Chinese tourists as they will have more
choices and may even enjoy better services.
That is why the decision to fully open its market to foreign travel agencies
from July 1, about four months ahead of the deadline it set upon its entry to
the World Trade Organization in 2001, is welcome. With the country's economic
integration with the rest of the world, Chinese citizens travel overseas more
and more. China's growth rates of international travel have been astounding in
recent years.
Yet, even bigger than the growth in international travel is the surge in
domestic travel. There were 1.5 billion trips taken within China in 2006 and
this growth is likely to remain solid for several years to come. Driven by the
2008 Beijing Olympics and the 2010 Shanghai Expo, China's tourism industry will
predictably witness rapid growth in the years to come.
The World Tourism Organization predicted that China's tourism industry will grow
at an annual rate of 8.7 percent in 2007-2016, and China is expected to become
the world's second-largest tourist economy within 10 years. The China National
Tourism Administration also estimates that China's tourism industry will pull in
a record $128.6 billion of revenues in 2007, an increase of 10 percent over
2006.
In spite of the huge potential of China's tourism market, some domestic travel
agencies have complained that fierce competition already cuts deep into their
profits. However, such a view has not taken into account both the interests of
tourists and the long-term development of the domestic tourism industry.
It is believed that the introduction of the world-class tourism giants and
famous brands can help raise the overall quality of service in the domestic
tourism market.
Beijing to ease import
rules
China will import more goods in the future as the government makes it easier for
people to bring in foreign products and as consumption plays a greater role in
driving economic growth, the Commerce Ministry said.
In a report on mainland trade, issued every six months, the ministry also said
Beijing will introduce new policy measures to boost consumption.
The ministry gave no specifics Friday, but analysts widely expect the
authorities to raise export taxes on certain products to try to slow the
nation's export boom and trim its massive trade surplus. Beijing plans to
further cut tax rebates on certain exports, including some basic materials and
textiles, sources said.
"In the future, we will make it more convenient to bring in goods and actively
increase imports of energy, raw material, high-tech equipment and essential
parts," the report said.
Washington has led the way in trying to pressure China to rein in its flood of
cheap exports and is likely to discuss the issue during a "strategic economic
dialogue" in Washington next week.
Mainland officials acknowledge that the nation must tilt economic growth away
from investment and exports and toward consumption if it is to make it easier
for the central bank to manage monetary policy.
Beijing has already taken steps to rein in its trade surplus by cutting tax
rebates on certain exports and scrapping restrictions on some imports. But the
impact has been limited. China's trade surplus hit US$177.5 billion (HK$1.38
trillion) last year, handing fresh ammunition to critics who say Beijing is
keeping the yuan artificially low.
The ministry also said China faced problems arising from excess liquidity,
energy inefficiencies and excessively rapid economic growth.
It said robust levels of investment and strong overseas demand for mainland
goods meant that export growth would hold up in spite of global economic
uncertainties.
The value of China's total trade is likely to grow by an annual 21 percent to
US$2.13 trillion next year.
The report gave no predictions for import or export growth this year.
On prospects for the world economy, the report said financial risks are mounting
in the United States as a result of subprime mortgage loan problems and the
country's over-reliance on consumption and capital inflows.
High oil and metal prices, growing trade protectionism and an impasse likely to
prevent World Trade Organization nations from reaching a global trade pact by
the end of the year all posed challenges to global trade, it added.
May 16, 2007
Realty check (Beijing Olympic)
By Hu Yuanyuan
Sun Ting was furious. "Can you believe this? The money I spent on a
130-square-meter apartment four months ago won't get me a 100-square-meter flat
in the same building these days," fumed the 28-year-old company executive as he
browsed the housing options - or non-options - at Beijing Spring Real Estate
Trade Fair last month. Beijing's property prices jumped 40 percent in 2001 when
the capital won the bid to hold the 29th Olympic Games. In the past six years,
the compound growth rate has exceeded 50 percent. That's the root of Sun Ting's
anger.
Last year, Beijing's property prices saw double-digit growth for seven months in
a row, making it the hottest real estate market among all major Chinese cities.
This unceasing price appreciation has naturally raised concerns about a real
estate bubble. Is the Olympics driving up the prices? Will the bubble burst
after the Games? Should I wait a little longer to buy a house? These are the
questions Beijingers like Sun Ting are increasingly asking these days.
Beyond Games - "The Olympics are fueling Beijing's property market, true, but it
is not the primary factor," says Mao Daqing, general manager of the Beijing
operations of CapitaLand (China) Investment Co Ltd. The real driving force, he
believes, is the strong demand not only generated by Beijing residents
themselves but also by others planning to settle down in the capital. According
to Qin Xiaomei, head of the research department of the commercial real estate
services firm CB Richard Ellis's Beijing branch, about 10 percent of the
property price rise can be attributed to the coming Olympics. The other factors
are far less transient.
After all, houses don't exist in a vacuum. If the economy grows, it's only
natural for real estate prices to rise. China's gross domestic product has
maintained a growth rate of over 8 percent for years now, while that for Beijing
hovered around 12 percent last year, higher than the average growth in a decade.
"The end of the Games won't mean the end of this booming economy, so it's
unlikely that the property market will crash after the Games," says CapitaLand's
Mao. "In fact, the boost that the city has received in terms of infrastructure,
transportation and facilities will begin to show only after the Games." Of the
1,500 billion yuan of Olympics-related investments in Beijing, only 22 billion
yuan, or 1.47 percent, is going into stadiums. Around 280 billion yuan has been
poured into infrastructure, while 700 to 800 billion yuan has flown into the
property sector, according to Luo Gaobo, who specializes in Olympics and real
estate research.
After the end - "Areas around the Games venues will be the biggest
beneficiaries, and the city's center will move from the current second ring to
the fourth and fifth rings in the northern part, just around the Olympic
Garden," said Luo. In fact, Dream World 2008, a residential project within the
Olympic Garden, has sold nearly 90 percent of its units since its opening late
last year, with the average price hovering around 16,454 yuan per square meter,
according to the Beijing Property Deals Management website.
A comparison with other Olympic host cities could help find an answer to the
vexing bubble question. Among the five host cities since 1984, three saw jumps
and two experienced drops in their real estate sectors after the Games.
Barcelona and Seoul benefited immensely from the Olympics-induced economic boom,
but their residential markets ended up differently once the party was over.
Barcelona saw its property price skyrocket by 250 to 300 percent from 1986 to
1993 and then plummet by 50 percent from 1993 onwards, after the Olympics in
1992.
Seoul, however, experienced a flourishing real estate market long after the
Olympic Games in 1988 and the momentum didn't flag until 1995. "There is some
relationship between Olympic Games and the property market of the host cities,
but not as close as people may imagine," said Luo Gaobo. "Beijing might end up
like Seoul rather than Barcelona."
Real estate prices fell in Sydney after the 2000 Games too. But Luo says it was
brought about by the improper location of the Olympic Village more than anything
else. The Sydney government put the Olympic Village in a suburban area, the
reason why it became a ghost town when the Games ended. As for Barcelona, the
overly rapid growth in the run-up to the Games was the real estate market's
undoing, said Luo.
Different views - Although quite a number of developers share Luo's views and
are upbeat on Beijing's property market, there are many who beg to differ. They
are quite clear in their minds that property price rise will slow down after the
Games, some experts even forecast a drop afterward. "The growth rate of
Beijing's property prices will stabilize after the Olympic Games," said a top
manager of a large property developer who declined to be named. Andy Xie,
ex-chief economist with Morgan Stanley (Asia-Pacific), said late last year that
the downward turning point of China's property market might appear after 2008
for cyclical reasons. The declining rate of growth in real estate investment
reflects the cautious approach of property buyers. According to Beijing
Statistics Bureau, investment in the city's real estate sector totaled 171.9
billion yuan by the end of last year, up 12.8 percent year-on-year. But the
growth rate dropped 28.3 percent compared with early 2006, and that of the
residential sector fell from 86 percent early last year to 15.9 percent by the
end of December.
The average sales of property last year also dropped to a record eight-year low,
a recent report from the economic research institute of National Development and
Reform Commission showed. "We are expecting a sluggish property market after
2008 or 2009," the report said. Beijing Statistics Bureau last week said sales
of completed housing dropped 51.8 percent while forward deliveries fell 28.6
percent in the first quarter year-on-year.
"Beijing's property prices are doomed to fall within two to three years," Dai
Jianzhong, a professor with Beijing Academy of Social Sciences, was quoted by
People's Daily as saying. This forecast, Dai stressed, is based on the political
and social, rather than economic, trends.
In his address to the National People's Congress in March, Premier Wen Jiabao
promised to finance low-rent housing and increase the availability of affordable
housing using fiscally sound tax policies. Therefore, Dai held, as more low-rent
and subsidized housing is put into the market, property prices in Beijing will
tend to stabilize.
May 13, 2007
China's boom will continue
- By Li Hong
China's economic boom is creating unprecedented opportunities for previously
"static" economies like Latin America, Africa, Oceania, and elsewhere.
As China's manufacturing industry has progressed and matured, China's
businessmen and entrepreneurs will be encouraged to invest in factories and
plants in many foreign countries, creating jobs and improving the livelihood of
the locals.
Many are predicting China's three-decade near double-digit GDP growth will end
imminently. Although I am not an economist, I believe it won't stop, provided
the "executive managers" fine-tune the furnace fire: never letting it get too
hot and burn itself out, while ensuring a steady supply of fuel, be it wood,
coal, oil or a high-tech future of hybrid energy or fuel cell technology.
China's industrialization and modernization will go the distance, probably
another three to five decades. Urbanization will take even longer to fulfill.
About half the residents in big cities, like Shanghai, Shenzhen and Beijing, are
now better off and happy to be called "middle class"; others who are left behind
in the hundreds of medium and small-sized cities are aspiring to catch up. And,
the 250 million migrant farmer-turned-urban-workers are waiting for their turn.
Do not forget, these people are really hard-working, full of aspirations, and
they are the back bone of this nation.
I predict and hope China's rapid growth won't come to a close before 2040 or
2050. Why? Because China is truly a market-directed economy. We are elated the
governing Communist Party of China has reneged and rejected dogmatic communism,
which has been proved by history as catastrophic. No one will pick it up again!
Secondly, Chinese people's innate virtues, of industriousness, saving-money for
their children, and self-discipline (can I say these are merits outstanding
among other societies?), will continuously raise this country to new heights.
These merits dictate China won't be lazy, won't embrace consumerism and indulge
in extravagance, and our streets won't be a playground for criminals. On the
contrary, China will insist in enlarging production, will have lots of money to
invest at home and abroad, and will always remain harmless to anyone.
Thirdly, China keeps on learning from the world's successful experiences.
China's politics is no longer static. The leadership no longer giving out orders
for personal gain, and no punishment of dissenters is allowed. Thanks to greater
openness of the Internet, one can read all kinds of complaints, grievances, and
policy suggestions on the Web, which is truly a golden mine of ideas propelling
China's growth.
It is the lao-bai-xing (ordinary people) who have requested the Central
Government to pay heed to closing income divide, to curb official and business
corruption, to expand education programs, to prevent environmental pollution, to
ensure public security, to improve law and judicial justice, and also, to
prevent lies and rumors from spreading in this country.
The above-mentioned market force, merits of the people, coupled with a
progressing and maturing political mechanism lead to one answer: China's boom
will continue.
May 11, 2007
In sync with Tao -
Katherine Ng
 
Despite the widely held belief that guanxi,
or connections, hold the key to success for every business in the Chinese world,
Pan Shiyi said this was not the case for him and his Beijing- based property
development company, SOHO China. The firm, which he and his wife co- founded in
1995, has become the No 1 tax contributor among its peers in the mainland
capital and No 2 overall in the country in recent years - even without the all
important guanxi. Instead, Pan and his wife, Zhang Xin, rely on their Taoist
beliefs to guide their actions.
"When I left the government in 1992 and started doing my own business, there
were two choices: either doing trade business or entering the property market. I
did not have any connections so I chose to be a property developer," the
44-year-old Pan recalls. He experimented with property investments in Hainan
with five friends before moving to Beijing to start SOHO China.
Now his privately-held firm has become famous for its high-quality innovative
projects showcasing contemporary Chinese architecture, playing a leading role in
the country's urbanization. "The potential of China's property market is huge.
As long as you follow the [business] environment changes and adjust according to
your risk affordability, you will not lose."
Adopting Taoism's ideology of catering to market needs, Pan said he has even
managed to withstand market downturns. Taoist religious and philosophical
traditions have influenced Asia for more than t
wo thousand years. Basic tenets focus on humanism and relativism, providing
guidance in times of growing social pains and chronic environmental problems.
Teachings emphasize balance, peace, spontaneity and the strength of softness.
Harmony is advocated with both the world and the environment, being one with
nature. "The Tao wisdom is about balance, then there is the culture of
cooperation," Pan said. "Taoism emphasizes very much on gaining balance, like
'Yin and Yang,' once you have the equilibrium, you will have the power to be
creative and to grow."
Pan said the balance is not only between him and his spouse and business partner
Zhang, but also with others. His Hainan property investments in the early 1990s
earned him his first million yuan (HK$1.015 million) despite harsh financing
conditions.
"The five million yuan we borrowed from a financial institution had interest
rates as high as 20 percent, and 50 percent of our profits went to the
institution," he said. "Furthermore, the lender managed the borrowed money and
we had no say on how it operated. But finally, we made it. We earned more than a
million yuan after repaying all the debt and fulfilling the conditions."
In contrast to popular belief, Pan says he believes in doing business without
relying on guanxi or special treatment. "To run a profitable business, how large
your power is to add value to your product is your competitive edge over your
peers. Guanxi cannot sustain this. "Your knowledge and instincts in the industry
provide the skill set needed in predicting the market trend and government
policies that saves you from bubble risks."
After SOHO China's founding, Pan managed to avoid another hit by the central
government's austerity measures on the residential property sector. "I saw the
government was concerned about the residential housing prices and believed there
might be a new round of tightening measures targeting the sector. We decided to
switch from residential to commercial property development two years ago."
Since then, SOHO China has built its reputation as a real estate developer with
style and design. "We don't only build the house, but also provide the design
and decorations according to our clients' needs. They can just move in without
delay waiting for interior decorations," Zhang said.
