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CHINA’S<br />
F <strong>REIGN</strong> <strong>TRADE</strong><br />
The Export-Import Bank of China:<br />
Want to Be the Best in A Better World ?<br />
Special report<br />
Setting Tone for China<br />
Economy in 2011<br />
SURVEY<br />
China: A Booming<br />
Market for Foreign<br />
Cosmetics Brands<br />
国 内 邮 发 代 号 :80-799<br />
国 际 邮 发 代 号 :SM1581<br />
国 内 刊 号 :CN11-1020/F<br />
国 际 刊 号 :ISSN0009-4498
What’s on?<br />
China’s foreign trade structure diversified<br />
China’s trade volume surged in 2010. The development wasn’t only in<br />
quantity, but also in quality — namely structure diversification.<br />
The European Union, the United States and Japan remained<br />
China’s top 3 largest trading partners in 2010.<br />
But trade volumes between China and other emerging economies increased<br />
also. Bilateral trade volumes with BRIC nations — Brazil, Russia and<br />
India — all jumped more than 40 percent. That made India China’s tenth largest<br />
trading partner.<br />
Huang Guohua, Statistics Department Director of General Administration<br />
of Customs said “Trade volume between China and emerging economies<br />
increased faster than that with the traditional market. It indicates that China’s<br />
foreign trade is diversifying, and showing less dependence on the traditional<br />
partners. It’s a good way to reduce risks.”<br />
Data also shows that foreign trade volumes developed dramatically in<br />
China’s middle and western areas last year. Although the southern province of<br />
Guangdong still topped others in the total volume of import and export.<br />
Huang Guohua said “The export volume of middle and western areas<br />
surged over 40 percent year on year in 2010. The speed was 10 percentage<br />
points higher than the country’s total. It indicates that industrial structure has<br />
improved in these areas.”<br />
The import and export volume of private enterprises surged faster than the<br />
country’s average in 2010, with 47 percent year on year growth. Experts say<br />
China’s foreign trade development reduced dependence on foreign-funded enterprises.<br />
(CNTV)<br />
China to continue proactive fiscal policy<br />
China will continue its proactive fiscal policy in 2011 to improve infrastructure<br />
and people’s living standards, said Jia Kang, head of the Research Institute<br />
for Fiscal Science of the Ministry of Finance.<br />
Speaking at the China Textile Round-Table Forum Annual Conference<br />
2011, Jia attributed the policy decision partly to the need to roll out more followup<br />
investment programs for the four-trillion-yuan (607 billion yuan) economic<br />
stimulus program launched by the central government to combat the global<br />
downturn in November 2008.<br />
Further, Jia refuted criticism over China’s continuous building of infra-<br />
structure, saying many regions and cities were still<br />
suffering from inadequate roads or subway systems,<br />
citing Beijing’s severe traffic jams as an example.<br />
“China also needs to make investments in a<br />
nationwide medical insurance system and affordable<br />
housing, to expand domestic consumption and<br />
improve the living standards of the people,” said Jia.<br />
During the annual Central Economic Work<br />
Conference held in December 2010, the central<br />
authorities agreed that the country would continue<br />
its proactive fiscal policy next year, while switching<br />
its monetary policy stance from relatively loose to<br />
prudent.<br />
Jia said China’s fiscal policy, after years of being<br />
“proactive,” would return to “prudent” at some<br />
point of time, when appropriate. “However, it would<br />
be a gradual exit which is not likely to happen in<br />
2011.” (Xinhua)<br />
Chinese home appliance industry<br />
on the “Go global”<br />
To further promote the development of China’s<br />
self-owned brands in the home appliance field, the<br />
Ministry of Industry and Information Technology<br />
Figures<br />
10.3%<br />
China’s economy expanded 10.3<br />
percent in 2010 from a year earlier,<br />
and 9.8 percent year on year in the<br />
fourth quarter of last year, the National<br />
Bureau of Statistics (NBS) said<br />
on Jan. 20. (Xinhua)<br />
34.7%, 6.4%<br />
China’s foreign trade in 2010<br />
jumped 34.7 percent from a year earlier<br />
to $2.97 trillion, with its trade surplus<br />
falling 6.4 percent to $183.1 billion, the<br />
General Administration of Customs<br />
(GAC) said on Jan. 10. (Xinhua)<br />
23.8%<br />
China’s fixed-asset investment rose<br />
23.8 percent year on year in 2010, the<br />
National Bureau of Statistics said at a<br />
press conference on Jan. 20. (Xinhua)<br />
4.6%<br />
China’s consumer price index (CPI),<br />
a main gauge of inf lation, rose 4.6<br />
percent in December year on year, the<br />
National Bureau of Statistics (NBS) announced<br />
on Jan. 20. (Xinhua)<br />
$105b<br />
Foreign direct investment (FDI) into<br />
China hit a record 105.74 billion U.S.<br />
dollars last year, up 17.4 percent year on<br />
2
(MIIT) announced Tuesday to carry out<br />
a guiding plan that eyes to export more<br />
than 30 percent of China’s home appliance<br />
products by 2015.<br />
According to the guide, over 80<br />
percent of companies in the field in<br />
China are suggested to work out a clear<br />
development strategy by 2015, making<br />
achievements in core technologies.<br />
The MIIT intends for companies to<br />
inject 3 percent of their investments on<br />
research and development that can lift<br />
three to five brands to compete in the<br />
international market in the coming set<br />
years.<br />
China may also put forward a series<br />
of measures to support the development<br />
of the home appliance industry, and<br />
encouraging mergers and acquisitions<br />
with overseas companies, said the China<br />
News Agency.<br />
MIIT will back companies that<br />
apply for overseas trademark registration<br />
and patent, and inspiring Chinese<br />
companies taking the “Going globally”<br />
strategy.<br />
Haier Group, one of the largest<br />
white-goods company in the world, has<br />
already announced its five-year (2011-<br />
2015) development plan, which aims<br />
to promote itself to leading position in<br />
the country through integrations and<br />
mergers with Chinese white-goods companies,<br />
plus acquiring some overseas<br />
companies.<br />
In 2010, Chinese home appliance<br />
industry is estimated to have generated<br />
$165 billion. (Global Times)<br />
“Yuan internationalization a big step for world<br />
monetary reform”<br />
Quotes<br />
China should steadily promote the internationalization of its currency, the yuan,<br />
the head of China’s social security fund said on Jan. 15.<br />
The internationalization of the yuan is a significant step for advancing the reform<br />
of the international monetary system, Dai Xianglong, chairman of China’s National<br />
Council for Social Security Funds, said when speaking at annual economic forum in<br />
Beijing.<br />
The current international monetary system has not adapted to the new patterns of<br />
global economic development, he said, adding that currency diversification is a realistic<br />
solution. (Xinhua)<br />
“China pledges more action to fight IPR infringements”<br />
China is committed to improving the investment environment by adhering to<br />
its long-term fight against the infringement of intellectual property rights (IPR), said<br />
Chen Deming, minister of commerce, on Jan. 14.<br />
“China will go on strengthening communication and coordination with foreign<br />
enterprises, addressing their concerns about IPR protection. We expect the multinationals<br />
to have strong confidence in China’s commitment and efforts on the issue,”<br />
said Chen at an IPR forum held in Beijing.<br />
But “It takes time, and you need the patience to wait and see the changes,” said<br />
Chen. (China Daily)<br />
“China should be cautious of inflation, excess liquidity”<br />
China should be cautious of inflation and prevent the effects of excess liquidity,<br />
Fan Gang, a former advisor to the country’s central bank, said on Jan. 15.<br />
The loose credit policy of the United States is pumping money into the market<br />
and increasing expectations for the depreciation of the US dollar and the appreciation<br />
of other currencies, including the Chinese yuan, Fan told the annual meeting of<br />
China’s economy (2010-2011) in Beijing.<br />
The policy is reasonable for its own economy but will cause serious problems for<br />
the world, he said.<br />
It pushes up commodity prices and spurs hot money flows that cause inflation in<br />
emerging economies, he said. (Xinhua)<br />
year, the Ministry of Commerce (MOC)<br />
announced on Jan. 18. (Xinhua)<br />
30%<br />
Outbound merger and acquisition<br />
(M&A) deals by Chinese buyers increased<br />
by more than 30 percent to a<br />
new peak of 188 transactions in 2010,<br />
with a value of about $38 billion, a<br />
report from PwC said on Jan. 17. (Xinhua)<br />
15.7%<br />
China’s industrial output growth accelerated<br />
in 2010 from a year earlier, the<br />
National Bureau of Statistics (NBS) said<br />
at a press conference on Jan. 20. (Xinhua)<br />
5.5%<br />
China’s producer price index (PPI),<br />
a major measure of inf lation at the<br />
wholesale level, rose 5.5 percent last<br />
year, the National Bureau of Statistics<br />
(NBS) announced on Jan. 20. (Xinhua)<br />
$5.668b<br />
In 2010, 804 cases of venture<br />
capital (VC) investments conducted<br />
in China, a total capital injection of<br />
$5.668 billion, which is currently the<br />
highest investment amount in the<br />
country, according to ChinaVenture on<br />
Jan. 14. (Global Times)<br />
3
What’s on?<br />
China sets 2011 pollution control goal, warns of<br />
challenges<br />
The Chinese government has set its 2011 target to reduce the emission of four major<br />
pollutants, cutting them by 1.5 percent year-on-year.<br />
These main pollutants are Chemical Oxygen Demand (COD), sulfur dioxide, ammonia<br />
nitrogen, and nitrogen oxide. Ammonia nitrogen and nitrogen oxide were newly<br />
added to the country’s major pollutants monitoring list in accordance with its environmental<br />
protection plan from 2011 to 2015.<br />
Zhou Shengxian, minister of environmental protection, said on Jan. 13 at a national<br />
meeting on 2010 environmental protection that while experiencing quick economic development,<br />
the country is also facing increasing energy consumption and rising heavy<br />
metal, soil, dangerous waste and chemical pollution.<br />
According to Zhou, China will impose higher pollutant emission standards for<br />
paper-making, textiles, leather, chemical plants and other heavy-polluting industries.<br />
More efforts will also be made to control emissions of motor vehicles, build sewage<br />
processing plants at the county level and continue research on developing technology to<br />
remove sulfur, saltpeter, nitrogen and other polluting materials during industrial manufacturing.<br />
In addition, the country will also issue more policies, such as providing financial<br />
support for processing pollutants and collecting charges over emissions from motor vehicles<br />
on a trial basis, Zhou said. (Xinhua)<br />
Money inflow complicate China’s efforts to tighten policy<br />
China’s foreign exchange reserves hit a record $2.8 trillion in the fourth quarter of<br />
2010. That certainly consolidates what was already the world’s biggest stockpile, but it<br />
also shows that money streaming in from abroad will complicate efforts to tighten policy<br />
at home.<br />
China’s forex reserves climbed nearly 19 percent year on year in 2010. Experts say<br />
the forex increase reflects two things: a recovery in exports, but also the inflow of hot<br />
money. Some say the hot money inflows have impacted the appreciation of the yuan, and<br />
increases in domestic asset prices. These same factors could continue to push up forex<br />
reserves this year.<br />
Zong Liang, General Manager of Strategy & Development Department, BOC said “I<br />
believe China’s forex reserves will hit $3 trillion very soon. The United States is adopting a<br />
quantitative easing policy, some European countries are suffering debt crises and they could<br />
also adopt a similar QE policy. So China’s forex reserves are facing the risk of depreciation.”<br />
Wang Songqi, Deputy Director of<br />
Institute of Finance & Banking, CASS<br />
said “The central bank has to use hedging<br />
tools. It must adjust policies according<br />
to the situation, especially to avoid hot<br />
money inflows.”<br />
Experts suggest the central bank<br />
should further improve the exchange rate<br />
system, by allowing the rate reflect market<br />
supply and demand in a more timely<br />
fashion. They also suggest easing control<br />
on overseas investments, and encouraging<br />
Chinese investors to buy up on foreign<br />
currency. (CNTV)<br />
China gets first overseas<br />
order for LNG ships<br />
China State Shipbuilding Corporation<br />
(CSSC) signed a contract with Exxon<br />
Mobil and Mitsui & Co., Ltd. on Jan. 15<br />
to build four LNG ships (liquefied natural<br />
gas), the nation’s first overseas order for<br />
such an advanced carrier.<br />
Hudong-Zhonghua Shipbuilding<br />
(Group) Co., Ltd., a subsidiary of CSSC,<br />
will build the ships for Mitsui, a Japanese<br />
shipping giant.<br />
The ships are scheduled for delivery<br />
between 2015 and 2016. The fleet will<br />
be used for shipping China’s imports of<br />
liquefied natural gas from Australia and<br />
Papua New Guinea.<br />
In 2009, Exxon Mobil contracted<br />
with China’s major oil and gas producer<br />
PetroChina and refiner Sinopec to transport<br />
exports about 425 tonnes of liquefied<br />
natural gas per year.<br />
7.95t<br />
Figures<br />
New yuan-denominated lending in<br />
China reached 7.95 trillion yuan (about<br />
$1.2 trillion) last year, the People’s Bank<br />
of China (PBOC), the central bank, said<br />
on Jan. 11. (Xinhua)<br />
14.56%<br />
China’s electricity consumption<br />
rose 14.56 percent year on year to well<br />
over 4.19 trillion kWh in 2010, the China<br />
Electricity Council (CEC) said on Jan. 17.<br />
(Xinhua)<br />
1t<br />
China’s tax revenues rose 22.6 percent<br />
to 7.74 trillion yuan (1.17 trillion U.S.<br />
dollars) in 2010 compared to one year<br />
earlier, the State Administration of Taxation<br />
announced on Jan. 9. (Xinhua)<br />
2t<br />
China’s output value of forestry<br />
rose 27 percent last year to more than<br />
2 trillion yuan ($302 billion), a senior<br />
forestry official said on Jan. 5. (Xinhua)<br />
32%<br />
China’s auto sales hit 18.06 mil-<br />
4
A liquefied natural gas carrier is a<br />
tanker ship designed for transporting liquefied<br />
gas at a temperature of minus 163<br />
degrees Celsius, and marks an important<br />
part in the LNG supply chain.<br />
Only a handful of nations, such as<br />
the United States, Japan and the Republic<br />
of Korea, have the ability to build such<br />
ships.<br />
Hudong-Zhonghua Shipbuilding<br />
(Group) Co., Ltd. is China’s only LNG<br />
ship builder. Its first ship was delivered<br />
in April 2008. It has completed 5 vessels,<br />
with one still under-construction.<br />
The company did not disclose the<br />
price of the vessels.<br />
Tan Yajun, general manager of<br />
CSSC, said the company would strive<br />
to deliver the ship with high quality<br />
craftsmanship and on schedule. (Xinhua)<br />
China starts pilot scheme<br />
for settlement of overseas<br />
direct investments in yuan<br />
China announced on Jan. 13 that the<br />
nation’s qualified enterprises and banks<br />
could settle their overseas direct investment<br />
in yuan, a move that could expand<br />
the currency’s global reach.<br />
The People’s Bank of China, or the<br />
central bank, said on its website that,<br />
banks and enterprises which are allowed<br />
to settle the cross-border trade in yuan<br />
are permitted to conduct direct investments<br />
overseas using yuan, or Renminbi.<br />
(Xinhua)<br />
Quotes<br />
“Agricultural efficiency crucial<br />
for food security”<br />
China will maintain more than 90 percent of<br />
its self-sufficiency in grains during the coming<br />
decade by developing agricultural technologies and<br />
improving land use for food production, an agricultural<br />
expert said on Jan. 15.<br />
In 2010, the country saw the seventh consecutive record grain harvest with production<br />
of 546 million tons. The government said current grain stocks exceed 200 million<br />
tons, with grain self-sufficiency standing at 95 percent for the last decade. (China Daily)<br />
“Renminbi not undervalued as real exchange rate increases”<br />
The Chinese currency is not undervalued, if measured with Real Effective Exchange<br />
Rate (REER) based on Unit Labor Cost (ULC), a better way to grasp changes<br />
in competitiveness than looking at nominal exchange rate and REER based on Consumer<br />
Price Index (CPI), the United Nations Conference on Trade and Development<br />
(UNCTAD) said on Jan. 18.<br />
In a press conference presenting UNCTAD’s recent surveys and findings, Heiner<br />
Flassbeck, Director of UNCTAD’s Division on Globalization and Development Strategies,<br />
said according to his calculation based on the ULC oriented approach, the Chinese<br />
currency “is not undervalued”, but rather, “it has appreciated quite significantly in<br />
the last ten years.” (Xinhua)<br />
“China to attract overseas talent to aid economic<br />
restructuring”<br />
China will attract overseas experts in equipment manufacturing and emerging industries<br />
this year to help its economic restructuring process, officials said on Jan. 11.<br />
The country would also recruit overseas talent who could help in the technological<br />
upgrading of enterprises, the development of modern service industries, the research<br />
and development of core technologies and energy saving and emission reduction sectors,<br />
according to officials attending a national conference on the introduction of overseas<br />
expertise.<br />
Ji Yunshi, director of the State Administration of Foreign Experts Affairs, said that<br />
the administration would work with international headhunting companies and employment<br />
agencies to recruit foreign talent for China. (Xinhua)<br />
lion last year, up 32.37 percent from the<br />
previous year, the China Association of<br />
Automobile Manufacturers (CAAM) announced<br />
on Jan. 10. (Xinhua)<br />
82,000<br />
Applications for computer software<br />
copyright protection in China<br />
have almost quadrupled, from nearly<br />
21,500 in 2006 to nearly 82,000 in<br />
2010, the Copyright Protection Center<br />
of China said in a statement on<br />
Jan. 12. (Xinhua)<br />
$152b<br />
China has spent more than 1 trillion<br />
yuan ($151.5 billion) on building<br />
up its civil aviation infrastructure and<br />
in purchasing aircraft over the past<br />
five years, official data showed on<br />
Jan. 11. (Xinhua)<br />
25%<br />
Online games market rose 24.7 percent<br />
in the fourth quarter last year to hit<br />
9 billion yuan ($1.36 billion) with Tencent<br />
Holdings and NetEase.com extending<br />
their market share, iResearch showed<br />
on Jan. 13. (Xinhua)<br />
5
2011<br />
No.495<br />
44<br />
68<br />
84<br />
As the wind-vane to judge the current economic situation<br />
and to draw up the development of macro-economic policies<br />
next year, the central economic work conference is vital for<br />
how to give the direction for the realization of the Twelfth<br />
Five-Year Planning.<br />
International brands are exploring the Chinese market<br />
through acquisitions, as China is becoming a promising<br />
platform for the development of these brands.<br />
Having for long heard the movie Romance on Mt. Lu, which<br />
is claimed to be and famous for the PRC’s first movie with<br />
kiss scene.<br />
REGIONAL <strong>TRADE</strong> AND INVESTMENT<br />
08 ASIA-PACIFIC<br />
12 EUROPE<br />
18 NORTH AMERICA<br />
22 LATIN AMERICA<br />
28 AFRICA<br />
CONGRATULATORY MESSAGES<br />
33 Congratulatory Messages for the Spring Festival<br />
Special report<br />
44 Setting Tone for China Economy in 2011<br />
46 Shift to Prudent Monetary Policy<br />
48 Encourage to Boost Imports<br />
50 Equal Emphasis on the System of Affordable Housing<br />
and Commercial Housing<br />
52 A New Round of Reform on Income Distribution<br />
—Touch the Tender Spot<br />
voices and views<br />
54 Experts’ Views on China Economy of 2011<br />
INDUSTRY<br />
58 China Searching for Something<br />
60 M&A Deals in China Reach Record Levels in 2010<br />
62 China’s Outdoor Industry, Filled with Great Promise<br />
65 China’s Economic Data in 2010 Released<br />
SURVEY<br />
68 China: A Booming Market for Foreign Cosmetics Brands<br />
Technology<br />
74 Alibaba to Expand Supply Network in China<br />
Business TIPS<br />
76 Q&A for Foreign Business Practice in China<br />
Lifestyle<br />
80 The National Little Birch Tree Dance Troupe of Russia<br />
China Tour<br />
THIS IS China<br />
84 Touring Mt. Lu: Feeling Elegance and Poetic Beauty
EYE ON CHINA<br />
90 Spring Festival I Can’t Understand<br />
91 Unforgettable Spring Festival Fireworks<br />
Culture<br />
92 Why Chinese Lunar New Year?<br />
Index of Advertisements<br />
封 二 Ningbo Ruyi Joint Stock Co., Ltd.<br />
宁 波 如 意 股 份 有 限 公 司<br />
01 China National Electric Apparatus Research Institute<br />
中 国 电 器 科 学 院<br />
16 Dalian Kehui Bearing Instrument Co., Ltd.<br />
大 连 科 汇 轴 承<br />
17 Wenzhou Xiaoer Valve Co., Ltd.<br />
温 州 市 孝 尔 阀 门 有 限 公 司<br />
26 Tongxiang Baoyang Lighting Technology Co., Ltd.<br />
桐 乡 市 宝 阳 照 明<br />
27 Zhejiang Zhuyou Bamboo Machine Factory<br />
竹 友 机 械 厂<br />
42 Zhangjiagang Create Mechanical Mannfactuing<br />
Co., Ltd.<br />
张 家 港 市 开 创 机 械 制 造 有 限 公 司<br />
43 Tongxiang Zhongcheng Chemical Industry Co., Ltd.<br />
桐 乡 市 中 诚 化 工 有 限 公 司<br />
56 Baoding Laite Rectifier Co., Ltd.<br />
保 定 莱 特 整 流 器 股 份 有 限 公 司<br />
57 Yangchun Jozi Imp.& Exp. Trade Co., Ltd.<br />
阳 春 市 卓 志 进 出 口 贸 易 有 限 公 司<br />
66 Zhenjiang Hengwei Machine Manufacturing Co., Ltd.<br />
镇 江 恒 威 机 器 制 造 有 限 公 司<br />
67 Hebei MSJC Textile Co., Ltd.<br />
河 北 名 世 锦 簇 纺 织 有 限 公 司<br />
72 Jiangsu Jintan Xinland Diesel Engine Co., Ltd.<br />
金 坛 鑫 田 柴 油 机 有 限 公 司<br />
73 Jiangsu Tiancheng Biochemical Products Co., Ltd.<br />
江 苏 天 成 生 化 制 品 有 限 公 司<br />
78 Hebei Runlai Textile Co., Ltd.<br />
河 北 润 莱 纺 织 有 限 公 司<br />
79 Ningbo Teng Yuan Machinery Co., Ltd.<br />
宁 波 腾 远 机 械 有 限 公 司<br />
88 Nice Group Co., Ltd<br />
纳 爱 斯 集 团 有 限 公 司<br />
89 Heilongjiang Austrian Yu Graphite Group<br />
黑 龙 江 澳 宇 石 墨 集 团<br />
96 Zhanjiang Global Steel Wheel Manufacturing Co., Ltd.<br />
湛 江 环 球 钢 轮<br />
封 底 Anhui Jianghuai Automobile Co., Ltd.<br />
江 淮 汽 车<br />
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ASIA-pACIFIC<br />
<strong>TRADE</strong><br />
China, Israel ink contracts worth about<br />
$100 mln<br />
Enterprises from Israel and Harbin, capital of China’s<br />
northeastern Heilongjiang Province, signed on January 20,<br />
2011 to a package of economic and trade cooperation contracts<br />
valued at 648 million yuan (US$98 million).<br />
This is part of the ongoing 2nd China Harbin-Israel<br />
Cooperation Convention, an economic platform that was designed<br />
to deepen economic and trade cooperation for Chinese<br />
and Israeli enterprises.<br />
Also, 39 Israeli enterprises and 170 local enterprises in<br />
Harbin held talks on Tuesday for potential economic cooperation.<br />
(Global Times)<br />
China overtakes S Korea as world's<br />
largest shipbuilder<br />
The two countries’ total trade volume hit US$1.12 billion<br />
in 2010, up 41.5 percent from about US$791 million in 2009,<br />
according to the statistics from the department of statistics and<br />
planning of the Ministry of Commerce on January 18.<br />
Of the figure, Cambodia’s exports to China worth 56.8<br />
million, increased nearly four folds from US$15 million in<br />
2009 and Cambodia’s imports from China reached US$1.07<br />
billion, up 37.8 percent from US$776 million in 2009.<br />
The increase in trade volume is due to the economic recovery.<br />
Cambodia’s main imports from China are garment raw<br />
materials, machinery, foodstuffs, electronics, furniture, light<br />
products, medicines and cosmetics while Cambodia’s main<br />
exports to China are agricultural products, rubbers, fishery,<br />
timbers, and some garments and textiles. (Xinhua)<br />
China's imports from ASEAN up 44.8 pct<br />
in 2010<br />
China surpassed South Korea to become the world’s<br />
largest shipbuilder in 2010 in terms of shipbuilding capacity<br />
and new orders, according to recently released statistics from<br />
China’s Ministry of Industry and Information in January.<br />
The statistics show that from January to December<br />
2010, China’s shipyards finished building 65.6 million deadweight<br />
tons, an increase of 54.6 percent year on year. They<br />
received new orders exceeding 75 million deadweight tons,<br />
nearly triple the amount of a year earlier.<br />
The great development of the shipbuilding industry in<br />
recent years can be mostly attributed to the increasing capacity<br />
requirements due to economic growth, said an expert from the<br />
economic research center of China’s shipbuilding industry.<br />
China’s shipbuilding enterprises are mainly distributed<br />
among Jiangsu, Shanghai, Zhejing, Shandong and Guangdong,<br />
with Jiangsu ranking first. (People’s Daily Online)<br />
Cambodia’s trade with China up 41.5<br />
pct in 2010<br />
Bilateral trades between Cambodia and China increased<br />
41.5 percent in 2010 compared with that of 2009, official statistics<br />
showed.<br />
China’s imports from the Association of Southeast Asian<br />
Nations (ASEAN) rose 44.8 percent to US$154.56 billion in<br />
2010, said the General Administration of Customs on January<br />
20, 2011.<br />
Since the establishment of the China-ASEAN Free<br />
Trade Area at the beginning of 2010, bilateral trade had<br />
risen 37.5 percent year on year to US$292.78 billion, the<br />
customs said.<br />
ASEAN is China’s fourth largest trading partner, after<br />
the European Union, the United States and Japan.<br />
Mechanical and electrical products accounted for 53.7<br />
percent of all imports.<br />
In 2010,<br />
China’s exports to<br />
ASEAN were up<br />
30.1 percent from<br />
a year earlier to<br />
US$138.22 billion.<br />
China’s trade deficit<br />
with ASEAN saw<br />
a 30.7-fold increase<br />
to US$16.34 billion.<br />
(Xinhua)<br />
8
INVESTMENT<br />
Robust trade between Chinese<br />
mainland and Taiwan<br />
Trade volume between the Chinese mainland and Taiwan<br />
reached US$145.37 billion last year, up an annual 36.9<br />
percent, according to a report by China’s Ministry of Commerce<br />
on January 21, 2011.<br />
The mainland exported US$29.68 billion worth of<br />
products to Taiwan, up 44.8 percent year on year, and imported<br />
US$115.69 billion worth of products from the island,<br />
up 35 percent, figures showed.<br />
The December trade volume between the mainland and<br />
Taiwan increased 4.1 percent from November to US$13.61<br />
billion.<br />
The mainland is Taiwan’s largest export market.<br />
(Shanghai Daily)<br />
Japan’s TEL kicks off new plant in East<br />
China<br />
Japan-based Tokyo Electron Limited (TEL) began<br />
construction of its Chinese joint venture in eastern Jiangsu<br />
Province on January 18, 2011.<br />
The joint venture, Tokyo Electron Kunshan Limited,<br />
has a designed annual capacity of 500 sets of production<br />
equipments for flat panel display (FPD), solar and semiconductor<br />
products, with sales revenue up to 10 billion yuan<br />
(US$1.5 billion).<br />
According to the investment agreement jointly signed<br />
by TEL and Kunshan Economic & Technical Development<br />
Zone, where the joint venture is located, the project has a<br />
total investment of US$400 million with a registered capital<br />
of US$50 million.<br />
First-phase investment will reach US$150 million,<br />
with initial construction covering an area of 100,000 square<br />
meters, according to the agreement.<br />
Kunshan, a city adjacent to Shanghai, has been designated<br />
by the Chinese government as a key FPD industry<br />
promotion base.<br />
Set up in 1963, TEL is a leading supplier of semiconductor<br />
production equipment with a global network of<br />
about 90 locations in 15 countries in the United States, Europe<br />
and Asia. (Global Times)<br />
Record 284 companies invest in Hong<br />
Kong in 2010<br />
Invest Hong Kong of the Hong Kong government<br />
helped a record of 284 companies from Chinese mainland<br />
and overseas set up or expand<br />
in Hong Kong in 2010, with<br />
Chinese mainland continuing<br />
to be the largest single source<br />
of investment by taking 18<br />
percent of the total projects,<br />
the bureau said on Jan. 19.<br />
“Last year’s result was<br />
very encouraging. It demonstrated<br />
a strong vote of<br />
confidence in Hong Kong as<br />
a business location,” Director-<br />
General of Investment Promotion<br />
Simon Galpin said.<br />
Of the 284 completed<br />
projects, Chinese mainland accounted for 52 projects, followed<br />
by the United States with 51, the United Kingdom<br />
with 36, Japan with 19, and Australia with 16. The top three<br />
industry sectors were transport and industrial, tourism and<br />
hospitality, and innovation and technology, the statement<br />
showed.<br />
Last year also marked greater emphasis on green foreign<br />
direct investment, in particular on companies that provide<br />
renewable energy and environmental protection solutions.<br />
Invest Hong Kong will strengthen its promotion efforts in<br />
the mature markets of the United States and the United Kingdom<br />
in 2011, as well as the emerging markets of Chinese mainland<br />
and Russia, said Galpin. (Xinhua)<br />
Chinese hydro power enters Nepal<br />
hydro sector<br />
Nepal’s state–owned, Nepal Electricity Authority<br />
(NEA), has signed a power purchase agreement (PPA) for<br />
commissioning the 50 MW Upper Marshyangdi Hydro Electricity<br />
Project ‘A’ (UMHEP) with Sino Hydro Sagarmatha<br />
Power Company, a Nepal-China joint venture company. This<br />
is the first Chinese investment in hydro project in Nepal.<br />
UMHEP ‘A’ located at Bhulbhule VDC of Lamjung<br />
district will start construction work this winter. It is expected<br />
to be completed in five years at an estimated cost of US$138<br />
million.<br />
“UMHEP is an attractive project compared to other donor-funded<br />
hydro projects as it will generate 50 percent of the<br />
total capacity even during the dry season,” said Diwakar Poudel,<br />
an NEA official. The government issued generation license<br />
for the project after the parties concerned signed the PPA.<br />
The PPA has set the rate of 5.995 cents (approximately<br />
Rs 4.50) per unit taking 2010-11 as the base year. The PPA<br />
rate per unit from the commercial operation date (COD) will<br />
be 6.95 cents. The estimated COD for UMHEP is 2016-17.<br />
(China.org)<br />
9
ASIA-pACIFIC<br />
Promising Bilateral Trade Expansion<br />
Between Malaysia and China<br />
By Alice Yang<br />
H.E. Mr. Iskandar Sarudin<br />
Ambassador of Malaysia to China<br />
According to China Customs,<br />
the total trade value of import<br />
and export between<br />
China and Malaysia reached<br />
US$74.22 billion in the year of 2010,<br />
an impressive increase of 42.8% year<br />
on year. Among them, China’s export<br />
to Malaysia accounted for US$23.81<br />
billion, 21.3% growth upon the last<br />
year, and the import value amounted<br />
to US$50.41 billion, 55.9% increase<br />
compared with 2009. Based on the<br />
cheerful trade exchange between two<br />
countries, China’s Foreign Trade conducted<br />
a special interview with H.E.<br />
Mr. Iskandar Sarudin, Ambassador of<br />
Malaysia to China.<br />
Q<br />
: How did you introduce Malaysia<br />
to Chinese? During your<br />
time in China, what impressed you<br />
most?<br />
A<br />
: There are a lot of elements that<br />
I can put forward in promoting<br />
Malaysia to the world in general and<br />
to China in particular. Malaysia has a<br />
vast area of green forest, beautiful sandy<br />
beaches and islands for eco–tourism.<br />
Apart from that, we can also provide<br />
historical places for the cultural loving<br />
visitors, and shopping haven to satisfy shopaholics. I also believe that our unique cultural<br />
diversity with strong spirit of hospitality will impress the visitors from China<br />
and make their stay in Malaysia an experience that can be cherished forever. In addition,<br />
we offer anything and everything that you wish to see in Asia, as the slogan<br />
of our tourism goes, ‘Malaysia is Truly Asia.’<br />
As for my impression on China, China is an ancient country with thousands<br />
of history. The pace of moderation and development is breathtaking. On top of that,<br />
I admire the hard work and determination of the people of China, by giving their<br />
support to the Government, especially in ensuring the successful organizing of<br />
world events. The year 2010 has seen China has managed to organize successfully<br />
two events in Shanghai and Guangzhou, which is not an easy task to achieve without<br />
the commitment of everybody involved.<br />
Q<br />
: China-ASEAN FTA opened at the beginning of 2010. What influence<br />
has it generated in the cooperation between China and Malaysia?<br />
And what is to be expected in the future?<br />
A<br />
: The full implementation of the FTA between ASEAN and China is a big<br />
leap towards closer regional integration between ASEAN and China. Malaysia<br />
and China have always shared very close bilateral relations particularly in the areas<br />
of trade, investment, tourism, education, cultural and economic cooperation. The<br />
priority would be to further enhance this relation to a higher level of collaboration.<br />
Q<br />
: What are your comments on the mutual trade relationship between<br />
China and Malaysia? What is your hope for the future development?<br />
A<br />
: Malaysia and China continues to foster strong bilateral trade relation and in<br />
2009, total trade between Malaysia and China was valued at US$ 51.838 billion.<br />
It accounted for 2.3% of China’s total trade with the world.<br />
In 2009, Malaysia has emerged as China’s:<br />
• Largest trading partner;<br />
• Second largest export destination;<br />
• Largest source of import.<br />
In terms of ranking, Malaysia was China’s:<br />
• 8th largest trading partner;<br />
• 14th largest export destination;<br />
• 7th largest source of import.<br />
China by the sheer size of its market has vast potential that can benefit Malaysia<br />
and I strongly believe the future for bilateral trade expansion is very promising.<br />
I also encourage businessmen from China to source their products from Malaysia,<br />
which has a thriving manufacturing sector.<br />
Q<br />
: How is the investment situation from China to Malaysia? Which<br />
fields are most welcome for foreign investment there? For those Chinese<br />
enterprises who wish to invest in Malaysia, what recommendation<br />
will you give?<br />
A<br />
: In the first three quarters of 2010, investment inflows from China to Malaysia<br />
reached US$283 million (RM 914 million). In the area manufacturing, investments<br />
worth US$156.3 million were approved in the first 9 months of 2010.<br />
Malaysia continues to offer investment opportunities in a wide range of areas.<br />
10
Potential areas of investment which<br />
offers opportunities for Chinese investment<br />
include manufacturing of basic<br />
metal products; automotive parts and<br />
components; machinery and equipment;<br />
engineering support; medical devices;<br />
healthcare products; pharmaceutical<br />
products; chemical products; halal food<br />
products; solar related component/equipment;<br />
and alternative energy source.<br />
In the area of services, Chinese<br />
firms can consider favourably to set-up<br />
their regional offices in Malaysia. Malaysia<br />
also offers investment opportunities<br />
in the areas of construction, healthcare,<br />
educational services and tourism.<br />
With effect from June 23, 2010,<br />
the China Banking Regulating Commission<br />
(CBRC) had recognised Malaysia<br />
as its 11th approved Qualified<br />
Domestic Institutional Investor (QDII)<br />
investment destination. Fund managers,<br />
securities firms and financial institutions<br />
from China can now avail the Scheme<br />
to explore investment opportunities in<br />
the Malaysian capital market.<br />
Q<br />
: Malaysia is famous for its halal<br />
manufacturing industry. Are<br />
there any cooperation between<br />
China and Malaysia in this field?<br />
What is your view on its future cooperation<br />
and development?<br />
A<br />
: Increasingly, Malaysian businesses<br />
have expressed keen interest to explore<br />
the halal market segment in China.<br />
Currently, Malaysian entrepreneurs<br />
have set-up halal product business operations<br />
either wholly or jointly in Xi’an<br />
and Yinchuan. Malaysia is also providing<br />
training to Chinese entrepreneurs in<br />
the area of halal production awareness.<br />
Apart from collaboration in the<br />
manufacturing of processed halal food<br />
products, there is vast potential to explore<br />
halal meat products from China.<br />
Producers of processed food, and fresh<br />
or frozen meat from China can explore<br />
the potential of obtaining Malaysia’s halal<br />
