F REIGN TRADE - 中国国际贸易促进委员会

JUN. 2012 No. 523 Sponsored by CCPIT Since 1956CHINA’SF REIGN TRADEThe Export-Import Bank of China:Want to Be the Best in A Better WorldSpecial reportFDI Drops forSix MonthsSURVEYChina’s AgingPopulationBrings Opportunitiesfor InsurersLeeshan Birney,founder andchairman of StoneMountain Properties国 内 邮 发 代 号 :80-799国 际 邮 发 代 号 :SM1581国 内 刊 号 :CN11-1020/F国 际 刊 号 :ISSN0009-4498http://www.ccpit.org

PoliciesChina to timely fine-tune monetary policyChina will maintaina prudent monetarypolicy in the monthsahead, while timely andappropriately fine-tuningthe policy, the People’sBank of China (PBOC),or the central bank, saidon May 10, Xinhua reported.The government willmake its monetary policymore targeted, flexibleand forward-looking,said a report releasedby the PBOC to addressthe country’s monetarypolicy adopted in the firstquarter.The statement cameas the world’s secondlargest economy is tryingto cool inf lation whilesustaining economicgrowth. Its first quarterGDP growth hit a nearly three year low of 8.1percent caused by sagging exportsand domestic tightening efforts.The economy still has many favorable conditions and positive factors tosupport steady growth, the report said, citing an improving external market andrapid development in the country’s central and western regions, it said.But it also faces lingering uncertainties, which include a correcting propertymarket that will affect growth in the short term, and fluctuating consumer prices,the report said.Consumer prices may rebound, as prices of labor-intensive agriculturalproducts, service products and resource productstend to surge on rising labor costs, anda volatile global commodity market has keptimported inflationary pressure in place, thereport warned.While checking changes in foreign exchangefunds and market credit demand, thePBOC will use combined monetary toolssuch as open market operations and banks’reserve requirement ratio (RRR) to flexiblyregulate banking liquidity, it said.China to expand high-endequipment manufacturingsectorChina is looking to expand the sales revenueof its high-end equipment manufacturingsector to six trillion yuan ($951 billion)by 2015, according to the industry’s 12thFive-Year Plan (2011-15) published on May 7by the Ministry of Industry and InformationTechnology, China Daily reported.Sales of high-end equipment will accountfor 15 percent of the overall revenue ofequipment manufacturing industry, and helpgenerate 28 percent of industrial added value,together with alarger share of the global market,according to the plan on the ministry’swebsite.By 2020, the proportion of revenue willexpand to 25 percent, while the industrialadded value part will grow another two percentagepoints, which will make high-endequipment manufacturing a pillar industry ofthe world’s second-largest economy.Figures1.1bThe Chinese government has allocateda total of 1.1 billion yuan ($174 million) fromthe central budget to the National PublicationFoundation since 2008, according to astatement from the General Administrationof Press and Publication (GAPP).6thForeign direct investment (FDI) intoChina fell for a sixth straight month inApril amid global economic woes.51.1%Macao’s visitor arrivalsin package tourssurged by 51.1 percentyear-on-year to 754,163in March 2012, accordingto the figuresreleased on May 14 bythe city’s Statistics and Census Bureau.47,415Shanghai General MotorsCo., Ltd. (ShanghaiGM) will recall 47,415Chevrolet Aveo-model carsover faulty brake fluid reservoirs,China’s consumerquality watchdog said onMay 11.2