According to Tao, one needs to know what the surrounding is and how one could
position himself to suit the environment, Pan said, adding that author Lao Tzu's
Tao Te Ching philosophy also constitutes part of his management culture. "For
example, once you've bought land, you need to know the surrounding environment
and figure out who would be interested and be the potential buyers. Only when
you know about this can you could construct properties that suits the demand and
make profits," Pan said.
This kind of value added feature explains how SOHO China has managed to
distinguish itself from its counterparts over the years. The company currently
accounts for 40 percent of the Beijing market in terms of saleable floor areas
and 20 percent of total transactions. "We are the No 1 privately-owned developer
in Beijing," Zhang said.
May 10, 2007
China Further Slashes
Export Rebates for Primary Products
China has decided to further slash export rebates for primary products to curb
their excessive growth, said an official from the National Development and
Reform Commission (NDRC) on 26 April. The doubling of the export of products
involving high energy consumption in the first quarter has rekindled the growth
of industries with heavy energy consumption.
According to information released at an NDRC media briefing on 26 April on the
workings of the industrial economy in the first quarter, China's export of steel
soared 120% year-on-year to 14.13 million tonnes while that of steel billet
jumped 98.1% year-on-year to 1.78 million tonnes during the first quarter. The
net export of crude steel amounted to 12.19 million tonnes, a year-on-year
increase of 9.41 million tons.
During the same period, the country's coke export rose 20% year-on-year to 3.65
million tonnes and its ferroalloy export surged 70% year-on-year to 750,000
tonnes.
"There is a strong pull from the international market", said Jia Yinsong, deputy
director of NDRC's economic operation bureau. "Strong demand and rising prices
on the international market have led these sectors to expand production and
exports", he added.
According to Jia, China will conduct further studies on policies and measures
aimed at controlling the export of resource-based products with high energy
consumption and causing high pollution. Efforts will be made to strengthen
export control and further slash export rebates for these primary products.
Jia said China will make positive efforts to change its mode of foreign trade
growth and optimise its export mix. He pointed out that the massive export of
primary products at a time of energy shortage at home translates into heavy
consumption of natural resources and serious pollution, a situation which should
not be allowed to continue.
Beijing Bans False Discounts in Sales Promotions
False discounts in sales promotions will be banned and a fine will be imposed on
violators. Relevant measures have been put into trial implementation in Beijing
and will soon be enforced nationwide. Hong Kong companies engaged in retailing
business should watch out.
Under the Administrative Measures Governing Sales Promotions by Retailers
recently promulgated by the Beijing municipal bureau of commerce and other
departments, the use of false discounts such as coupons to cheat customers will
be banned. The new rules will take effect on 1 May 2007.
The rules cover all aspects of sales promotion, such as publicity, terms and
conditions, means of promotion, price and after-sale service.
The measures call for retailers to give consumers genuine benefits, such as
straightforward discounts, in sales promotions. And on the issue of discount
coupons that have long been criticised, the new rules stipulate that retailers
may not promote their products by falsely stating the original price or using
misleading pricing methods or frauds, such as false discounts in the form of
coupons to cheat and lure consumers into buying.
To prevent price frauds, the rules also stipulate that labels or price lists
should be used in sales promotion when products are sold at a discount. Reasons
for the price slash should be given and both the original and current prices
should be shown. Products may not be sold above the marked price and charges not
clearly stated may not be collected. According to the measures, the definition
of "original price" is the lowest price shown on the sales memo of the product
seven days prior to the discount in the same business venue. If there is no
transaction in the past seven days, the last price prior to the discount is
deemed the original price.
The rules also call for strong supervision over sales promotions lasting more
than three business days or continuing for over 16 hours.
May 9, 2007
High altitude - The mainland markets
continue to rocket into the stratosphere. It is a constant theme in these pages:
the Shanghai and Shenzhen bourses seem immune to government efforts to rein them
in. Yesterday, after flirting with the 4,000 mark for the first time, the
Shanghai Composite busted through that barrier in a day that saw the two
markets' combined trading volume top that of the entire Asian region. Nearly
US$50 billion was turned over in Shanghai and Shenzhen yesterday, while just two
months ago the average daily volume was around US$16 billion - and six months
ago it was a mere US$5 billion. Clearly something is going on. The incredible
returns being generated in the stock markets are bearing less and less
resemblance to reality. Some stocks are trading at 50 times earnings. New
accounts are being opened at the rate of 300,000 per day. And despite the
obvious signs of a bubble, there are indications that the frenzy will continue.
With the low interest rates provided by banks, inflation of about 3% means
savings accounts are looking at negative real returns. Everyone has a cousin or
workmate making money in the market, which means more of the nation's RMB20
trillion in savings could soon find its way into securities. Here's hoping
everyone invests wisely.
Fake food - China admitted to being the source of poisonous pet food that
killed 4,000 animals in the US. Apparently some Chinese companies have been
adding melamine, a chemical used in plastics and fertilizer, to the wheat gluten
and rice protein used in pet food to artificially pump up the protein levels to
meet US import requirements and increase profits. Melamine had not been
officially banned in food in China, though the government says it will remedy
this. Meanwhile, the New York Times reported that China was the source of
contaminated cold medicine that has killed at least 100 people in Panama.
According to the report, Chinese companies exported diethylene glycol, a poison,
as glycerin - which was then used to make cough syrup in Panama. Of course, fake
medicine and food has long been a problem in China - a much bigger problem than
fake DVDs and bags, which have more ink spilled over them. Human lives are
clearly more important than Hollywood profits. Yet the government seems to react
the same way every time. When fake baby formula killed a dozen infants in 2004,
the government announced a "crackdown" - the exact same thing it did this week
in response to the melamine. Just another glaring hole in the country's
regulation and enforcement system.
Golden week a goner? Finally, last week was the Labor Day holiday, and
China broke the record for single-day train rides, with 5.2 million people
riding the rails on May 1. Once again, the issue has been raised as to whether
it is healthy for the nation's infrastructure for its entire population to
vacation at the same time. Not even a decade old, the Golden Week system was
introduced as a way to encourage spending - it worked for a while, but now the
thinking is that people are going to start staying home rather than fighting the
crowds. The tourism industry would like to see individuals given more choice
over their holiday plans. But though officials talk about getting rid of Golden
Weeks every year, there have yet to be any concrete steps taken to abolish them.
May 3, 2007
Commerce Department Targets
Chinese Subsidies on Coated Free-Sheet Paper - Preliminary decision to apply
countervailing duty law to China signals major change in trade policy -
Tim Truman
Subsidies provided to Chinese producers and
exporters of coated free-sheet (glossy) paper are the subject of the first
countervailing duty (CVD) investigation against a non-market economy (NME) since
1991. On March 30, 2007, the Commerce Department preliminarily decided to apply
CVDs to coated free-sheet paper imported from China. The decision altered a
23-year-old policy of not applying the CVD law to NMEs, and it reflects China’s
economic development.
Sheets of recently coated paper are examined at NewPage Corporation’s Escanaba
operations in Escanaba, Michigan. The Commerce Department’s recent decision to
apply countervailing duties to Chinese imports of certain papers was made in
response to a petition filed by NewPage in 2006. (Photo courtesy of NewPage
Corporation.)
The preliminary results of the department’s CVD investigation found that Chinese
producers and exporters of glossy paper received net countervailable subsidies
ranging from 10.90 to 20.35 percent. As a result, U.S. Customs and Border
Protection is now collecting a cash deposit or bond from importers of that paper
subject to the investigation.
“This administration has aggressively enforced our antidumping laws to combat
unfair Chinese trade,” said Secretary of Commerce Carlos M. Gutierrez. “China’s
economy has developed to the point that we can add another trade remedy tool,
such as the countervailing duty law. The China of today is not the China of
years ago. Just as China has evolved, so has the range of our tools to make sure
Americans are treated fairly. By acting on the petition filed last October, the
United States is demonstrating its continued commitment to leveling the playing
field for American manufacturers, workers, and farmers.”
First China CVD Investigation since 1991 - The path to this decision began in
October 2006, when a U.S. manufacturer of coated free-sheet paper, NewPage
Corporation of Dayton, Ohio, asked the Commerce Department to reconsider its
long-standing policy of not applying the CVD law to China. NewPage’s petition
marked the first time since 1991 that a U.S. company formally requested the
Department of Commerce to countervail an NME. In its petition, NewPage alleged
that several Chinese companies received subsidies, such as tax breaks, grants,
and low-cost loans. From 2005 to 2006, imports of coated free-sheet paper
products from China increased by approximately 177 percent in volume and were
valued at an estimated $224 million.
Legal Authority to Apply CVD Laws to NMEs - The Commerce Department has the
legal authority to apply the CVD law to NMEs. However, in 1984, the Commerce
Department reasoned that subsidies had no measurable economic effect in the
Soviet-style economies that were then under consideration. So the department
adopted a policy of not applying the U.S. CVD law to NMEs. This policy was
subsequently upheld by the U.S. Court of Appeals in its 1986 Georgetown Steel
decision. Since then, the antidumping law has been the most commonly used
instrument to address unfair trade practices involving Chinese goods.
Nature of a Subsidy - Government subsides distort the free flow of goods and
adversely affect U.S. business in the global marketplace. Foreign governments
subsidize industries when they provide financial assistance to benefit the
production, manufacture, or exportation of goods. Subsidies can take many forms,
such as direct cash payments, credits against taxes, and loans at terms that do
not reflect market considerations. U.S. law and regulations establish standards
for determining when an unfair subsidy has been conferred. The amount of
subsidies that a foreign producer receives from its government is the basis for
the rate by which a subsidy is offset or “countervailed.”
CVD versus Antidumping - CVD investigations, including the current one, are
often accompanied by antidumping investigations. The Commerce Department
commonly applies the antidumping and CVD law at the same time. In fact, 30 out
of the department’s 35 current CVD orders are paired with a dumping order. The
Commerce Department recognizes that its conclusion to apply the CVD law to China
may require a review of U.S. antidumping methodology for China, particularly at
the enterprise-specific level, and it is currently considering this issue. A
possibility of double counting results from simultaneous antidumping and CVD
investigations, depending on the specific facts arising in such investigations.
Hence, to the extent that the parties to the proceedings provide evidence for
the investigations, the department will respond to the concerns in the course of
its investigations.
China Still an NME - Conducting this CVD investigation does not reverse the
Commerce Department’s decision, reaffirmed in August 2006, to treat China as an
NME under the antidumping law. Rather, the department will use all available
trade remedy tools to ensure a level playing field for U.S. manufacturers.
Commerce Issues Affirmative Preliminary CVD Determinations for South Korea and
Indonesia - On March 30, 2007, the Commerce Department also announced its
affirmative preliminary determinations in the CVD investigations on imports of
coated free-sheet paper from South Korea and Indonesia. The department
preliminarily determined that Korean and Indonesian producers and exporters have
received net countervailable subsidies ranging from 0.04 percent (de minimis) to
1.76 percent; and 21.24 percent, respectively. Because of the preliminary
determination, the Commerce Department has instructed U.S. Customs and Border
Protection to suspend liquidation of entries of subject merchandise and to
collect a cash deposit or bond based on the preliminary rates.
Tim Truman is a senior import policy analyst in the International Trade
Administration’s Import Administration
May 1, 2007
China's richest, thanks to an IPO
and dad
Country
Garden chairman Yang Guoqiang celebrates during their debut at the Hong Kong
Exchanges in Hong Kong on Friday, April 20, 2007
It sounds like a fairy tale. Yang Huiyan, a
25-year-old woman, has virtually overnight become the richest person in China,
with a net worth of about US$9 billion, Forbes reported on Tuesday. Yang owes
her great fortune to the initial public offering of Country Garden Holdings, a
real estate developer run by her father that posted sharp gains after debuting
on the Hong Kong Stock Exchange on April 20. Shares of Guangdong-based Country
Garden surged 35.1 percent from the issue price of HK$5.38 (69 cents) to HK$7.27
on Friday, following strong demand from institutional and retail investors. The
shares slipped modestly to HK$7.17 today.
Having raised US$1.66 billion in the initial public offering in Hong Kong,
Country Garden is now the biggest developer in China, with a market value of
about US$15 billion. Yang's wealth puts her far ahead of Zhang Yin, chairwoman
of top Chinese paper packager Nine Dragons Paper (Holdings) Ltd, as China's
richest person.
Zhang topped a list of China's richest people for the first time with a personal
fortune of 27 billion yuan according to Huruns' report which appeared in October
2006. And she has a fortune of more than HK$48 billion as she holds 72 percent
of the paper company and its share price closed at HK$16.28 today. Yang would
also have ranked as the world's second-youngest billionaire, behind Prince
Albert von Thurn und Taxis of Germany, and she would be the youngest woman on
the list, Forbes said.
Country Garden was co-founded by Yang's
father, Yang Guoqiang. Her enviable financial position has more to do with his
accomplishments than hers, Forbes reported. Yang holds a degree in marketing and
logistics from Ohio State University. She joined the family business in 2005.
And that year, her father transferred his shares in the business to her, with
the intention of grooming his daughter as his successor. Yang currently is an
executive director of the company, overseeing procurement, enterprise resources
management and development strategies, according to Country Garden's offering
prospectus.
In a statement on April 10, Country Garden said that Yang's ownership interest
is not bound by a trust or any other arrangement with her father or other family
members, and she has the freedom to manage her assets as she sees fit. Yang
Erzhu, another of the five founders of Country Garden, has also joined the ranks
of China's billionaires, thanks to the IPO. He reportedly comes from the same
village as Yeung. His 10.2 percent stake is worth about US$1.5 billion.
Country
Garden chairman Yang Guoqiang (L) celebrates with Ronald Arculli, Chairman of
Hong Kong Exchanges and Clearing Limited (HKEx), during the debut at the Hong
Kong Exchanges in Hong Kong April 20, 2007. Shares in Country Garden Holdings
Co, which raised US$1.66 billion in the biggest-ever IPO by a Chinese developer,
jumped 35 percent in their Hong Kong debut.
The wealth of Yang and her father was hard to
track in advance of the Country Garden offering. The co-founders had shunned the
media, and, until a corporate reorganization last year, their investments were
spread across more than 30 entities, including real estate development
companies, a theme park, hotels, a decoration business and a management concern.
People in Guangdong Province are familiar with Country Garden, which sold its
first project -- Bi Gui Yuan -- in 1997 in Shunde, a city on the outskirts of
provincial capital Guangzhou and one of China's richest urban areas. Over 10
years, the group has accumulated about 19 million square meters (7.3 square
miles) of land reserves by the end of January.