mark certification for wider market<br />
access and acceptance worldwide.<br />
Q<br />
: As a member country in<br />
ASEAN, what strategic role<br />
does Malaysia play in promoting<br />
closer relationship between China<br />
and ASEAN? Are there any future<br />
plans or on-going programs?<br />
A<br />
: As the first country amongst the<br />
original ASEAN membership to<br />
have established diplomatic relations<br />
with China, Malaysia is especially gratified<br />
at the constructive approach taken<br />
by China in her interaction with ASE-<br />
AN. The relationship is one of a partnership<br />
of equals and has brought mutual<br />
benefits, and we certainly look forward<br />
to the convening of an ASEAN-China<br />
commemorative summit in 2011.<br />
Malaysia has and will continue<br />
to play an active role in strengthening<br />
norms, rules and institutions in<br />
the region. We believe that enhancing<br />
relations require the enhancement of<br />
connectivity between ASEAN and<br />
China. Within ASEAN, Malaysia<br />
will continue to strengthen economic<br />
and people-to-people ties between<br />
ASEAN and China. For example<br />
in 2009, China recorded 4.1 million<br />
tourist arrivals from ASEAN. In turn,<br />
ASEAN received about 4 million Chinese<br />
tourists, and Malaysia continued<br />
to be a regional magnet for Chinese<br />
tourists. We hope to build on this.<br />
On economic relations, it is important<br />
for us to maximise the ASE-<br />
AN-China FTA Framework (ACF-<br />
TA). It would, among others, support<br />
production processes in ASEAN. In<br />
this connection, it is also important<br />
to work together to address concerns<br />
of ASEAN SMEs, particularly as<br />
they relate to China’s manufacturing<br />
prowess. China’s assistance towards<br />
Malaysia Pavilion at Shanghai Expo<br />
strengthening of SMEs in ASEAN<br />
will help to alleviate uneasiness among<br />
our business community over the<br />
ACFTA.<br />
In this connection, I believe that<br />
Malaysia can play a vital role in utilizing<br />
the US$10 billion ASEAN-China<br />
Investment Cooperation Fund to accelerate<br />
the necessary infrastructure<br />
related projects and linkages between<br />
ASEAN and China. Malaysia looks<br />
forward to a mechanism that would<br />
enable Malaysian companies to utilise<br />
the Fund for projects that would enhance<br />
connectivity between ASEAN<br />
and China.<br />
I wish to take this opportunity to<br />
express Malaysia’s appreciation on the<br />
assurance given by Premier Wen Jiabao<br />
at the 13th ASEAN-China Summit<br />
held in Ha Noi, Viet Nam on 29 October<br />
2010, that China would ‘forever<br />
be a good neighbour’. I have noted that<br />
during the past few months, some analysts<br />
have spoken of the threats posed<br />
by China’s growth and assertiveness in<br />
the South East Asian region. We definitely<br />
do not share the same view. Malaysia’s<br />
position is that in an important<br />
and strategic region such as South East<br />
Asia, it is important for all countries,<br />
large and small, to abide by rules and<br />
institutions which we have commonly<br />
established. The strategic role that we<br />
play in promoting closer relationship<br />
between China and ASEAN f lows<br />
from this position.<br />
11
Europe<br />
12<br />
<strong>TRADE</strong><br />
Volkswagen 2010 sales in China up 37%<br />
Europe’s largest carmaker, Volkswagen AG, said January<br />
7 that it had sold 37 percent more vehicles on the Chinese<br />
mainland and Hong Kong in 2010, compared to sales in<br />
2009.<br />
With 1.92 million vehicles<br />
delivered to its customers last year,<br />
Volkswagen had performed beyond<br />
expectation in the past year,<br />
said the European automaker in a<br />
statement.<br />
The company also planned<br />
to invest 10.6 billion euros (about<br />
13.8 billion U.S. dollars) in China<br />
through 2015 to expand its production<br />
capacity and develop new<br />
products, said Karl-Thomas Neumann,<br />
president and chief executive<br />
of Volkswagen Group China,<br />
which operates car ventures with<br />
Chinese state auto groups SAIC Motor and FAW Group.<br />
Neumann also said he expected significant sales in the<br />
country in the coming years and noted that the first Volkswagen<br />
electric cars would hit the roads in China in 2011. (Xinhua)<br />
German pork, egg imports halted<br />
Germany’s dioxin contamination problems deepened<br />
in mid January as China banned pork and egg imports and it<br />
emerged that tainted meat may be in circulation.<br />
A day after authorities ordered the slaughter of 140 pigs<br />
at a German farm after discovering dangerous dioxin levels<br />
in pork for the first time since a scare began early January,<br />
China said its ban was effective immediately.<br />
The country has banned imports of “German-produced<br />
edible pork and egg products,” the country’s product safety<br />
watchdog, General Administration of Quality Supervision,<br />
Inspection and Quarantine, announced in a statement on its<br />
website dated,<br />
saying the move<br />
was aimed at<br />
safeguarding<br />
the health of<br />
consumers.<br />
Authorities<br />
also said<br />
t h e y w o u l d<br />
inspect goods<br />
shipped from<br />
Germany prior<br />
to January 11 and would release them only if found to be safe.<br />
“This is a scandal that is growing bigger and worse every<br />
day,” Johannes Remmel, agriculture minister in the western<br />
state of North Rhine-Westphalia in Germany, told the<br />
Frankfurter Allgemeine Zeitung (FAZ) daily.<br />
Germany exported 7,000 tons of pork to China in 2009,<br />
the German government said, worth some six million euros<br />
($7.78 million).<br />
Previously only South Korea had banned German pork<br />
imports, while Slovakia had halted sales of German eggs and<br />
poultry meat, despite Berlin’s repeated assurances there was<br />
no immediate risk to human health. (Global Times)<br />
China-Russia natural gas pricing agreement close<br />
China may reach an initial agreement with Russia on<br />
natural gas pricing - a subject of great contention for years -<br />
by the middle of 2011, industry experts close to the matter<br />
said.<br />
“We’ve seen that the price gap has narrowed during the<br />
past several months. And we’re cautiously optimistic that the<br />
initial price disagreement will be solved in the first half of<br />
2011,” said Wan Chengcai, director for the Russian Foreign<br />
Relations Development Research Center under the State<br />
Council.<br />
The two countries signed a natural gas contact as early<br />
as 2006, when they agreed to construct two pipelines to<br />
transport a total of 70 billion cubic meters (cu m) of the fuel<br />
annually from Russia to China.<br />
The first pipeline is expected to become operational<br />
this year. But disagreement on the pricing of natural gas has<br />
stalled negotiations for several years.<br />
China has strengthened its cooperation with Russia, the<br />
world's largest energy producer since 2009, in terms of exploration<br />
and supplies of crude oil and natural gas.<br />
The first pipeline linking Siberia in Russia and China’s<br />
Daqing oil field, in the northeast of the country, started operating<br />
on Jan 1. The 16 billion yuan ($2.42 billion) pipeline is<br />
expected to carry 15 million tons of crude oil annually from<br />
Russia to China for 20 years.<br />
“The operation of the oil pipeline is just the beginning<br />
of the countries’ cooperation in the energy sector,<br />
and a deeper and broader partnership can be developed<br />
afterwards,” said Huang Xiaoyong, vice-president of the<br />
Graduate School of the Chinese Academy of Social Sciences.<br />
Russia’s biggest natural gas export destination is Europe.<br />
However a trend through 2008 and 2009 saw demand for the<br />
fuel declining.<br />
In the negotiations with China, Russia hoped to secure<br />
a price similar to that paid by its European customers, but<br />
China insisted on paying a lower price as it did with several<br />
Asian countries such as Turkmenistan.<br />
“China is exploring closer cooperation with Russia in<br />
the field of natural gas. However, as the country’s consumption<br />
power per capita lags far behind its counterparts in the<br />
West, the natural gas price is much lower and cannot compete<br />
with the West,” Huang said.<br />
China is expected to more than double the proportion of<br />
natural gas it consumes on an annual primary basis from the<br />
current level of 4 percent by 2020.<br />
The country may consume 300 billion cu m by then,<br />
leaving a huge market for other overseas providers of the fuel<br />
to tap into.<br />
“We hope the two nations can reach an agreement in<br />
the summer, and see more cooperation in the sectors of hydropower,<br />
nuclear power and coal,” Wan said. (China Daily)
INVESTMENT<br />
BlueStar buys Norwegian Elkem for nearly US$2b<br />
Norwegian conglomerate Orkla ASA announced<br />
January 11 it will sell almost all its Elkem unit to chemical<br />
group China National BlueStar Corp for nearly US$2 billion.<br />
The deal, which also covers a major power contract that<br />
Orkla bought last year, includes Elkem Silicon Materials, Elkem<br />
Foundry Products, Elkem Carbon and Elkem Solar. However,<br />
Orkla said it will continue to own Elkem Energi AS.<br />
A silicon and carbon parts maker, Elkem specializes<br />
in components for solar panels. It also is involved in energy<br />
production in Norway and has 2,500 employees. It reported<br />
revenues of US$1.2 billion in 2009.<br />
Orkla CEO Bjoern M. Wiggen said BlueStar will<br />
provide Elkem an owner “that has the best attributes to take<br />
advantage of the potential of Elkem’s technological strength<br />
and competence,” with solid finances and already well positioned<br />
in the metals and renewables sector.<br />
BlueStar Chairman Ren Jianxin said the deal will benefit<br />
both groups, with Elkem getting access to Asia and the<br />
Chinese market and BlueStar profiting from the Norwegian<br />
company’s management experience and technology.<br />
“We strongly believe in the huge potential for Elkem’s<br />
new solar-grade technology with its leading energy efficiency<br />
and environmental safety characteristics,” he said.<br />
Orkla said the sale will not greatly change Elkem’s main<br />
structure or the way it operates its existing plants.<br />
The deal is subject to regulatory approvals and is expected<br />
to be completed in the first half of this year. (Shanghai Daily)<br />
PetroChina eyes 2 European refineries<br />
PetroChina said January 10 it has agreed to invest in<br />
two refineries in Europe owned by private British firm INEOS<br />
Group Holdings Plc as a major step of its global strategy.<br />
PetroChina said it plans to set up a joint venture<br />
through its wholly-owned subsidiary PetroChina International<br />
Co to run INEOS’s Grangemouth refinery in Scotland<br />
and Lavera refinery in southern France, according to a filing<br />
to the Shanghai Stock Exchange.<br />
PetroChina International Co signed the agreement with<br />
INEOS European Holdings Ltd and INEOS Investments<br />
International Ltd, both wholly-owned unit of INEOS.<br />
PetroChina didn’t disclose the value of the deal or the<br />
stake it will take in the joint venture.<br />
Industry sources said last year the offer for Grangemouth<br />
was about US$6 billion-US$7 billion, Reuters reported<br />
yesterday.<br />
It will be PetroChina’s third overseas refinery deal after<br />
investing US$2 billion in Singapore and Japan.<br />
The proposed joint venture is set to be set up in the first<br />
half this year and will also engage in oil trading.<br />
“PetroChina will inject capital in INEOS and setting<br />
up the joint venture will be very meaningful for the company<br />
to establish a broader business platform in Europe,”<br />
it said in the statement.<br />
Both the two refineries have a processing capacity of<br />
about 200,000 barrels a day. (Shanghai Daily)<br />
Italian retail giant to open five-luxury outlet centers<br />
Italian fashion retail giant RDM announced January<br />
19 that it will invest $910 million to set up five Italianstyle<br />
luxury outlet centers in China under the brand name of<br />
“Florentia Village.”<br />
Jacopo Mazzei, chairman and CEO of RDM Group,<br />
made the remarks when attending a ceremony to mark the<br />
completion of RDM’s first “Florentia Village” in Tianjin.<br />
The fashion outlet slated to open May 19 represents the<br />
launch of RDM’s investment and development strategy in<br />
China, he said.<br />
The outlet covering 60,000 square meters will offer an<br />
average 50-70 percent off domestic retail prices for luxury<br />
brands such as Giorgio Armani and Burberry.<br />
The shopping village, which resembles a 16th century<br />
Italian town, will feature nearly 200 world-renowned brand<br />
name stores with authentic merchandise.<br />
Ivano Poma, chairman and CEO of Florentia Village and<br />
managing director of RDM Asia, said the company chose to<br />
launch the first China outlet in Tianjin because of its potential<br />
to attract a new generation of stylish consumers with growing<br />
disposable incomes in the luxury sector. (Xinhua)<br />
German auto logistics company to enter China<br />
MOSOLF Group, a leading provider of logistical services<br />
in Germany, signed a memorandum of understanding<br />
(MOU) with one subsidiary of Beijing Automobile Works Co.,<br />
Ltd. (BAW) January 18, according to the China Business News.<br />
The two sides plan to build a joint venture (JV) in China<br />
for further develop<br />
the automobile logistics<br />
market in the<br />
country.<br />
China’s fast<br />
growing auto industry<br />
provides plenty of<br />
opportunities for auto<br />
logistics companies,<br />
said Jorg Mosolf,<br />
CEO of MOSOLF.<br />
Business in the<br />
JV will include finished<br />
vehicle logistics, auto<br />
production logistics and<br />
after-sales services, according<br />
to the report.<br />
Logistics companies<br />
are not merely<br />
a channel of distribution. Auto companies need them to provide<br />
differentiated logistical services that can help them deal<br />
with future changes in the auto market, said an insider.<br />
Founded in 1955, MOSOLF has developed from a<br />
forwarding agency into a provider of technical and logistical<br />
services for the international automobile industry. It is also a<br />
logistics provider for manufacturers of agricultural and construction<br />
machines together with car rental, leasing companies<br />
and fleet customers. (Xinhua)<br />
13
Europe<br />
A New Phase for Sino-EU<br />
Economic Relationship<br />
By Cai Hongbo, Han Lili<br />
In 2010, the European economy<br />
began to slowly revive, but the increasingly<br />
sovereign debt crisis made the<br />
process of recovery extremely fragile and<br />
full of uncertainty. Despite the challenges<br />
and adverse factors, the economic<br />
and trade relations between China and<br />
the EU still maintained a good momentum,<br />
bilateral trade volume was substantially<br />
increased and even exceeded precrisis<br />
levels. With both China and the<br />
EU’ entering into the new phase for economic<br />
adjustment, the future is expected<br />
to continue to deepen bilateral economic<br />
and trade cooperation.<br />
Recovering bilateral trade<br />
According to the latest data from<br />
China Customs, in 2010, bilateral trade<br />
volume reached 479.7 billion dollars, an<br />
increase of 31.8% year on year. Among<br />
them, China exported 311.2 billion dollars<br />
to the EU, an increase of 31.8%; China<br />
imported 168.5 billion dollars from<br />
the EU, an increase of 31.9%. China’s<br />
trade surplus was 142.7 billion dollars, up<br />
35.7%, a significant increase. China continues<br />
to maintain the EU’s largest source<br />
of imports and second largest export market.<br />
(See the Table and the Chart.)<br />
Bilateral trade between China and the EU<br />
from Jan. to Dec. 2010<br />
Unit: US$ billion<br />
Import and Export Export Import<br />
Month Absolute Increase±%<br />
Value (y-o-y)<br />
Absolute Increase±%<br />
Value (y-o-y) Absolute Increase±%<br />
Value (y-o-y)<br />
Jan 2010 351.82 -6.99 233.47 -4.6 118.35 -11.4<br />
Feb 2010 302.82 -13.93 205.81 -11.8 97.00 -18.0<br />
Mar 2010 359.44 18.70 214.50 4.2 144.94 49.4<br />
Apr 2010 363.12 1.02 222.97 3.9 140.15 -3.3<br />
May 2010 397.21 9.39 258.61 16.0 138.60 -1.1<br />
Jun 2010 419.42 5.59 272.05 5.2 147.38 6.3<br />
Jul 2010 437.89 4.40 286.73 5.4 151.15 2.6<br />
Aug 2010 426.75 -2.54 279.29 -2.6 147.46 -2.4<br />
Sep 2010 437.01 2.40 288.02 3.1 148.99 1.0<br />
Oct 2010 389.65 -10.84 267.25 -7.2 122.39 -17.9<br />
Nov 2010 454.68 16.69 295.34 10.5 159.34 30.2<br />
Dec 2010 458.46 0.83 289.38 -2.0 169.08 6.1<br />
Source: General Administration of<br />
Customs of the P.R.C.<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Bilateral trade between China and the EU from Jan. to Dec. 2010<br />
Unit: US$ billion<br />
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec<br />
In the first two months of 2010,<br />
the trade volume declined and became<br />
a negative growth year-on-year due to<br />
the financial crisis. In the second quarter,<br />
with the slow recovery of the global<br />
economy, bilateral trade was largely<br />
and quickly increased, a fast, high rate<br />
of growth quarter-on-quarter. In the<br />
third quarter, the growth slowed down<br />
and decreased to a negative growth in<br />
August. In the fourth quarter, trade<br />
volume fluctuated greatly and created<br />
annual record high of negative growth<br />
in October. While in November the<br />
trade rebounded sharply, it came down<br />
slightly in December.<br />
Increasing investment flow<br />
In addition to the rapid recovery<br />
in foreign trade, direct investment between<br />
China and the EU has been<br />
expanding, and investment further<br />
widened. In the first ten months of<br />
2010, the EU invested in China for<br />
5.1 billion dollars, European companies’<br />
investment in China extended from<br />
traditional manufacturing to service<br />
industries, business areas such as mergers<br />
and acquisitions and venture capital.<br />
At the same time, Chinese companies<br />
have also begun to actively invest to Europe.<br />
In the first three quarters of 2010,<br />
Chinese direct investment in the EU in-<br />
Data source: General Administration of Customs of the P.R.C.<br />
creased by more than 5 times. Currently,<br />
many Chinese enterprises go to Europe<br />
to invest in large-scale projects, for example,<br />
China Ocean Shipping (Group)<br />
Company invested in Piraeus Greece,<br />
China Geely Holding Group Co.,<br />
Ltd. acquired Volvo Car Corporation.<br />
Challenges ahead<br />
Ex%Im<br />
Export<br />
Import<br />
However, with the further development<br />
of the bilateral trade and<br />
investment, China-EU economic and<br />
trade relations will inevitably face many<br />
challenges.<br />
First, the Trade Friction. In 2010,<br />
the EU had launched anti-dumping investigation<br />
or imposed high anti-dumping<br />
duties on a variety of Chinese goods.<br />
According to Chinese Ministry of Commerce<br />
statistics, in the first ten months of<br />
2010, the EU launched 10 cases of trade<br />
remedy investigations to China, which<br />
is more than the whole year’s cases of<br />
2009. In addition, the EU also continued<br />
to break its previous range of trade remedy<br />
investigations and the bottom line,<br />
launched the first anti-subsidy investigation<br />
on Chinese goods (coated), involving<br />
goods from light industry, textiles to<br />
electrical, electronics and other high-tech.<br />
In 2010, the EU has become the largest<br />
member in WTO that set trade remedy<br />
investigations to China.<br />
14
Second, Exchange Rate Fluctuation.<br />
In 2010, the wide Euro exchange rate<br />
fluctuation led to a greater exchange loss to<br />
trade enterprises, many enterprises in trade<br />
with Europe therefore did not dare to take<br />
large, long list. Currently, when the Euro<br />
is still unstable because of the impact of the<br />
Euro zone sovereign debt crisis, how to effectively<br />
trade in the EU to avoid exchange<br />
rate risk is the problem before us.<br />
Third, the Technical Barrier. The<br />
EU has continued to emphasize the<br />
environmental and safety standards of<br />
goods, Chinese toys, clothing and motor<br />
vehicles became the main victims.<br />
According to the China Trade Remedy<br />
Information Network statistics, from<br />
January to August 2010, the EU recalled<br />
338 textile and garment goods,<br />
an increase of 117%. Among them, the<br />
recall of Chinese goods was 175, an increase<br />
of 127%.<br />
Fourth, Market Access. In<br />
2010, the EU strengthened the border<br />
enforcement on intellectual property<br />
rights, restricted the companies of nonopening<br />
market countries to participate<br />
in its government procurement. On the<br />
issue of market access, EU put further<br />
pressure on china, which created new<br />
troubles to China-EU trade.<br />
But overall, the positive factors in<br />
China-EU trade are far more than the<br />
disadvantages. In particular, the frequent<br />
high-level visits between China-EU<br />
in 2010 set a more solid foundation for<br />
bilateral cooperation and made the mutually<br />
most important trading partners<br />
relationship strengthened. EU is fully<br />
aware of the importance of China’s market<br />
in pulling its economy out of crisis<br />
and achieving sustainable growth. China<br />
supports the EU’s measures to deal with<br />
the debt crisis and Euro’s stability and<br />
continues to send trade and investment<br />
delegations to visit Europe, to expand<br />
and deepen cooperation. We have good<br />
reason to believe that, with the gradual<br />
improvement of the EU’s economy,<br />
China-EU trade and investment will<br />
also enter into a brighter tomorrow.<br />
(Authors: from School of Economics<br />
and Business Administration,<br />
Beijing Normal University Beijing,<br />
P.R.C.)<br />
Europe<br />
Link 1: FDI in China from EU<br />
Link 2: Chinese Investment in EU<br />
According to Ministry of Commerce,<br />
P.R.C., in January-December 2010, the<br />
top ten countries/regions (calculated by<br />
the actual utilized value of foreign capital)<br />
investing in China were: Hong Kong<br />
(US$67.47 billion), Taiwan (US$6.70 billion),<br />
Singapore (US$5.66 billion), Japan<br />
(US$4.24 billion), USA (US$4.05 billion),<br />
ROK (US$2.69 billion), UK (US$1.64<br />
billion), France (US$1.24 billion), Netherlands<br />
(US$952 million) and Germany<br />
(US$933 million), all of which accounted<br />
for 90.1% of China’s total actual use of<br />
foreign capital.<br />
The actual input of foreign capital<br />
from EU to China accounted for US$6.59<br />
billion, up by 10.71% year-on-year.<br />
According to Ministry of Commerce, P.R.C., Chinese investors<br />
in the year of 2010 made direct investment in EU for US$2.13 billion,<br />
297% increase year on year in a whole excluding investment in Luxembourg<br />
(a tax haven).<br />
By the end<br />
of 2010, the accomplished<br />
turnover<br />
of China’s<br />
foreign contracting<br />
projects in<br />
EU amounted to<br />
US$4.99 billion,<br />
accounting for<br />
5.4% of the total,<br />
5 7. 1% g r o w t h<br />
compared w ith<br />
the previous year.<br />
15
NORTH AMERICA<br />
<strong>TRADE</strong><br />
Data Watch on Sino-US Trade<br />
Throughout 2010<br />
By Yan Manman<br />
Total Export Export to the US Total Import Import from the US<br />
Value(US$ ±% y-o-y Value(US$ ±% y-o-y Value(US$ ±% y-o-y Value(US$ ±% y-o-y<br />
100<br />
100<br />
100<br />
100<br />
million)<br />
million)<br />
million)<br />
million)<br />
Jan. 1,094.8 21.0 187.3 8.4 953.1 85.5 77.6 56.6<br />
Feb. 945.2 45.7 164.0 39.2 869.1 44.7 64.4 18.8<br />
Mar. 1,121.1 24.3 193.3 17.6 1,193.5 66.0 94.6 52.5<br />
Apr. 1,199.2 30.5 204.7 19.4 1,182.4 49.7 86.1 31.7<br />
May 1,317.6 48.5 241.1 44.3 1,122.3 48.3 74.0 28.7<br />
Jun. 1,374.0 43.9 255.1 43.9 1,173.7 34.1 78.1 27.1<br />
Jul. 1,455.2 38.1 273.5 35.0 1,167.9 22.7 79.2 25.2<br />
Aug. 1,393.0 34.4 267.3 42.1 1,192.7 35.2 86.4 37.0<br />
Sep. 1,449.9 25.1 269.8 27.5 1,281.1 24.1 89.9 29.8<br />
Oct. 1,359.8 22.9 251.1 18.0 1,088.3 25.3 70.8 14.9<br />
Nov. 1,533.3 34.9 264.6 32.2 1,304.4 37.7 97.3 35.1<br />
Dec. 1,541.5 17.9 262.1 18.0 1,410.7 25.6 122.2 28.2<br />
(Source: China Customs)<br />
Chia's Export to the U.S. throughtout 2010<br />
Chia's Import from the U.S. throughtout 2010<br />
Value (US$100 million)<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
Value (US$100 million)<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
Jan.<br />
Feb.<br />
Mar.<br />
Apr.<br />
May<br />
Jun.<br />
Jul.<br />
Aug.<br />
Sep.<br />
Oct.<br />
Nov.<br />
Dec.<br />
Month<br />
Month<br />
(Source: China Customs)<br />
Chia's Total Export to All the Countries Each<br />
Month throughtout 2010<br />
Value (US$100 million)<br />
2,000.00<br />
1,500.00<br />
1,000.00<br />
500.00<br />
0.00<br />
Jan.<br />
Feb.<br />
Mar.<br />
Apr.<br />
May<br />
Jun.<br />
Jul.<br />
Aug.<br />
Sep.<br />
Oct.<br />
Nov.<br />
Dec.<br />
Jan.<br />
Feb.<br />
Mar.<br />
Apr.<br />
May<br />
Jun.<br />
Jul.<br />
Aug.<br />
Sep.<br />
Oct.<br />
Nov.<br />
Dec.<br />
(Source: China Customs)<br />
Chia's Total Import from All the Countries<br />
Each Month throughtout 2010<br />
Value (US$100 million)<br />
1500<br />
1000<br />
500<br />
0<br />
Jan.<br />
Feb.<br />
Mar.<br />
Apr.<br />
May<br />
Jun.<br />
Jul.<br />
Aug.<br />
Sep.<br />
Oct.<br />
Nov.<br />
Dec.<br />
Month<br />
Month<br />
(Source: China Customs)<br />
(Source: China Customs)<br />
18
INVESTMENT<br />
China invests in Canada oil project<br />
China is helping to finance the development of a proposed<br />
$5.51 billion dollar oil pipeline to Canada’s West Coast<br />
that would open the Asian market to Canadian crude, which is<br />
now chiefly consumed by the U.S.<br />
State-owned China Petroleum & Chemical Corp., or<br />
Sinopec, is among a consortium of Canadian oil producers and<br />
Asian refiners investing $100 million in Enbridge Inc.’s proposed<br />
Northern Gateway pipeline, Enbridge Chief Executive Pat Daniel<br />
said during a Web cast investor conference on January 20.<br />
The Northern Gateway pipeline would pipe an average<br />
of 525,000 barrels of crude oil a day from Canada’s oil-sands<br />
region to a port in British Columbia, from which it would be<br />
shipped to Asian markets. Regulators aren’t expected to rule<br />
on whether the project can go forward until next year. If approved,<br />
construction is scheduled to be completed in 2016.<br />
Canada’s oil sands hold an estimated 170 billion barrels of<br />
oil, making it the second-largest oil reserve in the world, after<br />
Saudi Arabia’s. The U.S. is the only export market for Canadian<br />
crude oil, and Canada is the U.S.’s largest single supplier.<br />
“We think it is hugely in Canada’s national best interest<br />
to have a second outlet for our crude oil,” Mr. Daniel said, ”...so<br />
that we can become a price-maker with regard to crude-oil<br />
pricing, instead of a price-taker.”<br />
Sinopec and other investors have put up $100 million to<br />
help Northern Gateway get through the regulatory process,<br />
which includes producing environmental-impact studies and<br />
consulting with native and environmental groups — some of<br />
which oppose the project.<br />
Mr. Daniel said Enbridge itself has already spent $100<br />
million on the regulatory process. The Calgary-based pipeline<br />
company applied for approval to build Northern Gateway in<br />
May, and expects Canada’s federal energy regulator to approve<br />
it by the middle of 2012.<br />
The proposal has met fierce criticism from native groups<br />
and environmental nongovernmental organizations. Some<br />
warn of the risk of spills from the pipeline or from oil tankers,<br />
while others are chiefly opposed to further growth of the oilsands<br />
industry, which has come under fire for its substantial<br />
greenhouse-gas emissions and fears of water contamination.<br />
Mr. Daniel said he is confident Enbridge could win over<br />
opposition. The company in November proposed giving a 10%<br />
equity stake to native groups in an attempt to win them over,<br />
Daniel said. (Wall Street Journal)<br />
ICBC acquires 80% of Bank of East Asia USA<br />
The Industrial and Commercial Bank of China (ICBC)<br />
and Hong Kong-based Bank of East Asia had reached and signed<br />
an agreement in which ICBC would pay 140.23 million U.S.<br />
dollars to buy 80 percent interest of Bank of East Asia USA, the<br />
Hong Kong bank said late on January 23 in a statement.<br />
Bank of East Asia will retain the remaining 20 percent<br />
stake in Bank of East Asia USA, and the two banks signed the<br />
agreement in Chicago on Jan. 21, according to the statement.<br />
Upon completion of the transaction, Bank of East Asia<br />
will have the put option to sell its remaining shares to ICBC in<br />
accordance with the terms and timeline specified in the agreement,<br />
it said.<br />
Both ICBC and Bank of East Asia are seeking the necessary<br />
regulatory approval in the U.S. and China. Once the deal<br />
was completed, ICBC would be responsible for the operation<br />
and management of Bank of East Asia USA.<br />
The transaction will create a win-win situation for both<br />
parties, said ICBC Chairman Jiang Jianqing.The acquisition<br />
would enable ICBC to establish a solid presence in the U.S.<br />
With a commercial bank license in the U.S., ICBC can further<br />
expand its retail banking business and operating network<br />
across the nation, and ultimately enhance its market position,<br />
he said.<br />
Bank of East Asia Chairman and Chief Executive David<br />
Li said the transaction will further optimize the allocation of<br />
the bank’s resources and strengthen financial services in the<br />
major markets where Bank of East Asia operates.<br />
Successful completion of the transaction is subject to<br />
approval from China Banking Regulatory Commission, the<br />
Hong Kong Monetary Authority, and U.S. Federal Reserve<br />
Board, according to the statement. (Xinhua)<br />
CSR, GE to form joint venture<br />
Chinese railway equipment maker CSR Corporation<br />
Ltd. and US General Electric Co. will form a joint venture<br />
in the U.S. with a high-speed railway technology transfer, according<br />
to a memorandum signed between China’s Ministry of<br />
Railway and GE.<br />
As early as December, CSR announced it would set up a<br />
$100 million 50-50 joint venture with GE to bid for US highspeed<br />
railway and urban rail projects.<br />
The venture hopes to win two high-speed railway projects<br />
in Florida and California, and with its strong position in highspeed<br />
technology, CSR will expand the venture’s reach to other<br />
U.S. projects and markets outside the U.S., analysts said.<br />
But it is unknown what technologies will be transferred<br />
and how much GE will pay for them. If the deal is done, it will<br />
be the first time China exports its high-speed rail technologies.<br />
(China.org.cn)<br />
China, US reach $45 billion export deals<br />
China and the United States on January 19 agreed<br />
on $45 billion in US export deals and to give US companies<br />
greater access to China’s $88 billion-plus government contracts<br />
market at the start of President Hu Jintao’s four-day state visit.<br />
White House officials said the agreements included a $19<br />
billion contract to buy 200 Boeing aircraft for delivery between<br />
2011 and 2013.<br />
“From machinery to software, from aviation to agriculture,<br />
these deals will support some 235,000 American jobs —<br />
and that includes many manufacturing jobs,” US President<br />
Barrack Obama said at a joint press conference with Hu.<br />
Another deal involving GE builds on an existing partnership<br />
with the Chinese Ministry of Railways to bring Chinese<br />
high-speed rail technology to the United States, and for GE to<br />
manufacture locomotives for China.<br />
The White House also announced deals in various stages<br />
of development involving Honeywell, Caterpillar, Westinghouse<br />
Electric, a unit of Japan’s Toshiba Corp, and other companies.<br />
(China Daily)<br />
19
NORTH AMERICA<br />
“The Root Actually Lies in the<br />
Relations between Capital and Labor”<br />
—An Exclusive Interview with Dr. Tu Xinquan, Professor and Vice Dean of WTO<br />
Research Institute, University of International Business and Economics<br />
By Yan Manman<br />
Dr. Tu Xinquan<br />
Professor and Vice Dean of WTO Research Institute, University<br />
of International Business and Economics<br />
On January 21, President Hu Jintao concluded his<br />
state visit to the US. And the international communities<br />
had closely watched this visit, commenting<br />
that it was a successful visit, which bore substantial<br />
fruit and is of great significance for the future trend<br />
of Sino-US relations. In terms of the economic and trade ties,<br />
China and the United States agreed on $45 billion in US export<br />
deals to China and to give US companies’ greater access<br />
to China’s $88 billion-plus government contracts market.<br />
Does this mean the conflict and dispute afflicted trade<br />
relations between China and US will be changed in the following<br />
years? What difficulties still lie ahead on the way of<br />
Sino-US cooperation? And can China’s huge trade surplus<br />
with US be gradually settled with the US’s growing export to<br />
China and Chinese companies’ increasing investment in the<br />
US? Concerning these issues the journalist of China’s Foreign<br />
Trade made an exclusive interview with Dr. Tu Xinquan, professor<br />
and Vice Dean of WTO Research Institute, University<br />
of International Business and Economics, who was an expert<br />
in studying Sino-US economic and trade relationship.<br />
CFT: On January 21, President Hu Jintao concluded<br />
his state visit to the US. And the international communities<br />
commented that it was a successful visit, which bore substantial<br />
fruit and is of great significance for the future trend of<br />
Sino-US relations. In terms of the economic and trade field,<br />
how do you comment on President Hu’s visit? What do you<br />
think is the most significant meaning of this visit?<br />
Dr. Tu: This visit in general was positive and the basic<br />
tone was cooperation. The most important meaning of this<br />
visit was to mitigate the tension in the past two years and lay<br />
foundation for the cooperation between China and the US in<br />
the coming years.<br />
Obama visited China at the end of 2009, which actually<br />
did not have produced positive influence. And later<br />
the Cheonan Incident further worsened the relationship.<br />
Last year, the Sino-US relations were mostly confrontation,<br />
whether in the eyes of political circle, business communities<br />
or academia. However, this time governments of the two<br />
countries reached a tacit understanding. Chinese government<br />
lowered its posture to assure the US; and signed with the US<br />
substantial benefit, I mean, the big deals of US$45 billion;<br />
while the US valued President Hu very much with the highest<br />
standard state diplomatic etiquettes. Besides, Chinese<br />
Government also pledged to coordinate with the US on the<br />
North Korea issue. The two sides reached an agreement over<br />
cooperation, and reversed the trend of worsening relationship<br />
in the past year. And in the second half of 2011, the US Vice<br />
President Biden and China Vice President Xi Jinping would<br />
exchange visit, which actually aimed at fixing the orientation<br />
of Sino-US relationship in future.<br />
Right now, neither China nor the US admitted the socalled<br />
G2, but as a matter of fact, this kind of situation was<br />
forming, well, in my personal opinion. In his State of Union<br />
address on January 25, Obama mentioned China for four<br />
times within one hour. What’s more, he admitted the competition<br />
between China and the US, but he also stressed that<br />
the US should work hard to strengthen itself instead of containing<br />
China. So seen from the State of Union address, the<br />
signal that the US Government conveyed was also very positive<br />
and cooperative, which further echoed President Hu’s<br />
Visit.<br />
Cooperation will be the keynote of Sino-US relations<br />
in the coming several years from now on. Certainly China<br />
and the US will further the economic and trade cooperation<br />
in future. However, it doesn’t mean the trade disputes will be<br />
reduced or eased in the years to come.<br />
CFT: In order to add job opportunities, Obama Ad-<br />
20
ministration proposed National<br />
Export Initiative (NEI), placing<br />
expanding export as one priority of<br />
its work. On the contrary, China,<br />
in order to deal with the huge trade<br />
surplus, began to list increasing<br />
import in its 12th five year plan. In<br />
this view, Sino-US economic and<br />
trade cooperation had a foundation<br />
of mutual demand. Theoretically, it<br />
is true. But what would be the concrete<br />
integration point in reality?<br />
What are the major barriers?<br />
Dr. Tu: Yes, it is true theoretically.<br />
But there are indeed some paradoxes. First, the US government<br />
proposed the NEI and set the goal of its export, but<br />