QuotesHigh-end equipment mainly refersto aviation equipment, satellite andapplications, railway transportationequipment, marine engineering equipment,and intelligent manufacturingequipment.China to expand propertytax to more citiesThe State Council has decided toexpand property tax to more pilot citiesthis year, Shanghai Securities Newsreported on May 10.It is unknown which cities willbe pilot cities and what taxation planwill be adopted, Qin Hong, director ofthe Policy Study Center of Ministryof Housing and Urban-Rural Developmentof China, told Shanghai SecuritiesNews.Taxation for owning a property andtrading a property will both be considered,the Shanghai Securities Newsreported, citing Xie Xuren, Minister ofFinance.The Ministry of Finance, StateAdministration of Taxation and theMinistry of Housing and Urban-RuralDevelopment are evaluating the effectsof property taxation in the pilot citiesof Chongqing and Shanghai, accordingto the Shanghai Securities News.The “Shanghai model” may be appliedin new pilot cities, the newspaperreported, citing an unnamed analyst.“China can achieve this year’s development goals”China has the confidence, conditionsand capabilities to achievethis year’s development goals, PremierWen Jiabao said at a trilateralbusiness summit between China,Japan and the Republic of Korea,Xinhua reported.Wen noted that the Chineseeconomy is currently enjoyingsound development momentum,and people’s living standards andmarket confidence are continuing toimprove.China will accelerate the transitionof the country’s developmentmode, adjust the economic structure, strive to expand domestic demand,promote energy conservation and emissions reduction, develop the greeneconomy and realize sustainable development, the premier said.“China’s economy must advance on two legs”Today State-owned and private enterprises are playing coordinated, notcontradictory, roles in China’s economy. State-owned economies, many ofwhich are resource, capital, or technology intensive, should concentrate oncompeting in the global arena, and take the leading role in key industries.Private enterprises, which rely more on labor, should help create employmentand stimulate regional development, and join the international marketif possible, said Hu Angang, director of the Center for China Studies at TsinghuaUniversity.Competition, as well as coordination, of State-owned and non-Stateownedsectors is an indispensable prerequisite of China’s remarkable economicgrowth. This is how China was able to break the US’ monopoly inmanufacturing, he said.10%The Ministry of Industryand Information Technologyannounced on May 11 that thecountry’s gold output in the firstthree months of the year reached80.8 tonnes, up 10 percent year on year.2.1%Macao’s domestic loans to local private26.01bsector in March increased 2.1 percentmonth-on-month to 170.4billion patacas (21.3 billionU.S. dollars), accordingto figures released bythe Monetary Authorityof Macao on May 10.China’s foreign exchange regulatorsaid it has approved quotas worth a total of26.01 billion U.S. dollars for 141 qualifiedforeign institutional investors (QFII) as ofMay 8.3.15tA report released on May 10 showedthat China’s local governments sold333,900 hectares of land to be used forconstruction in 2011, with the total valueof the sales contracts reaching 3.15 trillionyuan (501 billion U.S. dollars).3

PoliciesGreen credit criteria taking shapeChina is working on criteria with which to evaluate the implementation ofits green credit policy by banks and enterprises, according to the China BankingRegulatory Commission, China Daily reported.A green credit policy means using loans as a stimulus for green industriesand projects, while it also requires banks to deny loans to energy inefficient andpolluting enterprises. It has been advocated by international organizations like theInternational Finance Corporation of the World Bank Group for years.Enforcement of the policy will be tied to restrictions on doing business in certainareas, and the commission can deny promotions to top executives for failingto carry it out.Bad performers might even be identified on a black list, a senior official ofChina’s top bank ingregulator said on May 16.Wang Zhaoxing, vice-chairman of the commission, said that China will issuean evaluation and system of rewards and punishments when the time is right.“We will evaluate the enforcement of the green credit policy by China’s financialinstitutions and use it as a reference for regulatory rating, institutional access,business access and the promotion of top executives,” Wang said.China to fix copyright law draft amendmentThe National Copyright Administration (NCA) will revise a draft amendmentto China’s copyright law that has stirred controversy since being circulatedto seek public opinion, according to an announcement by the NCA. The NCA hasreceived 1,560 comments concerning 81 articles in the draft amendment sinceitwas published on March 31, according to the administration.The NCA will therefore revise the draft amendment based on the public’ssuggestions, as well as those from a committee of experts, and publish the revisedversion to seek more opinions before the end of May, an NCA official said.The draft amendment has triggered heated discussion among members of thepublic. It has also drawn wide attention from trade organizations and businessesfrom the United States, the European Union, Britain and Japan, as well as fromHong Kong and Taiwan.Public feedback has mostly concerned statutory licensing, collective managementof copyrights, the review obligations of network service providers, legalliability for non-exclusive license users, compensationfor damages and the registration ofcopyrights. Chinese music composers haveexpressed anger regarding the draft amendment,as they believe it will diminish theirprofessional rights if passed.Article 46 of the document stipulates thatmusic producers may use a musical work fromanother recorded product, as long as it hasalready been published for more than threemonths, in their own productions withouthaving to obtain consent from the copyrightholder. The article says producers must reportthe use to relevant government authorities andfairly compensate the original artist.The draft says that if the copyright holderdoes not state otherwise, royalties for such usewill be collected through collective copyrightmanagement organizations.Composers have complained that thedraft may deprive them of their copyright interests.Industry insiders have also expressedconcerns that the provisions will make recordFigures4.7%Hong Kong’s composite ConsumerPrice Index (CPI), a gauge of inflation,rose 4.7 percent in April from a yearearlier, easing from 4.9 percent growthin March, the city’s statistics departmentsaid on May 22.1.33%China’s auto sales dropped from theprevious year in the first four months of2012, as the slowing economy, the removalof subsidies and high fuel prices deterredbuyers.100bThe construction of a 100-billion yuan(16 billion U.S. dollars) high-tech zone wasjointly launched on May 8 in southwestChina’s Sichuan province by the provincialgovernment and a Singapore company.1.65tSales of the top 100 chain stores inChina totaled 1.65 trillion yuan (238.634