Nonetheless, Yang had managed to maintain the lowest of low profiles until he
showed up in public for a road show in support of the IPO last month. The
52-year-old Yang was born in an impoverished village in Shunde, reportedly never
wearing new clothes before he was 17. He earned a living by raising cattle and
growing crops before becoming a bricklayer and contractor, according to the Hong
Kong Economic Times.
In 1992, Yang and several partners built 4,000 houses in a Shunde development.
Hit by a real estate tax implemented to cool down rising property prices the
next year, Yang had a hard time in selling the properties. To solve the crises,
he built an international school inside the villa that eventually attracted
affluent Guangzhou residents to the houses.
Yang has a good relationship with the local government and is currently a member
of the Standing Committee of the People's Political Consultative Conference in
Foshan, one of the largest cities in Guangdong Province.
China Bids Farewell to
Beepers
The Ministry of Information Industry (MII) recently published a notice on China
Unicom's application for terminating its paging business in 30 provinces,
autonomous regions and municipalities. According to the notice, China Unicom is
seeking permission to stop its 198/199, 126/127 and 128/129 wireless paging
service nationwide (except Shanghai). So far, it has basically completed the
work of account clearance and network transfer for users in Beijing, Tianjin,
Hebei and the other 27 provinces, autonomous regions and municipalities. MII is
expected to give its formal approval soon.
The beeper had its heyday in China in the 1990s and the user base once soared by
150% to reach 100 million. However, the fast popularisation of mobile phones
since the end of 1999 has dealt a telling blow to the paging business. China
Unicom used to be the market leader in the paging industry. It acquired a great
number of small companies in 2002 in spite of the market downturn and expanded
its subscriber base to over 40 million. It even regarded paging as one of its
key businesses at one stage. The company made a splash when it launched a new
paging service based on the 198/199 national high-speed paging network in 2002.
However, at the beginning of 2005, it was reported that the company submitted an
application for withdrawing from the paging market and terminated its 191/192
wireless paging service.
Currently there are very few beeper users left in China. According to MII's
monthly statistical bulletin, there were only 970,000 beeper users in the
country in December 2005, down 298% from the end of 2004. MII has even stopped
compiling statistics on this business since the beginning of 2006.
Greater Pressure for Investors as Dongguan Undergoes Economic
Transformation
Dongguan's new development strategy for this year is to "promote economic and
social transformation and build a prosperous and harmonious new Dongguan".
Economic transformation means changing from a resource-led economy to an
innovation-led economy, that is, moving from an economy driven by the
consumption of labor, electricity and other production factors to an economy
with innovation playing a leading role. Social transformation means moving from
primary urbanization to advanced urbanization. "New Dongguan" means having a new
direction and new requirements for transformation and ultimately achieving the
new goals of economic and social development.
Liu Zhigeng, secretary of the Dongguan city party committee, believes that
Dongguan must first undergo industrial transformation and change from a
resource-led economy to an innovation-led economy in its economic and social
transformation. He reckoned that many of Dongguan's problems are rooted in its
industrial structure. If the industrial structure is optimized and more
high-tech projects are launched, there will be no need for so much manpower. If
the industries are not labor-intensive, Dongguan's population will not be so
large. And if imported projects have a higher technology content, pollution will
also be less serious.
Hong Kong manufacturers with investment in Dongguan are expected to face greater
pressure as Dongguan undergoes industrial transformation. Those producing labour-intensive
and low value-added goods may have to relocate to areas with lower cost. Those
choosing to remain in Dongguan must continuously upgrade their technology and
produce goods of higher value-added.
According to Liu, future cooperation between Hong Kong and Dongguan should focus
on producer services and financial services. On the one hand, Hong Kong's
well-developed producer services and its position as an international trading,
financial, shipping and information centre should be fully utilized to promote
the upgrading and transformation of Dongguan's manufacturing sector. On the
other hand, it is necessary for Dongguan to draw on Hong Kong's successful
experience in public management and urbanization to accelerate its social
transformation.
Film Shooting Banned from Scenic Spots
In view of the damage caused by film shooting and big-budget performing
activities at natural reserves, scenic spots and historic sites, the State
Environmental Protection Administration (SEPA), Ministry of Construction,
Ministry of Culture and State Administration of Cultural Heritage have jointly
issued a circular on strengthening supervision over film shooting and big-budget
performing activities in these areas.
Under the new rule, film shooting and big-budget performing activities will be
banned from the core zones and buffer zones of natural reserves and the core
zones of scenic spots. Meanwhile, film shooting and big-budget performing
activities will be restricted in the experimental zones of natural reserves,
outer zones of scenic spots, and historic sites. Film production and performing
activities organisers with genuine needs must strictly comply with the
stipulations of the Law on Environmental Impact Assessment, the Regulations on
Natural Reserves, the Regulations on Scenic Spots, and the Law on Cultural
Relics Protection. They must also undergo the approval and verification
procedures concerning environmental protection, urban construction and cultural
relics protection. If the proposed film shooting or performance is likely to
cause a negative impact on the environment, the party concerned should submit an
environmental impact assessment report to the local environmental protection
department in accordance with the Law on Environmental Impact Assessment, and
propose what measures can be taken to prevent or reduce the negative impact.
Duly approved environmental impact assessment reports will serve as approval
documents for film shooting and performances in the locations concerned.
Serious Damage Done to Natural Reserves - Pan Yue, deputy director of SEPA,
pointed out that the rapid development of China's film and TV industry in recent
years has taken its toll on the ecological environment as production companies
look for remote, virgin land as locations for their big-budget productions. To
boost viewership of their works, production teams have been vying to do location
shooting at scenic spots, natural reserves, ecological zones, and historic and
cultural relic sites despite that such activities are excessively resources
draining and detrimental to the ecological environment. The garbage generated
during the shooting period, as well as the movements of crew and cast, transport
vehicles, lighting and other activities cause highly devastating impact on the
environment within a short time. The new rule is intended to strengthen
supervision in accordance with law so that filming and performance organisers
may heighten their awareness of resources conservation, environmental protection
and ecology protection, pay respect to nature in general, as well as foster
greater harmony between man and nature.
Joint Enforcement Efforts to Punish Non-Compliance - Pan explained that under
the new rule, which was formulated in accordance with existing laws and
regulations, film shooting and big-budget performances in cultural protection
sites and scenic spots must comply with the relevant regulations. Pan further
pointed out that the circular stipulates that SEPA, Ministry of Construction,
Ministry of Culture and State Administration of Cultural Heritage will make
joint efforts in enforcement on the basis of a clear division of
responsibilities and synergy. At the same time, environmental protection,
construction and cultural heritage departments at local level are required to
continue to discharge their respective duties in strengthening supervision over
film shooting and big-budget performances taking place at natural reserves,
scenic spots and cultural protection sites.
The circular stipulates that supervisory government departments must stop any
ecological damage, environmental pollution and damage done to cultural relics
and order the responsible party to undo the damage. If the damage is
irreparable, remedial measures should be taken depending on the extent of the
damage done, and the responsible party will be punished. In cases where the
damage or environmental pollution caused is very serious, the party and
personnel concerned will also be held liable legally.
Home Electrical Appliances First to Experiment with Recall
System
Hong Kong companies dealing in the home electrical appliance business on the
mainland should take note of a new measure concerning the recall of defective
products. Mainland authorities have introduced the recall system on a trial
basis and are expected to fully implement it in the near future. A series of
punitive measures will be launched alongside the implementation in order to
eliminate any disputes over home electrical appliances. Hong Kong companies are
advised to take necessary actions during the transition period.
Prior to the recent trial launch, there was no recall of home electrical
appliances in the real sense of the term in China. Even when items such as hi-fi
systems, washing machines and refrigerators were recalled, it only took place at
the distributor level and consumers were often kept in the dark.
An industry source pointed out that automobile was the first industry where a
recall system was implemented in China in October 2006. Other industries have
yet to follow suit. The recall of home electrical appliances has always been
considered a thorny issue by industry players.
Xia Jianjun, director of the China Quality Certification Division, said product
recall is practiced in many developed countries and is a growing trend.
According to the EU's export bulletins sent to China's quality inspection
authorities, there have been a number of occasions on which the defective
products of China's home electrical appliances exports to the EU were recalled
in compliance with the relevant EU rules.
April 30, 2007
China's future growth is
riding on rails
Being the factory for the world, China is highly reliant on its ability to move
cargo. While the country has already built a string of first-class ports, its
railway network leaves a lot to be desired. At the end of 2005, the mainland's
railway system stretched 75,000km, the most in Asia and ranked third in the
world. But the density of railroad and average usage per person was far behind
that of many countries. On average, 20 per cent of cargo movement around the
world is dependent on railways; in China it is less than 2 per cent. No wonder
the central government plans to develop a high-speed and high-density railway
system.
Currently, cargo is transported domestically primarily by truck. Since it is
cost ineffective to use motor vehicles when the distance is longer than 500km
(or about one day's transport), 94 per cent of trade goods are manufactured
within 250km of the coast, where they can be quickly craned onto ships.
This is one of the reasons for the great income gap between coastal and interior
residents. In turn, the wealth disparity is one of the key impetuses for China
to develop an intensive railway system.
In addition, a widespread rail network will improve the nation's productivity,
helping inland industries such as mining and agriculture to expand more rapidly.
Indeed, railway expansion is extremely important for any nation's development.
The completion of a line linking the east and west coasts of the United States
in 1869 is one of the oft-cited factors for that economy's high sustainable
growth rate at that time and for its development into the richest nation in the
world.
Beijing emphasised the need to improve China's railway system in the 11th
Five-Year Programme, proposing to add 17,000km by the end of 2010. It is
estimated that at that time the total length of railway network will be
90,000km.
The speed of trains is also being accelerated. The target speed is 200km/h on
the 13,000km mainstream network by 2010, and there is a plan to link Beijing and
Shanghai with a train that travels at up to 300km/h.
Speeds were increased five times from 1997 to 2004, and on April 18, Beijing
again boosted the limit. The running time from Shenzhen to Guangzhou is going to
be reduced to 52 minutes from 65 minutes. Travelling from Hung Hom KCR station
to Lo Wu and then changing for a train to Guangzhou will be a 92-minute trip -
the same time as a direct Hong Kong-Guangzhou train but 40 per cent cheaper.
These changes are not just a matter of convenience; they offer investor
opportunities. A Credit Suisse research report reckons railway construction
expenditure from 2006 to 2010 will be 1.25 trillion yuan, or four times that of
2001-05.
Several Hong Kong-listed companies, such as Angang Steel, Maanshan Iron & Steel,
China Communications Construction and Zhuzhou CSR Times Electric Company should
benefit from this multibillion-dollar bounty. Angang produces the best-quality
heavy railway track in the country. Maanshan has a 90 per cent market share for
highly profitable rail wheels. While they contribute just 3 per cent of the
company's turnover, they generate 27 per cent of profit.
Zhuzhou CSR's business is wholly focused on railway development. It manufactures
train-borne electrical systems and electrical components. China Communications
Construction designs and builds large transportation infrastructure, including
railways.
April 25, 2007
China's Action Plan on IPR Protection 2007
To give a comprehensive,
systematic and substantive outline of China's measures for IPR protection in
2007, to effectively dictate nationwide IPR protection efforts and to follow
guidelines of the National Working Group for IPR Protection, member agencies of
the Working Group Office are pleased to present this Action Plan on IPR
Protection for 2007, which details 276 measures in 10 areas.
In line with the 2007 Action Plan, relevant authorities will draft, formulate
and revise 14 laws, regulations, rules and administrative measures on trademark,
copyright, patent and customs protection as well as 7 judicial interpretations
and guidelines. On the enforcement side, 14 dedicated campaigns including Fight
Piracy Every Day, crackdown on pirated textbooks and teaching supplements and
Operation Blue-sky, coupled with 11 standing enforcement programs will be
carried out. With regard to trails, 8 measures will be in place to keep
self-innovation and IPR inventiveness alive. With regard to institutional
building, 8 areas of efforts involving 46 measures will follow to establish a
highly potent enforcement coordination mechanism and to improve and standardize
the functions of the IPR Service Centers. 74 publicity measures in 8 forms such
as large promotion events, media programming and press conferences will
continue. 36 training measures in the forms of reading materials, training
courses and workshops will target party and government leaderships, grass-rote
enforcement agents, corporate and non-corporate organizations, lawmakers as well
as university, middle and primary school students. In international exchange and
partnership programs, 26 measures such as dialogues, study visits, exchanges and
training cooperation will be implemented to further engage China in
international activities of trademark, copyright and patent protection. To
advance IPR protection at the business level, 9 measures such as building a
business priority watch-directory in the public security system and formulating
Opinions on Strengthening IPR Protection in Large State-owned Enterprises will
be introduced. In addition, 8 measures will be at the service of right-holders,
including a regular meeting mechanism to consult and coordinate with
foreign-invested enterprises, and a hotline and online platform for overseas IPR
disputes. Last but certainly not the least, 23 thematic studies on IPR
protection will be organized.
Saturday - April 14, 2007 AmCham
Shanghai Charity Gala - Shanghai China
aboard our Yangtze Delta Queen for
the 2007 Annual Charity Gala at the Pudong Shangri-la Hotel. Event sponsorships
include cash, auction items and in-kind sponsorships help raise funds to train
medical personnel and build much-needed healthcare facilities in cooperation
with the Soong Ching Ling Foundation for sustained healthcare.
AmCham Shanghai held their Annual Charity Gala on Saturday, April 14, 2007 at
the Pudong Shangri-la Hotel, Shanghai. This prestigious black tie event,
attended by 500 members and friends, raised an estimated US$180,000 through
sponsorships, silent auction, raffle and live-auction. The funds raised are for
the Soong Ching Ling Foundation to train medical personnel and build much-needed
healthcare facilities in the poor rural areas of Guizhou. The evening was
extremely festive, filled with songs and dances performed by the AmCham staff
and students of the International School. Mr. Kong Xiang Dong, descendant of
Confucius and a renowned pianist, dazzled the audience with music from George
Gershwin and the first movement from Yellow River Piano Concerto. Mr. Lu Ping,
Chairman of the Soong Ching Ling Foundation, talked about the close ties between
China and USA. He thanked all the members of AmCham, especially AmCham’s
President Ms. Brenda Foster for her relentless efforts in making contributions
to the Foundation’s cause in maternity and child health care. Ms. Yen Chun,
Director of Hong Kong.China.Hawaii Chamber of Commerce (HKHcc) and a trustee of
the Soong Ching Ling Foundation also attended the event.