it didn’t issue the concrete implementing steps or measures.<br />
This made me doubt the effect of NEI. I met an American<br />
expert in this field a few days ago, and when we talked about<br />
this issue, he expressed the same questioning.<br />
You know, there are two aspects to do in order to increase<br />
the export. One is to strengthen one’s own industrial<br />
competitiveness and the other is to open export market,<br />
which demands trade liberalization. The US government<br />
mentioned improving its strength and capturing the height of<br />
emerging industries. In opening the export market, the US<br />
needs trade liberalization, not only bilaterally but more multilaterally.<br />
However, the US government has been keeping a<br />
negative attitude over the Doha negotiation. And the TPP<br />
still did not have clear goals and progress. So I really question<br />
its NEI.<br />
The second problem is that what the US will sell to China.<br />
You know, by now, Miscellaneous products( category 99),<br />
according to the export and import goods classification, are<br />
still the category with the largest amount that the US sold<br />
to China. All kinds of scraps accounted for a large portion of<br />
FOR THE US SIDE, THEY<br />
ALSO SHOULD SEE THE<br />
SOURCE OF CHINA’S <strong>TRADE</strong><br />
SURPLUS. IT IS NOT THE<br />
PROBLEM BETWEEN CHINA<br />
AND THE US. THE ROOT<br />
ACTUALLY LIES IN THE<br />
RELATIONS BETWEEN THE<br />
CAPITAL AND THE LABOR.<br />
this category. Besides the Miscellaneous<br />
products, mechanical equipment, particularly<br />
the electric equipment, and the<br />
agricultural products are what the US<br />
mainly sold to China. So the question is<br />
what else the US could export to China?<br />
For its export control, many products the<br />
US bears the comparative advantage over<br />
China could not be exported to China.<br />
Then what else? For the traditional manufactured<br />
products, the US does not have<br />
the comparative advantage obviously. So<br />
the US companies moved to China and<br />
manufactured goods, which then was<br />
exported back to the US. Even the high-tech ipods are also<br />
not produced in the US, but in China. So how does the US<br />
increase its export to China?<br />
CFT: So just as you mentioned, the ipods are produced<br />
in China and then back to the US. Actually a large portion<br />
of China’s trade surplus were produced in this way, and the<br />
surplus creators are those large MNCs, including quite a few<br />
US MNCs. However, the US government always pressed<br />
China in trade issues taking China’s huge trade surplus with<br />
the US as the so-called “evidence”. So how do you comment<br />
on China’s trade surplus with the US?<br />
Dr. Tu: You are right. China just bore a bad name of<br />
having huge trade surplus, but actually share a very small<br />
portion of benefit. Take the ipod as an example. Chinese<br />
companies only earn 5% of the added-value. There are<br />
complaints over this in China. I think there is nothing to<br />
complain. You still don’t have the capacity to take the 95%<br />
added-value, that’s your problem. And those MNCs chose<br />
to locate their production here for they thought the investment<br />
environment was good for them to invest. However,<br />
for the US side, they also should see the source of China’s<br />
trade surplus. It is not the problem between China<br />
and the US. The root actually lies in the relations<br />
between the capital and the labor. Capital’s nature<br />
of going after profit means that it would move to<br />
the place it can maximize the profitability. For the<br />
low labor cost and other factors, the US MNCs<br />
moved its production from its home to China.<br />
This kind of industrial transfer caused the unemployment<br />
in its home country, or the labor had<br />
to shift to the third industries. You know, in the<br />
US, the income of the employees in the average<br />
third industries is comparatively lower than in the<br />
second industries. So in either situation, the sense<br />
of happiness would be reduced in general. They<br />
thought it was Chinese who scrambled their jobs.<br />
So China’s huge surplus became one target for<br />
them to lodge their complaint. Actually, to solve<br />
this problem, China has nothing to help. Even<br />
though China’s huge surplus is reduced a lot, it<br />
does not necessarily mitigate the US’s unemployment.<br />
Their problems can only be addressed by<br />
themselves.<br />
21
<strong>TRADE</strong><br />
China, Chile celebrate 40th anniversary of<br />
diplomatic ties<br />
China and Chile on December 8, 2010 celebrated the<br />
40th anniversary of diplomatic ties at a reception in Beijing.<br />
The Chinese People’s Association for Friendship<br />
with Foreign Countries (CPAFFC) and the China-Latin<br />
America and Caribbean Friendship Association jointly<br />
held the reception.<br />
Almost 60 guests attended the event, including<br />
Abdul’ahat Abdulrixit, vice chairman of the National<br />
Committee of the Chinese People’s Political Consultative<br />
Conference, other Chinese officials, as well as<br />
Chilean experts and overseas students in China.<br />
Addressing the reception, Li Xiaolin, vice president<br />
of the CPAFFC, said Chile was the first country<br />
in South America to forge diplomatic relations with new<br />
China and the first in that region to recognize China’s<br />
market economy status and sign a bilateral free trade<br />
agreement with China. China and Chile established diplomatic<br />
ties in 1970.<br />
In the years since 1970, China-Chile relations have<br />
developed smoothly, with frequent high-level visits as well<br />
as exchanges and cooperation in various areas, especially in<br />
the cultural, education, economic and trade sectors, Li said.<br />
Chile is China’s second biggest trade partner in Latin<br />
America and China is Chile’s largest trade partner. Bilateral<br />
trade volume rose 2.1 percent to US17.72 billion in<br />
2010.<br />
China and Chile forged a comprehensive cooperative<br />
partnership in 2004. China-Chile non-governmental exchanges<br />
have growth in strength over the years, Li added.<br />
Chile’s ambassador to China Luis Schmidt Montes, spoke<br />
highly of the development of Chile-China relations. He<br />
said Chile would like to further expand its cooperation<br />
with China as the two countries have much to share with<br />
each other. (Xinhua)<br />
Brazil ups rates and signals more<br />
tightening<br />
Brazil’s central bank raised interest rates by 50 basis<br />
points and signalled further tightening in the weeks to<br />
come as Latin America’s biggest economy seeks to rein in<br />
a worrying surge in inflation.<br />
In a hawkish statement, the central<br />
bank increased the benchmark Selic rate to<br />
11.25 per cent in a move that could lead<br />
to further pressure on Brazil’s currency,<br />
the real, to appreciate against the dollar.<br />
The rate increase was the beginning<br />
of “a process of adjustment<br />
in the benchmark interest rates<br />
whose effects, coupled with macroprudential<br />
measures, will contribute<br />
to a convergence of inflation to<br />
the target trajectory”, the central bank<br />
said.<br />
The move will ratchet up pressure on the new government<br />
of President Dilma Rousseff to make politically difficult<br />
cuts in government spending, which is partly blamed<br />
for recent rises in inflation.<br />
Consumer prices in Brazil rose more than economists<br />
expected in December, contributing to year-end inflation<br />
of 5.91 per cent, the fastest increase for a calendar year in<br />
six years.<br />
The central bank’s target for inflation is 4.5 per cent,<br />
plus or minus 2 per cent, leading to expectations among<br />
traders in the futures market that rates could reach as<br />
much as 13.25 per cent this year, according to Bloomberg<br />
data. Brazil already has the highest real interest rates,<br />
policy rates adjusted for inflation, of any large economy.<br />
Ms Rousseff has made lowering rates one of her priorities<br />
but must first reverse an increase in the government<br />
budget during the past two years, when Brazil spent more<br />
to counter the effects of the global financial crisis and then<br />
entered an election year.<br />
High interest rates and rapid economic growth also<br />
have attracted hot-money flows from foreign investors,<br />
driving an appreciation of the real against the dollar of almost<br />
40 per cent in two years.<br />
“By most metrics, Brazil’s economy closed 2010 overheating,”<br />
wrote Tony Volpon, emerging markets economist<br />
with Nomura Securities. Ms Rousseff’s first act on coming<br />
to office has been to try to combat the appreciation of the<br />
real with measures designed to damp speculation on the<br />
currency.<br />
Brazil’s strong exchange rate contributed to a 40 per<br />
cent increase in imports last year, which domestic manufacturers<br />
say is threatening to drive them out of business.<br />
Ms Rousseff has also promised stringent budget cuts to be<br />
implemented next month but analysts believe she needs to<br />
act more quickly to convince markets.<br />
Nomura’s Mr Volpon said he expected interest rates<br />
to increase 150bp during this tightening cycle.<br />
“The government’s incorrect emphasis of the ‘currency<br />
war’ over the need to detail its fiscal constraints has once<br />
again put the central bank in a tough spot,” Mr. Volpon<br />
said. (Financial Times)<br />
22
INVESTMENT<br />
Latin America Lessons for Euro zone<br />
to Avoid Lost Decade<br />
By Komal Sri-Kumar<br />
Despite a €110bn bail-out programme that the European<br />
Union and the International Monetary Fund<br />
arranged in early May, Greek debt yields remain<br />
elevated. Ten-year Greek debt yielded around 11.5<br />
per cent on December 13, 2010, 8.5 percentage points over<br />
comparable German obligations.<br />
The Greek bail-out has been followed by a surge in<br />
yields on Irish, Portuguese and Spanish debt as investors<br />
shunned those obligations as well. In understanding this “debt<br />
contagion,” it is useful to examine the characteristics of the<br />
region’s debt crisis, as well as compare it with the experience<br />
of Latin American economies through most of the 1980s.<br />
Today, many of the once debt-ridden countries such as Brazil<br />
are growing rapidly, have ample foreign exchange reserves,<br />
and have become significant creditors to other countries.<br />
How did this transformation occur?<br />
The euphoria following the formation of the euro zone<br />
led some lenders to believe that there was no greater sovereign<br />
risk in Greece than in Germany, significantly increasing<br />
exposure to the weaker economies. Similarly, in the 1970s,<br />
foreign banks believed global capital market integration had<br />
eliminated Latin American country risk. Symptomatic of the<br />
era was the oft-quoted statement by the then chairman of<br />
Citicorp, Walter Wriston: “Countries don’t go bust.”<br />
I followed the situation closely as a country risk analyst<br />
as loans made at f loating interest<br />
rates became unserviceable after<br />
global interest rates doubled after<br />
1979. In August 1982, Mexico was<br />
the first to declare that it could not<br />
make principal and interest payments<br />
as scheduled. Brazil, Argentina and<br />
most of the region followed. The<br />
IMF and the US Treasury attempted<br />
to defuse the debt contagion by imposing<br />
austerity and adding to the<br />
countries’ debt. However, the situation<br />
worsened with sharp devaluations<br />
and a deep recession. The ratio<br />
of Mexico’s net public debt to GDP<br />
surged from 34 per cent in 1981 to<br />
81 per cent by 1986.<br />
The situation started to improve<br />
only when Nicholas Brady, US<br />
Treasury Secretary, offered a plan in<br />
March 1989 for creditors to accept<br />
“haircuts”, either through a principal<br />
reduction but maintaining market<br />
interest rates, or by keeping the face value of the loans but<br />
substantially lowering interest rates. Mexico repaid the “Brady<br />
Bonds” in full in 2003, some 15 years ahead of schedule.<br />
The Latin American crisis was a solvency issue rather<br />
than a liquidity issue. A significant portion of the loans the<br />
nations received in the 1970s was used to finance wasteful<br />
consumption, or eventually landed in Miami and New York<br />
based banks due to capital flight. They were no longer available<br />
to service debt. We also learned that these countries<br />
could not generate sustainable economic growth, or create<br />
jobs, until the debt levels were reduced.<br />
Both these conclusions are relevant to resolving problems<br />
that southern Europe and Ireland face today, and call<br />
for a similar programme to reduce the level of debt. Irish real<br />
estate developers borrowed at low interest rates because of the<br />
perception that euro zone membership eliminated risk of default.<br />
The developers, and the Irish banks which lent to them,<br />
can no longer service debt since building values have crashed.<br />
With Ireland due to pay a relatively high average interest rate<br />
of 5.8 per cent on the new funds, its debt is projected to rise<br />
from 99 per cent of GDP this year, to 108 per cent in 2013.<br />
The budget measures will likely lead to negative growth in<br />
2011 following three successive years of GDP declines.<br />
In the case of Greece, the €110bn programme announced<br />
in May requires it to lower the public sector budget<br />
deficit from over 15 per cent of GDP in 2009 to less than 9<br />
per cent this year. The unemployment rate will rise to almost<br />
15 per cent by 2012 according to the IMF, and could eventually<br />
jump to 20 per cent.<br />
The Latin American experience also suggests that<br />
there will be adverse implications for<br />
European debt and equity markets.<br />
The deterioration in debt ratios will<br />
discourage voluntary lending to the affected<br />
euro zone countries and, in the<br />
absence of functioning capital markets,<br />
those governments will become<br />
permanent supplicants for official aid.<br />
Poor economic growth prospects will<br />
dampen equity market performance as<br />
well since an increasing percentage of<br />
savings will be destined toward debt<br />
service rather than domestic investments.<br />
The vicious cycle of austerity,<br />
declining GDP and worsening debt<br />
ratios means that there will be no selfcorrecting<br />
cure for the malaise in debt<br />
and equity markets.<br />
In the absence of debt reduction,<br />
the 2010s could become a “lost<br />
decade” for some euro zone countries,<br />
much as the 1980s turned out to be for<br />
Latin America. (Financial Times)<br />
23
Trade Data Watch<br />
in Latin America<br />
By Li Zhen<br />
Nowadays, Latin American countries are increasingly<br />
of great importance to China in terms of<br />
economic and trade relations. Take Brazil for<br />
example, it has become China’s most important<br />
partner, both as a market for Chinese goods and as a source<br />
of raw materials. Brazil supplies some 45% of all China’s<br />
soybean imports and is also the source for other agricultural<br />
products, as well as iron ore and petroleum. It has becomes<br />
clear that China’s trade with Latin America has fuelled a<br />
boom in the region’s export sectors in countries such as Argentina,<br />
Brazil, Chile, Peru and Venezuela.<br />
From the beginning of 2011, China’s Foreign Trade<br />
magazine will keep a close look on what happened in Latin<br />
American countries’ trade agenda. In this issue, we pick<br />
three countries, namely Mexico, Peru and Venezuela, for<br />
your reference.<br />
Mexico<br />
Mexico reported a trade deficit equivalent to US$102<br />
million in November of 2010. Mexico is the biggest exporter<br />
and importer in Latin America. Mexican trade is<br />
fully integrated with that of its North American partners:<br />
close to 86% of Mexican exports and 50% of its imports are<br />
traded with The United States and Canada. Mexico’s major<br />
exports are: manufactured goods, oil and oil products, silver,<br />
fruits, vegetables, coffee and cotton. Mexico imports mainly<br />
include metal working machines, steel mill products, agricultural<br />
machinery and electrical equipment.<br />
Mexico exports were worth US$2.815 billion in November<br />
of 2010. Mexico is the biggest exporter in Latin<br />
America. Mexico’s major exports are: manufactured goods,<br />
oil and oil products, silver, fruits, vegetables, coffee and cotton.<br />
Mexican trade is fully integrated with that of its North<br />
American partners: 82% of Mexican exports are with the<br />
United States.<br />
Mexico imports were worth US$2.825 billion in November<br />
of 2010. Mexico is the biggest importer in Latin<br />
America. Mexico imports are mainly metal working machines,<br />
steel mill products, agricultural machinery, electrical<br />
equipment, car parts for assembly, repair parts for motor<br />
vehicles and aircrafts. Its main import partner is United<br />
States. Mexico also imports from European Union, China<br />
and Japan.<br />
Figure 1 Mexico Balance of Trade in 2010 (Jan.-Nov.)<br />
(Million USD)<br />
600<br />
400<br />
200<br />
0<br />
-200<br />
-400<br />
-600<br />
-800<br />
-1000<br />
-1200<br />
Jan<br />
Feb Mar Apr May Jun Jul Aug Sep Oct Nov<br />
Data Source: TradingEconomics.com<br />
Figure 2 Mexico’s Imports and Exports (IM/EX) in<br />
2010 (Jan.-Nov.) (Billion USD)<br />
3<br />
2.5<br />
2<br />
1.5<br />
1<br />
0.5<br />
0<br />
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov<br />
Data Source: TradingEconomics.com<br />
Figure 3 Peru Balance of Trade in 2010 (Jan.-Oct.)<br />
(Million PEN)<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Jan Feb Mar Apr May Jun Jul Aug Sep Oct<br />
EX<br />
IM<br />
Data Source: TradingEconomics.com<br />
24
Peru<br />
Peru reported a trade surplus equivalent to 424 million<br />
PEN in October of 2010. Peru’s major exports are fish products,<br />
gold, silver, copper, zinc, lead, coffee, asparagus, and<br />
textiles. Peru’s imports mainly petroleum and petroleum<br />
products, plastics, machinery, vehicles, iron and steel, wheat<br />
and paper. Its main trading partners are: the United States,<br />
European Union, China and Brazil.<br />
Peru exports were worth US$3.083 billion in October<br />
of 2010. Peru’s major exports are fish products, minerals<br />
(gold, silver, copper, zinc, lead), agricultural products (coffee,<br />
asparagus), petroleum products, and textiles. Peru’s main<br />
exports partners are the United States, European Union and<br />
China.<br />
Peru imports were worth US$2.659 billion in October<br />
of 2010. Peru’s major imports are petroleum and petroleum<br />
products, plastics, machinery, vehicles, iron and steel, wheat<br />
and paper. Its main import partners are United States, China,<br />
European Union, Brazil and Ecuador.<br />
Venezuela<br />
Venezuela reported a trade surplus equivalent to<br />
US$74.46 billion in the third quarter of 2010. The petroleum<br />
sector accounts for around 80% of Venezuela’s export<br />
earnings. Thanks to petroleum exports, the country usually<br />
posts a trade surplus. Venezuela imports mostly raw materials,<br />
machinery and equipment, transport equipment and<br />
construction materials. Its main trading partners are: the<br />
United States (49% exports, 24% imports), European Union<br />
and Brazil.<br />
Venezuela exports were worth US$15.49 billion in the<br />
third quarter of 2010. The economy of Venezuela is based in<br />
large part on oil. The petroleum sector accounts for around<br />
80% of export earnings. Venezuela also exports steel, aluminum,<br />
transport equipment, textiles, apparel, beverages,<br />
and foodstuffs. The United States is Venezuela’s leading<br />
trade partner.<br />
Venezuela imports were worth US$9397 billions in the<br />
third of 2010. Venezuela imports mostly raw materials, machinery<br />
and equipment, transport equipment and construction<br />
materials. Its main import partners are United States,<br />
European Union, Brazil, Colombia and China.<br />
Figure 4 Peru’s Imports and Exports (IM/EX) in 2010<br />
(Jan.-Oct.) (Billion USD)<br />
3.5<br />
3<br />
2.5<br />
2<br />
1.5<br />
1<br />
0.5<br />
0<br />
Data Source: TradingEconomics.com<br />
Figure 5 Venezuela Balance of Trade in 2010 (Q1-Q3)<br />
(Billion USD)<br />
100<br />
90<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Q1 Q2 Q3<br />
Data Source: TradingEconomics.com<br />
Figure 6 Venezuela’s Imports and Exports (IM/EX) in<br />
2010 (Q1-Q3) (Billion USD)<br />
18<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
Jan Feb Mar Apr May Jun Jul Aug Sep Oct<br />
EX<br />
Q1 Q2 Q3<br />
EX<br />
IM<br />
IM<br />
Data Source: TradingEconomics.com<br />
25
<strong>TRADE</strong><br />
Africa<br />
China pledges to help Angola in<br />
diversifying exports in bilateral trade<br />
China, Mauritius sign about 9 million U.S.<br />
dollars economic cooperation accord<br />
Visiting Chinese Vice Minister of Commerce Zhong<br />
Shan said here on Jan. 13 that China would help Angola<br />
in diversifying its exports to China as part of the efforts to<br />
boost trade relations between the two countries.<br />
Zhong made the pledge during his meeting with Angolan<br />
Minister of Trade Maria Idalina Valente to explore<br />
ways of further expanding trade and economic ties between<br />
the two countries.<br />
Zhong said China has attached importance to developing<br />
ties with Angola, the largest trading partner of China in<br />
Africa, and the 2010 visit to Angola by Chinese Vice President<br />
Xi Jinping brought Sino-Angolan ties to new highs.<br />
The Chinese official said crude oil was almost the sole<br />
product of Angola which ended up in Chinese markets despite<br />
the fact that trade volume between the two countries<br />
amounted to some 25 billion U.S. dollars in 2010, and the<br />
Chinese government has decided to reduce or waive tariffs<br />
on Angolan exports to China from January 1, 2011 to<br />
encourage Angolan businessmen to export more products<br />
to China, including agricultural produces, fish and other<br />
marine products<br />
and diamonds.<br />
Z h o n g<br />
said China<br />
a nd A ngola<br />
have made<br />
substantial<br />
progress in<br />
bilateral cooperation<br />
in<br />
the f ields of<br />
energy, basic<br />
infrastructures<br />
and agriculture, and the Chinese government has encouraged<br />
Chinese enterprises to invest in Angola and make<br />
technological transfers to the African country as well.<br />
For her part, Maria Idalina Valente said Angola welcomed<br />
China’s proposal to expand bilateral trade and economic<br />
cooperation on the basis of the strategic partnerships<br />
hammered out during Xi Jinping’s visit to Angola.<br />
The Angolan minister said the biggest challenge faced<br />
by her government is to diversify its oil-dependent economy<br />
and to build up industrial and manufacturing capabilities in<br />
the national economy.<br />
She said Angola is trying to improve its investment<br />
conditions and hopes to reach an agreement with China on<br />
the protection of investments by the year 2012.<br />
The minister said her country is also keen on learning<br />
from China’s development experiences in setting up special<br />
economic zones and zones of processing products for exports.<br />
Zhong arrived in Luanda earlier in the day for a twoday<br />
work visit to the African country. (Xinhua)<br />
China has signed an economic and trade cooperation<br />
accord with Mauritius worth about 9 million U.S. dollars,<br />
including 6 million dollars grant and 3 million dollars<br />
interest-free loan.<br />
The accord was signed on Friday and the signing ceremony<br />
was attended by visiting Chinese Vice Premier Hui<br />
Liangyu and Mauritius Vice Prime Minister and Minister<br />
of Finance and Economic Development Pravind Kumar<br />
Jugnauth.<br />
According to the accord, the grant and loan will fund<br />
projects agreed on by the two governments in the future.<br />
Hui and Jugnauth also agreed on boosting cooperation<br />
in science and culture and implementing the programs of<br />
the accord signed by the two sides.<br />
Hui also met Mauritius Prime Minister Navinchandra<br />
Ramgoolam in the capital of Port Louis on Friday when he<br />
started a three-day official visit to Mauritius.<br />
During the meeting, Hui commended the bilateral cooperation<br />
since the two countries established diplomatic ties<br />
in 1972 and the promising trend to further strengthen the<br />
ties in cultural exchange, education and tourism.<br />
He thanked the Mauritius government for its support<br />
on issues concerning the core interests of China.<br />
Hui noted that the two countries should keep pushing<br />
for extensive cooperation and high level exchange of visits,<br />
continue to building political trust between the two governments<br />
and implement the measures in the framework of<br />
China-Africa Cooperation Forum.<br />
Ramgoolam also spoke highly of the fruitful cooperation<br />
between the two countries and thanked China for the<br />
assistance in improving the country’s infrastructure including<br />
a new international airport which is under construction.<br />
Hui held talks with Mauritius opposition leader Paul<br />
Berenger on Saturday afternoon before he wraps up his visit<br />
to Mauritius, the first leg of his five-African country tour<br />
which will also take him to Zambia, the Democratic Republic<br />
of Congo, Cameroon and Senegal. (Xinhua)<br />
28
INVESTMENT<br />
China to forgive half of Africa rail debt<br />
Chinese Vice - Minister of Commerce Zhong Shan<br />
signed an agreement with counterparts from Zambia and<br />
Tanzania in Lusaka, Zambia’s capital, on Jan 19, to forgive<br />
50% of the debt from China to build and operate the Tanzania-Zambia<br />
railway.<br />
The Chinese government took the action because of the<br />
traditional friendship between China and Africa, and Chinese<br />
people want to do their best to support African people’s<br />
development, said<br />
Zhong at the signing<br />
ceremony. He<br />
also said the Chinese<br />
government<br />
hopes the railway<br />
will operate with<br />
less debt and boost<br />
the regional economy<br />
and benefit the<br />
two countries.<br />
Chinahelped<br />
construct the<br />
Tanzania-Zambia<br />
railway at the request<br />
of the leadership<br />
of Tanzania<br />
and Zambia in<br />
1970, and handed<br />
it over after its<br />
completion in<br />
1976. The Chinese<br />
government provided an interest-free loan of 988 million<br />
yuan to complete the project, and continued to provide<br />
such loans and technicians to ensure its operation. (Chinadaily.com.cn)<br />
Uganda: China Pledges More Support for<br />
Nation’s Oil and Infrastructure<br />
at the current pace,” he said.<br />
The highway funded by preferential loan from China is<br />
to provide an alternative route linking the country’s capital<br />
and its international airport at Entebbe, 40 kilometres south<br />
of Kampala.<br />
Chinais also committed to working with Uganda in its<br />
nascent oil industry as China National Offshore Oil Corp<br />
(CNOOC) is seeking to partner with Total and Tullow to<br />
build an oil refinery in the western part of the country.<br />
President Museveni, is known to be in favour of building<br />
the country’s own oil industry with a complete chain of<br />
finished oil products. “China aims to assist Uganda build its<br />
own oil industry through participation in the production of<br />
oil products and assisting the country to attain its Millennium<br />
Development Goals before 2015 the Unites Nations’<br />
target years,” said Mr Heping.<br />
Ugandahit oil in the western part of the country in the<br />
Albertine Graben region in 2006. So far, Tullow, has discovered<br />
about one billion barrels of crude oil in the area. Tullow<br />
estimates that Uganda has a further potential of 1.2 billion<br />
barrels more in the Albertine basin which also borders the<br />
Democratic Republic of Congo. (allAfrica.com)<br />
China to fund US$900m projects in Nigeria<br />
Nigeria says it has secured a US$900 million loan<br />
from China to boost infrastructure in Africa’s most populous<br />
country, the Associated Press reported at the end of 2010.<br />
Minister of Finance Olusegun Aganga told the reporters<br />
that the Nigerian government had signed a US$900 million<br />
loan agreement with the Export-Import Bank of China<br />
for the construction of a US$500-million railway in the capital<br />
and a US$400-million public security communications<br />
project.<br />
While Nigerian commercial banks avoid risk, China has<br />
become a major financier of projects across the continent, the<br />
report said.<br />
A Chinese report released Thursday said that China’s<br />
direct investment in Africa had reached US$9.33 billion in<br />
2009, a jump from US$490 million in 2003. (China Daily)<br />
Kampala - China will continue to assist Uganda in the<br />
development of its infrastructure and oil industry, Mr Sun<br />
Heping, the Chinese ambassador to Uganda has said.<br />
“The Chinese government has attached great importance<br />
to the development of infrastructure in Africa,<br />
Uganda in particular, and made it one of the key areas of<br />
cooperation in the framework of the China-Africa Cooperation<br />
Forum,” Mr. Sun told a Chinese news agency<br />
recently.<br />
He said the cooperation has provided a platform for<br />
China and African countries to have dialogues and implement<br />
several projects covering infrastructure, education<br />
and health funded by grants and preferential loans.<br />
He said the Chinese and Ugandan governments have<br />
been in close touch on the proposed Kampala-Entebbe highway<br />
project, the first in the country, which is expected to cost<br />
about US$350 million. “The project is currently in preparations<br />
stage and will get underway in 2011 if everything keeps<br />
29
Africa<br />
New Developments Pull<br />
China and Africa Closer<br />
By Alice Yang<br />
Africa in Chinese eyes<br />
Africa, a land full of wonders, gives<br />
a lot of possibility beyond your imagination.<br />
“Africa isn’t as scary as people<br />
think. Since Africa is so vast that the<br />
living environment varies from region to<br />
region. Some areas are very comfortable<br />
to stay in, neither too cold nor too hot.<br />
You may think Africa is very hot as it<br />
is in the tropical zone, but the heaviest<br />
snow I’ve ever seen in my life is in the<br />
mountain areas of Tunisia of North Africa,”<br />
said Dawn Zhang, a senior officer<br />
from China Road & Bridge Corporation<br />
(CRBC), who has visited and stayed<br />
in nearly 10 countries in Africa.<br />
CRBC, as the first Chinese companies<br />
in Africa since 1979, now conducts<br />
business in over 20 countries there,<br />
such as Angola, Equatorial Guinea, Kenya,<br />
and Rwanda. “We have about 70 to<br />
80 on-going projects in Africa, accounting<br />
for two-thirds of the total business<br />
volume of the whole company. Doing<br />
business with Africa has to take bigger<br />
risk and tougher condition compared<br />
with other regions; as a result, investment<br />
there will receive higher return,”<br />
said Zhang.<br />
In Zhang’s memory, in the 1980s,<br />
Africa enjoyed higher development levels<br />
than China. “My first time to shop in<br />
a supermarket was in Burundi in 1982;<br />
my first time to pass by an expressway<br />
was in Côte d’Ivoire (Ivory Coast called<br />
at that time). In these so-called poor<br />
countries, you can see more cars on<br />
streets than in Beijing at that time.”<br />
Africa’s development mode is<br />
highly influenced by western countries.<br />
The land is the whites’ paradise in<br />
Zhang’s eyes. In the city life of Africa,<br />
there is hardly any language barrier;<br />
also living habits, consumption patterns<br />
and social institutions all follow<br />
the western style. “When you turn<br />
on the TV, you’ll watch the latest TV<br />
programs from France, America and<br />
Britain. When you relax in the bars or<br />
dancing hall, you’ll hear the most popular<br />
hits of western music. It’s very easy<br />
for the whites to have a comfortable life<br />
in Africa: they are always on the top of<br />
the rich class here, easy to have villas<br />
to live in with servants and gardeners.”<br />
Zhang said.<br />
30
“I stayed in Ethiopia and Kenya for<br />
2 years, and I’m now still visiting other<br />
African countries for business travel. Just<br />
in 2 or 3 years, you can really feel the significant<br />
changes everyday taking place<br />
in Africa,” said Wang Peng, a project<br />
manager of China National Machinery<br />
& Equipment Import & Export Corporation<br />
(CMEC), China’s 3rd largest<br />
enterprises in terms of business turnover<br />
of foreign contracted projects.<br />
“It seems to me that most developing<br />
African countries hold a welcome<br />
attitude to the Chinese, only very few<br />
of the poorest nations and some southern<br />
areas controlled by the Whites are<br />
the exception,” said Wang.<br />
Stray Xie, a young girl working<br />
for China Development Bank (China’s<br />
largest financial partner of Africa) in<br />
Beijing has been to Zambia, Kenya and<br />
Egypt due to the company’s business<br />
connection with Africa. “From my experience,<br />
the local government and enterprises<br />
welcome Chinese companies<br />
warmly. I can feel their anticipation<br />
in the friendship and cooperation of<br />
China from the heart,” she said.<br />
Yes, it is a land full of change and<br />
surprise. But it may also be necessary<br />
for Chinese companies to shed some<br />
sweat or tears there.<br />
“Africa has many disadvantages<br />
as well: unstable politics and society,<br />
relatively poor investment environment,<br />
low working efficiency, heavy corruption,<br />
low experience of personnel...<br />
When conducting business in Africa,<br />
Chinese enterprises need to highlight<br />
the security concerns. As a foreign girl<br />
in Africa, I never dare to take a bus<br />
alone there,” Xie said. “Irregular and<br />
unreliable transportation in Africa is<br />
also a problem. Roads are in poor condition,<br />
and it is very difficult to find<br />
a taxi. Also, in the middle and west<br />
Africa, you may also meet problems of<br />
poor-timing and low-trust.”<br />
Liu Zhirong, director of Woreta-<br />
Woldiya Project launched by World<br />
Bank, stayed in Africa for years. In<br />
his view, African people have a completely<br />
different work attitude from<br />
Chinese. “They don’t want to work<br />
extra hours even though overtime<br />
pay is much higher than their regular<br />
salaries. They’d rather enjoy the free<br />
time as granted by law. What is worse,<br />
Chinese companies generally lack local<br />
legal understanding, which brings a<br />
lot of trouble for themselves.” Liu gave<br />
an example, “A Chinese construction<br />
company in Africa once was served 150<br />
subpoenas in one day because it fired<br />
employees without following legal procedures<br />
and the employees all sued.”<br />
Liu’s view on legal awareness was<br />
echoed by Wang Peng. “For any Chinese<br />
companies or individuals who go to Africa<br />
to conduct projects or business, you<br />
must pay high attention to the small print<br />
in the contract agreements, such as the<br />
legal provisions mentioned in the contract<br />
(tax, insurance, labor rights, etc.). A lot of<br />
study and research in advance is very necessary,”<br />
Wang reminded kindly.<br />
China in African eyes<br />
“You Chinese work very hard,”<br />
said Mr. Balay, a government official<br />
in an Ethiopian city. “That’s the main<br />
reason your country develops so fast.<br />
People in Ethiopia lack that spirit.”<br />
“African’s general impression of<br />
the Chinese people is hard-working. Be<br />
it engineering or doing business, Chinese<br />
people barely rest on weekends or<br />
holidays. We work from 7 am to 6:30<br />
pm, plus frequent overtime at night.”<br />
said Liu Zhirong according to his experience<br />
in Ethiopia. Hard-working is<br />
just a part of Chinese nature.<br />
In most African’s eyes, Chinese<br />
products means cheap. Cheap Chinamade<br />
products do provide improvement<br />
to every-day life of the middle and<br />
lower class of the society. “With the<br />
label of ‘Made-in-China’, many common<br />
African families have improved<br />
their lifestyle: wear decent clothes and<br />
shining shoes, visit friends on their own<br />
vehicles (bicycles, motorbikes, or cars),<br />
enjoy many electrical appliances in daily<br />
life, and decorate the house by attractive<br />
building materials...” said Zhang.<br />
Xie thought the same. “They (Africans)<br />
think Chinese products combine<br />
cheap price and good quality at<br />
the same time. Also the infrastructure<br />
projects in Africa invested by Chinese<br />
enterprises benefit the livelihood of<br />
the local people. They are happy about<br />
that.”<br />
“CMEC currently has too many<br />
projects in Africa that it is hard to give<br />
an exact number. Our over one hundred<br />
of our projects have covered 80% of African<br />
countries.” Wang said. “Generally<br />
speaking, the contract-based projects<br />
from China have a good reputation in<br />
31
Africa<br />
the local community. But projects in<br />
trade only are more demanding, mainly<br />