Using CSR to Forge Links Between
Foreign & Chinese Businesses - Brenda Foster, President AmCham Shanghai
download file in PDF format
April 20, 2007
Strategic partners can
help firms build brands
Is there a shortcut for building brands, expanding distribution networks and
attracting the ever-increasing numbers of young consumers? This has always been
the question for companies eager to make the most of every yuan spent. If such
shortcuts do exist, carefully crafted partnerships with other companies could be
one of them. Branding is considered a pivotal task for any company. And changing
consumers' perceptions, especially building high-end brands, is never an easy
task. Some companies resort to extensive advertising campaigns. Some rely on the
glamour of celebrities. But sometimes partnership with other high-profile brands
is the most effective method.
Consumers tend to choose a series of products to reflect their social status. A
few years ago, some Chinese consumers defined luxury as drinking Remy Martin
Louis XIII, using a Zippo lighter, holding a Louis Vuitton handbag and wearing a
Prada suit. Such psychology provides a shortcut for lesser-known brands to
enhance their recognition, if they can associate their own brands with the world
famous ones.
Asus and Acer branding - Some computer makers from Taiwan have
been quite successful in doing so. Just a few years ago, Japanese and US brands
used to dominate the high-end laptop market, although a great proportion of
their products were made by Taiwan-based original equipment manufacturers such
as Asustek Computer Inc and Acer Inc. Meanwhile, consumers tended to recognize
the Asus and Acer nametags as low-end brands, despite their technology and
research and development capabilities.
To upgrade the image of their brands, both Taiwan computer makers adopted the
same strategy striking up partnerships with the world's leading racing
carmakers, Asustek with Lamborghini and Acer with Ferrari. By doing so, Acer was
able to put the Ferrari logos on its laptops in 2004 and conveyed the message
that its laptops are the equivalent of Ferrari cars in terms of advanced
technology and sleek design. Thanks to the fame of Lamborghini and Ferrari,
those two Taiwan laptop brands gradually won the recognition of high-end users.
Successful partnerships can also help expand distribution networks. Nowadays, a
few leading companies usually dominate the distribution network in an industry,
and thus create entrance barriers for latecomers. However, if those latecomers
can employ the existing distribution networks of partners, they can bypass the
barrier and find a way into the market.
Coca-Cola and Nestle - The partnership between Coca-Cola and
Nestle is a good example. In 2005, the two companies achieved a partnership
agreement, which allowed Nestle to sell its Nescafe product through the world's
largest beverage makers' vending machines and sales outlets. The partnership
then helped to increase Nescafe's market share as well as sales revenue in just
a few months.
Moreover, for companies trying to win the recognition of teenage consumers,
partnering with Internet companies, especially online game operators, has
already proved to be an effective solution. These days, online games often prove
to be more powerful than TV commercials for young consumers who spend hours
every day in the virtual world.
In April 2005, Coca-Cola sealed a partnership with Chinese online gaming company
The9 and the two companies agreed to cooperate on marketing and distribution
campaigns. Coca-Cola then started a two-month promotion campaign. And consumers
in more than 50 cities won 40 million prizes such as laptops and online gaming
time by purchasing Coca-Cola products.
Coca-Cola and They spent more than 100 million yuan on the marketing campaign,
but officials from Coca-Cola later said the partnership not only enhanced its
brand recognition, but also brought double-digit sales growth.
Thus, we can see partnerships can be useful marketing tools. But companies
should pay attention to the following before they seek partners.
A careful evaluation of potential partners should be done in terms of
distribution network, customer base, brand awareness and recognition. The best
candidates should have a substantial market share, a large user population, and
high consumer recognition.
Sometimes the best partners come from a different industry, but the two
companies may share the same target group of consumers. The partnership
arrangement should be feasible and strictly adhered to.
April 19, 2007
New Policies for Zhuhai-Macau
Cross-Boundary Industrial Zone
The Administrative Measures of the General Administration of Customs for the
Zhuhai Park of the Zhuhai-Macau Cross-Boundary Industrial Zone took effect on 8
April. Under the new measures, the Zhuhai Park will enjoy special policies as a
bonded area, an export processing zone and a special port. This is the first
customs-supervised special area in the whole of China and is the only industrial
zone with these three "special roles" approved by the State Council.
Under the new measures, enterprises operating in the park enjoy greater freedom
and flexibility than those outside in terms of customs declaration. Enterprises
within the park that deliver goods across customs boundaries and enterprises
crossing customs boundaries to pick up deliveries in the park may either make
customs declarations at the park or directly declare the goods to the local
customs where they are registered.
Export Rebates for Goods Entering Zhuhai Park - Enterprises in the park are
eligible for more preferential tax policies under the new measures. Customs will
create a virtually tax-free environment for these enterprises. Goods entering
the park will be considered as having been exported and will immediately be
eligible for export rebates (except for goods intended for daily or office use
in the park). Goods leaving the park will be taxed as they are, and no VAT will
be levied on goods processed in the park. Scraps, rejects, packaging materials,
defective and sub-standard goods leaving the park are taxed as they are, which
is more preferential than like goods outside the park. Equipment and office
supplies entering the park for own use are entitled to tax deduction and
exemption. Goods entering the rest of the country via the park in the form of
general trade are entitled to zero tariff if they have obtained CEPA
Certificates of Hong Kong or Macau Origin issued by the Hong Kong or Macau
issuing authorities.
Processing Trade Eligible for Preferential Policies - The customs offers five
preferential policies to processing trade in the cross-boundary industrial zone.
These include: implementation of electronic account management, whereby
paperless processing trade registration handbooks are used; customs duty deposit
is not required; the processing of bird's nest, shark, American gingseng and
antler, which is forbidden elsewhere in the country, is permitted; processing
trade is not subject to national or customs territory unit consumption standards
and enterprises are only required to make a truthful declaration to customs for
verification and cancellation purposes; consumables are entitled to bonded
treatment whether or not they are completely consumed in the production of
export products.
According to the Gongbei customs, the State Council approved the establishment
of the Zhuhai-Macau Cross-Boundary Industrial Zone on 5 December 2003, and the
zone officially went into operation as a bonded area on 8 December 2006. The
industrial zone is divided into two sections, the Zhuhai Park which comes under
the administration of the Zhuhai government and the Macau Park which comes under
the administration of the Macau SAR government. The two parks are separated by a
waterway and are connected by a special customs port channel. A total of 26
enterprises have moved into the Zhuhai Park during the past four months. Among
them, 14 foreign-invested enterprises have registered with the Chinese customs.
Total investment in the Zhuhai Park exceeds US$100 million.
April 17, 2007
MOFCOM Announces Access
Requirements for Processing Trade Enterprises
The Ministry of Commerce (MOFCOM) required commerce departments at all levels to
check the operation and production capacity of local processing trade
enterprises and use the findings as an important basis for granting approval for
processing trade activities.
MOFCOM issued the Circular on Issues Concerning the Strengthening of Processing
Trade Management on 12 April 2007, calling on processing trade enterprises to
optimise their structure, improve efficiency, make proprietary innovations and
actively take up social responsibility. The circular is aimed at forbidding
processing trade enterprises from engaging in the processing of high energy
consumption, high pollution and low value-added products, thereby expediting the
transformation and upgrading of processing trade and promoting its healthy
development. Commerce departments at all levels are urged to strengthen their
management of the market access requirements for processing trade enterprises.
Commerce departments at all levels are also demanded to take environmental
protection, energy consumption, employment, equipment and other factors into
consideration in granting approval. Enterprises that fail to reach environmental
and energy consumption standards and those causing environmental damage will not
be allowed to engage in processing trade activities. Also, those employing
workers without complying with standard procedures or failing to meet local
minimum wage requirements as well as those failing to comply with local social
insurance requirements will not be given access to the industry. Enterprises
using backward equipment and technologies that have been officially listed as
obsolete will be barred from engaging in processing trade while new enterprises
using equipment and technologies under the restricted category will no longer be
allowed to engage in processing trade.
The circular also announces that with effect from 1 July 2007, applications by
processing trade enterprises for the domestic sale of bonded materials and
components will be handled by commerce departments that originally issued the
Processing Trade Approval Certificate in accordance with the Provisional
Administrative Measures on the Examination and Approval of Domestic Sales of
Bonded Materials and Components Imported for Processing Trade. However, if the
goods involve quotas, permits and other special administrative measures, they
will still require the approval of provincial commerce departments or MOFCOM.
For details of this circular in Chinese, please visit the website of MOFCOM at:
http://www.mofcom.gov.cn/aarticle/h/redht/200704/20070404572092.html
 Piracy Case to Raise U.S. Trade Tensions
The U.S. is taking its longstanding spat with China over pirated movies, music
and books to the World Trade Organization. President George W. Bush's
administration plans to challenge China's level of enforcement of its own
antipiracy laws as well as its restrictions on the distribution of foreign
movies, music and printed material.
While supported by U.S. movie and music businesses, the complaints have stirred
unease among executives of other U.S. industries, including drug companies and
high-tech manufacturers. Many fear that a clash over piracy could undermine the
increasing cooperation they have won from local Chinese officials.
Ma Xiushan, deputy general secretary of the China Intellectual Property Society,
said the proposed cases will be seen as a negative signal from the U.S. at a
time "when China is working very hard to narrow our distance from the U.S. and
other developed countries in intellectual-property-rights protection."
"The piracy issue is a world-wide issue," said Chen Zhaokuan, deputy director of
the Copyright Society of China. "Many countries are facing the same challenges
in their antipiracy campaigns. For China, we are a later-comer in this area, and
it's natural that the sense of copyright protection among the Chinese people is
not that strong. Considering how much work we have done to promote the
copyrights protection and to fight against piracy in the past 10 years, we
already have made many achievements."
U.S. industry groups that aren't expected to support the WTO cases include the
Business Software Alliance, whose members include Microsoft Corp. and Apple
Inc., as well as the Pharmaceutical Research and Manufacturers of America, the
drug industry's main trade group. Both sectors have made their own market-access
and antipiracy advances and don't want to see that work disturbed, Bush
administration and industry officials said.
April 3, 2007
Chain Stores Set New
Records in 2006
According to statistics published by the Commercial Reform and Development
Department under the Ministry of Commerce and the China Chain Store and
Franchise Association, sales revenue of China's top 100 chain stores totalled
Rmb855.2 billion in 2006, up 25% year-on-year and exceeding the 13.7% rise in
China's total consumer goods sales. There were 69,100 chain store outlets in the
country, employing 2.04 million people, up 31% year-on-year.
An analysis of China's top 100 chain stores in 2006 shows the following
characteristics:
Higher share in total sales - The total sales of the top 100 stores recorded an
average annual growth of over 30% in recent years and their share in the total
retail sales of consumer goods soared to 11.2% in 2006 from 6% in 2002. Of the
top 100 stores, sales of the largest 10 reached Rmb407.3 billion in 2006,
accounting for 48% of the total sales of the top 100.
Foreign retailers fast expanding - Carrefour opened 33 new stores, Wal-Mart
opened 15 new stores, and Metro opened six in 2006. Eleven foreign retailers,
mainly operators of big supermarkets, opened over 100 new stores across the
country. In addition to opening new stores in a quick pace, foreign companies
also expanded their business by means of merger and acquisition.
Franchising growing rapidly - In 2006, among China's top 100 enterprises, 46 had
embarked on franchise operation (41 in 2005). The total sales of franchised
stores reached Rmb102 billion, an increase of 27% over 2005. The top 100
enterprises had a total of 41,000 franchised stores in 2006, double the 2005
figure.
Chinese Customs Strictly Bans "Foreign Garbage" Smuggling
The General Administration of Customs (GAC) is taking the following four
measures to prevent the smuggling of "foreign garbage" into the country at
source.
A system of management of waste import enterprises by category is implemented
and the establishment of waste metals and waste plastics parks is encouraged.
Customs supervision and control at ports for waste imports are tightened. Small
ports without sufficient customs officers and do not have the necessary
infrastructure, such as customs channels, electronic weigh bridges, X-ray
machines and independent stacking grounds, will not be allowed to handle the
import of waste metals and plastics.
Awareness against corruption is heightened and the intensity of anti-corruption
work is enhanced. GAC urges customs offices directly under its jurisdiction to
strengthen the supervision of relevant functional departments, firmly rectify
non-compliant and unlawful practices, and severely punish deliberate connivance
in smuggling.
Competent departments are encouraged to clearly define the rules governing waste
import administration under the Law on the Prevention of Environmental Pollution
Caused by Solid Wastes, set minimum penalties and conviction yardsticks for
crimes of waste smuggling in conjunction with the Supreme People's Court, and
expedite the promulgation of judicial interpretation on "crimes of waste
smuggling". GAC will also look into the possibility of asking the customs
authorities of exporting countries to allow overseas offices of the General
Administration of Quality Supervision, Inspection and Quarantine to inspect
China-bound wastes and check the relevant documents before loading in order to
stem the smuggling of wastes into China at its roots.
The State Administration of Environmental Protection, in conjunction with the
former Ministry of Foreign Trade and Economic Cooperation and GAC, has
promulgated and revised the Catalogue of Wastes Imported as Raw Materials
Restricted by the State from time to time since 1996. The catalogue covers items
such as animal waste, slag from smelting, wood and wood product waste, waste and
scrap of paper or paperboard, textile waste, waste and scrap of base metals and
their products, various types of waste and old metal parts, electrical machines
and appliances, scrapped transport equipment, as well as waste, scrap and
residue of plastics. Import of wastes not covered in the catalogue is banned.
Under existing regulations, environmental protection departments are responsible
for the approval of waste imports while quality inspection departments are
responsible for inspection. Customs will give clearance based on the Certificate
of Approval for Import of Wastes issued by the State Administration of
Environmental Protection and the Inbound Goods Clearance Note issued by quality
inspection departments.
China Encourages Legal Tax Avoidance through Donations
Cheng Siwei, vice-chairman of the National People's Congress Standing
Committee, said at a recent meeting on China's taxation issues that while much
controversy now surrounds tax avoidance through legal means, such acts are
allowed provided that they are carried out within the law.
Cheng added that to encourage enterprises and individuals to engage in
philanthropic activities, more tax incentives will be offered to the charitable
donations made by them.
Legal avoidance of tax refers to the avoidance of paying tax or the reduction of
tax liabilities by taxpayers using proper means in the spirit of respecting the
tax law.
Cheng said that enterprises and individuals are encouraged to reduce their tax
liabilities through charitable donations and participating in tertiary wealth
distribution. If more tax incentives are offered, more enterprises and
individuals will consider spending money on charity.
According to a circular issued by the Ministry of Finance and State
Administration of Taxation last year, charitable and relief donations made by
enterprises, organisations, social groups and individuals to 10 community bodies
including the All-China Women's Development Foundation are fully deductible
before income tax.
At present, taxpayers' donations to 38 bodies are partially or fully deductible
before income tax, with donations to 22 bodies fully deductible.
Beijing’s New Rules on Housing Community Construction
Starting from 1 March, newly built residential commodity housing cannot be
handed over to the tenant if the water, electricity and gas supplies are not up
to standard. Under a set of provisional measures promulgated by Beijing on the
administration of newly built residential commodity housing, property developers
are responsible for arranging municipal facilities for the residential
communities they develop according to requirements in the planning proposal.
Infrastructure - The measures require that water for daily use supplied by the
urban pipeline network must first obtain proper approval from authorised water
supply units. Electricity for daily use must not be supplied from temporary
construction sites or other non-compliant power sources. Residential communities
using gas supplied by the municipal government's pipelines must have their
interior and exterior pipes installed and connected according to the gas supply
proposal approved by the property developer and the gas supplying enterprise.
Hospitals and schools - Public service facilities such as schools, hospitals and
other community service centres should be constructed concurrently and ready for
use upon 50% completion of the residential housing. As for other community
facilities, they should be concurrently built and ready for use when the whole
residential construction project is completed by 80%. The property developers
should conduct completion inspection of their residential projects only after
the respective public facilities have passed the required inspection, confirmed
their property right and management right, and are in ready conditions for use.
Property enterprises - In view of the fact that the property developers of some
residential communities cannot meet the set requirements and their committed
standards within a long time after the residents have moved in, the measures
stipulate that the property management enterprise, assigned by the property
developer by law, must take part in each phase of the completion inspection of
the construction project. The property developer and the property management
enterprise cannot proceed with the move-in formalities until all the public
utilities and public service facilities have been constructed and undergone
completion inspection.
Property purchase contract - Property projects failing to comply with the
requirement that public service facilities must be constructed concurrently
cannot be put up for sale. The measures require that the pre-sale contracts of
commodity housing must carry concrete details about the availability of public
utilities and public service facilities. In addition, the measures have also
improved and clarified the inspection criteria for approving the construction
plans of the public service facilities for the residential community, and
further enhanced the requirements for tender and construction procedures for
public service facilities for residential projects.
Penalty measures - During the construction process, if property developers are
found to have violated the measures or engaged in deceptive activities, the
construction department will order the violators to make corrections, record
such improper behaviour in the property developers credit information system,
and make public announcement. For violations of more serious nature, the
construction department would, according to law, downgrade or revoke the
property developers' qualification. For cases of criminal nature, the
construction department would refer them to the public security prosecution
department for further action.
Applicability - The measures are applicable to residential community projects
which have their land-use right transfer contracts signed on or after 1 March
2007. Starting from 1 March 2007, all residential community projects in the city
which have their land-use rights transfer contracts signed but have not started
the construction tender process should prepare a construction plan and proceed
with tender, construction, property pre-sale and completion inspection according
to these measures.
Measures on Food Safety Launched
To maintain order in food circulation and guarantee safety in food products,
the Ministry of Commerce (MOFCOM) has promulgated the Administrative Measures on
Food Safety, which will become effective on 1 May 2007. The measures clarify
specific responsibilities in the supervision of food safety in the market, and
set a maximum fine of Rmb30,000 for violation of the relevant rules.
According to an official from the Treaty and Law Department under MOFCOM, the
measures set detailed requirements on the structure, personnel and system of
market management organisations, as well as on the sale of on-site made food,
bulk food, and raw and fresh food. The aim of the measures is to call on the
market to establish five management systems so that food products in circulation
can be traced to ensure food safety. The five systems are:
Market access system -- The market should sign a food safety guarantee agreement
with distributors entering the market, clearly stating the responsibilities over
food safety.
Distributors management system -- The market should establish a distributors
management database to truthfully and dynamically record basic information such
as distributor identity, contact method, products handled and credit records.
After a distributor exits from the market, its records should be kept for at
least two years. No forging of distributors records is allowed.
Document inspection system -- The market should request licences and
documentation on food products entering the market. Valid documents relating to
the food suppliers and food safety should be inspected according to law. Copies
of related documents should be kept for future reference.
Buy and sell record system -- The market should establish or request the
distributors to establish a buy and sell record system which accurately records
the producer, description, delivery date, place of origin, specifications,
quality grade and quantity of each food product. For wholesalers, the record
should also contain information about the buyer, contact method, time of sale,
specifications and quantity.
Substandard food products recall system -- The market should immediately stop
selling and keep a record of any food products deemed substandard by the
competent administration department. Food found with potential safety hazards in
the market should be verified by an authorised testing agency. If the findings
are positive, the market should stop selling the product immediately and report
to the relevant departments accordingly.
The measures also prohibit the use of counterfeit green market certification
mark. For the sale of on-site made food, bulk food, and raw and fresh food, the
seller must have the necessary facilities, equipment and conditions meeting the
national standards for food safety and keeping away from pollution sources.
Latest Survey Shows Fast Salary Growth in Beijing's High-Tech
Sector
The 2006 China Salary Report just released is a useful reference for
employers in all sectors. According to Taihe Consultancy Co which conducted the
survey, the average annual cash income of a high-tech personnel in Beijing
amounts to Rmb600,000, nearly Rmb100,000 higher than their counterparts in
Shanghai and Shenzhen.
The survey finds that the average income of employees in Beijing's high-tech
sector has gone up by 9.3%, with the software industry setting the pace with a
12% growth due to Beijing's growing importance in this sector. Beijing's
software exports registered rapid compound growth in 2006, accounting for 33% of
the national total.
The survey also shows that although rank-and-file workers in Beijing's high-tech
sector made slightly less than their counterparts in Shanghai and Guangzhou in
total cash income, those in management positions or above were leading the
salary scale, and the higher the position and the more competitive the person,
the greater the salary disparity. For example, for senior decision makers in the
same department, those working in Beijing had an annual cash income of
Rmb600,000, while those in Shanghai and Shenzhen were only paid Rmb500,000,
Rmb100,000 less than those in Beijing.
In 2006, actual pay rise in the high-tech industry was about 7.5%. A comparative
analysis of Beijing, Shanghai and Shenzhen, cities with the most flourishing IT
industry in China, shows that Beijing's high-tech sector was developing by leaps
and bounds and salary was higher than in the other two cities thanks to the
capital city's excellent human and technology resources, including the
prestigious Peking and Tsinghua Universities and the Zhongguancun Science Park.
Growth of the telecoms products sector began slowing down in late 2004 and early
2005 and the trend continued throughout 2006. In terms of salary, there was
little change in the sector from 2005, with core employees earning about
Rmb500,000 a year on average, slightly higher than a year ago. By comparison,
the overall salary level had gone up significantly in the Internet industry.
Salary disparity between positions was obvious, with core employees earning
about Rmb540,000 a year.
People working in Beijing's property sector enjoyed the highest pay rise last
year. Under the continuous impact of the macro-control policy, property workers
in Beijing had an 11.9% average pay rise last year, slightly lower than 12.5% in
2005 but still showing strong growth. Staff working in the sales, interior
design, marketing and project management departments were the highest paid. For
example, the average annual salary of a design manager was over Rmb200,000.
Monopoly sectors such as banking witness obvious changes in their overall
earnings as policy changes. Seen from the market situation in 2006 as a whole,
financial enterprises all registered good earnings as the securities industry
went from "bearish" to "bullish". Most securities brokers over-fulfilled their
targets by five to 10 times. At this rate, their performance bonus at least
doubled, even tripled, the 2005 level.
The salary of rank-and-file workers in the securities industry ranged between
Rmb31,000 and Rmb116,000 a year. Those who performed well earned over Rmb140,000
in total annual cash income. The benchmark salary for junior and mid-level
managers was between Rmb136,000 and Rmb345,000. For core personnel keenly sought
after in the industry, their cash income level may exceed Rmb400,000. The salary
level for senior executives who could make corporate development decisions was
between Rmb540,000 and Rmb1.3 million, while the salary for people who made huge
profits for the company was between Rmb1.3 million and Rmb1.6 million.
The pharmaceuticals industry saw a most volatile year in 2006. It ended more
than 20 years of high growth and entered a period of steady growth. Because of
this change, the salary situation of the industry became the focus of attention.
The industry's salary growth rate was 9.2% in 2006, or about 8% in real growth
after deducting price factors. This represented a slight increase over the
overall growth rate of 8.8% in 2005, but the rate of growth had significantly
slowed down.
The pharmaceuticals industry will undergo changes this year under the combined
impact of the policy of the "anti-commercial bribery campaign" and the banning
of "selling the same drug under several different names". The decline in overall
profits in the industry was another reason for the downturn in salary level. At
the same time, the salary disparity between different enterprises in the sector
also grew as the gap between their business performance and returns widened.
These changes may be analysed from the salary disparity between different levels
in different enterprises. The salary disparity between senior executives of
different enterprises increased by nearly 14%, that of marketing managers
increased by 7% while that of execution level personnel increased by 9%. The
salary gap between different pharmaceuticals enterprises obviously widened.
The labour supply peak resulted in a slight drop in the starting salary of fresh
university graduates in Beijing last year. The average starting salary of
undergraduates was Rmb2,500 a month, while that of postgraduates was Rmb4,500.
According to the human resources manager of a famous IT company, campus
recruitment exercise was no longer restricted to universities in Beijing but was
extended to key universities in other cities. The lower salary expectations of
university graduates outside Beijing not only helped lower labour cost but
broadened the source of recruitment. In order to avoid cut-throat competition,
Beijing graduates are now turning their eyes to cities like Wuhan and Chengdu
where the fast growing economy affords a better employment environment. This
heralds the breaking of geographical barriers for IT personnel.
March 13, 2007
China's state-owned
enterprises: Board governance and the Communist Party -
Richard He Huang and Gordon Orr
As the state-owned sector attracts strategic investors, they find themselves
befuddled by the role of an almost invisible power: the Communist Party.
As more and more major Chinese state-owned enterprises list in Hong Kong and
on international exchanges, the governance of those companies has become an
increasingly important issue. This trend has been reinforced by the fact that
foreign strategic investors are now allowed—for the first time—to acquire a
significant shareholding in state-owned enterprises listed on China’s
renminbi-denominated A-share exchanges, in Shanghai and Shenzhen.
Too often, however, investors and independent international directors remain
unsure how governance really works in China’s state-owned enterprises and how it
is changing. Outside directors on boards may be frustrated or simply puzzled by
the seemingly invisible forces that make important decisions about, for example,
appointments of chief executives or major acquisitions. In China’s state-owned
enterprises, the board of directors often seems to have no more than the ability
to rubber stamp the big decisions.
Investors are rightly concerned about how key decisions are made in companies in
which the majority shareholder is still the government and the Communist Party
plays a powerful if shifting role. By better understanding that role in the
governance of state-owned enterprises, foreign companies can learn to deal with
them more effectively.
China has 70 million party members, and a typical state-owned enterprise may
have hundreds if not thousands of them on staff. Consequently, as long as a
company remains a state-owned enterprise, the Communist Party committee plays a
pivotal role in key decisions—for example, the nomination of top executives,
executive evaluation and compensation, asset acquisitions and disposals, and
annual budgets. Sometimes the party committee may even get involved in
operational decisions, such as whether to take on a specific major supplier or
to purchase housing for key employees.
True, the party recognizes that boosting the market value of state-owned
enterprises is good for the economy and therefore in its own best interests. It
also understands that conflict between the board and the party committee will
hurt the valuation of a state-owned enterprise because of the “governance
discount” that foreign investors apply. As a result, the party is paying greater
attention to investor reactions and increasingly willing to seek out and test
solutions.
This is easier said than done, however. Although most academics, government and
party officials, and company executives accept broad best-practice principles,
few are putting much effort into designing the details necessary to implement
good governance, because of the apparent domestic sensitivities and complexities
involved. Foreign investors, in other words, shouldn’t expect China’s
state-owned enterprises to reach world-class standards of corporate governance
anytime soon.
Which is hardly to say that there isn’t an evolving debate in the government
about the party’s role in decision making: there is. Key questions that have
arisen recently include just how many directors the party should appoint, which
decisions it should influence, and how involved it should be in evaluating
executives and determining which posts they should move to and when.
By following the current debate and trying to understand where the party
committee draws the line, foreign investors will be able to focus their efforts
more successfully. On some issues they’ll have little leverage: for instance, on
appointments of top personnel, at least for the foreseeable future, outside
directors can express their views, but the party committee will make the final
decision. On issues concerning company strategy or major deals, however, the
party values the views of strategic investors more highly. A seat on the
strategy committee can be crucial because it exposes outside directors to issues
and their associated data before they come before the full board. At one
company, by the time investment decisions worth hundreds of millions of dollars
came before the board, the role of that body was typically just to conduct a
yes-or-no vote based on a one-page summary. By joining the strategy committee,
one international board member was able to gain greater influence over
decisions, to introduce international benchmarks on capital intensity, and to
influence the timing of the company’s investments.
Strategic investors should strive to ensure that the directors they appoint join
the strategy committees of the companies in which they invest Strategic
investors should thus strive to ensure that the directors they appoint join the
strategy committees of the companies in which they invest. The best time to put
this arrangement in place is during the negotiations over the initial strategic
investment, when investors have maximum leverage. Too often they let this moment
slip by. Any agreement should specify which committees the outside board members
will serve on and whether they will chair those committees. A more assertive
stance would have investors spelling out key items that should appear regularly
on the agenda of the strategy committee. Once on it, strategic investors should
endeavor to encourage meaningful and challenging debates during meetings. Given
the greater experience of a multinational in drafting market- and
investor-oriented strategies, it has a powerful rationale for asserting a
leadership role.