because the after-sales service can not<br />
catch up with the growing expansions.”<br />
According to Ministry of Commerce,<br />
P.R.C., by the end of 2010,<br />
the accomplished turnover of China’s<br />
foreign contracting projects in Africa<br />
amounted to US$35.83 billion, accounting<br />
for 38.9% of the total, 27.5%<br />
growth compared with the previous<br />
year, involving in fields of mining, financial,<br />
manufacturing, construction,<br />
agriculture, business and trade, wholesales<br />
and retails, etc.<br />
However, the attitude of local<br />
government towards cooperation with<br />
Chinese enterprises often falls in a dilemma.<br />
“They hope Chinese enterprises<br />
can boost the local economy, as well as<br />
create more job opportunities for the<br />
local community. However, they also<br />
worry if too many Chinese enterprises<br />
march into the market at one time,<br />
it would be a threat to the local companies,<br />
and risk the market balance.”<br />
Zhang said.<br />
“Politically, China is easy to make<br />
friends with Africa, particularly when<br />
the land was bullied by the Western<br />
countries. But, in other cases? Hard to<br />
say. Africa has been influenced so much<br />
from the West: language, religion, culture,<br />
social system, technical principles,<br />
even life style. Significant numbers of<br />
Africans respect or even encourage the<br />
Western society style and the westerners.<br />
This probably dates back to African<br />
history itself which China missed the<br />
chance to be involved in early developments.<br />
It will take a long time for China<br />
to win their real respect and trust.”<br />
Zhang said.<br />
“Chinese business in Africa still<br />
remains in a low level in internationalization.<br />
There are many stories of<br />
unethical practices and lack of social<br />
responsibility among Chinese companies.”<br />
Xie said.<br />
Wang added, “It’s important for every<br />
Chinese company to build confidence,<br />
trust and establish a fair and honorable<br />
reputation. Yes, indeed, a few Chinese<br />
companies who attempt short cuts have<br />
disturbed the normal market stability by<br />
not following the rules. For each instance<br />
where one company breaks one rule,<br />
many companies will have to do a lot of<br />
things to pay back the loss and build back<br />
up the reputation again.” he said.<br />
In fact, those Chinese who have<br />
travelled outside China are more likely<br />
to have a more open and international<br />
mind. However, their ways of thinking,<br />
communication, and behavior style...all<br />
these need to adjust to fit for the game<br />
rules of the global market. It is still a<br />
long way ahead. “In my eyes, it is still<br />
difficult for Chinese to blend into the<br />
global village; maybe Chinese culture<br />
is too unique in itself. We still<br />
need time to adjust, to get familiar<br />
with acceptable global business<br />
practice.” remarked Zhang.<br />
More opportunities in<br />
future<br />
The China-Africa Cooperation<br />
Forum was established in October<br />
10, 2000. In the past decade,<br />
trade and investment between the two<br />
sides grew rapidly, which proved that<br />
they need each other, and indicated more<br />
potential to explore further in future.<br />
According to China’s Ministry of<br />
Commerce data, from 2000 to 2009,<br />
the trade value between China and<br />
Africa has increased from US$10.6<br />
billion to US$91.0 billion. China now<br />
is the largest trade partner of Africa.<br />
From July 1, 2010, China has reduced<br />
60% tariff for 26 countries in Africa,<br />
involving over 4700 items. This will, no<br />
doubt, promote, encourage and grow<br />
the bilateral trade.<br />
In 2009, China announced to offer<br />
a US$10 billion preferential loan<br />
to African countries in 3 years. “The<br />
financial aid from China will mainly<br />
focus on the areas of agriculture,<br />
health, education, clean energy and talents<br />
training. This is the main focus of<br />
people’s livelihood in Africa, also what<br />
they need most.” said Gao Yuanyuan,<br />
vice director of Department of Aid to<br />
Foreign Countries of MoC. “Financial<br />
cooperation will be the main highlight<br />
in our future work.”<br />
From 2000 to 2009, China’s direct<br />
investment in Africa increased from<br />
US$210 million annually to US$1.44<br />
billion. Meanwhile, the FDI from Africa<br />
to China increased from US$280<br />
million annually to US$1.31 billion.<br />
Wei Jianguo, former vice-minister of<br />
commerce commented, “Now is the<br />
best time for Chinese firms to invest<br />
in the continent as Africa needs to upgrade<br />
its economic structure.”<br />
It is a land full of opportunities.<br />
When Dawn Zhang saw the vast idle<br />
land in Africa, he often wondered if the<br />
land could be tapped by Chinese, how<br />
much wealth would be created from it.<br />
Zhang’s dream is now encouraged by<br />
Chinese government. “Chinese companies<br />
can explore more chances in sectors<br />
like agriculture and manufacturing,<br />
as well as the current focus on infrastructure<br />
and energy resources,” Lu<br />
Shaye, director-general of the African<br />
affairs department with the Ministry of<br />
Foreign Affairs, said at a China-Africa<br />
forum in Beijing last May.<br />
According to Zhong Manying,<br />
director of the Department of Western<br />
Asian and African Affairs of MoC,<br />
currently, there are only 30 direct<br />
flights between China and Africa every<br />
week. “That is quite a small number<br />
(considering that the direct flights between<br />
China and United Arab Emirates<br />
per week exceed 30). Moreover,<br />
those flights are mainly run by African<br />
airlines. China can explore its chance in<br />
this and related areas.” Zhong said.<br />
“Very few large and medium-sized<br />
supermarkets in Africa are operated<br />
by Chinese. Though Chinese products<br />
are very popular in Africa’s market, the<br />
distribution and logistics ability is very<br />
limited,” Zhong added, “To enhance an<br />
all-around service is our target there.”<br />
32
2011<br />
Congratulatory Messages<br />
For The Spring Festival<br />
SCO<br />
尊 敬 的 中 国 外 贸 的 读 者 朋 友 们 :<br />
值 此 中 国 传 统 节 日 - 春 节 即 将 来 临 之 际 , 谨 向 大 家 致 以 节 日 的 祝 贺 !<br />
在 过 去 的 2010 年 里 , 上 海 合 作 组 织 全 力 落 实 2009 年 6 月 16 日 叶 卡 捷 琳<br />
堡 峰 会 、2 010 年 6 月 11 日 塔 什 干 峰 会 、2 0 0 9 年 10 月 14 日 北 京 政 府 首 脑 理 事 会<br />
会 议 确 定 的 目 标 和 任 务 , 包 括 2009 年 10 月 通 过 的 《 上 海 合 作 组 织 成 员 国 关<br />
于 加 强 经 济 合 作 、 应 对 全 球 金 融 经 济 危 机 、 保 障 经 济 持 续 发 展 的 共 同 倡<br />
议 》。 上 海 合 作 组 织 致 力 于 贸 易 和 投 资 便 利 化 、 落 实 本 地 区 和 地 区 间 交 通 、<br />
运 输 基 础 设 计 的 共 同 项 目 , 扩 大 和 深 化 人 文 合 作 , 为 推 动 上 海 合 作 组 织 地<br />
区 各 国 的 经 济 社 会 发 展 、 维 护 本 地 区 的 和 平 与 稳 定 做 出 了 重 要 贡 献 。<br />
2011 年 是 上 海 合 作 组 织 成 立 十 周 年 。 我 们 愿 以 此 为 契 机 , 将 上 海 合 作 组<br />
织 框 架 内 的 各 领 域 合 作 提 高 到 崭 新 的 水 平 , 造 福 于 本 地 区 各 国 人 民 。<br />
祝 大 家 身 体 健 康 , 万 事 如 意 !<br />
穆 · 伊 马 纳 利 耶 夫<br />
上 海 合 作 组 织 秘 书 长<br />
H.E. Mr. Bolat Nurgaliyev<br />
Secretariat of SCO<br />
UNICEF<br />
On the occasion of the 2011 Spring Festival, I would like to extend my<br />
best wishes to all and express my sincere hope that all children, everywhere,<br />
will have a better future.<br />
Dr. Yin Yin Nwe<br />
UNICEF Representative People’s Republic of China<br />
33
2011<br />
Congratulatory Messages For The Spring Festival<br />
Asia<br />
Pakistan<br />
THE PRESIDENT Islamic Republic of Pakistan to<br />
H.E. Mr. Hu Jintao, President of the People’s Republic of China, Beijing.<br />
February 2011<br />
Excellency,<br />
On behalf of the people of Pakistan and on my own behalf, it gives me great pleasure to extend<br />
warmest felicitations to Your Excellency and the government and people of China on the advent of Chinese<br />
Lunar Year and Spring Festival.<br />
China’s civilizational renaissance is a defining theme of the 21st century. Chinese phenomenal ascent<br />
over the last six decades bears testimony to the wisdom of its leaders and genius of its people. For us in<br />
Pakistan, China’s success story has come to serve as a source of inspiration and confidence.<br />
We believe that China is a factor of hope for the people of the world. It’s unparalleled development<br />
has brought, in its wake, peace, prosperity and harmony in its immediate neighbourhood and beyond.<br />
China is Pakistan’s closest friend and time tested partner. Rooted in the vision of Shaheed Zulfikar<br />
Ali Bhutto, the brotherly ties between our two countries have, over the years, flowered into a comprehensive<br />
strategic partnership based on mutually beneficial cooperation. Our close and friendly relations with<br />
China have been and will remain the corner stone of our foreign policy. The recent visit of Premier H.E.<br />
Mr. Wen Jiabao to Pakistan was the testimony of our unique relationship.<br />
We have declared 2011 as Year of Pak – China Friendship, which also coincides with the 60th anniversary<br />
of establishment of diplomatic relations between the two countries. Our two countries have<br />
already agreed on a comprehensive action plan to celebrate the Friendship Year which, inter alia, includes<br />
visit of Your Excellency to Pakistan.<br />
Through our deep and abiding friendship, Pakistan and China can together make a significant contribution<br />
towards fashioning a better future for the region and work towards creating a peaceful and harmonious world.<br />
I avail myself of this opportunity to convey best wishes for Your Excellency’s good health and happiness<br />
and continued progress and prosperity for the friendly people of China.<br />
Please accept, Excellency, the assurances of my highest esteem and consideration.<br />
(ASIF ALI ZARDARI)<br />
PRIME MINISTER Islamic Republic of Pakistan to<br />
H.E. Mr. Wen Jiabao, President of the State Council of the People’s Republic of China, Beijing.<br />
February 2011<br />
Excellency,<br />
On the advent of Chinese Lunar Year and Spring Festival, I have great pleasure in extending, on my<br />
behalf and on behalf of the government and people of Pakistan, our cordial greetings and sincere felicitations<br />
to Your Excellency, the government and the people of China.<br />
Chinese phenomenal ascent over the last six decades bears testimony to the wisdom of its leaders<br />
and genius of its people. For us in Pakistan, we believe that China is a factor of stability and of hope for<br />
the people of the world. This belief is reinforced by the fact that China’s growth has, in its wake, brought<br />
peace, prosperity and harmony in its immediate neighbourhood and beyond. As a close friend and good<br />
neighbour of China, Pakistan deeply appreciates China’s initiatives for building mutually beneficial economic<br />
complementarities for progress and social harmony in Asia and beyond.<br />
For us in Pakistan, the model set by China, our special friend and a time-tested partner, is a source of<br />
pride, inspiration and admiration. Our close and friendly relations with China have been and will remain<br />
the cornerstone of our foreign policy. The recent visit of Your Excellency to Pakistan was the testimony<br />
of our unique relationship.<br />
Pakistan and China have declared 2011 as Year of Friendship, which also coincides with the 60th<br />
anniversary of establishment of diplomatic relations between the two countries. Our two countries have<br />
already agreed on a comprehensive action plan to celebrate the Friendship Year.<br />
I avail myself of this opportunity to convey best wishes for Your Excellency’s good health and happiness<br />
and continued progress and prosperity for the friendly people of China.<br />
Please accept, Excellency, the assurance of my highest consideration.<br />
(SYED YUSUF RAZA GILANI)<br />
34
Asia<br />
Bahrain<br />
2011<br />
On the auspious occasion of the Chinese New Year, allow me to extend<br />
to the readers of China’s Foreign Trade Magazine my cordial wishes.<br />
Wishing every happiness and every increasing progress and success to<br />
China and Chinese People, I am optimistic that the existing friendly relations<br />
between us will be further enhanced in 2011 and beyond.<br />
With my higher consideration and esteem.<br />
Cambodia<br />
H.E. Bibi Al-Alawi<br />
Ambassador of Bahrain to China<br />
It gives me a great pleasure to extend, on behalf of the people and the<br />
Royal Government of Cambodia, my sincere congratulations and best<br />
wishes to the people and the Government of the People’s Republic of China<br />
on the occasion of the Chinese traditional New Year--Spring Festival.<br />
I feel very proud that the Chinese people will enjoy the upcoming Spring<br />
Festival just a few months after the great success of the Shanghai World Expo.<br />
China’s national development over the past 61 years in transforming<br />
the rural backward society into a Superpower is quite obvious to the Chinese<br />
peopleand the people in the rest of the world.<br />
I am confident that the Chinese people will continue to prosper in the<br />
years to come and materialize further modernization.<br />
Once again, I am delighted to extend our cordial greetings and best<br />
wishes to the people and the Government of the People’s Republic of<br />
China for the continued success in the building of a harmonious and prosperous<br />
society in all aspects.<br />
H.E. Khek Caimealy Sysoda<br />
Ambassador of Cambodia to China<br />
Congratulatory Messages For The Spring Festival<br />
35
2011<br />
Congratulatory Messages For The Spring Festival<br />
Asia<br />
Jordan<br />
Since the establishment of diplomatic ties between Jordan and China<br />
in 1977, leaders of the two countries have attached great importance to<br />
the bilateral relationship and have made many direct efforts to bring it<br />
forward. Thanks to their support, bilateral cooperation in the political,<br />
economic, cultural, and education areas has made sound progress, and<br />
friendly exchanges have been scales up.<br />
With both sides making vigorous efforts on the basis of equality,<br />
reciprocity and common development, Jordan and China have witnessed<br />
rapid progress in bilateral trade and economic cooperation, which has<br />
yielded satisfactory results in recent years. Bilateral trade broke the 2<br />
billion USD barrier in 2009 for the first time and has been maintaining a<br />
momentum of fast development.<br />
Both the Jordanian and Chinese economics are strongly complementary<br />
to each other, and there is huge room for trade and economic<br />
cooperation between the two countries. China can increase its imports<br />
of phosphate and potassium and participates in Jordan’s mega projects.<br />
Jordan is working on a number of Mega Projects that are regional in their<br />
impact and scope, cutting across several sectors and based on partnerships<br />
with the private sector. These mega projects in the key sectors of<br />
energy, transport, water and environment position Jordan as a regional<br />
hub for energy and transport networks, but are also essential in creating<br />
a transformative economic dynamic by allowing it to overcome chronic<br />
natural resource and development constraints in terms of water and<br />
energy, as well as significant environmental challengers. These efforts<br />
equally contribute to ensuring sustainable economic growth and quality<br />
standards of living, as well as addressing critical challenges of poverty<br />
alleviation, sustained growth and investment flows.<br />
The mega projects currently in preparation include the Jordan National<br />
Railway Project, the Nuclear Power Plant Project and the Jordan<br />
Red Sea Projects (Red-Dead Desalination projects), in addition to projects<br />
in alternative energy (such as oil shale, solar power projects). Cooperation<br />
with China can help in knowledge and experience transfer in the<br />
implementation and management of such projects, in addition to financing<br />
options which will help in bridging the financing gaps.<br />
Finally, on behalf the Government of Hashemite Kingdom of Jordan, I<br />
would like to extend my cordial greetings and best wished to the one million<br />
readers of China’s Foreign Trade. May the year 2011 be a better and a<br />
happier year and wish the China’s Foreign Trade magazine a great success!<br />
H.E. Anmar A.H.N.Al-Hmoud<br />
Ambassador of the Hashemite Kingdom of Jordan to China<br />
36
Europe<br />
Albania<br />
2011<br />
On the eve of the Spring Festival, I take the opportunity to wish the<br />
prestigious China’s Foreign Trade Magazine and its devoted and talented<br />
stuff a lot of prosperity and success in the coming year.<br />
The China’s Foreign Trade magazine is becoming very valuable to its<br />
users in China and abroad, due to the information it is publishing. Keep<br />
going on to this path and your success will be achieved.<br />
I wish you, I wish the Chinese people a prosperous year 2011.<br />
H.E. Maxhun Peka<br />
Ambassador of the Republic of Albania to the P.R.C.<br />
Bosnia and Herzegovina<br />
Dear Chinese Friends,<br />
I want to wish you a very happy and lucky Spring Festival as we enter the<br />
year of the Rabbit, a year traditionally associated with liveliness and speed.<br />
In this auspicious year of the Rabbit, I wish that China keeps progressing<br />
with more vitality and in higher speed, and accomplish greater<br />
successes in all fields, in order to make its society even much stronger for<br />
betterment of the whole world.<br />
I look forward to continuing to strengthen the friendly relationship<br />
between Bosnia and Herzegovina and China, keep promoting our mutual<br />
beneficial economic and trade cooperation, and reinforce the efforts for<br />
our respective development and prosperity.<br />
So as we join in the celebration of the Spring Festival with Chinese<br />
communities all around the world, please do pass on my warm best wishes<br />
to your family and friends:<br />
新 春 快 乐 兔 年 大 吉<br />
H.E. Mr. Amel Kovacevic<br />
Ambassador of Bosnia and Herzegovina to China<br />
Congratulatory Messages For The Spring Festival<br />
37
2011<br />
Congratulatory Messages For The Spring Festival<br />
Europe<br />
Greek<br />
Cordial wishes for a harmonious, creative, dynamic and prosperous<br />
Year of the Rabbit 2011.<br />
Hungary<br />
H.E. Theodore Georgakelos<br />
Ambassador of Greek Embassy in China<br />
I wish family happiness and business success to all readers, editors<br />
and employees of China’s Foreign Trade magazine in the upcoming Chinese<br />
Year of the Rabbit!<br />
I congratulate China’s Foreign Trade for its great success in the 54<br />
years of its existence and especially for its transformation into a monthly<br />
published magazine with rich content.<br />
I hope that in its new form China’s Foreign Trade will continue its<br />
highly valuable service to all readers and will successfully promote the<br />
trade cooperation between Chinese and foreign companies, including the<br />
Hungarian companies and entrepreneurs eager to develop trade and economic<br />
cooperation between Hungary and China.<br />
H.E. Mr. Sándor Kusai<br />
Ambassador of the Republic of Hungary to China<br />
38
Europe<br />
Russia<br />
2011<br />
Poland<br />
Dear readers of China’s Foreign Trade,<br />
On the occasion of the Spring Festival approaching, I wish you all the<br />
best in the coming Year of Rabbit!<br />
The strategic partnership and cooperation between Russia and China<br />
has been steadily improving in recent years, as the two countries continue<br />
to achieve breakthroughs in political, economic and cultural cooperation.<br />
Unprecedented frequency of political contacts and level of mutual<br />
understanding, as well as fruitful cooperation in international problems<br />
and wide variety of bilateral projects gives us confidence in the bright<br />
prospects of our friendship.<br />
I hope you have a most happy and prosperous New Year!<br />
Sincerely yours,<br />
H.E. Mr. Razov Sergey<br />
Ambassador of Russia to China<br />
I wish the readers of China’s Foreign Trade all the best for the Chun Jie and I wish economics of<br />
our countries that can develop faster in the New Year then the Rabbit can run!<br />
H.E. Mr. Tadeusz Chomicki<br />
Ambassador of Poland to China<br />
Congratulatory Messages For The Spring Festival<br />
39
2011<br />
Congratulatory Messages For The Spring Festival<br />
Africa<br />
Cape Verde<br />
On the occasion of the Chinese New Year, may my wife and I extend to all the Chinese people our<br />
warmest greetings, as well as wishes of family happiness and wealth, career greater success and the<br />
utmost achievements in building a harmonious and prosper society in 2011.<br />
Djibouti<br />
H.E. Julio Marais<br />
Ambassador of Cape Verde to China<br />
40
Africa<br />
Niger<br />
2011<br />
North America<br />
On the occassion of the upcoming Spring Festival, I would like to express<br />
in the name of the Embassy of the Republic of Niger in China, and<br />
in my own name, our sincere greetings and wishes to all the members of<br />
China’s Foreign Trade.<br />
Receive our sincere thanks for keeping us informed about China’s<br />
trade issue which help us a lot in our work in China.<br />
Wishing you the best for the New Year’s activities.<br />
Jamaica<br />
H.E. Boubakar Adamou<br />
Ambassador of Niger to China<br />
As we once again celebrate the Spring Festival in China, I take this<br />
opportunity to extend greetings and best wishes to all the members and<br />
readers of China’s Foreign Trade magazine.<br />
Indeed, we are afforded new information and perspectives each month<br />
on China’s finance, economy, investment and trade, which undoubtedly<br />
contribute towards a better understanding of the Chinese economic and<br />
business environment. I look forward to more of these in 2011 and hope<br />
that our partnership as well, will be strengthened in the coming year.<br />
Jamaica is home to a very large Chinese community, which will be<br />
celebrating the coming festival as well. I also wish them a very joyous<br />
season of activities, which, over the years, have become interwoven into<br />
the cultural fabric of Jamaica.<br />
H.E. E. Courtenay Rattray<br />
Ambassador of Jamaica to China<br />
Congratulatory Messages For The Spring Festival<br />
41
Setting Tone for<br />
China Economy in 2011<br />
by guo yan<br />
Since the second quarter of 2010,<br />
China economy has overtaken<br />
the rank of Japan’s economy,<br />
becoming the second largest<br />
economy. And recently, the World<br />
Bank predicted that the rate of China’s<br />
contribution to the world economic<br />
growth will reach 25% this year, then<br />
China will be the first engine to the<br />
global economic growth for two consecutive<br />
years.<br />
2011 is beginning of China<br />
“Twelfth Five-Year Planning”. As the<br />
wind-vane to judge the current economic<br />
situation and to draw up the development<br />
of macro-economic policies next<br />
year, the central economic work conference<br />
is vital for how to give the direction<br />
for the realization of the “Twelfth Five-<br />
Year Planning”. This time, the conference<br />
stipulates six tasks including the<br />
goal of macro-economic control, fiscal<br />
and monetary policies, livelihood, price<br />
reform, foreign economic and other issues<br />
of concern.<br />
In which, some policies highlighted<br />
several “first times”. In 2010,<br />
the price hikes reflected the living of<br />
citizens. More efforts will be made to<br />
ensure market supplies, stabilize prices<br />
and regulate market order in 2011. At<br />
first, China shift its monetary policy<br />
stance from loose to prudent in 2011.<br />
The second major task for economic<br />
work next year is to ensure the effec-<br />
tive supply of agricultural products. Anti-inflationary<br />
macro-control work will become the focus<br />
of next year. Since 2005 the policy of exchange<br />
reform has carried out. It is the first time that “to<br />
further improve the RMB exchange rate formation<br />
mechanism” was emerged in the document<br />
of central economic work conference publicly. In<br />
addition, it also was the first time that this session<br />
proposed to raise f the policy of expanding the<br />
scale of import to the level of balancing the macroeconomic<br />
and adjustment of economic structure<br />
height.<br />
This issue of livehood concerns a wide range.<br />
The central economic work conference discussed<br />
the issues including the education, employment,<br />
health insurance, and housing. At the conference,<br />
the emphasis was put on accelerating the developments<br />
of the housing guarantee system, and it was<br />
mentioned for the first time that a housing system<br />
including both affordable housing and commercial<br />
housing will be established in accordance with the<br />
national conditions. As the increasingly expanding<br />
income gap is setting barriers for Chinese social<br />
development, the central government requires<br />
strengthening the reforms on national income distribution<br />
system. This is also the first time to appear<br />
independently, not as one of the measures of<br />
improving the livehood.<br />
Therefore, how the central economic conference<br />
shift monetary policy, improve the exchange<br />
rate mechanism, expand the scale of imports, increase<br />
housing “dual” supply and adjust the reform<br />
of income distribution and other hot spots? This<br />
issue of China’s foreign trade will give you more<br />
detail.<br />
45
Shift to<br />
Prudent<br />
Monetary Policy<br />
by Chinanews. com<br />
“the money supply would grow by<br />
15-16% in 2011.”<br />
—Xia Bin<br />
The Central Economic Working Conference<br />
of 2010 was accompanied by<br />
a high CPI—5.1%. The National Bureau<br />
of Statistics released the macroeconomic<br />
data in advance on December 11th in<br />
2010 for which the Bureau claimed they wanted<br />
to release the data soon afterwards the data was<br />
obtained. However, more people believed it was<br />
the ongoing Central Economic Working Conference<br />
that advanced the data release.<br />
Back to August 10th 2009, the cover story<br />
on Time magazine was “Can China Save the<br />
World ” with an illustration, where a chubby<br />
panda was pumping up the deflated earth with<br />
sagging world economy. In that month, China’s<br />
CPI saw a year-on-year drop of 1.2%, a negative<br />
growth in 7 consecutive<br />
months, with decline<br />
in prices of five<br />
commodities among<br />
the eight commodities<br />
for calculating CPI.<br />
Under the deflationary<br />
pressure, a shift in the macro policy, particularly<br />
the monetary policy seemed to be a fable.<br />
But one year later, the fable comes true.<br />
As the weathervane of the Central Economic<br />
Working Conference, the Conference of the<br />
Political Bureau of CPC Central Committee<br />
held on December 3rd in 2010 by convention<br />
set the tone for this year’s Central Economic<br />
Working Conference—to implement proactive<br />
fiscal policy and prudent monetary policy and to<br />
enhance the relevance, flexibility and effectiveness<br />
of macro regulation (“proactive and prudent,<br />
cautious and flexible” to be short). After<br />
having tried the moderately loose, to be exact,<br />
extremely loose monetary policy for three years,<br />
China’s policy makers are considering again the<br />
prudent policy.<br />
There were signs for inflation, which were<br />
perceived by Premier Wen Jiabao. “Last year was<br />
most difficult for economic development, while<br />
this year will be most complicated,” said Premier<br />
Wen when communicated with netizens prior<br />
to this year’s NPC and CPPCC. Afterwards,<br />
the housing price saw the sharpest rise and that<br />
outside the Beijing 5th ring road reached RMB<br />
20,000, a shocking beginning for this year’s<br />
high commodity prices.<br />
In fact, as early as the fourth quarter of<br />
last year, many insiders expressed their concern<br />
about inflation. But the government have merely<br />
adopted anticipation management with no substantive<br />
changes in the monetary policy. The<br />
overall policy would not be changed, and small<br />
adjustments would be made in the growth rate<br />
of monetary supply and new credit scale in 2010,<br />
said Li Yang, Deputy President of the Chinese<br />
Academy of Social Sciences.<br />
For the figure itself, CPI is not that heartrending.<br />
During February to April of 2008,<br />
China’s CPI jumped more than 8% year on year<br />
for a third straight month, much higher than<br />
this year’s 5%. The stable pork price began to<br />
soar in April 2007, which concerned the whole<br />
country and imposed much more impact on<br />
people’s daily life than this year’s high-price garlic,<br />
bean and ginger.<br />
Some people have noted the nuance of the<br />
46
inflation in 2008 and 2010. Economist<br />
Chang Xiuze warned that before the inflation<br />
in 2007, China had implemented<br />
prudent monetary policy for ten years<br />
only with several adjustments; whereas<br />
in the wake of the 2008 global financial<br />
crisis, the Central Bank initiated the<br />
two-year “moderately loose” period and<br />
in 2009 increased the newly increased<br />
loans to RMB 9.5 trillion. In spite of<br />
adjustments in 2010, the aggregate<br />
credit scale was still nearing RMB 7.5<br />
trillion during the first 11 months.<br />
The Central Bank has did pointed<br />
out the difference between the prudent<br />
policy of 2010 and ten years ago. “This<br />
year’s prudent policy is different from<br />
that of 2008. In 2008, the prudent policy<br />
is subject to changes, while the prudent<br />
policy here is an intermediate state,<br />
neither loose nor an abrupt stop,” Sheng<br />
Song, the new head of the Financial<br />
Survey and Statistics Department of the<br />
Central Bank explicitly showed in Time<br />
for Prudent Monetary Policy carried in<br />
the Financial Times of mid November.<br />
Sheng’s opinion now seems in<br />
line with the message delivered by<br />
this year’s Central Economic Working<br />
Conference—to prevent inflation<br />
yet sustain economic growth, which<br />
is the long-term goal and also a severe<br />
challenge for China. On the night<br />
when the Central Economic Working<br />
Conference opened, the Central Bank<br />
announced a 0.5 percentage points<br />
hike in the deposit-reserve ratio from<br />
December 20th, the third time for the<br />
Central Bank to lift the deposit reserve<br />
ratio in one month. The abandonment<br />
of raising interest rates—most direct<br />
to adjust money supply—indicates that<br />
the Central Bank is considering the<br />
prudent policy.<br />
All parties are weighing the degree<br />
of the prudent policy. “The prudent<br />
policy this time is to deal with the<br />
stable triangle of economic development,<br />
structural adjustment and inflation<br />
curbing. Therefore, the prudent<br />
policy is to stay between tight and<br />
loose extreme. In theory, the chance<br />
for tight and loose policy is equal, but I<br />
prefer neutral monetary policy, because<br />
the economy is now in development<br />
after having recovered,” Chang Xiuze<br />
analyzed. “Next year, the monetary<br />
policy tends to be slightly tight,” said<br />
Xia Bin, Member of the Monetary<br />
Policy Committee of the Central Bank<br />
and Director of the Research Institute<br />
of Finance of the State Council<br />
Development Research Center in an<br />
interview with the media. Xia also<br />
forecasted the money supply would<br />
grow by 15-16% in 2011. Anyway, one<br />
thing is for sure: the policy makers will<br />
be more prudent and even cautious for<br />
capital use, as the Central Economic<br />
Working Conference has made it clear<br />
that more credit funds will be input to<br />
the real economy, particularly SMEs<br />
along with projects concerning agriculture,<br />
rural areas and farmers.<br />
Prior to the Central Economic<br />
Working Conference, it was reported<br />
that the Conference would stick to a<br />
minimum 8% economic growth for<br />
2011, while control CPI within 4%,<br />
breaking the former bottom line of<br />
3%. Although this news remains to be<br />
proved in next year’s NPC and CPP-<br />
CC, it can infer that the prudent policy,<br />
in the real sense for the policy makers,<br />
aims at economic growth rather that an<br />
abrupt slow down at the cost of small<br />
yet controllable inflation.<br />
47
Encourage<br />
to Boost Imports<br />
By China Times<br />
It’s learned that “adjusting structure and<br />
promoting balance” would be the tone<br />
for China’s foreign trade work in 2010.<br />
However, there’re some changes in specific<br />
policies which will shift attention to boosting<br />
import, unlike previous measures that blindly<br />
focus on encouraging imports; one of the major<br />
measures would be to facilitate the clearance of<br />
customs of commodities by abolishing non-tariff<br />
barriers.<br />
Some insider with the Ministry of Commerce<br />
(MOC) told reporters on December<br />
15th that policy guidance of next year will be<br />
imports-facilitating, which will further reduce<br />
the examination and approval procedures of imports,<br />
and narrow the registration scope subject<br />
to automatic import licensing; the MOC will<br />
continue to promote the reduction of tariffs and<br />
non-tariff barriers and open up manufacturing<br />
and services sectors to push the opening<br />
up of domestic markets. Besides the Ministry<br />
of Commerce will promote key industries and<br />
encourage the introduction of industry supporting<br />
policies, concerning, say, energy-conserving<br />
& environment-friendly industries, high-tech<br />
industries, to promote the restructuring of Chinese<br />
enterprises and the development of service<br />
industry.<br />
Secretary-General of the China Center<br />
for International Economic Exchanges, former<br />
Vice Minister of the Ministry of Commerce,<br />
Wei Jianguo said that China’s previous study on<br />
import was not enough; rather than take “import”<br />
into serious consideration, major national trade<br />
policies just kept focus on encouraging exports,<br />
which now require timely adjustments.<br />
During the just-ended 2010 Central Economic<br />
Work Conference, there are some changes<br />
in the account concerning foreign trade. The<br />
conference proposed to “attach equal importance<br />
to exports and imports, or more exactly, attracting<br />
foreign investment and investing in foreign<br />
countries, broaden the channels of international<br />
economic cooperation, and enhance opening up<br />
constantly.”<br />
Exports beat market’s expectations<br />
According to some statistics, China’s foreign<br />
trade jumped 36.3 percent from a year earlier<br />
to 2.67728 trillion U.S. dollars from January<br />
to November of 2010. Among that China’s export<br />
recorded at USD 1423.84 billion, up 33.0%<br />
year on year and import rose 40.3% year on year<br />
to USD 1,253.4 billion, resulting in a trade surplus<br />
of 170.42 billion U.S. dollars.<br />
In fact, the Ministry of Commerce estimated<br />
at the end of 2009 that imports and exports<br />
would grow by eight to ten percent in the<br />
whole year of 2010; however, judged by the data<br />
of China’s foreign trade in the first 11 months<br />
of 2010, the recovery of exports has been much<br />
better than expected.<br />
“It’s estimated that export growth rate this<br />
year will be 28 to 30 percent” analyzed by some<br />
from the foreign trade system. The Ministry<br />
of Commerce has raised the estimated export<br />
growth rate to around 25 percent in the symposium<br />
in the 2010 Canton Fair.<br />
This impressive growth rate, however, may<br />
be unsustainable.<br />
Earlier a number of key provinces and cities<br />
engaged in foreign trade have estimated that<br />
overseas demand in the first half of 2011 will be<br />
slowing down greatly, making it difficult to reproduce<br />
the fast growth in 2010.<br />
Feedback from the Canton Fair Autumn<br />
2010 showed that export orders at the fair were<br />
not in large numbers; what’s worse, most of<br />
those are short-term contracts. Some pessimists<br />
are even talking about a negative growth of export<br />
in 2011. “Even if it’s not a negative growth,<br />
the growth rate will be very limited.” Mr. Wei<br />
told reporters, “generally China’s exports next<br />
48
year does not seem to be optimistic; a<br />
decline of 10 to 15 percentage points is<br />
expected.”<br />
According to the insider from<br />
the MOC China’s foreign trade policies<br />
will start to put more emphasis<br />
on the adjustment of trade structure<br />
from 2012; the country’s foreign trade<br />
growth target will thus expectedly be<br />
lowered.<br />
Huo Jianguo, the president of<br />
the Chinese Academy of International<br />
Trade and Economic Cooperation, an<br />
institute under the Ministry of Commerce,<br />
gave the same judgment. He<br />
estimated that exports growth in 2011<br />
will be around 15 to 16 percent; and<br />
imports will rise slightly faster, at a rate<br />
of 17 to 18 percent.<br />
Emphasis will be put on<br />
boosting imports<br />
It’s the first time for China to position<br />
import so high in the country’s<br />
overall strategy.<br />
In fact, foreign trade policies<br />
have been showing signs of a shift ever<br />
since the start of the latter half of 2010.<br />
Reporters have noted that, officials<br />
with the Ministry of Commerce have<br />
been talking about taking a series of<br />