Investors wanting to affect decision making in broader areas will need to
recognize the influence of the party committee and to devise a plan for
communicating with it. Even if the goal is merely to create a partnership with a
major state-owned enterprise, lobbying and presale communications should target
both senior executives and members of the party committee. And, yes, there is
considerable overlap between these two groups: all senior executives serve on
the party committee except those recruited from abroad and from multinationals
operating in China. Other high-ranking company officials are party committee
members charged with looking after purely party-related matters, such as party
discipline or unions.
Best practice is to obtain the state-owned enterprise’s organization chart
showing both party committee members and senior executives. Then investors must
ask themselves whether they have covered most of the real decision makers
(including those who don’t speak the investors’ home language) and whether their
influence is broad enough to get the party committee’s attention.
Foreign strategic investors have a crucial role to play in upgrading the
standards of corporate governance in China’s state-owned enterprises.
Unfortunately, we’ve seen far too many foreign investors fail to appreciate the
importance of the Communist Party. They should actively participate in the
ongoing governance debate in China, the better to safeguard their own
investments and to help state-owned enterprises move closer to international
best practice. While a confrontational push for a major change of direction will
achieve little, constructive input on how to move forward step by step can
create real momentum for change.
About the Authors - Richard Huang is an associate principal
in McKinsey’s Beijing office, and Gordon Orr is a director in the Shanghai
office. A shorter version of this article was published in the Financial Times
on September 27, 2006.
March 12, 2007
Guangzhou Development
Zone Applies for Designation as Pilot for National Comprehensive Reform
According to sources, the Guangzhou Development Zone plans to apply for
designation as a pilot for national comprehensive reform. Once approved, it will
receive the same preferential tax policy and funding support from the state as
Shanghai's Pudong New Area and Tianjin's Binhai New Area, both of which have
already been approved by the State Council as such pilots.
The Guangzhou Development Zone, the first to be established in China, is now a
hot spot for international investment. According to the Guangzhou Daily, South
Korea's Hyundai Corps has just moved in, bringing the number of Fortune 500
companies operating in the zone to a record 96.
Attracting Fortune 500 companies remains one of the priorities of the Guangzhou
Development Zone's tenants recruitment activities this year. Companies engaged
in electronic information, biotech and new materials, industrial design,
software, animated cartoons and online games are particularly welcome.
Revised Catalogue of
Imported Goods Not Eligible for Tariff Exemption
The Ministry of Finance (MOF) announced on 22 January 2007 that the revised
Catalogue of Imported Goods Not Eligible for Tariff Exemption for
Domestic-Funded Projects (2006 Edition) will be implemented from 1 March 2007
onwards. The revised edition contains the latest round of full-scale changes
made to the catalogue since 2000.
According to MOF, domestic-funded projects approved after 1 March 2007 will be
subject to the revised catalogue when importing equipment, while those approved
before 1 March 2007 will still be subject to the 2000 edition of the catalogue
if they import their equipment before 1 January 2008.
After the latest round of revision, the catalogue will have a total of 795
items, of which 192 are newly added and 207 are revised, while 36 items in the
old version have been deleted or merged with others.
It is understood that the newly added 192 items mainly fall under industries
which China has attained considerable manufacturing capability and technological
level, as well as those with a substantial market size and China is likely to
build up its own manufacturing capability in the short term. These sectors
include: machinery, metallurgy, mining machinery, food, packaging, environmental
protection, meters and instruments, and electronics. The 207 revised items have
been revised to reflect upgraded technical specifications of the items concerned
as well as enhance the accuracy of their names for the sake of effective
classification by enterprises and customs.
The revision represents a major measure to create a level playing field for
domestic-funded equipment manufacturing enterprises to develop along the lines
of proprietary innovation, in keeping with the State Council's opinions on
expediting the development of the equipment manufacturing industry.
Since 1 January 1998, no customs duties and import-related VAT have been imposed
on state-encouraged domestic-funded and foreign-invested project's for the
import of equipment for own use within the project's total investment amount
unless the equipment concerned is listed in the Catalogue of Imported Goods Not
Eligible for Tariff Exemption for Domestic-Funded Projects and Catalogue of
Imported Goods Not Eligible for Tariff Exemption for Foreign-Invested Projects.
It is understood that in the last six years after the implementation of the 2000
edition of the catalogue for domestic-funded projects, China has been able to
produce certain categories of equipment reaching the technological level of
foreign countries. Yet, such equipment is not included in the catalogue, which
means that it can be imported into China tariff-free, putting domestic
enterprises producing the same equipment in a disadvantageous position. People
in the trade therefore called on the authority to revise the catalogue.
China has so far adopted different import tax policies for domestic-funded and
foreign-invested projects. At first, the catalogue for domestic-funded projects
included over 580 kinds of equipment of different technical specifications that
China was capable of producing, whereas the catalogue for foreign-invested
projects only included 20 items (mainly automobile and electronic office
equipment) for which the state strictly prohibited tariff-free treatment.
Besides, the former catalogue was revised twice, in 2000 and 2006, to include
items that the country became capable of producing, while the latter has never
been revised. The gap between the two catalogues has thus widened.
Some experts pointed out that China's preferential import tax treatment was
intended to attract foreign investment at a time when domestic investment was in
the doldrums following the Asian financial crisis. However, since China's
accession to the WTO, the investment environment has improved greatly and
preferential tax treatment as a means to attract FDI has significantly lost its
appeal.
Experts have also called for the merger of the two catalogues as soon as
possible, arguing that it will not only help unify the import tax policies on
domestic and foreign enterprises, but also effectively revitalise the equipment
manufacturing industry in China.
Guangdong Coatings
Makers Move North
Out of the 2,000-plus coatings factories operating in Guangdong today, some 20
are posting annual sales of over Rmb100 million. The province accounts for half
of the country's top 10 coatings makers in terms of production scale. In 2005,
the Pearl River Delta (PRD) region of Guangdong produced 1,365,600 tones of
coatings, accounting for 35.7% of the national total. Hence, coatings are
designated by the Guangdong provincial government as one of the five burgeoning
pillar industries in the province.
Despite this, the coatings industry has been struggling with rapidly shrinking
profit margins in recent years because of various factors such as continued
increase in chemical raw materials prices, and rising land, rental, energy,
transport and labor costs. Furthermore, national security planning concerns,
more stringent environmental protection requirements, and tighter supervision of
the market have combined to add to the challenges faced by Guangdong coatings
makers, many of whom are hard pressed by the urgency to relocate away from the
PRD.
In view of these challenges, the Guangdong Coatings Industry Association (GCIA)
has actively supported the relocation of coatings factories from the PRD to the
mountainous regions in northern Guangdong. The association has organized
coatings makers to tour Xinfeng and Wengyuan prefectures in Shaoguan city,
Qingyuan city, and Fogang and Huidong prefectures, and has signed a letter of
intent with Xinfeng. Reportedly, experts have found Xinfeng to be one of the
most suitable locations for developing the coatings industry in Guangdong. Lying
along major transport lines linking the PRD with other major mainland cities,
Xinfeng occupies a strategic location from which coatings produced in Guangdong
can be shipped to the rest of the country. Besides, the prefecture is endowed
with rich natural resources such as water and electricity supply, as well as
land and labor resources.
Thanks to the Xinfeng's aggressive investment promotion efforts, China Paint Mfg
Co Ltd of Hong Kong - which was recently named a Famous Chinese Brand - plans to
invest US$12 million to set up a factory in the prefecture in September 2007.
The facility is set to become an industry leader there.
Meanwhile, the Wengyuan prefectural government in northern Guangdong has
launched the Guangdong Huiyuan chemical coatings industry base. Wengyuan also
has a number of advantages which make it suitable for the development of the
coatings industry, these include relatively low land cost, convenient transport
links, ample supply of inexpensive water and electricity, and a quality labor
force. According to GCIA, an industry park for water-soluble coatings and
non-dangerous chemicals is set to be built in Xinfeng while an industry park for
dangerous chemicals will take shape in Wengyuan. GCIA advised coatings
manufacturers to seize the present opportunity and relocate in line with the
latest government policy directions. A new industrial base for coatings is
likely to emerge in northern Guangdong in the near future.
China Adopts New ISBN
System
From 1 January 2007, China has updated its China Standard Book Number (CSBN)
that had been in use for two decades to align with the latest version of the
International Standard Book Number (ISBN) system adopted by over 160 countries
worldwide, increasing the digits from 10 to 13.
Readers generally pay little attention to the digits preceded by ISBN that
appear in every book. In fact, the digits represent the unique identification of
the book and serves as a pass for its publication and distribution worldwide.
Some 700,000 publishers from 166 countries and regions around the world have
adopted the ISBN since it was introduced in 1970. China joined the international
ISBN agency in 1982 and promulgated the first CSBN in 1986. Since its
implementation on 1 January 1987, CSBN has been widely applied to books,
audio-visual products and electronic publications. It has played a significant
role in the different processes of publishing, distribution and library
management, as well as the trading of publications.
According to Su Jianzhong, deputy director of the General Administration of
Press and Publication (GAPP) barcode centre and China ISBN Centre, the new
version of CSBN (GB/T5795-2006) was jointly released by the General
Administration of Quality Supervision, Inspection and Quarantine, and National
Regulatory Commission for Standardization on 18 December 2006. The new 13-digit
CSBN is preceded by ISBN, comprising the prefix number (by EAN UCC), group area
code, publisher number, publication serial number and inspection number.
Su pointed out that the new CSBN has expanded the theoretical capacity of the
whole system of book codification. The new system clearly sets out the two types
of codification formats, CSBN and CSBN barcode. It emphasises that publishers
should do their best to ensure that CSBNs are assigned and used exclusively,
permanently and specifically. Besides, the scope of CSBNs is now extended from
traditional print publications to non-print publications, such as electronic
publications, especially online publications via the Internet. Publishers are
also required to file the information of their publications for record under the
new rule.
Safety Glass Mandatory
in New Buildings
Starting from 1 January 2007, it is mandatory to use safety glass at 11 parts of
a building under the Regulations on the Administration of Construction Safety
Glass jointly formulated by the National Development and Reform Commission,
Ministry of Construction, General Administration of Quality Supervision,
Inspection and Quarantine, and State Administration for Industry and Commerce.
The implementation of the regulations marks the launch of a regulatory framework
for the production, design, installation and application of construction safety
glass in China. Safety glass refers tempered glass, laminated glass and glass
produced by combining steel-reinforced glass and layered glass or other glass
products such as insulating glass that meet the current national standards for
construction safety glass.
Under the regulations, safety glass must be used in all buildings in all cities
that are to be newly constructed, expanded, refurbished, decorated and repaired.
The requirements for the production, import, sourcing and application of safety
glass are also set out. It is mandatory to use safety glass in 11 parts of a
building, including push-open windows in buildings of seven storeys or more,
windows that measure more than 1.5 sqm in area, glass curtain wall, windows
installed at a slanted angle, panorama lifts, indoor partitions, bathroom
partitions, and glass screens. Penalties are also clearly stipulated in the
regulations.
Foreign-invested Travel
Agents to Enjoy National Treatment
Starting from 1 July 2007, the Chinese government will lift the restriction on
foreign-invested travel agents to establish branches in China and will grant
them national treatment in terms of registered capital.
The new policy was announced by Zhao Qiwei, Director of National Tourism
Administration, at a national tourism work meeting on 18 January. Starting from
1 February, China has eased the restriction on domestic tourist operators to set
up branch offices while qualified operators are encouraged to "go out" to major
tourist destinations of Chinese nationals to invest in the acquisition,
construction and management of hotels and tourist spots.
Zhao said that the authorities will consider further opening the Chinese tourism
market, subject to further studies on the subject and the establishment of a
sound regulatory system and an effective supervisory regime, in a bid to attract
major international tourist operators and brands to the market, enhance China's
competitiveness in the sector and raise the industry's overall standards.
10 New Occupations
Announced
The Ministry of Labor and Social Security (MLSS) announced the eighth batch of
new occupations at a meeting in Shanghai on 11 January. Most of the new jobs are
in the service sector, reflecting the sector's rapid expansion under China's
fast economic growth.
The 10 new occupations include exhibition designer, jewellery appraiser,
business start-up consultant, sign language interpreter, hazard information
officer, orphans and handicapped children attendant, urban rail contact network
maintenance technician, numerical-controlled programme technician, synthetic
materials tester, and interior decoration quality inspector.
The posts of exhibition designer and urban rail contact network maintenance
technician are created to meet the needs of city modernization, while synthetic
materials tester and interior decoration quality inspector will have a positive
impact on upgrading people's living standards.
The creation of sign language interpreter and orphans and handicapped children
attendant is a result of the development of China's social service sector, while
business start-up consultant can help build a business environment conducive to
entrepreneurship. With the creation of the post of hazard information officer,
the management of hazards in China is expected to be improved.
Presently, MLSS are conducting studies on three other new occupations including
auto glass installation and maintenance worker, environmental art designer and
electronic music composer. Public consultation on the subject is underway.
MLSS has announced a total of 86 new occupations in eight batches since it
established the system of announcing new occupations in August 2004.
Liberalized Refined Oil
Products Market Generates Greater Profits
The Measures for the Administration of the Refined Oil Products Market
promulgated by the Ministry of Commerce (MOFCOM) set the stage for the
liberalization of the refined oil products wholesale market. Under the measures,
qualified enterprises are allowed to engage in the wholesale of refined oil
products in China, which is going to be a lucrative market with fierce
competition. Business operators are advised to be cautious and take note of the
details of the measures.
According to the latest policy on granting wholesale rights to enterprises, the
requirement on an enterprise to be operating at least 30 petrol stations has
been removed. Meanwhile, new requirements on registered capital, storage
capacity and administrative permission have been added.
Before, in a bid to protect their own interest, private enterprises had strongly
requested that MOFCOM remove the market access threshold with regard to the
number of petrol stations run. To this end, they had submitted petitions on
several occasions and had even threatened to collectively pull out of the market
should their request be rejected.
While the problem on the number of petrol stations has been resolved in the new
measures, there is yet another long-standing thorny issue which has not been
addressed. The issue is whether the opening up of the refined oil products
wholesale market means that private and foreign enterprises, in addition to
being allowed to engage in wholesale business, will be permitted to directly
import refined oil products wholesale from the international market. The latter
business has long been dominated by China National Petroleum Corp and Sinopec.
According to Professor Han Xuegong of the Petroleum Cadres Training Institute,
under the new policy wholesalers will be allowed to import refined oil products.
The new measures stipulate that enterprises applying for wholesale rights must
have a crude oil primary processing capacity of one million tones or above. Yet,
only a few private oil refineries in the country now have such production
capacity. In addition, applicants are required to sign a contract for one year
or above with enterprises which have a business volume of over 200,000 tonnes
and import of more than 100,000 tones of refined oil products.
As regards pricing, under the new measures, the prices of refined oil products
in China will be set based on the prices of crude oil, instead of refined oil
products, in the international market. In other words, the prices of crude oil
in the three major oil production regions of Brent, Dubai and Minas will take
the place of the prices of refined oil products in the three cities of New York,
Singapore and Rotterdam to serve as a basis for the determination of prices of
refined oil products in the country.
It is common practice that wholesale enterprises often engage in the refinery
business as well. Yet private enterprises have a slim chance of accessing the
refinery market as the entry threshold to this market is prohibitively high. New
refineries are required to have a refinery capacity of over 8 million tones of
refined oil products, which entails a capital of at least Rmb3 billion. Such a
requirement is way beyond the means of private enterprises.
To apply for wholesale rights in refined oil products, enterprises must meet the
following requirements:
(1) Applicants must have a long-term, stable source of supply of refined oil
products from one of the following four sources:
a. refineries which comply with the state's industrial policy and have a crude
oil primary processing capacity of over one million tones and an annual
production capacity of over 500,000 tones of petroleum and diesel oil meeting
the state quality standards;
b. enterprises qualified to import refined oil products;
c. signing a refined oil products supply agreement for one-year or more with
enterprises which have wholesale rights in refined oil products and a business
volume of over 200,000 tones;
d. signing a refined oil products supply agreement for one-year or more with
import enterprises which import over 100,000 tones of refined oil products each
year.
(2) Applicants must be corporate entities in China, with a registered capital of
not less than Rmb30 million;
(3) If the applicant is a branch of a Chinese corporate entity, the entity must
have wholesale rights in refined oil products;
(4) Applicants must possess oil tanks for refined oil products with a storage
capacity of not less than 10,000 cubic meters, whose construction must meet the
requirements in urban and rural planning and oil tanks distribution plans, and
approved by various government departments including state land resources,
planning and construction, safety supervision, public security and fire
services, environmental protection, meteorology and quality supervision.
Sewage Charge to be
Introduced Nationwide
China is stepping up efforts at reforming the pricing structure of water and
will be introducing the policy of sewage charge, according to director of the
State Environmental Protection Administration Zhou Shengxian. The sewage charge
will be applied to all localities across the mainland at a rate that will
progressively increase to Rmb0.8 per tonne.
By the end of 2008, sewage charge will be levied on all users of water sources.
At places where the charges collected cannot cover the costs of sewage
treatment, the local finance authorities will subsidize the shortfall. Local
authorities will also implement the state's preferential policies on land use
and taxation in the construction of sewage treatment plants. The sewage
treatment divisions of local governments are encouraged to reorganise as
franchised enterprises through which the local governments can strengthen
supervision over sewage treatment. Also, the policy and mechanism for conserving
the ecosystem will be improved and implemented on a trial basis.
China has introduced a series of new policies on water price reform, and sewage
and garbage treatment charges in recent years. About 800 urban sewage treatment
plants have been built. The rate of sewage treatment in urban areas has risen by
18 percentage points from 2000 to 52% at present.
The central government has earmarked Rmb3.9 billion from the state treasury to
support the construction of urban sewage treatment plants and supporting
facilities this year. Local authorities are urged to expedite the construction
of their urban sewage treatment projects. All urban sewage treatment projects
that have been included in local government plans must be completed and become
operational on schedule. The goal is to achieve a minimum 70% urban sewage
treatment rate by the year 2010.
Given the steep challenges of the water environment, China is devoting great
efforts to investigating and punishing law-breaking activities against the
environment as well as keeping close tabs on market access in order to prevent
pollution at source.
Seven ministries under the State Council have jointly launched an environmental
protection campaign in 2006 to clamp down on the illegal behaviors of polluting
enterprises in industrial zones in a bid to ensure the safety of drinking water
and public health. By the end of October, some 500,000 enterprises were
inspected, of which 19,000 were punished for breaking environmental protection
rules. In addition, various departments under the State Council have conducted
special inspections to verify the safety of drinking water at source. A total of
over 1,400 pollution sources that may jeopardize the safety of drinking water at
source were either rectified or relocated. It is understood that China will
complete the planning and adjustment of drinking water source zones by the end
of 2007. Direct sewage outlets within class one protected drinking water source
zones will be removed by then.
March 6, 2007
New regulations back
drive for quality chocolate in China
Chocolate spa for Valentine's Day
China's increasingly savvy chocolate
consumers will be better equipped to choose higher quality chocolate if new
regulations entering into force next month are properly enforced. China’s
ministry of commerce has said that the fat content in chocolate must be made up
of at least 95 per cent cocoa butter. Any products containing more than 5 per
cent cocoa butter replacement cannot be labeled as chocolate after 1 December.
Currently only black and white chocolate must be labelled with the proportion of
cocoa content, which must be a minimum of 18 per cent and 20 per cent
respectively. Under the new regulation, to be policed by the quality and safety
body AQSIQ, manufacturers must specify the proportion of cocoa substitute and
type. The law could significantly shake up the domestic confectionery sector.
Only about a quarter of chocolate products on the market are made with pure
cocoa butter, according to Chen Guoxing from the confectionery committee of
China’s Food Industry Association.
Chocolate body paintings in Xi'an
Others estimate that 90 per cent of Chinese chocolate makers rely on cocoa
butter substitutes. This is a result of the significant price differential - a
ton of cocoa costs around RMB30,000 while cocoa substitutes range from
6,000-15,000 depending on its quality and type. Some in the industry are
skeptical about how well the regulation will be enforced, particularly given its
impact on the domestic industry. Jimmy Yang of Paalsgard, an emulsifier supplier
to chocolate makers, adds that it will be a difficult standard to police. “It’s
not so easy to analyse cocoa butter content in a chocolate product,” he told AP-Foodtechnology.com.
However many feel that China’s confectionery industry is already moving towards
higher quality products, independently of government regulation. The world’s
biggest chocolate maker, Barry Callebaut, says the Chinese market has been
buying increasing amounts of higher quality product for some time. “This [the
new regulation] is a positive move towards quality but it is the market that is
driving this trend ahead of any regulations,” Maurizio Decio, the firm’s vice
president of Asia, told AP-Foodtechnology.com in a recent interview. He added
that the firm’s gourmet business – selling chocolate to artisans, hotels and
restaurants – is growing ‘really, really strongly’, another indication of the
good demand for higher end products. Others in the industry agree.
“Chinese customers are more and more concerned about quality as well as price.
As a result, in order to better satisfy people’s taste, more producers will use
pure cocoa butter instead of substitute which has been adopted by most local
companies,” Chen from the food industry association said. Shanghai-based
confectionery firm Jinsihou says all of its new products are made with pure
cocoa butter. “We used to use substitute for most of our chocolates, like many
Chinese companies. But the new types of our products are made of pure cocoa
butter, which is becoming more and more trendy,” said company spokesman Mr
Zinghong.
He acknowledged that ingredient costs have since doubled but that Jinsihou does
not want to be confined to a small section of the market. “We believe it is the
trend that customers will prefer better quality products as they get rich,” he
told AP-Foodtechnology.com. The new regulations was one of many topics under
discussion at the Confectionery Manufacturing Expo in Shanghai in September
2006.
Chinese chocolate war
goes to court
The Chinese ambassador's reception may never be the same again. Ferrero Rocher,
maker of the celebrated hazelnut chocolates, is taking the Chinese manufacturer
of an almost identical product to court to try to force them off the market.
Ferrero Rocher chocolates have been on sale in China since 1984. But alongside
them on many shelves are similar-tasting, similarly-packaged chocolates costing
half the price, sold by a Chinese firm under various names, including Tresor
Dore and Golden Dream. The chocolates not only come wrapped in golden paper,
nestling in brown cases, but the boxes – rectangular or heart-shaped with a
plastic cover – are almost the same.
Tresor Dore have the same role at Chinese government functions that Ferrero
Rocher claimed for its product at the ambassador's reception in its much-mocked
advertisement: "Wiz zese chocolates you are really spoiling us!" advertisement.
Ferrero Rocher's case that Montresor, the chocolate arm of the Chinese food
company Liangfeng, has copied its product and should be banned is to go before
China's highest judges, the Supreme Court, on Wednesday. "What we are saying is,
if you want to make chocolates, fine, make chocolates, but make them different,
don't just make copies of our product," said Alessandro Cagli, Ferrero's
European affairs director.
Product piracy, ranging from fake DVDs of films to wholesale copying of complex
designs under Chinese brand-names, has become a major issue between Western
businesses and China. General Motors tried and failed to sue a Chinese rival,
Chery, alleging that it copied GM's "Smart" car, after designs were apparently
stolen. Fashion brands such as Gucci and Louis Vuitton have tried with only
limited success to stop the sale of lookalikes.
Ferrero Rocher first appeared in China's Friendship Stores, shops which only
foreigners could use, but by the 1990s they became popular as chocolate-eating,
a new habit to China, caught on. A Montresor heart-shaped box of eight
chocolates sells for 20 yuan, about £1.35, compared to 37 yuan (£2.50) for
Ferrero Rocher. Montresor admits that it put its chocolates on sale after
Ferrero came to China but Huang Bin, who is representing Montresor in court,
said: "We think the packaging of this chocolate is universal." He said there
were 20 firms making similar chocolates in China, but Montresor was the only one
successful enough to challenge Ferrero's dominance.
The case is likely to be protracted. Mr Huang said the firm had lost sales since
the lower court, against whose judgment the firm is appealing, came out in favor
of the Italian company. "This result is a matter of life or death to us," he
said. "If we lose, there will never be a Chinese golden ball-shaped hazelnut
chocolate."
March 5, 2007
Liberalized Refined Oil
Products Market Generates Greater Profits
The Measures for the Administration of the Refined Oil Products Market
promulgated by the Ministry of Commerce (MOFCOM) set the stage for the
liberalization of the refined oil products wholesale market. Under the measures,
qualified enterprises are allowed to engage in the wholesale of refined oil
products in China, which is going to be a lucrative market with fierce
competition. Business operators are advised to be cautious and take note of the
details of the measures.
According to the latest policy on granting wholesale rights to enterprises, the
requirement on an enterprise to be operating at least 30 petrol stations has
been removed. Meanwhile, new requirements on registered capital, storage
capacity and administrative permission have been added.
Before, in a bid to protect their own interest, private enterprises had strongly
requested that MOFCOM remove the market access threshold with regard to the
number of petrol stations run. To this end, they had submitted petitions on
several occasions and had even threatened to collectively pull out of the market
should their request be rejected.
While the problem on the number of petrol stations has been resolved in the new
measures, there is yet another long-standing thorny issue which has not been
addressed. The issue is whether the opening up of the refined oil products
wholesale market means that private and foreign enterprises, in addition to
being allowed to engage in wholesale business, will be permitted to directly
import refined oil products wholesale from the international market. The latter
business has long been dominated by China National Petroleum Corp and Sinopec.
According to Professor Han Xuegong of the Petroleum Cadres Training Institute,
under the new policy wholesalers will be allowed to import refined oil products.
The new measures stipulate that enterprises applying for wholesale rights must
have a crude oil primary processing capacity of one million tones or above. Yet,
only a few private oil refineries in the country now have such production
capacity. In addition, applicants are required to sign a contract for one year
or above with enterprises which have a business volume of over 200,000 tones and
import of more than 100,000 tones of refined oil products.
As regards pricing, under the new measures, the prices of refined oil products
in China will be set based on the prices of crude oil, instead of refined oil
products, in the international market. In other words, the prices of crude oil
in the three major oil production regions of Brent, Dubai and Minas will take
the place of the prices of refined oil products in the three cities of New York,
Singapore and Rotterdam to serve as a basis for the determination of prices of
refined oil products in the country.
It is common practice that wholesale enterprises often engage in the refinery
business as well. Yet private enterprises have a slim chance of accessing the
refinery market as the entry threshold to this market is prohibitively high. New
refineries are required to have a refinery capacity of over 8 million tones of
refined oil products, which entails a capital of at least Rmb3 billion. Such a
requirement is way beyond the means of private enterprises.
To apply for wholesale rights in refined oil products, enterprises must meet the
following requirements:
(1) Applicants must have a long-term, stable source of supply of refined oil
products from one of the following four sources:
a. refineries which comply with the state's industrial policy and have a crude
oil primary processing capacity of over one million tonnes and an annual
production capacity of over 500,000 tones of petroleum and diesel oil meeting
the state quality standards;
b. enterprises qualified to import refined oil products;
c. signing a refined oil products supply agreement for one-year or more with
enterprises which have wholesale rights in refined oil products and a business
volume of over 200,000 tones;
d. signing a refined oil products supply agreement for one-year or more with
import enterprises which import over 100,000 tones of refined oil products each
year.
(2) Applicants must be corporate entities in China, with a registered capital of
not less than Rmb30 million;
(3) If the applicant is a branch of a Chinese corporate entity, the entity must
have wholesale rights in refined oil products;
(4) Applicants must possess oil tanks for refined oil products with a storage
capacity of not less than 10,000 cubic metres, whose construction must meet the
requirements in urban and rural planning and oil tanks distribution plans, and
approved by various government departments including state land resources,
planning and construction, safety supervision, public security and fire
services, environmental protection, meteorology and quality supervision.
February 28, 2007
Fair organizers stage
roadshows in Shanghai
The 8th China International Trade Show for Exhibitions and Conferences (InterExpo
2007) opened at Intex Shanghai on 18th January 2007, and attracted a record
turnout of domestic and foreign fair organizers. Some 100 exhibition companies
set up booths at the expo to promote themselves as well as the events they are
organizing. Even Ningbo, a second-tier city, staged roadshows for 18 local
events, including exhibitions and fairs on trade and investment in Zhejiang.
There were also organizers of shows for consumer goods, real estate, tourism,
food and household goods. A boisterous scene such as this was never before seen
in InterExpo's history.