measures to further boost imports and<br />
maintaining a balanced development of<br />
foreign trade.<br />
In order to further expand imports<br />
volume, the Chinese government has already<br />
taken several measures, including<br />
lowering the import tariffs. The general<br />
tariff level in this country has been lowered<br />
at 9.8 percent in 2010, and China<br />
has further cut import tariffs of some<br />
raw materials and consumer goods and<br />
formulated policies for domestic sales of<br />
processing trade companies.<br />
However, the Ministry of Commerce<br />
will focus more on expanding<br />
imports in 2011.<br />
The insider with the Ministry<br />
of Commerce told the reporter, the<br />
Ministry of Commerce will focus on<br />
encouraging imports from the countries<br />
with trade deficit with China, the Ministry<br />
of Commerce is even considering<br />
opening up unilaterally, relaxing import<br />
regulation, lowering import costs, simplifying<br />
import financing for domestic<br />
enterprises etc. In addition, the Ministry<br />
of Commerce will also support and<br />
organize various forms of investment<br />
and trade promotion missions to “go<br />
out” to invest and procure in 2011.<br />
Talking about the expansion of<br />
imports, Bai Ming, Deputy Director<br />
of the Research Department of International<br />
Market under the Chinese<br />
Academy of International Trade and<br />
Economic Cooperation (CAITEC), an<br />
affiliate of the Ministry of Commerce,<br />
said, “Apart from technology, China<br />
mainly needs to import resources,<br />
which for the most part refer to commodities,<br />
such as iron ore, crude oil.”<br />
To further enhance trade facilitation,<br />
China will continue to clean up nontariff<br />
barriers, improve trade policies,<br />
measures and customs inspection<br />
procedures, continue to simplify and<br />
relax certain import regulations, reduce<br />
import procedures, as well as reduce<br />
import costs.<br />
Long Guoqiang, Director of<br />
the Research Department of Foreign<br />
Economic Relations, Development Research<br />
Center of the State Council, told<br />
reporters that Europe and the United<br />
States need to relax the controls of<br />
technology export to China; for China’s<br />
part, the country should further open<br />
up the markets unilaterally, and give<br />
preferential trade treatment to the least<br />
developed economies to promote the<br />
liberalization of regional trade and<br />
multilateral so as to increase imports.<br />
Domestic and foreign trade<br />
will be integrated<br />
The country should look forward<br />
to plan for the future as well as pay<br />
attention to the current situation to<br />
deliver a good result in foreign trade in<br />
2011, as it’ note worthy that 2011 is the<br />
first year of the 12th Five-Year Plan.<br />
It is known that in the 12th Five-<br />
Year period great emphasis will put on<br />
the transformation of the structure,<br />
quality, technology and standard of<br />
China’s foreign trade, with focus on<br />
urging the change of processing trade.<br />
What’s more, the Ministry of Commerce<br />
will also help foreign trade companies<br />
to enter the domestic market<br />
gradually in 2011.<br />
Chen Deming, the Minister of<br />
the Ministry of Commerce, noted in<br />
his investigation and research of foreign<br />
trade in Guangzhou, that “I believe<br />
China’s foreign trade structure will<br />
be greatly changed and improved and<br />
domestic market will integrate with<br />
overseas market after a few years’ time,<br />
especially in the 12th Five-year period.<br />
In my opinion the future Chinese domestic<br />
market will surpass Japan’s market<br />
significantly to become the world’s<br />
second largest domestic market.”<br />
Some people engaged in foreign<br />
trade indicated that, in addition to an<br />
expanding foreign trade size, China’s<br />
foreign trade team will be changed<br />
fundamentally with the transformation<br />
of international market pattern and the<br />
country’s economic development mode.<br />
Mr. Bai commented that China’s<br />
foreign trade will shift from a “masstrader<br />
pattern” to a “go-getter pattern”<br />
in the next five years; companies with<br />
few variations of products and weak<br />
bargaining power will be eliminated<br />
gradually.<br />
Along with the unification of domestic<br />
and overseas market, the product<br />
chain and industry chain of Chinese<br />
foreign trade enterprises will be further<br />
“extended” in the future, similar<br />
to the production and operation mode<br />
of current multinational enterprises in<br />
developed countries; and it will become<br />
a trend for manufacturing companies<br />
to move from “Made-in-China” to<br />
“Created-by-China” in accordance with<br />
their own needs for development.<br />
49
Equal Emphasis<br />
on the system<br />
of Affordable<br />
Housing and Commercial Housing By Li Qianqian<br />
According to the statements on the<br />
real estate sector developments at<br />
the Central Economic Work Conference,<br />
the emphasis was put on<br />
“accelerating the developments of the housing<br />
guarantee system”, and it was mentioned for the<br />
first time that “a housing system including both<br />
affordable housing and commercial housing will<br />
be established in accordance with the national<br />
conditions.” This statement implies that the dual<br />
track housing supply system, which combines<br />
affordable housing and commercial housing as<br />
many experts had long advocated, has gained<br />
approvals from the central government and recognitions<br />
of markets. In the future, this housing<br />
system will gradually take shape.<br />
Many factors raise the difficulty in<br />
controlling the property market<br />
According to the data provided by the<br />
National Bureau of Statistics, in November in<br />
2010 the average selling price of houses in 70<br />
Chinese big and medium-sized cities rose by 7.7%<br />
on year-on-year basis, the amount of increase<br />
contracting by 0.9 percentage point compared<br />
with October; however, this price kept a month<br />
to month growth of 0.3% in November, rising<br />
by 0.1 percentage point compared with October<br />
and the third consecutive monthly increase since<br />
September in 2010. As for the trading volume, in<br />
November commercial houses with a total space<br />
of 101.13 million square meters were sold, rising<br />
by 14.5% on a year-on-year basis. The absolute<br />
amount surged by 8.34 million square meters,<br />
a 9.0% increase from October; the commercial<br />
housing sales across China valued 528.6 billion<br />
yuan, rising by 18.6% on a year-on-year basis.<br />
The absolute amount rose by 21 billion yuan, an<br />
increase of 4.1%. A double surge in amount and<br />
price happened in many cities, including Beijing,<br />
Tianjin, Wuhan and Changsha.<br />
Currently, the inflationary expectations<br />
began to rise after one or two months’ policy<br />
implementation and observation. The inflationary<br />
pressure also intensified and could not be<br />
eased in the short run. The role of property as<br />
investment tools was strengthened, which bolstered<br />
up the housing prices. Additionally, the<br />
favorable exchange and interest rate gains led a<br />
huge amount of foreign capital into the property<br />
market. Therefore, under these multiple factors,<br />
the control and management of property market<br />
has arrived at a critical period of game playing.<br />
Due to the inflationary expectations, the<br />
curbing effect of management and control policies<br />
on demands has moderated. The surging<br />
price aroused property buyers’ worries about<br />
devaluation of purchasing powers and lack of<br />
investment channels, and strengthened their<br />
beliefs that “having one house in hands is better<br />
than none”. Also, the inflationary expectations<br />
rose with the growing pressure, and the spike<br />
of price made capital flow back to the property<br />
market after a short period of observation,<br />
which increased the difficulty in controlling the<br />
property market.<br />
“Buckets Effect” of affordable housing<br />
becomes prominent; construction of public-rent<br />
houses will speed up.<br />
For quite a long time, the imbalanced<br />
development of Chinese commercial housing<br />
market and the affordable housing market was<br />
also an important factor that contributed to the<br />
spike of housing prices. On the one hand, the<br />
long accumulated “historical debts” of affordable<br />
housing prompt demands to unleash in huge<br />
50
amount in the commercial housing<br />
market, which boosted the high housing<br />
price; on the other hand, the inadequacy<br />
of affordable housing accentuates<br />
the housing difficulties against the<br />
backdrop of high housing prices, which<br />
forms a vicious circle.<br />
Compared with the commercial<br />
housing market, which grows rapidly<br />
with the urbanization, the development<br />
of affordable housing clearly lags behind,<br />
as the amount of houses is insufficient.<br />
In the middle of June of 2010,<br />
Mr. Liu Jiayi, Auditor-General of the<br />
National Audit Office of China, stated<br />
in his 2009 work report delivered to the<br />
Standing Committee of the National<br />
People’s Congress that as of the end of<br />
2009, the 448 new low-rent housing<br />
projects and 10 squatter resettlement<br />
projects under the spot test had only<br />
completed 41% and 42% of the planned<br />
investment respectively. The “debts” of<br />
affordable housing channel huge housing<br />
demands into the commercial housing<br />
system, stress the relations between<br />
supply and demand, which become an<br />
important factor that contributes to the<br />
high housing price.<br />
The Central Economic Work<br />
Conference this year pointed out that<br />
the role of governments should be<br />
consolidated, all social forces should<br />
be mobilized, the constructions of affordable<br />
housing should be furthered<br />
and the public-rent houses should be<br />
developed. A system of affordable housing<br />
and commercial housing should be<br />
formed in accordance with the national<br />
conditions. Also, an additional emphasis<br />
on affordable housing will not only<br />
efficiently satisfies part of demands in<br />
the commercial housing market, but<br />
also provides a good solution to the<br />
housing problems of those deserving<br />
people.<br />
However, according to the housing<br />
programs in the “Twelfth Fiveyear<br />
Plan” in all regions, the affordable<br />
housing projects will take much more<br />
shares of the property market. The public-rent<br />
houses, which are used to solve<br />
housing problems for the “sandwich<br />
class”, will also become important in<br />
the construction program. During the<br />
“Twelfth Five-Year Plan”, the Beijing<br />
government plans to build and purchase<br />
1 million affordable housing and grant<br />
rental compensations to 100 thousand<br />
households. The affordable housing will<br />
take up 60% of the whole housing supplies.<br />
In 2011, the percentage of publicrent<br />
houses will increase to more than<br />
60% of the whole affordable housing<br />
program in Beijing. As for Shanghai,<br />
its initial plan during the “Twelfth<br />
Five-Year Plan” period is to build new<br />
houses with space of 130 million square<br />
meters. Among these houses, the affordable<br />
housing space will take up 50%<br />
and the number of houses will take<br />
about 60% of the total.<br />
The Ministry of Housing and<br />
Urban-rural Development has recently<br />
pointed out that in 2011 the affordable<br />
housing program will cover 10 million<br />
houses, compared with the 5.8 million<br />
in the year 2011, the new incremental<br />
4.2 million houses mainly belong to the<br />
public-rent houses.<br />
Developers will take greater<br />
initiative in the affordable<br />
housing program<br />
In those earlier days, Jia Kang,<br />
director of the Research Institute for<br />
Fiscal Science, Ministry of Finance,<br />
P.R.China and other experts claimed to<br />
establish “double track” housing supply<br />
system. The key lies in the division of<br />
responsibilities between government and<br />
market: the government should carry out<br />
well the territorial development and “top<br />
planning” for the property constructions,<br />
and provide low-rent houses for the lowincome<br />
class and the rental houses for<br />
“sandwich class”. The market should<br />
play its role in allocating common commercial<br />
housing and other properties.<br />
This means that more affordable housing<br />
houses should be built.<br />
Actually, in recent years, as the<br />
double-track housing system of commercial<br />
housing and affordable housing<br />
becomes clearer, and the development<br />
of affordable housing was furthered<br />
and accelerated all across China, some<br />
real estate developers have followed<br />
the policy trend and take part into<br />
the affordable housing program on a<br />
voluntary basis. Many large real estate<br />
corporations, including Vanke, Poly,<br />
CSCEC, Chixia Development, green<br />
land, Merchants Property etc, have<br />
quickened their pace towards the affordable<br />
housing market and intended<br />
to grab more shares of the market.<br />
We think that during the “Twelfth<br />
Five-Year Plan” period, it will be a big<br />
market trend that more and more real<br />
estate corporations will participate into<br />
the affordable housing developments<br />
and raise their corresponding investments.<br />
Reasons are as follows:<br />
The first reason is that since last<br />
year, the control over property market<br />
has strengthened, which raised the<br />
policy risk for developing commercial<br />
housing programs. The contraction in<br />
real estate credit will surely happen next<br />
year. However, the affordable housing<br />
program has won a lot of policy support<br />
in capital, land and taxation. Compared<br />
with the commercial housing market,<br />
developers will suffer less risk in developing<br />
affordable housing and gain<br />
stable profits, protections on the capital<br />
return and credit support. It is said that<br />
currently, among all the housing space<br />
invested by Vanke, 5% of them belongs<br />
to affordable housing and the net profit<br />
rate amounts to 6%. The average net<br />
rate of all Vanke projects is about 10%.<br />
Second, there is not much space<br />
left for developers in the commercial<br />
housing markets at the first-line and<br />
second-line cities. As the affordable<br />
housing program becomes more urgent<br />
and important, its huge market will<br />
become a new place for business competition<br />
and source of profits. Also, the<br />
affordable housing program will be carried<br />
out as business rather than public<br />
welfare projects. The affordable housing<br />
planned to be constructed this year<br />
will cover 1 million square meters. In<br />
Beijing, 1/3 of the houses developed by<br />
Vanke Beijing will become affordable<br />
housing in 2010.<br />
From “letting real estate sector play<br />
a prominent role” emphasized in 2008<br />
Central Economic Work Conference, to<br />
“provide more commercial housing supply”<br />
in 2009, to “accelerating affordable<br />
housing system development” this year,<br />
the policy trend has become quite clear.<br />
Under such background, real estate<br />
developers should adapt to the market<br />
change and make long-term plan about<br />
its position, to grab a share from the<br />
increasingly fierce competition in the affordable<br />
housing market.<br />
(Author: from Xinhua News Agency)<br />
51
A New Round of<br />
Reform on Income Distribution<br />
—Touch the Tender Spot<br />
By Outlook Weekly<br />
The unreason of income distribution<br />
system mainly includes the influence<br />
of non-market factors on market factors<br />
in the initial distribution, and<br />
weak compensatory intervention of the government<br />
in redistribution of initial distribution.<br />
As the increasingly expanding income<br />
gap is setting barriers for Chinese social development,<br />
the central government requires<br />
“strengthening the reforms on national income<br />
distribution system”. The new round of reform<br />
on income distribution system should cut to the<br />
quick, and really works.<br />
According to the data from National Bureau<br />
of Statistics, the Gini coefficient of China<br />
has kept on rising since 2000 when it topped 0.4,<br />
the warning limit. And now it comes to 0.47,<br />
according to the World Bank. Companied with<br />
the expanding income gap is the rapid concentration<br />
of social wealth, which is contrary to the<br />
target of building a moderately prosperous society<br />
in all aspects, demonstrating the urgency of<br />
adjusting income distribution system.<br />
The unreason in income distribution system<br />
since marketization reform mainly shows in<br />
influences of non-market factors on market factors<br />
in the initial distribution, and insufficient<br />
compensatory intervention of the central government<br />
in redistribution of initial distribution<br />
results. First is the gray income out of combination<br />
of market mechanism and non-market factors.<br />
“Gray income” means interference of nonmarket<br />
forces on market mechanism, which can<br />
lead to concentration of incomes that should<br />
be equally distributed by market mechanism to<br />
hands controlling non-market forces. In addition,<br />
gray income is not included in social and<br />
economic statistics. Overall, gray income in<br />
China includes incomes from double-track price<br />
system, monopoly, loss of state-owned assets,<br />
tax erosion and illegal operation, etc.<br />
Second, the weak position of laborers<br />
causes that the labors now are having a declining<br />
income proportion. In this long-term oversupply<br />
labor market in China, “monopsony”<br />
objectively exists, and this situation is even<br />
worse in traditional labor-intensive industries.<br />
Enterprises often force employees to accept a<br />
wage offer that can hardly meet the basic demands,<br />
to make the largest profits. This results<br />
in a situation that labors can not equally share<br />
achievements in economic growth.<br />
Third, state-owned monopoly industries<br />
can offer much higher wages. In the process of<br />
state-owned enterprise reform, this problem is<br />
not solved.<br />
52
Fourth, the social security system<br />
hasn’t sufficient relieving capabilities in<br />
redistribution. As a relieving system for<br />
the government to intervene in income<br />
distribution by market mechanism,<br />
social security system should not only<br />
have functions to correct the unbalances<br />
in initial distribution by market<br />
mechanism, but also capabilities to<br />
relieve the social contradictions due to<br />
income gap. In the process of marketization<br />
reform, meaning through the<br />
transformation from “enterprise-funded<br />
security” to social security, the unbalanced<br />
social security coverage due to<br />
different income levels between urban<br />
and rural area and different enterprises<br />
still exists. According to the statistics of<br />
2009, only 4.8% of rural population in<br />
China takes pensions, and the ratio of<br />
urban population is 78%. After several<br />
times of adjustments, now urban enterprise<br />
retiree has a basic annuity of 1200<br />
RMB/month, but still less than 50% of<br />
that of a civil servant. This is contrary<br />
to the aim of social security system to<br />
remedy the groups with weak market<br />
competitiveness and “losers”, and may<br />
even worsen the unbalanced income<br />
distribution by expanding the actual<br />
income gap.<br />
The above four “spots” are the<br />
targets for current reform on income<br />
distribution system.<br />
First, make comprehensive efforts<br />
on gray income, meaning overcoming<br />
the income gap due to grey or even<br />
“black ” income, which needs great<br />
determination from decision-makers.<br />
Cleaning gray income needs comprehensive<br />
measures, and the priority is<br />
to reference on experiences from other<br />
countries of market economy, especially<br />
those with mature market economy, to<br />
patch the loopholes in financial, administrative,<br />
state-owned resources management<br />
systems that may lead to losses<br />
of public capital, corruption and so<br />
on, while establish a standardized and<br />
transparent systems, cut unnecessary<br />
administrative examination and approval<br />
procedure, reduce administrative<br />
monopoly, standardize governmental<br />
authority, perfect strict social monitoring<br />
mechanism.<br />
Second, actively and steadily boost<br />
collective labor contract negotiation<br />
mechanism, and raise labor income.<br />
The main reason for laborers having a<br />
declining income proportion is that a<br />
single laborer is weak facing an enterprise<br />
in labor market, while collective<br />
agreement negotiation can arm labors<br />
and effectively protect their economic<br />
interests. The existing legal framework<br />
in China has provided a legal basis for<br />
boosting the collective negotiation.<br />
From the perspective of economics,<br />
collective negotiation<br />
can<br />
ease the buyer<br />
monopolization<br />
in labor<br />
market, and<br />
maximize social<br />
welfare by<br />
market competition.<br />
It is<br />
demonstrated<br />
that collective negotiation can be a legal<br />
way to secure labors’ economic interests<br />
and avoid social contradictions, as a<br />
smoother to social contradictions.<br />
Third, average the higher incomes<br />
in monopolized industries, to overcome<br />
the income gap between industries,<br />
especially with monopolized industries.<br />
This is a key part for reform on income<br />
distribution system in China. The following<br />
measures can be taken. For<br />
example, carry out state-owned capital<br />
management budget, turn in the equity<br />
earnings and profits of monopolized<br />
enterprises to state treasury to supplement<br />
social security, impose special<br />
taxes to monopoly profits, hold public<br />
hearings before any price changes of<br />
products and services from monopoly<br />
industries, make transparent of income<br />
distribution in administrative monopoly<br />
industries, etc. Taking chance of this<br />
wave of reform on income distribution<br />
system, treat anti-monopoly as a necessity<br />
for socialist market economy construction,<br />
and only in this way can we<br />
secure a balanced<br />
income distribution.<br />
M e a n -<br />
while, the social<br />
security system<br />
should focus on<br />
those disadvantaged,<br />
to prevent<br />
intergenerational<br />
transmission of<br />
poverty. As China has a large population<br />
and unbalanced economic development<br />
between urban and rural areas<br />
and different regions, it is hard to realize<br />
equal social security coverage in a<br />
short term. So, we should vigorously<br />
promote the construction of rural social<br />
security system and the establishment<br />
of urban social security system for migrant<br />
workers, while consider setting<br />
up educational funds in social security<br />
system for low-income, especially rural<br />
poor population, to improve labor quality<br />
and competitiveness, therefore preventing<br />
intergenerational transmission<br />
of poverty.<br />
As China has a large population<br />
and unbalanced economic<br />
development between urban and<br />
rural areas and in different regions,<br />
it is hard to realize equal social<br />
security coverage in a short term.<br />
53
voices and views<br />
Experts’ Views on<br />
China Economy of 2011<br />
Zhang Yansheng<br />
director of Foreign Economic Research Institute of National<br />
Development and Reform Commission<br />
Zhang Yansheng points out<br />
that, the statement of Central<br />
Economic Work Conference<br />
on RMB exchange rate means<br />
that next year China will insist<br />
on perfecting RMB exchange rate<br />
regime in accord with actual national<br />
conditions, and continue the reform<br />
direction towards enhancing regime<br />
f lexibility and forming mechanism<br />
marketization. He believed that appreciation<br />
of RMB would not help to solve<br />
the “problem” of trade surplus of China,<br />
as China’s trade surplus is mainly from<br />
processing trade, internal trade of multinational<br />
companies, and is resulted<br />
from globalization. It can not be overcome<br />
by exchange rate regime.<br />
Wang Xiaoguang<br />
researcher at Decision-making Consultation Department of<br />
Chinese Academy of Governance<br />
Wang Xiaoguang said, in consideration<br />
of that the export<br />
and actual consumption may<br />
slowdown next year, but investment<br />
would continue to<br />
rise, China is possible to have 9% to 9.5%<br />
of GDP growth in 2011. According to the<br />
data issued by General Administration<br />
of Customs recently, in November 2010,<br />
China had an import and export value totaled<br />
283.76 billion US dollars, up 36.2%<br />
from a year ago, refreshing the record of<br />
US$273.09 billion September 2010, and<br />
topping US$280 billion for the first time.<br />
Wang Xiaoguang pointed out that, as export<br />
grew too fast in 2010, even to a new<br />
height in November, it may slow down in<br />
2011 due to this large basic value; on the<br />
other hand, global economy recovered as a<br />
whole in 2010, and may face adjustments<br />
in the following year. “In American and<br />
European markets we may face higher<br />
pressure, so it is estimated that 2011 will<br />
see an export growth of 10% plus or so,<br />
which could be a major restrictive factor<br />
for China economic growth.”<br />
Liu Fuyuan<br />
president of China Human Resources Development Research<br />
Association, researcher of Academy of Macroeconomic Research<br />
of National Development and Reform Commission<br />
Liu Fuyuan said, the key of economic<br />
structure adjustment is the<br />
transformation of peasant workers<br />
and making free of farmers. He<br />
pointed out that, if 1% of rural<br />
population can be turned into urban, China’s<br />
economy development will improve<br />
by one percentage, and GDP growth rate<br />
will not be less than 10%. Now the principal<br />
contradiction in China is the contradiction<br />
between urban and rural mode of<br />
production. Liu Fuyuan said, changing<br />
the social identity of peasant workers<br />
and accelerating urbanization of rural<br />
population, can solve many problems. He<br />
consistently claims that transformation of<br />
social identity of peasant workers should<br />
be an important topic during 12th Fiveyear<br />
Period. “Peasant workers should stay<br />
in cities. The major barrier for the transformation<br />
lies in lack of a social security<br />
system with comprehensive coverage.<br />
Moving rural population to towns instead<br />
of urbanization is not a good choice, and<br />
the best way is to perfect the social security<br />
system,” he said.<br />
54
Xiao Geng<br />
from School of Public Policy and Management, Tsinghua University<br />
P<br />
rofessor Xiao Geng believed<br />
personal income tax<br />
threshold does not matter<br />
much, but it is important<br />
to lower the rates. Doing<br />
this can attract many industries<br />
to relocate in China Mainland from<br />
overseas, such as finance and other<br />
high-end service industries. In this<br />
way, the revenue would increase<br />
rather than decline. As to those new<br />
taxes like resources tax, environment<br />
tax and house tax, he said the government<br />
should be prudent. For example,<br />
the property and value of real<br />
estate in China is very complicated<br />
to figure out, so it must be cautious<br />
to set building tax rate. “These new<br />
taxes should have a low rate, if they<br />
are imposed,” he said.<br />
Zhang Xiaojing<br />
director of Department of Macroeconomics, Institute of<br />
Economics, Chinese Academy of Social Sciences<br />
Z<br />
hang Xiaojing said, the number<br />
of favorable factors to stimulate<br />
consumption increases<br />
in recent years. For example,<br />
farmers’ income, standards<br />
for minimum urban living allowance,<br />
minimum wage and personal income<br />
tax threshold are on the rise, the govern-<br />
ments’ input in people’s livelihood is<br />
increase, and the process of urbanization<br />
is speeding up. Since most people source<br />
their incomes from work, next phase of<br />
reform on income distribution system<br />
will take wage reform as the core and lift<br />
the proportion of labor income in initial<br />
distribution of income.<br />
Yi Xianrong<br />
Researcher Yi Xianrong from Institute of Finance and Banking<br />
Y<br />
i Xianrong said, the key of reasonable<br />
property market regulation<br />
is to clean speculation.<br />
There are numerous policies,<br />
but they are not put into practice as expected.<br />
About 70% to 80% of property<br />
market regulation policies are not carried<br />
out as expected. “House tax which is hot<br />
recently can do little help, and the key<br />
to regulate property market is to control<br />
speculative purchases. 10 million sets<br />
of welfare housing to be constructed in<br />
2011 will ease the pressure on people<br />
with housing difficulties, having no<br />
major impacts on commodity property<br />
market.<br />
Zhuang Jian<br />
Asenior economist from Asian Development<br />
Bank China Office<br />
Zhuang Jian pointed out that,<br />
most of the governmental investments<br />
were used in infrastructure<br />
construction. In the<br />
12th five-year period, central<br />
government will put more attention to<br />
people’s livelihood, to boost domestic<br />
demand and improve people’ lives; investments<br />
in emerging strategic industries<br />
will increase; meanwhile, the government<br />
also should spare investment<br />
to small and medium-sized and private<br />
enterprises, to develop various driving<br />
forces to boost economic development.<br />
55
China Searching for Something<br />
By Lan Shen<br />
• Online search data sug<br />
gests rising interest in<br />
buying a home<br />
• Searches for buying a car<br />
resumed their uptrend in<br />
late 2010<br />
• Inflation became a big<br />
concern nationwide in<br />
late 2010<br />
• Wealth management<br />
products are growing rap<br />
idly in popularity<br />
What people search for online can be a good signal of present and<br />
future consumer demand. In March 2009, we believe we became<br />
the first bank research team to use Google Tools to track what<br />
people in China were searching for online. We are now excited<br />
to find that Baidu, which has an 80% share of the search market among China’s<br />
online population of 300mn, has developed a similar tool, the Baidu Index (BI).<br />
Again, we believe we are the first to use this tool to highlight what the Chinese<br />
consumer is thinking about. Our main findings are as follows:<br />
• Interest in buying a home has risen in the last few months, after plateauing<br />
at a high level in 2010. This is a bullish signal for near-term housing<br />
demand.<br />
• Interest in buying a car is rising again, too.<br />
• Online interest in inflation is through the roof.<br />
• Wealth management products appear to be the dominant inflation<br />
management tool for retail investors.<br />
First, a quick note on how the BI works. We did all of our searches in<br />
simplified Chinese and limited them to searches in mainland China. The results<br />
are an index representing the number of daily searches for that term over<br />
time via Baidu’s search engine (we asked Baidu’s investor relations department<br />
how they calculate this index, but the exact details have not been made public).<br />
Despite this lack of transparency, it is clear that the BI is different from<br />
Google’s equivalent tool. Google compares the number of searches for one<br />
58
search term to all other searches carried<br />
out at that time, and thus provides<br />
a sense of how popular a search term<br />
is relative to others. The Baidu Index,<br />
in contrast, will show more searches<br />
simply as a result of an increase in the<br />
online population, and in the number<br />
of people using Baidu. As a result, we<br />
should focus on periods of stability<br />
and spurts in growth in the BI. Most<br />
of the BI data starts in June 2006 and<br />
runs to December 2010. Unfortunately,<br />
Baidu does not allow the data to be<br />
downloaded, so we have eyeballed the<br />
charts and recreated them as best we<br />
can. Baidu also provides statistics on<br />
the gender, age, occupation, education<br />
and location of searchers. To smooth<br />
out the volatility, we have averaged<br />
the monthly data over three months in<br />
our charts. Housing interest continues<br />
to rise Nationwide searches for ‘buy a<br />
home’ (‘ 买 房 ’) are rising again, as Chart<br />
1 shows. The only time searches for this<br />
term declined between June 2006 and<br />
December 2010 was during a brief period<br />
in Q1 and Q2-2008. When searches<br />
recovered in Q3-2008, transactions followed,<br />
and so did the monthly average<br />
selling price (ASP). Strong interest was<br />
maintained throughout 2009-10. Inter-<br />
Chart 1: Searches for ‘buy a home’<br />
Nationwide searches for ‘buy a home’ vs. monthly ASP<br />
1,000<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Jun-06<br />
Oct-06<br />
Feb-06<br />
Jun-07<br />
'Buy a house'<br />
Oct-07<br />
Feb-08<br />
Jun-08<br />
Oct-08<br />
Feb-09<br />
Jun-09<br />
Oct-09<br />
Feb-10<br />
Jun-10<br />
Oct-10<br />
ASP, CNY/m2(RHS)<br />
12,000<br />
10,000<br />
8,000<br />
6,000<br />
4,000<br />
2,000<br />
0<br />
Sources: Baidu, CREIS, Standard Chartered Research<br />
Chart 2: Searches for ‘buy a home’<br />
Top 3 cities (Beijing, Shanghai, Shenzhen)<br />
– searches for ‘buy a home’<br />
1,000<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Jan-09<br />
Mar-09<br />
May-09<br />
Jul-09<br />
Sep-09<br />
Nov-09<br />
'Buy a house' (nationwide)<br />
Jan-10<br />
Mar-10<br />
May-10<br />
Jul-10<br />
Sep-10<br />
Nov-10<br />
'Buy a house' (three cities)<br />
Sources: Baidu, Standard Chartered Research<br />
1,000<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Chart 3: Searches for ‘buy a car’<br />
Nationwide searches for ‘buy a car’<br />
Jun-06<br />
Oct-06<br />
Feb-06<br />
Jun-07<br />
Oct-07<br />
Feb-08<br />
Jun-08<br />
Oct-08<br />
Feb-09<br />
Jun-09<br />
Oct-09<br />
Feb-10<br />
Jun-10<br />
Oct-10<br />
'Buy a car'(nationwide)<br />
Sources: Baidu, Standard Chartered<br />
Research<br />
Chart 5: Searches for ‘travel abroad’<br />
Searches for ‘travel abroad’ vs. passengers on<br />
international routes, mn.<br />
160 2.00<br />
120 1.60<br />
1.20<br />
80<br />
0.80<br />
40<br />
0.40<br />
0 0.00<br />
Dec-07<br />
Jun-08<br />
Dec-08<br />
'Travel abroad'<br />
Jun-09<br />
Dec-09<br />
Jun-10<br />
Dec-10<br />
International passengers, mn<br />
Sources: Baidu, CEIC, Standard Chartered<br />
Research<br />
Chart 4: Searches for consumables<br />
Searches for ‘buy a TV’, ‘buy a computer’ and ‘buy<br />
a mobile phone’<br />
1,000<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Aug-09<br />
Sources: Baidu, Standard Chartered Research<br />
estingly, there was no dip in searches following the property-market cooling<br />
measures announced in April 2010. Even more interestingly, search interest<br />
has risen again since Q3-2010. This suggests that strong transaction volumes<br />
can be expected in the near term. Looking at city-specific data (available since<br />
October 2008), searches from the top three cities (Beijing, Shanghai and<br />
Shenzhen) followed almost the same pattern as nationwide searches until recently,<br />
but the two have diverged since H2-2010 (see Chart 2). This suggests<br />
that housing demand in Tier 1 cities has weakened, while buying interest in<br />
other cities has risen gradually. This reflects transaction activity (for more details<br />
on China’s housing market, see Special Report, 18 November 2010, ‘China<br />
– Our big real-estate survey, Phase 2’).<br />
Planes, trains and automobiles As Chart 3 shows, searches for ‘buy a car’<br />
(‘ 买 车 ’) are also rising again, suggesting that even after a strong year and the end<br />
of most car-buying subsidies, sales may still have some momentum. We expect<br />
passenger car sales growth of 10-15% in 2011. That said, given that the main<br />
subsidy for car buyers ended on 30 December 2010, the rise in searches may represent<br />
a surge in interest before the subsidies disappeared. The January 2011 data<br />
for ‘buy a car’ searches should be more telling. Chart 4 shows searches for ‘buy a<br />
TV’ (‘ 买 电 视 ’), ‘buy a computer’ (‘ 买 电 脑 ’) and ‘buy a mobile phone’ (‘ 买 手 机 ’).<br />
While searches for durable goods like TVs and computers have been quite steady,<br />
searches for ‘buy a mobile phone’ rose sharply in Q2-2010 and plateaued in Q3-<br />
2010. In March 2010, searches for ‘travel abroad’ (‘ 国 外 旅 游 ’) rose significantly<br />
and have remained at this higher level. This is consistent with passenger trends on<br />
international air routes, as Chart 5 shows. With recovering confidence and strong<br />
income growth, Chinese consumers are holidaying again.<br />