Competition outside the exhibition venue was just as keen. Senior executives
from Reed Exhibitions, a global exhibitions company, arrived in Shanghai to
promote 33 exhibitions planned for 12 Chinese cities in 2007. They were
particularly eager to promote the 23 exhibitions due to take place in cities
outside Shanghai. Adsale Exhibition Services Ltd, a Hong Kong-based exhibition
company, organised a roadshow attended by about 300 people. The event was aimed
at promoting the international rubber and plastics fair to be held in Guangzhou
in May 2007 to those involved in the plastics, packaging, auto parts and new
materials enterprises in Shanghai, Jiangsu and Zhejiang.
Munich International Trade Fairs Pte Ltd, the Middle East Exhibition Union, CMP
Asia and exhibition companies in Chinese cities like Hangzhou, Dalian, Qingdao,
Changsha, Zhengzhou, Chengdu, Jinan, Wuhan, Yiwu, Fuzhou and Xiamen have all
staged roadshows in Shanghai to draw attention to their events. After more than
20 years of development, Shanghai has now become a city with the most
flourishing and marketable exhibition industry. International exhibitions last
year occupied an area of 16,500 sqm on average, the largest in the country.
About 98% of these exhibitions were organised by enterprises, far exceeding
those in other cities, with over 50% of trade visitors coming from abroad or
from other Chinese cities. So, Chinese and foreign trade fair organizers are
encouraged to increase the impact of their exhibitions in Shanghai and
nationally by staging roadshows before the event, and Shanghai is the obvious
venue. Attracting the participation of Chinese enterprises, including those in
Shanghai, will help increase turnout and achieve the multiplication effect of
boosting the business of related sectors, such as hotels, catering, transport,
retail, tourism and telecommunications.
January 24, 2007
Mascot Design Sought
Worldwide for Shanghai World Expo
The Shanghai World Expo Coordination Bureau announced on 17 January 2007 that
with the approval of the 2010 Shanghai World Expo Organizing Committee, a
worldwide invitation was issued to artists to submit designs and ideas for the
official World Expo mascot. The recruitment of mascot designs commenced on 17
January and will close on 31 May 2007. A cash award of Rmb200,000 will go to the
winning entry.
The mascot is very important in promoting the theme and concept of the expo to
the public, especially among children, said the organizer.
The invitation is not only open to professional designing, consultancy and
advertising companies and designers with experience in image building, brand
development, animation cartoon creation and mascot design, but also to members
of the public. Interested parties may download the rules, registration form,
author's commitment letter and pictures of the World Expo emblem from the
official website of the 2010 World Expo at
www.expo2010china.com
According to the organiser of the Shanghai World Expo, all designs entering the
competition must be submitted in compliance with the set rules. The design may
take the form of a single drawing or a combination of drawings in different
moods, actions and colours. Online entries are not acceptable. All entries must
be submitted by mail or by hand to the Mascot Design Collection Office at No.
3588, Pudong South Road, Shanghai. The deadline for design submission is 6 pm on
31 May 2007.
Strict requirements are set for the mascot design competition. The mascot must
have Chinese characteristics, reflect the theme and image of the Shanghai World
Expo, have human characteristics and be likeable. It should be suitable for
dissemination and recreation on graphic, 3-D and electronic media. It should
also have commercial value and can be applied on licensed products (such as T
shirts, backpacks, cups and stationery), graphics and 3-D animations (in
different media such as TV, Internet, CD and cell phone), as well as different
venues of the World Expo.
Guangdong Sets Legal Fee
Standards
Guangdong's Price Bureau and Department of Justice have jointly promulgated the
Measures of Guangdong Province for the Administration of Lawyers' Service
Charges, setting standards for legal fees. Under the new measures, lawyers may
charge Rmb160 to Rmb3,600 per hour for their services. Law firms must be
transparent about their legal charges. The new standards took effect on 10
January 2007.
Fees charged by lawyers are classified as intermediary service charges and must
be set according to government guidance rates or market-regulated rates. Fees
for civil and administrative proceedings, state indemnity cases, various types
of lawsuits, legal advice for criminal suspects, acting as attorney for appeal
and accusation, application for bail, acting as defence counsel or private
prosecutor for the accused, and acting as prosecution counsel for victims, are
charged at government guidance rates. Other legal services provided by law firms
are charged at market-regulated rates.
The following are government guidance rates:
A. Legal charges on hour basis: Rmb200-3,000/hour.
B. Legal charges on case basis:
Criminal cases:
(1) Inquisition stage: Rmb2,000-6,000/case.
(2) Examination and prosecution stage: Rmb6,000-16,000/case.
(3) Trial stage: Rmb6,000-33,000/case.
The above rates apply to acting as private prosecutor in criminal cases and as
attorney for victims. For criminal cases involving long span of time and
extensive regional coverage, syndicated crime, and other serious and complicated
cases, the legal fees may be charged up to 1.5 times the standard rate by mutual
agreement.
Civil and administrative proceedings not involving property:
Rmb3,000-20,000/case.
C. Legal charges for civil and administrative proceedings involving property: In
addition to a basic fee of Rmb1,000-8,000, cumulative charges based on fixed
percentages of the disputed amount are also charged:
Rmb50,000 or below: no additional charge;
Rmb50,000-100,000: 8%;
Rmb100,000-500,000: 5%;
Rmb500,000-1,000,000: 4%;
Rmb1,000,000-5,000,000: 3%;
Rmb5,000,000-10,000,000: 2%;
Rmb10,000,000-Rmb50,000,000: 1%;
Over 50,000,000: 0.5%.
The above charging standards are allowed to float within a 20% range. For
criminal cases involving civil matters, legal fees for the civil proceedings may
be charged at half the standard rates applicable to first hearing.
Guangzhou: Filing of
Records Required for Lay-offs of Over 20 Employees
It has been learned from the labor and social security bureau of Guangzhou that
the Guangzhou municipal government has recently issued a set of opinions on how
to strengthen employment and re-employment.
Under the opinions, an early warning system on unemployment will be established.
Local governments at various levels will be required to draw up unemployment
warning levels and formulate contingency plans which should be activated when
unemployment reaches a dangerous level. In addition, enterprises which lay off
over 20 workers at one go should file a record of their workers' arrangement
plan with the municipal labour and social security bureau.
Enterprises which do not have a workers' arrangement plan, are unable to make
the necessary severance compensation to employees in accordance with the law or
settle all the debts owed to employees will not be allowed to lay off any
workers. Enterprises are also strictly prohibited to dismiss their workers in a
random manner to avoid creating large-scale unemployment.
Bank loans made available to enterprises employing laid-off workers
In the past, enterprises which employ laid-off female and male workers over 35
and 40 years of age respectively used to enjoy social security subsidy and post
allowance for three years. Under the latest policy, for enterprises which employ
laid-off female and male workers aged over 40 and 50 respectively, such subsidy
and allowance will be available until these workers' statutory retirement age.
For a small labour-intensive enterprise which qualifies for financing and whose
current workforce has 30% or more of its newly created positions taken up by
laid-off workers holding Re-employment Privilege Card and with whom it has
entered into labour contracts with a period of over one year, it will be
entitled to be extended a bank loan of an amount not exceeding Rmb1 million.?
May 3, 2006
Financial strengths add up for Chinese investors - China has
decided to learn the ropes of global investing and Hong Kong is the place to
help them do it
With anything up to US$1.6 trillion sitting idly in banks and the world’s
biggest foreign exchange reserves of US$856 billion, China has decided to learn
the ropes of global investing. And Hong Kong looks like the place to do it –
adding a powerful new dimension to the city’s role as a key international
financial centre. China announced new regulations in April setting up a
long-awaited Qualified Domestic Institutional Investor (QDII) scheme, for the
first time allowing corporations and individuals to send money abroad for
investment purposes. Previously, corporations could only hold foreign currencies
as part of their business operations.
Under new rules issued by the central People’s Bank of China, banks and mutual
will be allowed to put money to work abroad for their corporate and individuals
clients. The old restrictions were intended to prevent big outflows of capital
which could destabilize China’s economy, but have also led to a huge stockpile
of foreign exchange reserves and criticism about an undervalued currency and
large trade surpluses from key trade partners the US and EU.
New role for HK - As China opens up, it is creating a whole new financial centre
role for Hong Kong, which had been mainly a conduit for inward investment of
foreign money into the mainland. The upside for Hong Kong is huge as billions of
dollars of Chinese money is finally freed to seek better returns abroad, say
investment professionals. “A natural target for all that money is Hong Kong.
That’s the first place that people in China think about. They are not going to
put it in Japan and Singapore is too far away,” said Brook McConnell, President
of mutual fund house South Ocean Management.
The fact that China has allowed QDII to happen may in part be due to its
confidence in Hong Kong’s financial system, says Mr McConnell. “It has
institutions that China can rely on. They are flush with cash and they are
solid,” he said. “I think it is mutually beneficial to both sides and its going
to last for a long time. It’s going to be very exciting in the next 10 years.”
The amount of capital flows from China to Hong Kong and other developed
financial markets may be slow at first but should pick up speed as Beijing gets
more confidence in the QDII system. “I think it is just the tip of a real big
ice berg,” said Mr McConnell. Long term benefits.
About US$2 billion QDII money may be invested in Hong Kong stocks this year but
should rise to about US$9 billion by 2010, according to Deutsche Bank research.
“Hong Kong’s stock exchange will likely be a long-term winner of strong capital
inflows from China,” Deutsche says. The announcement of regulations setting the
framework for a QDII scheme is just the latest in a series of such reform steps
in the last few months. The Chinese cabinet, the State Council, has already
approved regulations for the country’s US$25 billion National Social Security
Fund to invest overseas. Insurance giants China Life and Ping An have also been
given quotas.
“I foresee more and more investment activities will be done through Hong Kong,”
said Y.K. Chan a fund manager with Phillip Asset Management. “Hong Kong, at
least in the foreseeable future, will be one of the most important centres to
learn international rules and practices.” China now has the world’s fourth
biggest economy after the US, Japan and Germany and needs to find ways for
corporate and individual investors to find bigger returns as it shifts focus
from exports to domestic consumption.
Investors in Hong Kong assets have been better rewarded. Bank deposits in the
city can earn 3 per cent or higher, five-year government bonds yield 4.3 per
cent and the stock market has just hit five-year highs, though some blue chip
stocks are still offering attractive dividend yields of above 4 per cent. The
reforms also mean that Chinese investors will for the first time be able to buy
shares in some of the country’s biggest and best companies which are listed in
Hong Kong but not domestically. Among such names are dominant cell phone player
China Mobile, oil giant PetroChina and China Construction Bank, the country’s
third biggest lender.
Of course, some of China’s investment money will go further afield into asset
classes such as US treasury bonds or European stocks. But once again Hong Kong,
which boasts a wealth of fund management talent, can play an important
intermediary role. Hong Kong’s sound legal system and freedom of capital flows
have meant it has long offered a wide array of global investment products. The
new rules mean the banks and fund houses offering those products just gained a
new potential market of 1.3 billion people.
April 9, 2006
Shanghai World Expo in
marketing drive
China Eastern Airlines became the first
official partner of the 2010 Shanghai World Expo last month, putting itself in
the driving seat for special promotions and marketing deals leading up to this
premier showcase for invention, business and trade.
The airline says it is providing both development funds as well as traveling
passengers to the Expo, which is expected to attract more than 70 million
visitors from around the world and the nation.
A promotional Airbus 340-600 from China Eastern Airlines was used to showcase
the airline's commitment by carrying away from Beijing deputies who were
attending the National Peoples Congress recently.
The Shanghai World Expo Coordination Bureau officially kicked off its marketing
programme under the theme "Better City, Better Life" - with plans for striking
market development.
The development outline for the World Expo covers five independent but
inter-relating areas: brand sponsorship, licensing, operation of activities and
projects, visitor organization and commercial services in the Expo Park.
The timetable for investment invitation has been drawn up, calling for
recruitment of brand sponsors by the end of 2007 but continuing to allow an open
door to partners all the way up to the end of 2010.
Domestic licensing and operation of other activities and projects will also be
launched this year. The licensing program sees a domestic roll out in 2006 while
the foreign licensing gets seriously underway in 2007, with licensed products on
sale throughout 2010.
The majority of other activities and projects will be carried out from this year
until the end of October 2010, while the visitor organization program begins in
2008 and ends in October 2010.
Additionally, commercial services for Expo Park are set to also begin in 2008,
with preparation time between July 2009 and April 2010 and full operations
underway between May and October 2010.
At least ten partners
Shanghai World Expo's brand sponsorship program takes a two-tier approach
involving partners and senior sponsors. Partners are the highest ranking
sponsoring enterprises. In addition to funding and material support, they are
also expected to help organise the Expo within their respective trades. The
requirements and returns for partners are higher than those for senior sponsors.
Given the broad scope of the theme and the wide-ranging preparatory work
required - along with construction, operational support, visitor organization
and venue services - sponsoring enterprises will be chosen from among leading
companies in nearly 40 relevant sectors.
There will be between 10 and 15 partners and between 12 and 20 senior sponsors,
with the selection process ending in 2007.
The Expo organizer is under a duty to reward all sponsoring enterprises "in a
manner commensurate to their input and contributions".
Sponsoring enterprises will be eligible for exclusive rights to the brand name,
as well as exclusive commercial rights, the right to participate in venue
construction, priority in sponsoring activities, providing concessionary
tickets, arranging hospitality and reception arrangements, as well as other
services.
Licensed enterprises will be authorized to produce or sell IPR-related products
bearing the Expo name, emblem and mascot - and introduce the Chinese culture to
the world by promoting the World Expo concept and brand.
The licensing program covers 10 major categories of products, including
household, stationery, apparel, ornaments, gifts and small articles, personal
health care products, media products, software technology, toys and games, and
food and beverages.
Tenders for Expo Park catering
In addition to participating in the costly brand sponsorship program,
enterprises may also become supporters of Expo activities and projects.
Between 2006 and October 2010, companies are able to provide support by
co-organizing or sponsoring activities and projects before or during the Expo.
Participation can take the form of co-organization, sponsorship, media
interaction and relay, with enterprises already taking part in Expo market
development programs being given priority.
Companies can also take part in commercial services in Expo Park, such as
providing catering, retail and other commercial services to the exhibitors from
200 countries or international organizations, as well as the millions of
visitors.
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