Inflation is the hot issue Official CPI inflation breached 5% y/y in November<br />
2010. Searches for ‘inflation’ (‘ 通 货 膨 胀 ’) and ‘CPI’ are shown in<br />
Chart 6. Searches move in line with official CPI, though there is more online<br />
interest in inflation now than in February 2008, when official CPI inflation<br />
hit 8.7% y/y. In Chart 7, we compare searches for ‘grain price’ (‘ 粮 食 价 格 ’), ‘pork<br />
price’ (‘ 猪 肉 价 格 ’) and ‘vegetable price’ (‘ 蔬 菜 价 格 ’). All rose sharply in December.<br />
Searches for ‘grain price’ have remained lower than before; searches<br />
for ‘pork price’ are up a bit, but are still far below their mid-2007 peak. In late<br />
Oct-09<br />
Dec-09<br />
Feb-10<br />
Apr-10<br />
Jun-10<br />
Aug-10<br />
Oct-10<br />
Dec-10<br />
'Buy a TV 'Buy a computer' 'Buy a mobile phone'<br />
Chart 6: Searches for inflation<br />
Searches for ‘inflation’ and ‘CPI’ vs. official CPI<br />
inflation<br />
3,000<br />
10<br />
8<br />
2,000<br />
6<br />
4<br />
2<br />
1,000<br />
0<br />
-2<br />
0 -4<br />
Jun-06<br />
Dec-06<br />
Jun-07<br />
Dec-07<br />
Jun-08<br />
Dec-08<br />
Jun-09<br />
Dec-09<br />
Jun-10<br />
'Inflation' 'CPI' official CPI y/y%(RHS)<br />
Dec-10<br />
Sources: Baidu, NBS, Standard Chartered<br />
Research<br />
59
Chart 7: Searches for food prices<br />
Searches for ‘grain price’, ‘pork price’ and<br />
‘vegetable price’<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Jun-06<br />
Dec-06<br />
Jun-07<br />
Dec-07<br />
Jun-08<br />
Dec-08<br />
Jun-09<br />
Dec-09<br />
Jun-10<br />
'Grain price' 'Pork price' 'Vegetable price'<br />
Dec-10<br />
Sources: Baidu, NBS, Standard Chartered<br />
Research<br />
Chart 9: Searches for ‘equities’<br />
Search for ‘equities’ vs. SSE<br />
40,000<br />
30,000<br />
20,000<br />
10,000<br />
0<br />
Jun-06<br />
Dec-06<br />
Jun-07<br />
Dec-07<br />
'Equities'<br />
Jun-08<br />
Dec-08<br />
Jun-09<br />
Dec-09<br />
'SSE(RHS)'<br />
Jun-10<br />
Dec-10<br />
7,000<br />
6,000<br />
5,000<br />
4,000<br />
3,000<br />
2,000<br />
1,000<br />
0<br />
Sources: Baidu, Bloomberg, Standard<br />
Chartered Research<br />
Chart 8: Searches for investments<br />
Searches for ‘gold investment’, ‘FX investment’ ,<br />
‘structured products’ and ‘equities’<br />
800 40,000<br />
700<br />
600<br />
30,000<br />
500<br />
400<br />
20,000<br />
300<br />
200<br />
10,000<br />
100<br />
0<br />
0<br />
2010, searches for ‘vegetable price’ surged – unsurprisingly, given the vegetable<br />
price increases. What to invest in Amid broad concerns about inflation,<br />
we looked at how online China is responding in terms of investment<br />
options. Chart 8 shows searches for four investment options: gold, FX,<br />
structured products and equities. (‘ 黄 金 投 资 ’, ‘ 外 汇 投 资 ’, ‘ 理 财 产 品 ’, and<br />
‘ 股 票 ’).<br />
Jun-06<br />
Dec-06<br />
Jun-07<br />
Dec-07<br />
Jun-08<br />
'Gold investment'<br />
'Structured products'<br />
Dec-08<br />
Jun-09<br />
Dec-09<br />
Jun-10<br />
Dec-10<br />
'FX investment'<br />
'Equities'(RHS)<br />
Sources: Baidu, Standard Chartered<br />
Research<br />
Chart 10: Searches for ‘gold investment’<br />
Search for ‘gold investment’ vs. gold price<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Jun-06<br />
Dec-06<br />
Jun-07<br />
Dec-07<br />
'Gold investment'<br />
Jun-08<br />
Dec-08<br />
Jun-09<br />
Dec-09<br />
Jun-10<br />
Dec-10<br />
Gold price, USD/oz(RHS)<br />
1,600<br />
1,200<br />
800<br />
400<br />
Sources: Baidu, Standard Chartered<br />
Research<br />
0<br />
• Searches for ‘FX’ are highly volatile,<br />
as are searches for ‘equities’. Search interest<br />
in equities peaked just before the end of the<br />
bull market in H2-2007 and fell dramatically<br />
afterwards (see Chart 9). Search interest<br />
is still range-bound, providing little basis to<br />
judge where the Shanghai Stock Exchange<br />
Composite Index will go next.<br />
• Gold has seen a steady rise in interest<br />
in recent months. Searches are relatively consistent<br />
with gold price trends (see Chart 10).<br />
• Structured wealth management products<br />
are the clear winner. In recent years,<br />
banks have aggressively marketed these<br />
products, which are popular because of their<br />
ability to offer returns above deposit rates (see<br />
On the Ground, 14 September 2010, ‘China<br />
– How to prevent a housing bubble’).<br />
In short, then, online China is concerned<br />
about inflation, and is anxious to<br />
protect its wealth with structured products<br />
offered by banks, as well as home purchases<br />
and, to a lesser extent, gold investment. Interest<br />
in home-buying has recovered in Tier<br />
2 and 3 cities, but not in Tier 1 cities.<br />
(Author: from Standard Charted<br />
Bank (China) Limited)<br />
M&A Deals in China<br />
Reach Record Levels in 2010<br />
By Zhao Ailing<br />
T he c onsistent pac e of<br />
strong economic growth in<br />
China and the valuable inorganic<br />
growth opportunities<br />
created from consolidating<br />
industries are some of the<br />
important drivers behind<br />
this burgeoning M&A trend.<br />
The overall level of merger and acquisition (M&A) deals in China<br />
has reached an all time high, both in the number and value<br />
of domestic, inbound and outbound deals, according to PwC<br />
analysis released. A record 4,251 announced transactions valued<br />
more than US$200 billion were recorded in the 2010 calendar year, representing<br />
a 16% increase in the number of deals and a 27% increase in the<br />
value of deals over 2009. The consistent pace of strong economic growth<br />
in China and the valuable inorganic growth opportunities created from<br />
consolidating industries are some of the important drivers behind this<br />
burgeoning M&A trend.<br />
60
The trend is loud and clear<br />
for outbound M& A by China<br />
buyers, with M&A deal activity<br />
overseas growing by more than<br />
30%, to a record 188 transactions<br />
with a combined value of<br />
about US$38 billion in 2010, up<br />
from 144 deals in 2009 valued at<br />
US$30 billion. PwC Transaction<br />
Services Partner Nelson Lou said<br />
there was no denying the strong<br />
trend of China’s growing interest<br />
in quality assets overseas, and despite<br />
a relatively slower final quarter<br />
of outbound activity in 2010<br />
in terms of volume, there were no<br />
signs of the strong outbound trend<br />
waning during 2011 and beyond.<br />
“China’s appetite for overseas<br />
assets is insatiable, with natural<br />
resources remaining a key industry<br />
target, as the country aims to secure<br />
the resources it needs to fuel its engine<br />
of economic growth,” Nelson<br />
Lou said. As predicted by PwC earlier<br />
in the year, apart from continued<br />
strong interest in natural resources,<br />
there has been an increasing number<br />
of acquisitions of high technology<br />
companies, as Chinese buyers look<br />
to bring know-how back to China to<br />
foster a developing economy. There is<br />
also strong interest in machinery and<br />
equipment manufacturers, and the<br />
automotive sector.<br />
China’s interest in M&A targets<br />
overseas remain widespread<br />
globally, however the US is identified<br />
as a growing strategic target with 32<br />
Outbound deal-Top 10 sectors by number of<br />
deals, FY09 vs. FY10<br />
Raw materials<br />
Industrials<br />
High Technology<br />
Energy and Power<br />
Consumer Staples<br />
Conglomerate<br />
Healthcare<br />
Consumer Products<br />
and Services<br />
Media and<br />
Entertainment<br />
Retail<br />
11<br />
13<br />
5<br />
12<br />
11<br />
7<br />
1<br />
5<br />
9<br />
5<br />
4<br />
4<br />
2<br />
18<br />
19<br />
25<br />
22<br />
24<br />
FY10<br />
FY09<br />
Note: Raw Materials include mining, metals and chemicals.<br />
Source: ThomsonReuters and PwC analysis<br />
49<br />
Strategic buyer Deals-Top 10 sectors by deal<br />
value (US$ billion), FY09 vs. FY10<br />
Raw materials<br />
Financial Services<br />
Real Estate<br />
Conglomerate<br />
Industrials<br />
Energy and Power<br />
Consumer Staples<br />
High Technology<br />
Consumer Products<br />
and Services<br />
Media and<br />
Entertainment<br />
5.7<br />
5.1<br />
4.9<br />
4.9<br />
3.0<br />
4.6<br />
2.3<br />
28.2<br />
Source: ThomsonReufers, ChinaVenture and<br />
PwC analysis<br />
67<br />
9.7<br />
11.8<br />
12.8<br />
12.9<br />
10.5<br />
9.7<br />
11.0<br />
20.8<br />
20.5<br />
18.8<br />
20.5<br />
18.1<br />
FY10<br />
FY09<br />
Strategic buyer Deals-Top 10 sectors by<br />
number of deals, FY09 vs. FY10<br />
Raw materials<br />
Industrials<br />
Conglomerate<br />
Real Estate<br />
High Techndogy<br />
Energy and Power<br />
Consumer Staples<br />
Consumer Products<br />
and Services<br />
Healthcare<br />
Financial Services<br />
320<br />
308<br />
248<br />
253<br />
223<br />
202<br />
223<br />
179<br />
179<br />
120<br />
137<br />
106<br />
614<br />
539<br />
475<br />
428<br />
403<br />
351<br />
369<br />
404<br />
Note: Raw Materials include mining, metals and<br />
chemicals.<br />
deals in 2010 compared to 21 in 2009. The European Union, Australia<br />
and Africa remain important locations of interest, as well as countries<br />
in Asia. Outbound M&A deal activity is expected to continue to grow<br />
strongly in 2011 driven by the continued demand for natural resources<br />
as well as the search for technologies and know-how to bring back to the<br />
China market.<br />
The rise of Private Equity<br />
Private Equity (PE) is emerging as an important source of capital<br />
for private enterprises in China, with nearly 580 transactions involving<br />
PE activity with China targets announced in 2010, an increase of 66%<br />
over 2009. More than two thirds of these were initiated by domestic PEs,<br />
demonstrating the trend of localisation of the PE industry within China.<br />
“There are rapid developments in the private equity industry in China.<br />
All indications are that private equity will prove to be an important<br />
provider of growth capital for Chinese private enterprises in the future,<br />
and this is underpinned by the support of the Chinese government,” said<br />
Andrew Li, PwC Transaction Services Partner.<br />
“Nearly all of the major PE houses are gearing up to meet the growing<br />
competition from a burgeoning domestic PE industry, and while some<br />
of the new funds will fail, others will emerge as important players. The<br />
growth and localization of the PE industry in China is unstoppable.”<br />
Strategic deals make a comeback<br />
Foreign strategic buyers (corporates) are marching to the beat of a<br />
new drum, now showing signs of returning to China with inbound M&A<br />
activity growing by 32% to approach levels reached before the global financial<br />
crisis.<br />
However, Andrew Li said M&A activity in China is still dominated<br />
by domestic transactions, which grew at a steady pace of 6% to 2,947 announced<br />
deals in 2010, and an announced value of US$131 billion, up<br />
41% over 2009.<br />
“The policies and direction set by China’s new five year plan are likely<br />
to support continued M&A activity, as the government aims to continue<br />
domestic consolidation and restructuring of industries, while ensuring foreign<br />
investment is optimised and ‘going abroad’ is accelerated,” Mr Li said.<br />
“We expect overall strategic buyer activity both domestic and foreign<br />
to continue to grow steadily in 2011 and to exceed the peak levels seen in<br />
2010.”<br />
FY10<br />
FY09<br />
61
China’s Outdoor Industry, Filled with Great Promise<br />
—An Exclusive Interview with Mr. Frank Hugelmeyer, President &CEO<br />
of American Outdoor Industry Association<br />
By Yan Manman<br />
On February 23, the 7th ISPO China is to open at China National<br />
Convention Center. With the development in the past 6<br />
conventions, the scale of ISPO China is increasingly larger and<br />
larger, which has fully witnessed the rapid development of China’s<br />
outdoors industry in the last decade, sprouting, growing and rising. But<br />
what’s the trend of China’s outdoor industry? How do the foreign outdoors<br />
industry brands run in China? What can we learn from the western counties<br />
in this field? … Concerning some issues in the development of China’s<br />
outdoors industry, China’s Foreign Trade made an exclusive interview with<br />
Mr. Frank Hugelmeyer(Hereinafter short for F.H.), President &CEO of<br />
American Outdoor Industry Association, who shared his view point on<br />
China’s outdoor industry with us.<br />
Mr. Frank Hugelmeyer,<br />
President &CEO of American Outdoor<br />
Industry Association<br />
CFT: How do you comment on the development of the outdoors industry<br />
in China in the last decade?<br />
F.H.: Over the past ten years, the outdoor industry in China has been in its<br />
early formative stage and has been building to a future that is filled with<br />
62
great promise. The past decade has<br />
seen more National Parks created, ski<br />
areas constructed, and the introduction<br />
of mountain biking trails and<br />
urban hiking paths. As more Chinese<br />
enter the middle class, the need and<br />
desire for outdoor infrastructure and<br />
leisure activities will only grow.<br />
Strong and expanding<br />
outdoor cultures have followed<br />
the last two global industrial<br />
revolutions. Europe witnessed<br />
a broad expansion of its mountain<br />
ski resorts in the 1920’s to<br />
1940’s and America began to<br />
significantly embrace its outdoor<br />
industry in the 1950’s to<br />
1970’s. As China shifts from a<br />
production economy to a consumer<br />
economy, I expect that<br />
we will see many more Chinese<br />
pursue outdoor sports.<br />
However, compared to<br />
Europe and America, there are<br />
very few specialized retail outlets<br />
in China that provide the<br />
technical service, training and sales<br />
for the products that require the more<br />
advanced outdoor skills, like climbing,<br />
paddling, skiing. This apparent lack of<br />
specialty retail is a challenge and an<br />
opportunity.<br />
CFT: Compared with the outdoor industry<br />
in the US, what do you think<br />
the difference between China’s outdoor<br />
industry and the US’ outdoor<br />
industry?<br />
F.H.: America has a<br />
more mature<br />
Compared to Europe and<br />
America, there are very few<br />
specialized retail outlets<br />
in China that provide the<br />
technical service, training<br />
and sales for the products<br />
that require the more<br />
advanced outdoor skills,<br />
like climbing, paddling,<br />
skiing. This apparent<br />
lack of specialty retail<br />
is a challenge and an<br />
opportunity.<br />
outdoor industry at this point in time. In the U.S. annual outdoor product<br />
sales for all channels of retail and outdoor sports activities is US $48B. The<br />
U.S. has over nine different channels of retail distribution that serves the<br />
outdoor market. More than 50% of all Americans pursue between one to<br />
six outdoor activities a year with the most popular activities being fishing,<br />
cycling, hiking, camping and paddling.<br />
Across the nation, many U.S. cities and states focus key parts of their<br />
economic development strategies on outdoor recreation because it drives tourism,<br />
promotes quality of life and health and wellness.<br />
Most significantly, the U.S. federal government’s environmental<br />
policy protects large tracts of wilderness<br />
and open space, manages millions of acres of forests<br />
and ensures very clean air, land and water so that<br />
Americans have a strong desire to play outside.<br />
CFT:According to what you learned, how did the<br />
American outdoors brands run in China? What do<br />
you think the most challenging factor for them to<br />
expand in China?<br />
F.H.: Most brands gravitate towards two strategies<br />
when entering the Chinese market. The largest<br />
companies form subsidiaries within China and<br />
establish their own retail stores. Nike, Adidas, The<br />
North Face, Columbia Sportswear come to mind as<br />
some brands who are pursuing a direct strategy.<br />
Smaller brands are partner with distributors<br />
who are already based in the country. The challenge<br />
is that many Chinese distributors are also retailers. If a small brand chooses<br />
the wrong partner, their product can end up in only a handful of retail locations.<br />
I also know of several brands that are currently considering entering<br />
the market through online retail partners only.<br />
Besides choosing the right strategy and distribution partners, the biggest<br />
challenges in entering the market are the packaging and labeling requirements<br />
that are required by China or the consumer.<br />
CFT: The income of most people in China are still low relative to the high<br />
price of outdoor gear and apparel, and besides, most of the outdoor lovers<br />
mainly gather in big cities such as Beijing, Shanghai, Shenzhen or<br />
other large provincial capital cities. In most of the second-layer and third<br />
layer cities, outdoor sports is still a little strange to people. How do you<br />
comment on this? How do you comment on China’s outdoor market?<br />
F.H.: It is true that the initial market growth will originate from the wealthier<br />
citizens living in cities. At first, they will be the consumers that have<br />
more time and money.<br />
However, many second and third layer cities<br />
have a unique opportunity to develop the great<br />
recreation and natural areas that are located<br />
nearby and become a gateway recreation<br />
community. The urban outdoor recreationists<br />
will always visit the top quality<br />
natural areas and second and third tier<br />
cities that take advantage of this trend<br />
will realize real economic growth. There are<br />
many, many rural communities across America<br />
and Europe that have benefited from positioning<br />
themselves as a gateway city to recreation. As the local<br />
wealth increases due to the tourism, the gateway<br />
citizens will find that they are able to enjoy a close by<br />
63
natural resource more often and more affordably.<br />
LINKS<br />
Outdoor Industry Association<br />
Founded in 1989, Outdoor<br />
Industry Association (OIA) is the<br />
premier trade association for companies<br />
in the active outdoor recreation<br />
business in the USA. OIA provides<br />
trade services for over 4000 manufacturers,<br />
distributors, suppliers,<br />
sales representatives and retailers in<br />
the outdoor industry. Outdoor Industry<br />
Association seeks to ensure a<br />
healthy and diverse specialty retail<br />
and supply chain based on quality,<br />
innovation and service. To this end,<br />
OIA works diligently to raise the<br />
standards of the industry; increase<br />
participation in outdoor recreation to<br />
strengthen business markets; provide<br />
support services to improve member<br />
profitability; represent member interests<br />
in the legislative/regulatory<br />
process; promote professional training<br />
and education; support innovation;<br />
and offer cost-saving member<br />
benefits.<br />
CFT: To what extent do you learn about the China’s domestic<br />
brands in outdoor gear and apparel? What do<br />
you think their advantages and disadvantages?<br />
F.H.: One of the great advantages China has is that it is<br />
the center of outdoor products manufacturing worldwide.<br />
This will enable the necessary products to be rapidly and<br />
widely available to the consumer at an affordable price.<br />
Already we have seen several good technical domestic<br />
brands emerge in China that also manufacture products<br />
for European and American brands. These manufacturer-created<br />
brands have the ability to create a very efficient<br />
and profitable vertical structure. If these domestic Chinese<br />
companies invest in product and brand development<br />
like all great brands, I see few disadvantages. The biggest<br />
obstacle domestic Chinese brands will need to overcome<br />
is the real or imagined belief that American brands are of<br />
a higher value and quality.<br />
CFT: What do you think are the factors most influencing the development<br />
of China’s outdoor industry? What would be the barriers? What’s your<br />
advice for the development of China’s outdoor industry?<br />
F.H.: China and its local communities need to recognize that outdoor recreation<br />
will be a major economic engine if it is treated as a priority. The cities<br />
that fully embrace and promote the active outdoor lifestyle will have a great<br />
advantage and head start over the communities that do not. In Europe and<br />
America, the early cultural hubs for the lifestyle and industry now attract<br />
most of the top companies, talented employees and tourists.<br />
At the moment, the biggest barrier in China to realizing a strong recreation<br />
economy is the air and water quality in the cities. On my last trip to<br />
Beijing, I was in a hotel across from the Bird’s Nest Olympic Center and I<br />
could not see the stadium. Outdoor athletes and adventurers aspire to see<br />
great landscapes. Landscapes are an integral part of the overall outdoor<br />
experience and essential to growing a strong outdoor recreation economy.<br />
Poor air quality simply does not inspire people to go outside and play.<br />
China possesses some of the most amazing land and waterscapes in the<br />
world and they should not be hidden behind a cloud. Obviously, the manufacturing<br />
economy is very important to China but it cannot exist at the<br />
expense of losing the outdoor recreation and adventure tourism economies<br />
and their tremendous benefits. By choosing to lead on environmental issues<br />
in the future, China can realize the benefits of a very strong manufacturing<br />
base and a great outdoor recreation industry.<br />
CFT: You must have attended the ISPO for several times. How do you<br />
comment on the ISPO? What’s your expectation for the 7th ISPO?<br />
F.H.: ISPO China reminds me of the very exciting early days of Outdoor<br />
Retailer, which is the leading show in the U.S. There is a great energy and<br />
passion at the ISPO China show. You can just feel the entrepreneurial spirit<br />
and potential in the exhibit halls.<br />
At ISPO China, Outdoor Industry Association will launch a breakthrough<br />
global environmental assessment for developing outdoor products.<br />
The tools will help outdoor companies reduce cost, waste, energy and water<br />
when they produce products. The leading experts in sustainable development<br />
for U.S. outdoor companies like REI, Timberland and Patagonia will<br />
be presenting the new tool for the Asian market. GreenBiz.com named the<br />
OIA Eco Index as one of the top ten most hopeful green developments of<br />
2010 and we are very proud to be sharing it with our Chinese partners.<br />
64
China’s Economic Data<br />
in 2010 Released<br />
By Li Zhen<br />
On January 20 of 2011, National<br />
Bureau of Statistics<br />
(NBS) released China’s<br />
main economic data in<br />
2010. Data released by NBS showed<br />
that GDP for the year of 2010 was<br />
RMB 39798.3 billion, up 10.3% for the<br />
full year, or 1.1 percentage points higher<br />
than that in the previous year.<br />
The pace of growth in the last three<br />
months of 2010, which was 9.8 percent,<br />
accelerated from the 9.6 percent recorded<br />
for the third quarter. Both the quarterly<br />
and annual figures were significantly above<br />
what analysts had expected. Taken together,<br />
the data and a number of other statistics<br />
supported the view of many economists<br />
who believe that the government will have<br />
to further tighten monetary policy, which<br />
could eventually lead the Chinese currency<br />
to appreciate against the dollar.<br />
Inflation, which has become a major<br />
concern for the authorities in recent<br />
months, came in at 3.3 percent for the full<br />
year, above the official target of 3 percent,<br />
while the data for December showed<br />
consumer prices were up 4.8 percent from<br />
a year earlier. The price rose by 3.2% in<br />
cities and 3.6% in rural areas. Grouped by<br />
categories, the prices for food increased<br />
by 7.2%; prices for tobacco, liquor and<br />
articles went up by 1.6%; health care and<br />
personal articles, up by 3.2%; recreation, education, culture<br />
articles and services, up by 0.6%; housing, up by 4.5%; clothing,<br />
down by 1.0%; transportation and communication, down<br />
by 0.4% while household facilities, articles and maintenance<br />
services maintained the level of growth.<br />
In December, the consumer prices grew by 4.6% yearon-year<br />
and 0.5% month-on-month. In 2010, the producer<br />
prices for manufactured goods went up by 5.5% year-on-year.<br />
The year-on-year change in December was up by 5.9% and<br />
the month-on-month change was up by 0.7%. The purchasers’<br />
prices for raw material, fuel and power was up by 9.6%<br />
for the whole year, and in December it grew by 9.5% year-onyear,<br />
or 1.1% month-on-month.<br />
Moreover, many economists expect the pace of inflation<br />
to pick up again in coming months because of adverse<br />
weather conditions and other seasonal factors like the Lunar<br />
New Year holiday in February, which triggers higher household spending. Rising<br />
wages also have fanned inflation pressures in recent months.<br />
Total value of imports and exports increased rapidly and the trade surplus<br />
declined to some extent. The total value of imports and exports for the whole<br />
year reached US$2972.8 billion, an increase of 34.7% over that in the previous<br />
year. The total value of exports was US$1577.9 billion, up by 31.3%; that of<br />
imports was US$1394.8 billion, up by 38.7%. The trade surplus was US$183.1<br />
billion, a decline of 6.4 percent over that in the previous year.<br />
Agricultural production grew steadily with increase in grain output for<br />
consecutive seven years. In 2010, the total output of grain reached 546.41 million<br />
tons, and increase for the seventh year. Of this total, the output of summer<br />
grain was 123.1 million tons, a year-on-year decline of 0.3%; the output of early<br />
rice was 31.32 million tons, a drop of 6.1% over that in the previous year; the<br />
output of autumn grain was 391.99 million tons, a year-on-year increase of 4.8%.<br />
The output of oil-bearing seeds grew by 2.7% and that of sugar dropped by 1.9%.<br />
The output of meat maintained steady growth as the output of port, beef, mutton<br />
and poultry reached 77.8 million tons in 2010, up by 3.6%. Of this total, the<br />
output of pork was 50.7 million tons, up by 3.7%.<br />
Investment kept fast growth with further improved investment structure.<br />
In 2010, the total investment in fixed assets of the country reached RMB 27814<br />
billion, a year-on-year growth of 23.8%, or a drop of 6.2 percentage points as<br />
compared with the growth in the previous year. The real growth was 19.5% after<br />
reducing price factors. Of this total, the fixed assets investment in urban areas was<br />
RMB 24141.5 billion, up by 24.5%, or 5.9 percentage points lower than that in<br />
the previous year, and that in rural areas was RMB 3672.5 billion, up by 19.7%.<br />
At present, the national economy is in a crucial period of turning from recovery<br />
to steady growth. According to the general arrangements of the Central Economic<br />
Work Conference, China will insist on taking scientific development as the theme<br />
and transformation of economic development mode as the mainline, carry out the<br />
pro-active fiscal policy and prudent monetary policy and improve the relevance,<br />
flexibility and effectiveness of macro-control. It can be sure that China’s economy<br />
will continue to prosper in a sustainable way in the next five year plan period.<br />
65
A Booming Market for<br />
Foreign Cosmetics Brands<br />
By Zhu Zijun<br />
On December 6, 2010, Coty Inc., the world’s largest<br />
fragrance company and the fifth-biggest cosmetics<br />
manufacturer in France, agreed to acquire<br />
a majority stake in TJoy Holdings, Ltd., a Chinese<br />
skin care company. The investment was valued at about<br />
$400 million, making it the largest among a flurry of similar<br />
acquisitions in recent years, according to a report from China<br />
Daily.<br />
The acquisition boom<br />
This case is not unique. Over the past decade, foreign<br />
cosmetics and healthcare manufacturers have been active<br />
in local brand acquisition, L’OREAL of France, Beiersdorf<br />
in Germany and Johnson & Johnson from the U.S. have all<br />
bought controlling stakes in Chinese cosmetics firms.<br />
In 2008, healthcare and cosmetics giant Johnson &<br />
Johnson purchased Beijing Dabao Cosmetics Co., Ltd. for<br />
$337 million.<br />
In 2007, Beiersdorf paid 269.45 million euros ($354.5<br />
million) for an 85 percent stake in China-based C-Bons Hair<br />
Care as the cosmetics giant looked to penetrate deeper into<br />
the fast-growing Chinese market.<br />
In 2003, beauty brand L’OREAL, the world’s largest<br />
cosmetics company by volume, acquired local Chinese brand,<br />
Little Nurse, and then acquired another local cosmetic brand,<br />
YUE-SAI, in 2004.<br />
International brands are exploring the Chinese market<br />
through acquisitions, as China is becoming a promising platform<br />
for the development of these brands.<br />
China: a surging market<br />
The 2010 China Cosmetics Industry Development Trend<br />
Blue Paper issued earlier last year showed that, the sales of<br />
cosmetics in China surpassed RMB140 billion in 2009, up 7.7<br />
percent year-on-year, making China the third largest cosmetics<br />
sales market, next only to the U.S. and Japan. China is fast<br />
becoming an arena for transnational cosmetics giants to carry<br />
out their global strategic plans.<br />
For many years already, urbanization has been a significant<br />
trend affecting China’s economic development. With<br />
government policy aimed at stimulating domestic demand,<br />
transformation of domestic consumption is becoming the<br />
primary force for a new round of consumption boost. The<br />
income levels of both rural and urban residents have been<br />
increasing rapidly, and middle-income groups have been expanding<br />
further, speeding up the transformation of China’s<br />
68
consumption structure. These new consumption patterns and<br />
consumer concepts will also propel the development of the<br />
cosmetics industry.<br />
With China’s economy moving into the fast lane, the<br />
cosmetics industry, as a sunrise industry, is developing much<br />
faster than the average growth rate of GDP. The increase<br />
in consumption has boosted overall economic prosperity<br />
and made China the largest emerging market in the world.<br />
Predicatably, in the future China will become the largest<br />
consumer market globally, and the cosmetics industry as a<br />
whole has changed course to follow the development trend.<br />
One sign of improved consumption is the acceleration<br />
of luxury good consumption. According to China Marketing,<br />
by the end of last year, LV already had 29 locations in China’s<br />
first-tier and coastal cities, while most of the interior provinces’<br />
capitals have no LV outlets yet. Huangqiang, manager of<br />
Hangzhou Xinziyang Daily Chemicals Co., Ltd., predicted<br />
that with the continuously rising levels of consumption and the<br />
acceleration of urbanization, top international brands will soon<br />
move to second and third-tier cities. If there was one LV store<br />
in each city at the prefectural level, then there would be 400.<br />
Similarly, the high-end cosmetics market in China’s<br />
first-tier cities is booming. At present, the cosmetics market<br />
in major Chinese department stores is dominated by international<br />
brands. Looking at Lancome in China as a example,<br />
the Lancome counter at Hangzhou Tower had sales volume<br />
of RMB 55 million, the highest among all global sales counters,<br />
while the Xinjiekou counter at Jinying Shopping Center<br />
in Nanjing was No.3 with RMB 48 million in sales, and the<br />
Wulin counter at Intime Department Store in Hangzhou<br />
was No. 5 with RMB 43 million.<br />
Another example, the sales volume of Estee Lauder<br />
rose 43% year-on-year, making it one of the fastest-growing<br />
brands in China’s high-end cosmetics market. The brand’s<br />
Wangfujing counter in Chengdu, had the highest sales volume<br />
in China with RMB 40 million, while Intime saw 60%<br />
growth, putting it at the forefront across the country.<br />
Meantime, the rapid increase in consumption level has<br />
also contributed to the recent prosperity of the high-end cosmetics<br />
market. Currently, second and third-tier cities are seeing<br />
a rapid upgrade in their consumption level. Mainstream<br />
consumption has moved away from joint venture brands like<br />
OLAY, L’OREAL and Aupres with average prices around<br />
RMB 200 in the past, to brands like Shiseido, Elizabeth<br />
Arden, Beauté de Kosé, Laneige, and others with average<br />
prices from RMB 300-400, and gradually moving closer<br />
to RMB 500-600 for mainstream consumer goods in firsttier<br />
cities.<br />
Expanding channels for foreign brands<br />
As mentioned earlier, increased urbanization is the key<br />
engine behind the prosperity of the cosmetics industry. Take<br />
Hangzhou as an example, the city’s central business district<br />
(CBD) is expanding rapidly. In the past, there was only one<br />
business district, while in the future, there will be 5 or 6.<br />
In the meantime, large chain department stores, an<br />
important channel for cosmetics, are also expanding. Intime<br />
already has 5 stores in Hangzhou and will have another 5 in<br />
the near future compared with only one just a few years ago.<br />
Department stores in second and third-tier cities will<br />
also follow the trend and upgrade themselves, while wellknown<br />
chain department stores are marching into these cities<br />
as well. Meanwhile, in order to satisfy the higher demands of<br />
consumers, promote their own image and enhance competitiveness<br />
in the market, stores will be eager to introduce more<br />
high-end foreign brands. In the future, these cities will likely<br />
bring in more foreign brands to keep up with first-tier cities.<br />
Department stores in county-level cities will also be<br />
rising soon. Currently, across China there are about 2,000<br />
counties with a few large department stores. These counties<br />
are transitioning to medium-sized cities with populations of<br />
over 100 thousand or even hundreds of thousands.<br />
Cosmetics stores are another strategic channel for<br />
Chinese cosmetics and are taking new approaches such as<br />
expanding their networks, upgrading their store level, etc.<br />
Throughout China there are hundreds of thousands of cosmetics<br />
stores, which are undoubtedly an important channel<br />
for cosmetics sales, with networks covering all of the large<br />
and medium-sized cities and key towns. In Zhejiang Province<br />
alone there are more than 6,000 cosmetics stores.<br />
Presently, cosmetics stores are the main sales venue for<br />
foreign cosmetics brands and will likely be the most promising<br />
sales channel in the future. Some secondary stores, specializing<br />
in domestic brands, should introduce more foreign<br />
69
ands and lift the consumption level.<br />
However, the Blue Paper pointed out that although traditional<br />
channels are still the mainstream, new channels are<br />
emerging. Among the new channels, e-commerce deserves<br />
the most attention. Last year, high-end products like Lancome<br />
and Biotherm were testing online sales. Estee Lauder was<br />
also developing an e-commerce platform aimed at the consumers<br />
in second or third-tier cities, which it could not cover<br />
in an all-round way. The activities of these big brands show the<br />
great potential of online shopping in the future.<br />
Foreign brands in consumers’ eyes<br />
With their expanding share in the Chinese market, foreign<br />
cosmetic brands are attracting the attention of more and<br />
more consumers, some of whom have become fans of certain<br />
brands.<br />
As the Chinese Lunar New Year is fast approaching,<br />
many department stores in Beijing are launching promotions.<br />
Juntai Department Store and Zhongyou Department Store,<br />
the ground floors of which are dominated by foreign cosmetics<br />
brands, are seeing a growth in the number of consumers<br />
coming and going. As are the foreign brands, just a month<br />
ago Juntai introduced MISSHA, a korea-based brand from<br />
ABLE C&C.<br />
A college student, choosing her favorite cosmetics at<br />
Juntai, told the reporter that the cosmetics products she uses<br />
are mainly foreign brands, with brands like L’OREAL and<br />
CLINQUIE as her favorites. “In a traditional view, foreign<br />
brands are performing better, so I prefer them and I will continue<br />
to choose them,” she said.<br />
Another young lady said that due to advertisements and<br />
her friends’ introduction, she preferred foreign brands since<br />
she was at middle school. “Foreign brands usually do better<br />
in advertising, introduction of their products’ application,<br />
packaging and especially, R&D.”<br />
A middle-aged woman said that in her daily life she<br />
uses both domestic and foreign branded products. “Though<br />
domestic brands’ advertisements, packaging, popularity and<br />
research should catch up with those of foreign brands,” she<br />
shared her opinion with the young lady.<br />
Another girl said her cosmetics products are mainly of<br />
domestic brands. She said, “Domestic brands can meet my<br />
needs with their cost performance. But if I had more disposable<br />
income, I would like to try foreign brands.”<br />
“Foreign brands, with their good brand image, advertisements,<br />
R&D, and most importantly, product effects,<br />
are popular with Chinese consumers,” said He Lixia, the<br />
manager at the Planning Department of Xidan Department<br />
Store.<br />
According to a report from Baidu Data Research Center<br />
for mass-market cosmetics brands in Q3 2010, L’OREAL<br />
PARIS took the lead with the highest attention at 10.16%,<br />
while OLAY and ZA were rated as second and third,<br />
with 5.45% and 4.39%, respectively. In the top 10 brands,<br />
L’OREAL PARIS, MAYBELLINE NEW YORK and<br />
GARNIER all belong to L’Oréal, indicating its strong position<br />
in mass-market cosmetics brands. Among the top 10,<br />
only Chcédo was domestic.<br />
Attention Rankings of Mass-market Cosmetics Brands<br />
in Q3, 2010<br />
L’OREAL PARIS<br />
OLAY<br />
ZA<br />
MAYBELLINE NEW YORK<br />
Neutrogena<br />
LANEIGE<br />
MENTHOLATUM<br />
Chcédo<br />
PURE&MILD<br />
GARNIER<br />
4.39%<br />
3.85%<br />
3.70%<br />
3.55%<br />
3.22%<br />
3.08%<br />
2.59%<br />
2.24%<br />
5.45%<br />
10.16%<br />
(Source: Baidu Data Research Center, Nov. 2010)<br />
For high-end cosmetics brands in Q3 2010 the level<br />
of attention for the top 4 brands was very close, with only a<br />
disparity of 1%. Lancome ranked first with the attention of<br />
11.23%. Dior, Estee Lauder and CLINIQUE ranked second<br />
through fourth with attentions of 10.69%, 10.39% and<br />
10.22%, respectively.<br />
Here, ANNA SUI took the place of Shu Uemura as<br />
No. 10 on the list. Of the top 10 brands, the ever present<br />
three brands by Estee Lauder had been reduced to two. Fortunately<br />
Estee Lauder and CLINIQUE were still among the<br />
top brands, while Lancome from L’OREAL still topped the<br />
list due to its interactive online activities from last year. It can<br />
be seen that the top 10 were all foreign brands, which dominate<br />
the high-end market in China.<br />
Attention Rankings of High-end Cosmetics Brands in Q3, 2010<br />
Lancome<br />
Dior<br />
Estee Lauder<br />
CLINIQUE<br />
SHISEIDO<br />
CHANEL<br />
Elisabeth Arden<br />
BIOTHERM<br />
CLARINS<br />
ANNA SUI<br />
3.50%<br />
6.90%<br />
6.61%<br />
6.09%<br />
5.44%<br />
5.15%<br />
11.23%<br />
10.69%<br />
10.39%<br />
10.22%<br />
(Source: Baidu Data Research Center, Nov. 2010)<br />
For natural cosmetics brands, domestic brands have<br />
their own advantages due to a better understanding of the<br />
domestic market. The brand Sinoway Herb took the lead<br />
with the attention of 14.58%; another domestic brand HER-<br />
BORIST was the second with the attention of 13.48%; the<br />
third was Avène with the attention of 11.58%, and the remainder<br />
were all foreign brands.<br />
70
Attention Rankings of Natural Cosmetics Brands in Q3, 2010<br />
Sinoway Herb<br />
HERBORIST<br />
Avène<br />
THE FACE SHOP<br />
FANCL<br />
VICHY<br />
LA ROCHE-POSAY<br />
THE BODY SHOP<br />
KI EH L'S<br />
L'OCCITANE<br />
9.21%<br />
8.26%<br />
7.84%<br />
7.04%<br />
6.37%<br />
5.50%<br />
5.04%<br />
11.58%<br />
14.58%<br />
13.48%<br />
(Source: Baidu Data Research Center, Nov. 2010)<br />
Looking at skin care products, the report showed that in<br />
Q3 2010, L’OREAL PARIS ranked first with the attention of<br />
6.37%, while the following No. 2-10 were all within 4%-2%.<br />
The runner-up was Sinoway Herb with the attention of 6.37%,<br />
third was CLINIQUE with 4.05%. The others in the top 10 in<br />
order of attention were, HERBORIST, OLAY, Estee Lauder,<br />
Avène, Neutrogena, MENTHOLATUM and SHISEIDO.<br />
For color cosmetics, MAYBELLINE NEW YORK,<br />
ZA and Shu Uemura were the top 3 with the attentions of<br />
11.51%, 9.03% and 4.98% respectively. The others in the top<br />
10 were Dior, REVLON, SKIN79, Lancome, DHC and<br />
opera. All the brands were foreign.<br />
As for perfume, the report shows that CHANEL and<br />
Dior were the top 2 brands given the most attention, with<br />
13.56% and 13.50% respectively, well ahead of others in the<br />
top 10. The other brands in the top 10 were as follows: Elisabeth<br />
Arden, Calvin Klein, Lancome, BURBERRY, ANNA<br />
SUI, VERSACE, adidas and BVLGARI. CHANEL and<br />
Dior were the best known by domestic consumers for their<br />
classic fragrance, so its no wonder they took the top 2 spots.<br />
adidas was given more attention than before due to men’s increasing<br />
attention on fragrances.<br />
Nowadays, men are paying more attention to cosmetics.<br />
This was shown in the Q3 2010 report, where men’s favorite<br />
brands were L’OREAL, NIVEA and METHOLATUM.<br />
The others in the top 10 were GF, BIOTHERM, OLAY, Biore,<br />
GARNIER, CLINIQUE and UNO in terms of attention.<br />
Foreign brands’ strengths<br />
Foreign brands are trying to take a larger share of the<br />
Chinese market. It seems consumers’ favorite brands are<br />
mostly foreign brands, so how have these brands realized<br />
such success? After analysis here are the following reasons:<br />
First, foreign brands tend to adjust their market strategy according<br />
to the social formation of the target market. Now China<br />
is an M-shaped society which means the rich and the poor occupy<br />
the two ends of the spectrum with a not that large middle class.<br />
For instance, L’OREAL has carefully studied Chinese<br />
society. Its high-end, low-and-middle products focus on different<br />
consumers. It is said that two-thirds of its sales volume is<br />
derived from third-tier cities, and 61% of its skin care products’<br />
sales are from third or even fourth-tier cities. Another example<br />
is Maybelline, which reduced the price of its products<br />
to compete with domestic brands. This is the transformation<br />
strategy that foreign brands rely on to attract more consumers.<br />
Second, foreign brands invest much more into research<br />
and development of new products, which are continuously<br />
upgrading and improving. Take Crest as an example, when<br />
it entered China in 1996, it had a rough time as it did not<br />
fully understand the target market well. After a while, Crest<br />
learned to take consumer demands as the starting point for<br />
its R&D effort. Through adequate market research, Crest’s<br />
R&D team launched new products with natural ingredients,<br />
like herbal toothpaste, making its share in the Chinese market<br />
surge and allowing it to overcome Colgate, thereby taking<br />
the lead in the toothpaste industry.<br />
Third, foreign brands’ subdivision has a specific aim with<br />
consumers as the clear target. For instance, L’OREAL has<br />
over 10 brands and more than 400 different kinds of products<br />
that it needs to provide customer service for. However, domestic<br />
brands have only several dozen products at most.<br />
Last but not least, foreign brands have a big say in international<br />
and domestic fashion. Things like advertisements, brand<br />
image, and brand story all contribute to their success in the market,<br />
while domestic brands still have a long way to go in this field.<br />
With foreign brands grabbing a greater share of the Chinese<br />
market, domestic brands are worrying about their future.<br />
As the saying goes, “Necessity is the mother of invention”, domestic<br />
brands are trying vigorously to implement innovation.<br />
The first national brand established in 1862, Kong Feng<br />
Chun, is focusing more attention on R&D. The products it<br />
has developed in just a few years are equivalent to the advances<br />
it had made over the last century.<br />
“Though foreign brands have taken a large share of the<br />
Chinese market, the future of domestic brands should be<br />
much better due to their hard work and diligence. We all<br />
have confidence,” said Ma Ya, the President of the Chamber<br />
of Beauty Culture & Cosmetics at the All-China Federation<br />
of Industry & Commerce.<br />
71
Technology<br />
Alibaba to Expand Supply<br />
Network in China<br />
Chinese Internet giant Alibaba Group said it is investing<br />
as much as US$4.6 billion to build a network of warehouses<br />
across China, as<br />
it looks to feed<br />
the countr y’s<br />
boom in online<br />
shopping.<br />
The move<br />
will directly<br />
benefit Taobao,<br />
an Alibaba unit<br />
that is China’s<br />
biggest shopping<br />
website by<br />
transaction volume, and comes at a time when Alibaba says<br />
China’s logistics industry has insufficient capacity to meet the<br />
needs of the country’s expanding electronic-commerce sector.<br />
Alibaba will commit an initial RMB 10 billion (US$1.52<br />
billion) to the warehouse project and, joined by financing<br />
partners, more than RMB 30 billion over three to five years,<br />
said Zeng Ming, Alibaba’s chief strategy officer.<br />
The company is making the investment to help speed<br />
delivery of products to consumers. “In 10 years, we hope that<br />
anywhere in China you can buy a product online, and, at<br />
the slowest, it will get to your home in eight hours,” Alibaba<br />
Chairman Jack Ma said.<br />
Chinese couriers ship many of the goods bought online<br />
in China, and can often deliver items the day after an order for<br />
a fairly low price — the equivalent of a few dollars or less. But<br />
e-commerce executives complain that the existing infrastructure<br />
is often fragmented and inefficient.<br />
The regions Alibaba has chosen for initial warehouse<br />
construction include the areas around the northern cities of<br />
Beijing and Tianjin, the Yangtze River Delta in east China<br />
and the Pearl River Delta in southern China since each is a<br />
major population center, the company said.<br />
Alibaba, which is 40% owned by Yahoo Inc., currently<br />
plans warehouse facilities in those three regions with total<br />
floor space around three million square meters, or the size of<br />
560 football fields, Alibaba said. Logistics partners, Taobao<br />
sellers and other business-to-consumer websites will all be able<br />
to use Alibaba’s warehouses, it said.<br />
The company said Alibaba.com Ltd., its business-tobusiness<br />
commerce platform, will also offer warehousing services<br />
to small Chinese exporters.<br />
Online retail transactions in China reached RMB 134.17<br />
billion (US$20.4 billion) in the third quarter, double year-ago<br />
levels, and Taobao accounted for 75% of the market.<br />
Taobao operates a consumer auction website similar to<br />
eBay.com Inc., but its Taobao Mall retail portal, where merchants<br />
can set up online storefronts, is more similar to Amazon.com<br />
Inc.<br />
Transactions on Taobao reached almost RMB 400 billion<br />
in 2010, Mr. Zeng said, up from RMB 208.3 billion in<br />
2009. Alibaba Group said in 2008 that Taobao broke even,<br />
but the closely held company doesn’t disclose its financials.<br />
While several Chinese Internet firms, including smaller<br />
e-commerce rival E-Commerce China Dangdang Inc., made<br />
strong trading debuts in New York in 2010, Taobao Chief<br />
Financial Officer Daniel Zhang said Taobao has no current<br />
plans to seek an initial public offering. (Wall Street Journal)<br />
Lenovo to Focus on<br />
Tablets, Phones for Growth<br />
Lenovo Group Ltd. will form a new business unit focused<br />
on mobile Internet and “digital home” devices, it said<br />
on January 19, as it continues pushing to expand beyond its<br />
core personal-computer business.<br />
Lenovo’s Mobile Internet and Digital Home Business<br />
Group will make tablets, smart phones and devices for other<br />
categories like smart TV and cloud computing, China’s biggest<br />
PC maker by shipments said.<br />
The world’s fourth-biggest computer maker by shipments<br />
behind Hewlett-Packard Co., Acer Inc. and Dell<br />
Inc. has already joined other PC makers in launching mobile<br />
devices to diversify into new areas and boost margins.<br />
In May last year, the company launched LePhone, its first<br />
touch screen smart phone based on Google Inc.’s Android<br />
operating system with a detachable Qwerty keyboard. Lenovo<br />
earlier this month also unveiled a hybrid notebook and<br />
tablet that combines a high-definition Android-based tablet,<br />
called LePad, with a keyboard base that enables the product<br />
to operate Windows 7.<br />
Lenovo bought International Business Machines<br />
Corp.’s (IBM) PC business in 2005 to boost its business in<br />
developed markets, but in 2009 it announced restructuring<br />
measures to refocus on China and other emerging markets.<br />
The company’s focus on mobile Internet comes as it is still<br />
also investing heavily to build its market share in emerging<br />
markets like Latin America, India and Southeast Asia. That<br />
effort and a greater focus on lower-price consumer products<br />
have pressured Lenovo’s margins.<br />
Lenovo said in November its net profit for its fiscal<br />
second quarter ended Sept. 30 rose 44% to US$76.6 million<br />
from US$53.1 million a year earlier, helped by strong<br />
growth in PC shipments.<br />
Chief Operating Officer Rory Read said Monday Lenovo<br />
will continue to look at acquisitions that would give it<br />
a strategic advantage in mobile Internet.<br />
The mobile Internet segment will help enhance Lenovo’s<br />
margins over three to five years, though the effect may<br />
not be significant, Mr. Read said in a phone interview.<br />
“From a standpoint of business opportunity, the next<br />
12 or 18 months are interesting, but the real game at hand is<br />
in, you know, 24, 36, 48 months” for devices like those the<br />
new unit will make, Mr. Read said.<br />
Lenovo is likely to offer LePad outside China in late<br />
74
summer, after a new version of Android comes out and<br />
Lenovo has time to test it, Mr. Read said, adding the tablet<br />
may not be called LePad outside China.<br />
Read in April last year said Lenovo believed 10% to<br />
20% of its revenue would come from mobile Internet services<br />
within five years, up from low single digits at the time.<br />
(Wall Street Journal)<br />
Apple Ranked Last by China<br />
Environment Group for Transparency<br />
Apple Inc. ranked last out of 29 global technology companies<br />
in terms of responsiveness and transparency to health and<br />
environmental concerns in China, according to a Beijing-based<br />
nonprofit group.<br />
BT Group Plc and Hewlett-Packard Co. were among the<br />
highest ranked companies, Ma Jun, director of the Institute of<br />
Environmental and Public Affairs said in a phone interview.<br />
Apple refused to confirm suspected polluters were among its<br />
suppliers and avoided taking responsibility for environmental<br />
problems related to its products, he said.<br />
“Apple has had an extensive supplier auditing program<br />
since 2006 and we have lots of information available through our<br />
website,” said Jill Tan, a Hong Kong-based spokeswoman for<br />
Apple. Tan said she read the IPE report.<br />
Among the examples cited in the report is Wintek Corp.<br />
which in 2009 is alleged to have used poisonous chemicals in<br />
the production of screens for Apple that resulted in workers being<br />
hospitalized for nerve damage. In a regulatory filing in May,<br />
Wintek said it stopped using the chemical, N-Hexane, and all<br />
workers were getting adequate treatment. Apple has not acknowledged<br />
Wintek as a supplier, Ma said.<br />
All of the workers involved in that case have recovered<br />
fully, said Jay Huang, a spokesman for Taichung, Taiwan-based<br />
Wintek. He declined to say whether Apple is a current or past<br />
customer. Apple’s Tan declined to say if Wintek is a supplier, or<br />
comment on specific cases.<br />
BT and HP ranked highly in IPE’s list of technology companies<br />
because they have responded to environmental problems<br />
and worked with suppliers to ensure better compliance, Ma said.<br />
“We originally thought that Apple, as a corporate citizen,<br />
would take a leadership role, but now we feel they ended up as<br />
the most obstructive,” Ma said. IPE today released “The Other<br />
Side of Apple” a report that outlines findings from a group of 36<br />
non-governmental organizations into environmental and health<br />
practices among technology companies. (Bloomberg)<br />
Facebook Should Mimic<br />
Apple App Security Restrictions<br />
Experts at security company Sophos say a rise in unmonitored<br />
Facebook applications endangers the site’s 650<br />
million users.<br />
Instead, they suggest that it should mimic Apple’s App<br />
Store, which vets all programs available for download.<br />
But Facebook said its data shows the opposite of Sophos<br />
and that it already has extensive protection for users.<br />
“We have a dedicated team that does robust review of<br />
all third party applications, using a risk based approach,” the<br />
firm said.<br />
“That means that we first look at velocity, number of users,<br />
types of data shared, and prioritize. This ensures that the<br />
team is focused on addressing the biggest risks, rather than<br />
just doing a cursory review at the time that an app is first<br />
launched.”<br />
This is partially because of the site’s size and popularity,<br />
but also because Facebook allows anyone to build applications,<br />
games, surveys and other programs. The most popular<br />
ones have been downloaded tens of millions of times.<br />
While this open system might be good news for Facebook’s<br />
business, says the report, it leaves inexperienced users<br />
vulnerable to attacks from malicious hackers who are increasingly<br />
building fake applications that trick people into handing<br />
over their private information.<br />
“Facebook, by far the largest social networking system<br />
and the most targeted by cyber-criminals, has a major problem<br />
in the form of its app system,” it says.<br />
To combat this, the report suggests Facebook could<br />
learn a lesson from mobile phone makers such as Apple,<br />
which operates strict controls over what applications are<br />
available for users of its iPhone and iPad platforms to download.<br />
“A walled garden approach may be more suitable,” the<br />
report says. “This is the way the Apple App Store operates,<br />
with applications requiring official approval before they can<br />
be uploaded to the site and shared with other users.”<br />
Although such an approach would potentially screen<br />
users from fraudulent applications, it would not be without its<br />
problems, however. Apple’s own process has come in for criticism<br />
in the past for its seemingly arbitrary rules that resulted<br />
in the banning of some applications, such as dictionaries,<br />
while other similar ones were allowed through.<br />
Alternatively, Sophos says, the world’s biggest social<br />
network could offer more detailed controls over security, allowing<br />
them to decide more easily which applications can run<br />
on their profile.<br />
“We have built extensive controls into the product, so<br />
that now when you add an application it only gets access to<br />
very limited data and the user must approve each additional<br />
type of data,” the company<br />
said in a statement.<br />
“We make sure<br />
that we act swiftly to<br />
remove or sanction potentially<br />
bad applications<br />
before they gain access<br />
to data, and involve law<br />
enforcement and file<br />
civil actions if there is a<br />
problem.” (BBC)<br />
75
Business TIPS<br />
Q&A for Foreign Business Practice in China<br />
We are a company registered and established<br />
in Germany, but the nature of our<br />
Q:<br />
company is a subsidiary. Recently, we want to<br />
invest a new company in Beijing. Can we, a<br />
subsidiary of a foreign company, are allowed to<br />
invest in China? If can, what preparations shall<br />
we make for such investment?<br />
There are no explicit provisions on the nature of<br />
A: a company which plans to invest in China, but<br />
there are provisions on the industry to be invested. For<br />
details, please refer to the Catalogue for the Guidance of<br />
Foreign Investment Industries (amended in 2007). According<br />
to the type of the company that you want to<br />
establish, you shall observe the Detailed Rules for the<br />
Implementation of the Law of the People’s Republic of China<br />
on Foreign-invested Enterprises, the Detailed Rules for<br />
Implementation of the Law of the People’s Republic of China<br />
on Sino-foreign Equity Joint Venture and the Detailed<br />
Rules for Implementation of the Law of the People’s Republic<br />
of China on Sino-foreign Cooperative Joint Venture.<br />
Are foreign investment permitted in gold<br />
Q: smelting projects?<br />
In accordance with the industrial category (X) of<br />
A: Restriction for Foreign Investment in the Catalogue<br />
of Industries for Guiding Foreign Investment (Revised<br />
2007), non-ferrous metal metallurgy and rolling processing<br />
industry: 1. Rare metal smelting including tungsten,<br />
molybdenum, tin (excluding tin compounds) and stibium<br />
(including antimony oxide and antimony sulphide), and<br />
gold smelting belongs to the restricted category, the items<br />
of which differs from each other due to different content.<br />
You are advised to directly consult the local competent<br />
commercial authorities for specific procedures.<br />
Is the alcohol exclusive wholesale certificate<br />
Q: required for a brewery? If yes, how to get the<br />
certificate and what procedures are required?<br />
For the purpose of regulating the alcohol circulation<br />
order, promoting the orderly development<br />
A:<br />
of alcohol market and safeguarding state interests and<br />
the legitimate rights and interests of alcohol producers,<br />
operators and consumers, the MOFCOM has formulated<br />
the Measures for the Administration of Alcohol Circulation<br />
(No. 25 Decree of the MOFCOM, 2005) according<br />
to the relevant laws and regulations of China.<br />
Reference information:<br />
Article 6 of the Measures for the Administration of<br />
Alcohol Circulation (No. 25 Decree of the MOFCOM,<br />
2005): Any entity or individual engaged in wholesale<br />
and retail of alcohol (hereinafter referred to the alcohol<br />
operators) shall go through procedures for filing and<br />
registration with the competent commercial department<br />
at the same level of the administration for industry and<br />
commerce in the place where the operator is domiciled<br />
according to the jurisdiction administration principle<br />
within 60 days after receiving the business license.<br />
Clients from Nigeria come to China for<br />
Q: commercial negotiation, which needs the<br />
official invitation letters of Chinese party. Which<br />
department shall I make application in? What<br />
materials shall be prepared? Is it charged or<br />
not?<br />
A:<br />
I suggest that you contact the local competent<br />
commercial authority for handling related issues.<br />
Where one foreigner needs to handle valid commercial<br />
visa (F) once or twice due to economic and trade activities<br />
in China, the visa notice may be handled via local competent<br />
commercial authority; or invitation letter or invitations<br />
of fairs of all kinds issued by<br />
economic and trade committees<br />
or bureaus (general companies) in<br />
the districts and counties where<br />
invitation units of Chinese party<br />
are located may be posted or faxed<br />
to foreign party (except otherwise<br />
special provisions). Foreigners may<br />
hold visa notices or invitation letters<br />
or invitations to go through<br />
procedures of visa in the embassies<br />
and consulates of China abroad<br />
and then come to China.<br />
A is a foreign-invested<br />
Q: enterprise, which reinvests<br />
in China and sets up<br />
a 100% owned B Co., Ltd. Is<br />
B a foreign-invested enterprise?<br />
In case A establishes<br />
B jointly with a domestic<br />
company in which A holds 25% equities, is B<br />
still foreign-invested enterprise?<br />
A:<br />
According to the Provisional Rules on Investment<br />
in China by Foreign-invested enterprises ([2000]<br />
No.6 of the Ministry of Foreign Trade and Economic<br />
Cooperation and the State Administration for Industry<br />
and Commerce), in case the share of foreign investment<br />
in the reinvested registered capital of foreign-invested<br />
enterprise in the central and western regions of China<br />
is more than 25%, it may be treated as foreign-invested<br />
enterprises. With the Approval Certificate of Foreigninvested<br />
Enterprises and the Business License (Noted),<br />
enterprises with foreign reinvestment may enjoy the<br />
treatment specified by state laws and regulations.<br />
According to the Provisions on Establishment of<br />
Companies of Investment Nature by Foreign Investors, the<br />
establishment of an enterprise with investment from an<br />
investment company shall be separately submitted for<br />
approval in accordance with the approval authority and<br />
approval procedures for the examination and approval<br />
of foreign-invested enterprises.<br />
Q:<br />
How to accurately and easily confirm the<br />
legitimacy of an enterprise? Which certificates<br />
are required?<br />
76
According to the relevant provisions of the Company Law of<br />
A: the People’s Republic of China (amended in 2005), the public<br />
may apply for inquiry of the registration of any company with the<br />
company registration authority and the latter shall provide inquiry<br />
services. According to the provisions of the above-mentioned law,<br />
please make inquiry with the administration for industry and<br />
commercial in the place where the company is registered.<br />
Our company has obtained the approval documents<br />
of the MOFCOM and now the sharehold-<br />
Q:<br />
ers have decided to make liquidation ahead of<br />
schedule. Do we need to obtain the approval of the<br />
MOFCOM for such liquidation,<br />
or just go through procedures<br />
with local commercial department?<br />
According to the Implementation<br />
Rules for the Law<br />
A:<br />
of People’s Republic of China on<br />
Sino-Foreign Equity Joint Venture<br />
(amended in 2001) and the Measures<br />
for the Liquidation of Foreigninvested<br />
Enterprises, you have to<br />
apply for approval with the original<br />
approval authority.<br />
Whether the approval of<br />
Q: the MOFCOM is required<br />
for the entire change of a<br />
Sino-foreign joint venture of<br />
limited liabilities to a company<br />
limited by shares? If required,<br />
whether the application of<br />
such approval shall take the way of promotion?<br />
The applicant of the foreign-invested company limited<br />
by shares to be established shall submit such docu-<br />
A:<br />
ments as the application form, research report of feasibility<br />
and assets appraisal statement to the competent authority<br />
of the province, autonomous region, municipality directly<br />
under the Central Government or separately planning city<br />
where it is located. The aforesaid documents will be submitted<br />
to the foreign trade and economic relationship bureau<br />
of the province, autonomous region, municipality directly<br />
under the Central Government or separately planning city<br />
by the competent authority after examination and approval.<br />
The initiator may officially sign the agreements on establishment<br />
of the company and the articles of association after<br />
approval of aforesaid documents by the competent commercial<br />
department of the province, autonomous region, municipality<br />
directly under Central Government or separately<br />
planning city.<br />
After such examination and approval, the abovementioned<br />
documents shall also be submitted to the<br />
MOFCOM for approval. For details, please refer to the<br />
Interim Provisions on Some Issues concerning Establishment<br />
of Foreign-invested Company Limited by Shares (Decree of<br />
the Ministry of Foreign Trade and Economic Cooperation<br />
[1995] No. 1).<br />
How to handle the procedures for transfer of foreigninvested<br />
enterprises to domestic-invested enterprises?<br />
Q:<br />
1. For the alteration of equities of the investors of<br />
A: foreign-invested enterprises, the examination and approval<br />
authorities should, in accordance with Article 17 of<br />
the Provisions on the Alteration of Investors’ Equities in Foreignfunded<br />
Enterprises, decide to approve or not within 30 days<br />
upon the receipt of all the required documents.<br />
2. For alteration of the items of foreign-funded enterprises,<br />
besides submission of the application letter of alteration,<br />
copies of approval certificate and copies of the business<br />
license, the documents required for approval should be submitted<br />
according to the Implementing Regulations for the Law<br />
of the People’s Republic of China on Sino-foreign Equity Joint<br />
Ventures, the Detailed Rules for the Law of the People’s Republic<br />
of China on Chinese-Foreign Contractual Joint Ventures, the<br />
Detailed Rules for the Law of the People’s Republic of China on<br />
Foreign-Capital Enterprises and the relevant special laws and<br />
regulations, including board resolution, contractual revised<br />
agreement and the revised agreement of article of association.<br />
Shall the creditors be informed in the written form<br />
Q: after the preliminary reply of the merger of foreign<br />
companies from the Ministry of Commerce that<br />
has been published in the nationwide media? If so,<br />
how to determine the scope of creditors? Whether<br />
shall all those with debt relationship be informed?<br />
In accordance with Clauses 2 and 3 of Article 29 of<br />
A:<br />
the Provision on the Merger and Division of Enterprises<br />
with Foreign Investment (Revised 2007), the applicants of<br />
companies to be merged shall submit the examination and<br />
approval authorities the documents including certification<br />
of the company to its creditors and statements of handling<br />
the rights of creditors and debts related to the company.<br />
Information source:<br />
China’s General Principles of Civil Law provides that a<br />
debt represents a special relationship of rights and obligations<br />
established between the parties concerned, either according<br />
to the agreed terms of a contract or legal provisions. The party<br />
entitled to the right shall be the creditor, and the party assuming<br />
the obligations shall be the debtor. The right enjoyed<br />
by the creditor is called creditor’s right and the obligation the<br />
debtor is responsible for is called debt.<br />
What requirements are needed to establish vehicle<br />
export companies with foreign investment?<br />
Q:<br />
For foreign trade companies engaged purely in whole<br />
A:<br />
car export, the state has no specific regulations on the<br />
types of companies. You may refer to the Implementing Measures<br />
of the Law of the People’s Republic of China on Wholly Foreign-owned<br />
Enterprises, the Detailed Rules on the Implementation<br />
of the Law of the People’s Republic of China on Sino-Foreign<br />
Joint Cooperative Ventures, the Measures for the Administration<br />
on Foreign Investment in Commercial Fields and the Automobile<br />
Trade Policy. For the way of registration, please contact the<br />
local administration for commerce, industry and commerce,<br />
customs and other government departments.<br />
77
ON STAGE<br />
Lifestyle<br />
2/4/2011-2/8/2011<br />
The National Little Birch Tree Dance Troupe<br />
of Russia China Tour<br />
Venue: NCPA-Opera House<br />
Price: RMB 180/280/380/600/700/780/880<br />
Tickets are available at 400-610-3721; 6417 7845<br />
T h e L i t t l e<br />
Birch Tree Dance<br />
Troupe<br />
The Little<br />
Birch Tree Dance<br />
Troupe is very<br />
famous in Russia<br />
with a history of<br />
59 years. Being<br />
the representative<br />
of Russian folk<br />
songs and dances,<br />
the troupe has acclaimed as a national treasure. It has been<br />
invited to perform in more than 60 countries in the world.<br />
In 2007, the troupe was named as the Traditional Cultural<br />
Heritage of Russia. In 2009, it is the 60th anniversary of the<br />
troupe, the 100th anniversary of the troupe founder and also<br />
the 60th anniversary of the founding of People's Republic of<br />
China. The Little Birch Tree Dance Troupe will bring its perfect<br />
cast to China to present a colorful display of Russian folk<br />
songs and dances.<br />
2/13/2011-2/17/2011<br />
Verdi’s Opera: La Traviata (NCPA's Production)<br />
Venue: NCPA-Opera House<br />
Price: RMB 100/180/280/400/460/520/580<br />
Tickets are available at 400-610-3721; 6417 7845<br />
Production: National Centre for the Performing Arts<br />
Orchestra: China NCPA Orchestra<br />
Chorus: NCPA Chorus<br />
Conductor: Chen Zuohuangw<br />
Director / Lighting Designer: Henning Brockhaus<br />
Stage Design: Benito Leonori<br />
Costume / Makeup Design: Giancarlo Colis<br />
La Traviata is the last part of “Popular Trilogy” by Verdi,<br />
the Italian romanticist composing master. It's also one of the<br />
best-selling classical works in the world opera history. The<br />
original version of the story is from Dumas Fils’ famous novel<br />
Lady of the Camellias. The whole opera consists of three<br />
acts. It was initially performed in Teatro La Fenice on Mar.<br />
6, 1853. After further adaptation, it became one of the most<br />
popular works in different opera houses universally and was<br />
performed again and again. Many arias with elegant melody<br />
enjoy great popularity and are engraved on the mind of the<br />
audience. Among Verdi's pieces, it has the greatest number of<br />
famous selections, which can be compete with Bizet’s Carmen.<br />
Dumas Fils once hailed: “50 years later, people may not<br />
remember my novel, but Verdi makes it immortal.”<br />
2/12/2011<br />
Chinese Concertos III: For Yellow River -<br />
Sun Yingdi and Beijing Symphony Orchestra<br />
Concert<br />
Venue: NCPA-Concert Hall<br />
Price: RMB 80/120/200/300/350/400/500<br />
Tickets are available at 400-610-3721; 6417 7845<br />
Presenter: Beijing Symphony Orchestra<br />
Conductor: Tan Lihua<br />
2/14/2011<br />
Sweet Melody for Valentine's Day: The<br />
National Ballet of China Symphony Orchestra<br />
Concert<br />
Venue: NCPA-Concert Hall<br />
Price: RMB 80/120/200/300/350/400<br />
Tickets are available at 400-610-3721; 6417 7845<br />
2/16/2011<br />
2011 NCPA Lantern Festival Concert by Beijing<br />
Symphony Orchestra<br />
Venue: NCPA-Concert Hall<br />
Price: RMB 180/240/320/420/500/580<br />
Tickets are available at 400-610-3721; 6417 7845<br />
Presenter: Beijing Symphony Orchestra<br />
80
Lifestyle<br />
2/20/2011<br />
Primitive Song and Dance<br />
of Hakka People: Charm of<br />
the Round House<br />
Venue: NCPA-Opera House<br />
Price: RMB 80/100/120/230/<br />
280/330/380/480<br />
Tickets are available at 400-<br />
610-3721; 6417 7845<br />
2/24/2011-2/26/2011<br />
Ballet: The Nutcracker<br />
Venue: NCPA-Opera<br />
House<br />
Price: RMB 80/120/180/28<br />
0/330/380/430/500<br />
Tickets are available at<br />
400-610-3721; 6417 7845<br />
National Ballet of China<br />
2/26/2011<br />
Poetic Russian-China NCPA Concert Hall<br />
Orchestra Tchaikovsky Concert<br />
Venue: NCPA-Concert Hall<br />
Price: RMB 80/120/200/300/350/400<br />
Tickets are available at 400-610-3721; 6417 7845<br />
2/26/2011<br />
Love Ensemble-Classic Opera Duet Selections<br />
Concert<br />
Venue: Beijing Concert Hall<br />
Price: RMB 50/80/180/280/380<br />
Tickets are available at 400-610-3721; 6417 7845<br />
3/2/2011-3/3/2011<br />
Dance-Drama: Rosy Clouds<br />
Beyond the Horizon<br />
Venue: NCPA-Opera House<br />
Price: RMB 80/150/260/<br />
320/380<br />
Tickets are available at 400-<br />
610-3721; 6417 7845<br />
Presenter: Shanghai Song and<br />
Dance Ensemble<br />
3/4/2011<br />
American Pianist Peter<br />
Vinograde Piano Recital<br />
Venue: Beijing Concert<br />
Hall<br />
Price: RMB 50/80/180/<br />
280/380<br />
Tickets are available at<br />
400-610-3721; 6417 7845<br />
2/27/2011<br />
3/4/2011-3/5/2011<br />
NCPA International<br />
Piano Series 2011:<br />
Andras Schiff Piano<br />
Recital<br />
Venue: NCPA-Concert<br />
Hall<br />
Price:RMB 180/280/4<br />
00/520/600/680<br />
Tickets are available<br />
at 400-610-3721; 6417 7845<br />
China<br />
Philharmonic<br />
Orchestra 2010-<br />
2011 Music<br />
Festival Ballet<br />
Drama: Carmen,<br />
L’Arlesienne<br />
Venue: Poly Theatre<br />
Price: RMB 50/80/<br />
180/380/680<br />
Tickets are available<br />
at 400-610-3721;<br />
6417 7845<br />
81
ART & GALLARY<br />
Lifestyle<br />
Lost Horizon<br />
Inspired by Béla Tarr’s movie aesthetics and George Orwell’s<br />
novel ‘Animal Farm’, Xu Zhe fabricates a convincing geographical<br />
environment with documentary photography and ‘records’ the<br />
occurring situation by camera. In fact, the story itself has been<br />
dissolved in the scenes. What each audience receives is the most<br />
intense expression of absurdity. The world shall be clearer when<br />
seen in reverse. This is exactly what Xu Zhe wants to emphasize.<br />
Wandering Dream<br />
Without any help<br />
of inborn realities, Lian<br />
Dongya conjures many<br />
‘patients’, who try to act<br />
in different ways, struggling<br />
between reality<br />
and dream. ‘Wandering<br />
Dream’ is based on<br />
psychology, which is<br />
obviously audacious and<br />
fascinating as images,<br />
releasing us from inner<br />
fear, abnormity and rebellion.<br />
As leading role, the<br />
imaginary patients find a<br />
way out of dilemma and<br />
achieve new social order<br />
and relationships. Therefore,<br />
‘Wandering Dream’<br />
possibly attracts people to be involved themselves.<br />
One by one — ShanghART Group Show<br />
Group Exhibition ShanghART Gallery, Shanghai<br />
Duration: Dec. 20th, 2010 - Feb. 15th, 2011<br />
Exhibition space: Shanghart Main gallery, bldg.<br />
16, 50 Moganshan Rd. Shanghai<br />
“One by one”, 38 artists in total, 86 smaller size artworks in<br />
different media; each work is placed at the height of 1.1m from<br />
the floor.<br />
Every work only has a number beside, no artist’s name, no<br />
caption, not classified by any standards, aligned randomly.<br />
“One by one” will be one of the fanciest views in Shanghai<br />
during the upcoming New Year.<br />
Past 15 years, name one by one, exhibition one by one, space<br />
one by one.<br />
“One by one, 2010 – 2011” is an exhibition, is again the collective<br />
party, is another way to meet art, is a revel time about<br />
dream and memory!<br />
Then, what is Art? What is the Artist? What’s the judgment<br />
criterion of art?<br />
This exhibition<br />
could be<br />
no history, no<br />
names, but many<br />
kind of judgment<br />
standard. In the<br />
same time, art<br />
like aggregation<br />
of the sickness,<br />
dilution, issues<br />
and quests.<br />
In front of<br />
the view which<br />
made up of these 38 artists, the conjectures, the fallacies, even the<br />
fleeting history is surging forward.<br />
The meeting between the audience and the art will be more<br />
purely, interesting and even more exciting.<br />
But the most important is: Is Art fun for you?<br />
Are you happy with it?<br />
Do you art today?<br />
82
Lifestyle<br />
Things From the Gallery Warehouse 3<br />
—Huang Kui & Zhang Ding<br />
Shanghart H-Space, bldg. 18, 50<br />
Moganshan Rd. Shanghai<br />
Jan. 12th, 2011-Feb. 10th, 2011<br />
Following “Things from the gallery<br />
warehouse 1 and 2” which introduced<br />
this exhibtion series last winter<br />
ShanghART Gallery is pleased to<br />
present now “Things from the gallery<br />
warehouse 3.”<br />
This time three large scale installation<br />
works from two young artists,<br />
Zhang Ding and Huang Kui, will be<br />
exhibited. They are “Does God exist?”,<br />
“Heaven is only an excuse” from<br />
Huang Kui and “A game of unclear<br />
direction” from Zhang Ding.<br />
What we do is to present people<br />
more approaches of understanding the<br />
art pieces and their creators.<br />
“Game with direction unknow” by Zhang Ding, Game of Unclear Directions<br />
is a large stage raised at more than a meter above the floor, composed<br />
of four main settings: a stuffed peacock, a zen-style rock, a fountain<br />
made of a vase and foams; a carpet featuring a symbol; a boat with chairs<br />
sunken in the wooden floor; a snowy slope with half of a body at its bottom.<br />
All these objects extracted from reality are combined together into a<br />
decor that possesses an unusual, awe-inspiring beauty.<br />
“Heaven is only an excuse” by Huang Kui is showed this time, consists<br />
of a video and a light box installation. Inspired by an extremely<br />
violent online video, Huang Kui described its content as a process during<br />
which “some lives are deprived of by some other lives”. Huang separated<br />
this video frame by frame to obtain individual pictures in large quantity:<br />
pictures of murdering. Then he applied these pictures on an image of the<br />
oil painting named Le Printemps by French artist<br />
William-Adolphe Bouguereau, creating a new<br />
work, namely, the installation on display. During the<br />
production process, the colors of each picture were<br />
changed according to Le Printemps. Then, the artist<br />
took these color-changed pictures to make a new<br />
video, achieving this work that presents a uniquely<br />
sparkling effect.<br />
Beyond-ism — Sun Xun Solo Exhibition<br />
83
THIS IS<br />
CHINA<br />
Touring Mt. Lu: Feeling<br />
Elegance and Poetic Beauty<br />
By Yan Manman<br />
Having for long heard the movie Romance on<br />
Mt. Lu, which is claimed to be and famous for<br />
the PRC’s first movie with kiss scene. Though<br />
the movie-making technology was very lagging<br />
behind and the scene was not as delicate as now, when I<br />
saw the movie which was published in 1980, 30 years ago, I<br />
was moved by the pure and deep love between the hero and<br />
heroine, that kind of reticent way of expressing love, which<br />
was the very characteristic of Chinese people in the eyes of<br />
western world; I was touched by the beauty of Mt. Lu, that<br />
poetic beauty no matter in spring or autumn, summer or<br />
winter; I was awaken of the beautiful image in my mind by<br />
those famous poems written in Mt. Lu; and I was reminded<br />
of the heavy history in modern China history…Located<br />
in the northern part of Jiangxi province, Mt. Lushan faces<br />
Yangtze River to the north and borders Poyang Lake (the<br />
largest fresh water lake in China) on the east. Overlooking<br />
southward on top of the mountain, the Poyang Lake is like<br />
a silver mirror. In the north, the Yangtze River looks like a<br />
jade ribbon flying to the Mt. Lu views of the plains and the<br />
Yangtze are breathtaking. I was just so fascinated by Mt. Lu<br />
then, and told myself, “I wanna visit Mt. Lu someday.”<br />
Mt. Lu is famous for a splendid and pretty summer<br />
resort, and summer is the best time for visiting Mt. Lu.<br />
But its snowy scenery is also a miracle. I wished to see Mt.<br />
Lu covered by the crystal ice and white snow. Then just a<br />
few days after I saw the movie, I came to Mt. Lu with an<br />
impulse at a weekend in the winter. Arriving at Jiujiang at<br />
6:30, I took a bus at the coach station, which directly carried<br />
me to the Guling, a town on the top of Mt. Lu. Since it was<br />
in the morning, on the bus which ran on the winding road<br />
among the hills, I saw the sun rise and shine the mountains,<br />
and overlooked the Poyang Lake. I was just so excited that<br />
we had arrived at the Guling Town before I had enough of<br />
viewing the scene on the bus.<br />
Oh, an elegant fairyland<br />
It was cold even it was in the south of Yangtze River.<br />
Owing to the chillness, only a few tourists came. Some snow<br />
was still there on the ground. It was silent and quiet. My<br />
friend and I just meandered ahead along the street, and not<br />
far we saw the scenic spot Flower Path. That was the place<br />
where Bai Juyi, a famous poet of Tang Dynasty in his poem<br />
referred as “the fragrance in the human world has withered<br />
in Aprils, while flowers in the mountain are in full bloom”.<br />
All kinds of rare flowers are said to be found here. But it was<br />
winter, no flower. But for me, I still could sense that kind of<br />
poetic beauty.<br />
Not far away we walked was a lake with pagoda in the<br />
center and mountains with snow afar. Just like its name, Violin-like<br />
Lake, it was graceful like beautiful light music beside<br />
your ears.<br />
In the Yellow Dragon Pool and Dark Dragon Pool,<br />
snow covering the rocks and ice hanging there, the small wa-<br />
84
terfalls, like bead curtains, flowing along the rocks besides.<br />
Snow, ice and water together, just so amazing. Actually it is<br />
not the best waterfall at Mt. Lu. The best is Sandie (meaning<br />
three segments) Spring, which lies below Five Old Peaks.<br />
It drops through three craggy tiers with a fall of 155 meters<br />
(about 509 feet). It is said that the upper part is like snow falling<br />
down to the pond; the middle reach wanders and twists<br />
with splashing sprays dancing in the air; while the lower level<br />
resembles a jade dragon running in the pond. There is saying<br />
goes, “Without visiting Sandie Spring, one can not say having<br />
been to Mt. Lu.” I had been so eager to see the Sandie<br />
Spring, but I could not then because this scenery spot was<br />
closed owing to the consideration for the safety of the tourists.<br />
A pity for me.<br />
Walking on the winding road through the erecting<br />
metasequoia woods with white snow covering the ground, it<br />
seemed no ends to the woods, no people and no sounds and<br />
only metasequoia trees accompanying you. That road was<br />
called Returning Dragon Road. It was really a long path.<br />
At the end of the path, climbing on a bridge which is called<br />
Lulin Bridge, we came across another beautiful lake, Lulin<br />
Lake, which was said to be built for Chairman Maozedong<br />
to swim in. Now it is used as drinking water source for the<br />
people on Mt. Lu.<br />
Just touring a small part of Mt. Lu actually, however, it<br />
was, in my eye, an elegant fairyland already.<br />
Too much historical traces<br />
Walking back to the Guling Town, we walked by many<br />
western style villas built by Britain, Russia, America, France<br />
and so on in the early 20th century. The villas area once was<br />
the concessions of the western countries then. During 1930,<br />
it became the summer capital of Nanjing Kuomintang Government.<br />
The former residence of Mrs. Jiangs, Meilu Villa is<br />
kept well on the mountain. In 1937, Chou Enlai on behalf<br />
of CPC negotiated with Jiang Kai-shek and later released<br />
the important speech of anti-Japanese. After the foundation<br />
of People’s Republic of China, Chairman Mao mounted up<br />
to Lushan Mountain and hosted three center-governmental<br />
meetings. Historically,<br />
they were called Lushan<br />
Meeting, famous general<br />
of Communist Party of<br />
China, Peng Dehuai was<br />
deadly condemned here,due<br />
to his maintenance of right<br />
viewpoint. Laterly, he was<br />
dismissed to be the defense<br />
minister. Many villas had<br />
been the residential place of<br />
the top leaders then. Now<br />
all those villas still erected<br />
there, but those historic<br />
people nearly all passed<br />
away. Heavy sense of history<br />
just made my mind calmer.<br />
All the worldly disputes,<br />
no matter how influential it<br />
was once, are finally brought away by the fleeting time, only<br />
leaving some trace and becoming the subject in the future for<br />
the later generations to ponder.<br />
Too much cultural taste<br />
“Sunlight streams on the river stones.<br />
From high above, the river steadily plunges<br />
Three thousand feet of sparkling water —<br />
the milky way pouring down from heaven.”<br />
It was a very famous poem written by Li Bai, the most<br />
famous Poet in Ancient China. The elegance and mystery of<br />
Mt. Lu are just so deeply loved by multiple literators, artists,<br />
monks, Taoists and celebrities in politics and culture. Their<br />
love and behaviors enriched Mt. Lu dramatically in cultural<br />
taste and historical status. Numerous poets and essays activate<br />
it. Mt. Lu is characterized by its poets, calligraphers,<br />
painters, writers, philosophers. Its cultural and historical relics<br />
enrich and raise its spiritual meaning in Chinese people’s<br />
mind and heart. Both as the world heritages, Mt. Tai is created<br />
by emperors, while Mt. Lu is created by scholars.<br />
Time limited, I just visited a small part of Mt. Lu,<br />
missing too much. I had planned to Lushan Cinema to see<br />
that movie and experience that romantic feeling again, but<br />
did not have time finally. It was the most special and particular<br />
cinema, because it plays the same movie Romance<br />
on Mt. Lu everyday without any change in the past. It is<br />
the only movie that plays most and has most audiences. It is<br />
also the only one for non-stop playing all around the world.<br />
In 2002, Guinness organization<br />
of British Headquarters officially<br />
awarded Chinese<br />
movie, Romance on Mt.<br />
Lu to be the film that<br />
has the longest time<br />
for non-stop playing<br />
in the same cinema<br />
in the world. And<br />
another pity was<br />
that snow fell just<br />
t h e<br />
next day after I left. I missed<br />
the most beautiful Mt. Lu<br />
snowing world, fresh, peaceful<br />
and crystal like world full<br />
of spirituality. Life keeps<br />
missing, but I knew I would<br />
come again, if possible, at<br />
least once in each season. If<br />
time and money permitting,<br />
I wished to stay Mt. Lu for at<br />
least a month or longer. Mt.<br />
Lu is just such a mountain<br />
worth deeply tasting and appreciating.<br />
85
THIS IS<br />
CHINA<br />
Brief introduction to the scenic spots of Mt. Lu<br />
Flower path<br />
The eternal poetic masterpiece of Tang Dynasty famous<br />
poet Bai Juyi” the fragrance in the human world has<br />
withered in Aprils, while flowers in the mountain are in full<br />
bloom “describes the scenery here. All<br />
kinds of rare flowers are diaplayed to<br />
tourists. By the Violin-like lake, the<br />
scenery here is breathtaking.<br />
The Brocade Valley<br />
In this deep and sudden valley,<br />
flowers are always in full bloom, which<br />
are so brilliant that people call them<br />
brocade. The monk “huiyuan” gathered<br />
medicinal herbs in this valley far the<br />
Jin Dynasty according to legend.<br />
Here, we have overline bridge,<br />
head-like stone, and beautiful<br />
peaks.<br />
Immortal’s Cavern<br />
The carven is like a forward stretching hand. The cavern<br />
has shrines for idols or ancestral tablets, clear spring, and<br />
there are old monarch’s halls cavern the hole, Toad stone,<br />
Imperial Tablet Pavilion, and clubmoss. This hole gains the<br />
name because Lu Tung-pin practiced austerities here and became<br />
immortal according to legend.<br />
The Grand heavenly pool<br />
Tianchi Temple stands here. It was originally known as”<br />
Huguo Temple”. The Temple was built by an emperor who<br />
started Mimg Dynasty. In Song Dynasty people renamed it<br />
as “Tianchi”. Here tourists can see “wenshu” platform, old<br />
nurse’s shrine, Tianchi Tower, Traces, “yuanfu” temple, etc.<br />
And it is the best place to view a sea of clouds and “Buddhism<br />
light”.<br />
Dragonhead Cliff<br />
Besides a craggy cliff, it<br />
springs up some thousand<br />
feet out of the ground,<br />
rearing in the sky like<br />
a dragon head. Standing<br />
at the top, one can<br />
86<br />
enjoy<br />
a bird’s eye view<br />
of the millions<br />
of steep wall-like<br />
stones and hear<br />
the surfing of wind<br />
in the pine forest<br />
mingled with roaring<br />
of the waterfalls in the<br />
Stone Gate Ravine.<br />
The Suspension Bridge of Stone-Gorge valley<br />
The Bridge betweenthe two ravines seems a line of artificial<br />
rainbow from two mountains, as it was crafed by the<br />
invisible hands of gods. Standing on the bridge, people can<br />
look far into the distance.<br />
The Museum<br />
The museum, also called Lulin Villa and Lulin One, is<br />
Mao Tse-tung former residence. The villa combines the Chinese<br />
and Western architectural style harmoniously. It was<br />
changed into a museum in 1984. It has collections of bronzes,<br />
pottery, Porcelain, calligraphy and painting, etc. Among<br />
them, a painting of Xu conglong (a Qing Danasty painter)<br />
called “Five Hundred Buddists” is the most valuable.<br />
Five Old Peaks<br />
Five olds peaks exist side by side, like five old men chatting<br />
each other. The famous Tang Dynasty poet Libai left us<br />
poem about the beautiful scenery here. There are five little<br />
peaks coming in every shape before the peak, and tourist can<br />
enjoy stone engraving of rock on the peak, and yingke pines<br />
here. Seeing from the top of it, there is splendid view of sunrise.<br />
If it is foggy, people even can hear “the sound of fog”.<br />
Academy of White Deer<br />
In the valley of Wulanfeng stands one of the oldest<br />
institutions for higher learning in China. It was establish on<br />
A.D. 940. The teachings were first centered on the teachings<br />
of Confucius. The founder raised a pet white deer, thus<br />
its name “Academy of White Deer Cave”. In the courtyard<br />
there is the Tablet Corridor, The Sacred Gate of Ceremony<br />
and White Deer Cave.
Yellow Dragon Pool<br />
“It is the dragon make the water clever instead of the<br />
deepness of it.” Going through roots and rocks, and rushing<br />
downward along dark green precipice, waters<br />
straightly fall into the pool. It is said<br />
there is a untamed dragon in the<br />
pool, which often cause calamity.<br />
Later it has been subduded<br />
and kept in the pool by a Buddhist<br />
monk<br />
Dark Dragon Pool<br />
Dark dragon’s pool is divided<br />
into f ive chinks by a huge stone.<br />
Hanging from the stone, the five parts<br />
of water rush down to the pool. As the<br />
story does, there is a dark dragon inhabiting<br />
in the pool, so people name<br />
it after the dark dragon. The water is<br />
clear in the pool, which make people<br />
can not help drinking and playing<br />
with it.<br />
Three Ancient Trees<br />
“three trees stand in front of the<br />
temple, a tree and a bodhi”. Of three big<br />
trees, two are cryptomerias, the other is a gingko. It is tall<br />
and big, stalwart. It is said the tree was planted by Buddhist<br />
monk in the Jin Dynasty, but in fact it was done<br />
by monk in the Ming Dynasty. So it has a history of<br />
more than 400 years so far.<br />
Lulin Lake<br />
The Lulin lake was built in 1955 by piling up<br />
the dyke and building the bridge. The area is 130,000<br />
square meters, and water demand is 1,200,000 square<br />
meters. Surrounded by the mountains, the lake and the<br />
mountains set each other off. The rainbow-like bridge<br />
and mirror-like water make here a dreamlike place.<br />
Meilu Villa<br />
It was established in 1903 by Britain’s Lord Lannoze.<br />
The whole building reflects British winding corridors architectural<br />
style, and stresses the abstract beautiful rule of the<br />
building. It was transferred to the Mrs. Bali in 1922, and she<br />
presented it as a gift to Song Meiling in 1934. From then on,<br />
here became the summer official residence of Chiang Kaishek<br />
(the chairman of KMT). During the meetings of the<br />
Central Committee of the Communist Party of China, Mao<br />
Tse-tung lived here.<br />
Villa 359<br />
It was built in 1902 by<br />
priest Williams from U.S.A.<br />
north Presbyterian Church. The villa<br />
fully utilizes the topographical characteristic<br />
and occupies a commanding position. There is a kind of<br />
imposing manner out of the ordinary. Xiong shihui, the<br />
chairman of provincial government of Jiangxi bought the<br />
villa in 1932. During the meetings of the Central Committee<br />
of the Communist Party of China, Zhu De stayed here.<br />
Villas 286<br />
It was established by Kurchinan<br />
of the American missionary<br />
in 1903. In 1936, the National<br />
Government Ministry of<br />
Education bought the villa<br />
as its office on Mt. Lu.<br />
During the meetings of<br />
the Central Committee<br />
of the Communist Party<br />
of China, Deng Xiaoping,<br />
and Dong Biwu stayed<br />
here respectively in 1961 and<br />
1970.<br />
Former British Medical<br />
Hall Villa 438<br />
originally for British medical assembly<br />
hall, it was changed into little Christianity church<br />
in 1946. Chiang Kai-shek, Situ Leideng has prayed here.<br />
The building is influenced by the trend of architectural<br />
thoughts of European Renaissance and roman classics. The<br />
whole style is stable. During the meetings of the Central<br />
Committee of the Communist Party of China in 1950s,<br />
here is the middle and southern group meeting room.<br />
87
Spr ng Fest val<br />
I Can't Understand<br />
90<br />
By Paul Ward<br />
For most people,<br />
Spring Festival is<br />
not an option.<br />
It must be done.<br />
So, cheerfully<br />
accept and smile.<br />
I<br />
tried hard to think of a positive side to<br />
Chinese Spring Festival. But the truth<br />
is, I can’t. Not because I don’t want to,<br />
but because there is a cultural block. I<br />
don’t feel any emotion connected with SF,<br />
because it isn’t part of me. I didn’t grow up<br />
with it; I don’t have any family close enough<br />
to really appreciate its significance.<br />
For the 3 years that I lived in Shanghai,<br />
I observed SF from the outside. I Googled; I<br />
read; I listened; I watched. I asked questions.<br />
Some very kind colleagues tried to explain.<br />
BUT, I never really understood.<br />
The pattern was always the same. 2 weeks<br />
before SF, the tension would increase. The<br />
chatter at lunchtime focused on one topic; The<br />
travel home. Everyone needs to be with their<br />
family, everyone needs a ticket. Everyone has a<br />
plan, and a back-up plan, and a second back-up<br />
if the first back-up fails. Every route is explored;<br />
Plane (usually too expensive), train (preferred),<br />
bus (ok for a few hours travel), car (if you know<br />
someone else travelling to or past your hometown).<br />
Feel the anxiety. Guanxi is called in,<br />
spent, begged, given, traded. The boss must<br />
share the pain. Look the other way as your<br />
team disappear for 3 hour ‘lunch-breaks’ to go<br />
to the ticket office. Share the joy when a ticket<br />
is delivered. Like a prize in a lottery. Check<br />
the details (twice); Kiss the paper. Relief. Big<br />
smile. Phew, mum will be happy now. Think<br />
about the gifts. What to take? Food is traditional.<br />
Healthy fruit? Spicy meat? Yes. Snacks<br />
for the journey. And of course the hongbao.<br />
Can you get me three red envelopes please.<br />
Oops no, four, I forgot my new little brother<br />
(cousin). How much to put in? Can I afford one<br />
hundred. Yes, if I don’t go out next week. But<br />
the dinners with colleagues. Oh, I will manage<br />
somehow. Family will understand how difficult<br />
it is; how much effort I made to be there. I have<br />
my ticket. That is the most important thing.<br />
Everyone wants you to enjoy SF. But<br />
how? The usual questions; What are you doing<br />
for SF Mr Laowai? Will you travel? Are<br />
you kidding? Join 1.3 billion Chinese, all<br />
wanting to be somewhere else? My nightmare<br />
– I’m staying at home.<br />
The first year, naively, I went to the railway<br />
station to try and buy a ticket. Horrific<br />
scenes. People shouting, crying, pushing, everyone<br />
with huge bags. What makes these gentle<br />
people turn into monsters? SF of course.<br />
So eventually everyone gets to where<br />
they want to be. What now? Lots of dinners?<br />
Lots of chats. TV Gala’s. Visit the ancestors<br />
graves. Shopping. Telling happy ending<br />
stories. Playing cards or majong. More shopping.<br />
Special snacks between meals! Disorganised<br />
chaos. Happy family harmony.<br />
But what goes on in the background?<br />
My young team always dreaded the inevitable<br />
questions from their parents: You look<br />
thin. Are you eating properly? Do you have<br />
a girlfriend (boyfriend)? Whatever their answers,<br />
more questions would follow. Who is<br />
he (she)? Where is he from? Is she beautiful?<br />
How old is she? When will we meet him?<br />
Does he have a good job? A good family? A<br />
good education? Is he kind? Is he tall? Does<br />
he have a car? Does he have an apartment?<br />
The pressure to conform, follow the tradition,<br />
create and grow the next generation.<br />
And finally the fireworks. Wow, the incredible<br />
noise. Late at night; very, very late at<br />
night. Sleeping is not an option. The smoke; the<br />
pollution; the cost! Lots of theories about why<br />
they are so popular. Connections with the gods?<br />
Nah, Chinese men just like to make lots of noise.<br />
Stay a few days with the family, visiting<br />
relatives and old friends. Then the whole travel<br />
process begins again in reverse. Sometimes my<br />
team would be a few days late back to the office.<br />
Gifts from home. Mum’s cooking. Some new<br />
clothes. Tired, weary, exhausted. Was it worth<br />
it? Stupid question really. For most people, SF<br />
is not an option. It must be done. So, cheerfully<br />
accept and smile. One day, you can punish your<br />
kids by dragging them back from far away.<br />
Is it like Christmas? No.<br />
Is it like any Western festival? No.<br />
Will I ever understand it? No.
Unforgettable<br />
Spr ng Fest val<br />
Fireworks<br />
It’s that time of the year again, the Spring<br />
Festival, a time for celebrations and family.<br />
While I have been living in China for<br />
quite some time and the Spring Festival<br />
has become more and more familiar to me<br />
each year, I think the most exciting year for me<br />
would have to have been the first time I experienced<br />
Spring Festival. I wasn’t sure exactly<br />
what would happen, but it’s a night that turned<br />
out to be an unforgettable experience.<br />
As an American looking back, I think<br />
probably the most exciting and fun thing about<br />
the Spring Festival for me would be playing<br />
with the fireworks. I can still remember when<br />
I was young and we would celebrate Independence<br />
Day in the U.S., we would always<br />
play with fireworks as the sky became dark.<br />
Unfortunately, after a few years playing with<br />
fireworks was banned in my city, and in many<br />
other places across the U.S. since the risk of fire<br />
is too great. While this was for the good of the<br />
community and increased safety, it also took<br />
away one of the most exciting and representative<br />
parts of our National Day. Luckily, however,<br />
China’s tradition of fireworks lives on.<br />
While the symbolism of the Chinese<br />
use of fireworks during the Spring Festival is<br />
different (being used as a means to ward off<br />
evil spirits), it doesn’t mean playing with them<br />
are any less fun. On the contrary, I think the<br />
fireworks available in China are much bigger<br />
and more impressive than anything found in<br />
the U.S., which makes sense given that China<br />
is the birthplace of fireworks. During that first<br />
Spring Festival in China I remember noticing<br />
the fireworks shops popping up around the<br />
city, but I didn’t pay much attention to them.<br />
Then, on New Year’s Eve we stopped at one<br />
on the way to my wife’s family celebration (she<br />
is Chinese), I was both surprised and awed by<br />
the vast selection they had, and maybe I went<br />
a little crazy, spending a few hundred RMB<br />
on that night’s entertainment.<br />
After loading up the trunk of our car, we<br />
continued on to my wife’s parents house where<br />
we would celebrate. As many have said before,<br />
the focus of Spring Festival is spending time<br />
with family, and in that respect it is very similar<br />
with Christmas in the U.S. It was very relaxed<br />
and comfortable, enjoying a nice meal together<br />
and chatting. The food of course was great, and<br />
it was very interesting to experience all of the<br />
unique Chinese traditions related to Spring<br />
Festival for the first time. However, maybe it’s<br />
just me, or maybe there are others that share<br />
my feeling, but I kept looking back at my pile<br />
of fireworks near the door, then checking my<br />
watch to see how much longer until midnight.<br />
These fireworks needed to be set off!<br />
Finally it was approaching midnight<br />
and we went outside to prepare. I could hear<br />
other fireworks exploding in the distance,<br />
and that’s when I realized there are others<br />
out there just as excited as me. As midnight<br />
got closer the sights and sounds of the fireworks<br />
became more and more intense. We all<br />
took turns lighting up the different fireworks<br />
we had, saving the biggest and best for last.<br />
The whole sky was filled with explosions, so<br />
many that one might think they are in the<br />
middle of a war. But in reality it is a war, a<br />
war with all those evil spirits which need to<br />
be driven away. This was a war we continued<br />
to fight until there were no more fireworks<br />
left. While that was a sad realization, I immediately<br />
became happy again since my wife<br />
told me we could keep playing with fireworks<br />
for the next two weeks.<br />
Of course, after the fireworks there was<br />
still a lot of celebrating to do, not only that<br />
night, but over the next few days, spending<br />
more time with different family members.<br />
It was nice to see that people everywhere<br />
are largely the same, taking joy in the same<br />
things and sharing similar traditions, Christmas<br />
and Spring Festival are very similar in<br />
these respects. But I think maybe the biggest<br />
difference when compared with Christmas,<br />
at least in my experience, is that Christmas<br />
usually lasts only a day or two, but Spring<br />
Festival lasts two weeks, plenty of vacation<br />
time to spend with your loved ones.<br />
By Ty Clendenen<br />
The fireworks<br />
available in<br />
China are big and<br />
impressive, which<br />
makes sense<br />
given that China<br />
is the birthplace of<br />
fireworks.<br />
91
Culture<br />
Why Chinese Lunar<br />
Chinese spring festival is the lunar<br />
New Year, the first day of the first lunar<br />
month, the most important Chinese holi-<br />
New Year?<br />
day. It is a festival season for family gathering<br />
2011 falls on February 3rd, the Year of the<br />
and lasts for 15 days, ended as Lan-<br />
Rabbit.<br />
tern Festival, the 15th day of the first lunar There are many customs for Chinese<br />
month. In China, the fluctuating New Year New Year, in which people hope the new<br />
is the real start of the next year rather than start of a year will bring them good luck<br />
the fixed January 1. Chinese new year in and prosperity for the whole year.<br />
Why firework, lanterns and couplets?<br />
Most people stay up late on the eve<br />
of the Chinese New Year, watching TV,<br />
enjoying snacks and chatting with their<br />
family. Even if they don't, they are woken<br />
up by the loud bangs of firework at midnight<br />
-- if the sporadic firework sessions<br />
before 12 a.m. are not loud enough to stir<br />
the sound sleepers.<br />
Why Jiaozi and Niangao?<br />
In northern China, Chinese dumpling<br />
( 饺 子 jiǎo zi) is an indispensable dish on the<br />
New Year dinner table. It is an important<br />
tradition on New Year’s Eve for families to<br />
gather together and spend the evening preparing<br />
the dish. Experts say the snack was<br />
already popular in the Three Kingdoms<br />
period (220 - 280). Many Chinese believe<br />
that to eat dumplings at the turn of the year<br />
will bring good luck, because the food<br />
Why clean house?<br />
Before the New Year arrives, the<br />
Chinese consider it very important to give<br />
the house a thorough cleaning, sweeping<br />
Why red envelops?<br />
Children enjoy the holiday more than<br />
anyone else, largely because they get red<br />
envelops ( 红 包 hóng bāo) of “lucky” pocket<br />
money from their parents, grandparents and<br />
Why no haircut?<br />
Many Chinese has the superstitious<br />
belief that if a person has a haircut during<br />
the first month of the lunar year, his maternal<br />
uncle will die. As a result, barbershops<br />
open almost 18 hours a day in the preholiday<br />
rush for haircuts that lasts for at<br />
least two weeks until the New Year’s Eve.<br />
While women like to spruce up for<br />
Question:<br />
As a legend goes, Chinese ancestors<br />
were haunted by a monster named “ 年<br />
nián” (meaning year) that left its mountain<br />
dwelling for human communities amid<br />
food shortages in winter to prey on men<br />
and cattle. In the long run, people found<br />
out the monster was afraid of flames,<br />
bangs and red color. So they worked out<br />
resembles “ 元 宝 yuán bǎo”, a boat-shaped<br />
gold ingot that served for many years in history<br />
as China’s currency.<br />
Vegetables, meat, fish and shrimps<br />
can all make dumpling fillings. And it is<br />
common to put something special- from<br />
nuts and dates to coins- in just one of the<br />
dumplings. He who happens to eat this<br />
special dumpling is considered the luckiest<br />
person in the new year.<br />
away any bad luck that may have accumulated<br />
over the past year. However,<br />
don’t clean for the first few days of the<br />
other relatives. Experts say the custom, at least<br />
1,800 years old, conveys New Year greetings<br />
and aims to protect youngsters from ill luck.<br />
In Chinese cities, the sum in each<br />
the holiday, even men with short hair like<br />
to take an extra haircut before the new<br />
year lest their hair will grow too long before<br />
their next haircut, scheduled on the<br />
second day of the second lunar month.<br />
A Chinese legend goes that a poor<br />
barber loved his uncle dearly but could<br />
not afford a decent new year gift for<br />
How does your country celebrate the New Year?<br />
firecrackers and lanterns to scare it away.<br />
No one in China nowadays still believes<br />
such a monster actually existed, but<br />
the legend and customs have survived.<br />
Today, Chinese families still hang up<br />
red lanterns and put up red couplets with<br />
rhymed phrases at their door, light fireworks<br />
and stay up late to watch the old year out.<br />
In southern China, where people<br />
prefer rice to wheat, families eat glutinous<br />
rice cakes instead of dumplings for the<br />
new year. These sticky rice cakes, whose<br />
Chinese name “ 粘 糕 nián gāo” (same<br />
pronunciation as “ 年 高 ”, higher year), are<br />
also symbols of a prosperous new year. As<br />
such, eating nian gao has the symbolism<br />
of raising oneself higher in each coming<br />
year ( 年 年 高 升 nián nián gāo shēng).<br />
New Year. If you do any sweeping during<br />
this time, you risk sweeping away your<br />
good luck this year.<br />
envelop can range from RMB 100 up to<br />
several thousand, but has to be an even<br />
number. It is usually given in exchange of a<br />
child's New Year greetings to adults.<br />
him. So he gave his uncle a nice haircut<br />
that made the old man look many years<br />
younger. His uncle said it was the best<br />
gift he had ever had and wished to get a<br />
haircut every year. After his uncle died,<br />
the barber missed him very much and<br />
cried every new year. Over the years, his<br />
“thinking of his uncle” ( 思 舅 sī jiù) was<br />
interpreted as “death of uncle” ( 死 舅 sǐ<br />
jiù) because in Chinese, their pronunciations<br />
are almost the same.<br />
92
xīn nián jí xiáng huà<br />
新 年 吉 祥 话<br />
Chinese New Year<br />
Greetings<br />
2<br />
恭 喜 发 财 gōng xǐ fā cái<br />
May you come into a good fortune!<br />
This is another common greeting during the New<br />
Year. You may hear it quite frequently in shopping malls or<br />
supermarket. Children often greet their relatives with “ 恭<br />
喜 发 财 , 红 包 拿 来 ” gōng xǐ fā cái, hóng bāo ná lái. That is<br />
to say “Happy New Year and get rich, now give me a red<br />
envelope with some lucky money.”<br />
拜 年 啦 bài nián la<br />
CFT wishes every reader a very Happy New Year!<br />
tù nián xíng dà yùn<br />
兔<br />
年<br />
行<br />
大<br />
运<br />
May the Year of the Rabbit bring you good luck.<br />
jiā hé wàn shì xīng<br />
家<br />
和<br />
万<br />
事<br />
兴<br />
If the family lives in harmony, all affairs will prosper.<br />
3<br />
大 吉 大 利 dà jí dà lì<br />
Good luck and every success!<br />
Luck is important at the beginning of the year. There<br />
are many unwelcome words and expressions during Chinese<br />
New Year. Sometimes children may be unaware of<br />
this, and say something inappropriate. The adults will say<br />
“ 童 言 无 忌 , 大 吉 大 利 ” tóng yán wú jì, dà jí dà lì, to mean,<br />
“No matter what the child said, we’ll have a lucky and<br />
smooth year anyway.”<br />
4<br />
万 事 如 意 wàn shì rú yì<br />
May all your wishes come true!<br />
万 事 , literally means “10 thousand things”, referring<br />
to everything. 如 意 means “satisfy your wanting”. It is also<br />
a traditional handicraft in China, usually made of jade; 玉<br />
如 意 yù rú yì, as a sign of good luck, is a valuable gift to<br />
friends, also an exquisite decoration in any room.<br />
5<br />
岁 岁 平 安 suì suì píng ān<br />
Safe and sound every year.<br />
“Break” in Chinese is 碎 suì, the same pronunciation<br />
as 岁 (year). To ward off bad luck, Chinese say 岁 岁 平 安<br />
when something breaks during the New Year, e.g. drinking<br />
glasses.<br />
1<br />
新 年 快 乐 xīn nián kuài lè<br />
Happy New Year!<br />
There are many sayings and greetings associated<br />
with the Chinese New Year. Family members, friends, and<br />
neighbors greet each other with congratulations and wishes<br />
for prosperity of the coming year. “ 新 年 快 乐 ” is one of the<br />
most common greetings when Chinese meet each other at<br />
the first day of the New Year.<br />
6<br />
年 年 有 余 nián nián yǒu yú<br />
Wish you prosperity every year.<br />
A traditional New Year’s food is fish 鱼 yú, which has<br />
the same pronunciation as 余 (surplus), to indicate a rich<br />
coming year. Also when Chinese eat fish during the New<br />
Year, they prefer not to eat it all, but leave a small part to<br />
wish for a surplus year.<br />
93
Statement<br />
From January 2011, Issue<br />
No.1/494 of China's Foreign<br />
Trade magazine is to b e<br />
altered into monthly-published<br />
magazine with richer content<br />
(96 pages for each issue) for the<br />
same price (RMB 16/US$5 per<br />
issue). Subscription is welcome.<br />
We sincerely appreciate your<br />
continuous support to CFT.<br />
China's Foreign Trade<br />
Editorial Department
诚 征 来 稿 , 优 稿 优 酬<br />
诚 征 来 稿 , 优 稿 优 酬<br />
诚 征 来 稿 , 优 稿 优 酬<br />
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