http://cft.ccpit.orgwww.ccpit-cft.net.cn2012/06 No.52308444888The FDI index has suffered a negativegrowth for 6 consecutive months.Building energy conservationpresents both demand and market.The rapidly aging population in Chinapresents opportunities for insurancecompanies.Fascinating Chinese sceneries inblockbuster films.Special report08 FDI Drops for Six Months09 Why FDI Falling Down?10 Change of Foreign Capital Distribution12 Future Remains Bleak13 A Long-Term Decline Ahead14 China Expecting a Long-Term Slowdown of FDI Inflows15 Analysis: China’s Utilization of Foreign Capital in 2012ECONOMY20 Financial Reform after the Crisis: An Early Assessment24 Survey on Chinese Enterprises’ Outbound Investment and Operation (I)27 Why Chinese Enterprises’ Overseas Investment Fails Sometimes?28 Data Watch: China’s Foreign Trade and Investment in the First FourMonths of 2012Industrial Watch32 China reports spike in agricultural trade with Africa42 Tainted Spirulina Investigation43 China’s IT Expense to Surpass Japan in 201344 Building Energy Conservation Presents both Demand and Market46 China Sports Goods Industry: Big but Not Strongsurvey48 China’s Aging Population Brings Opportunities for InsurersCase Study52 How to Address Privacy Concerns of Internet Users?REGIONAL TRADE AND INVESTMENT54 Consensus Outweighs Divergence on the China-Japan-Korea FreeTrade Area56 Greece Starts the Dominos ?57 Multi-Lose Eurozone if Greece Secedes58 German Companies Confident with Chinese Market amid Challenges60 2012 State of American Business in China62 UNDP Chief Values China’s Sustainable Development63 Int’l Cooperation Zone under Construction in Jilin

COVER STORY66 An Oriental Rose Blossoming in the U.S. Real EstateIndustryPeople70 Pierre Cardin: Surprise Myself Constantly72 Wang Xiaoling’s Love with Wing Lai Yuen74 Yang Bingqing: Oil Industry Is Her Lifelong CareerInfoRMATION76 2012 China Market Suppliers List78 China Fairs & Expos82 Investments Projects in Fuding City, ChinaLIFESTYLE84 Contemporary Art and Classical Art Shining at the SameArt FairTHIS IS China88 Fascinating China Sceneries in Blockbuster Filmseye on china92 China as an Important Partner of Macedonia93 Trust or Not?culture94 Thirty-Six Stratagems (I)Index of Advertisements封 二 -0118-1930-3164-65封 底Changchun First Automobile Works一 汽 集 团Shaanxi Automobile Group Co., Ltd.陕 西 汽 车 集 团 有 限 责 任 公 司Zhengzhou Yutong Group Co., Ltd.郑 州 宇 通 集 团 有 限 公 司JONWAY AUTOMOBILE永 源 汽 车Anhui Jianghuai Automobile Co., Ltd.江 淮 汽 车Cooperation Media虚 假 新 闻 举 报 热 线 86-10-68053271Sponsored by ( 主 管 )CCPIT( 中 国 国 际 贸 易 促 进 委 员 会 )Operated by ( 主 办 )Trade Development and Cooperation Center of CCPIT中 国 国 际 贸 易 促 进 委 员 会 贸 易 推 广 交 流 中 心Published by ( 出 版 )China’s Foreign Trade Magazine中 国 对 外 贸 易 杂 志 社社 长 President 杨 晓 东 Yang Xiaodong总 编 辑 Editor-in-Chief 孟 燕 星 Meng Yanxing副 社 长 Vice President 石 净 Shi Jing杨 复 强 Yang Fuqiang李 英 宏 Li Yinghong编 辑 部 副 主 任Editorial Deputy Director编 辑 部 Editorial DepartmentTel:86-10-68053271流 程 总 监 Operation Director英 文 校 审 English Copyeditor杨 蔚Yang Wei郭 艳 Guo Yan李 振 Li Zhen竹 子 俊 Zhu Zijun崔 晓 玲 Cui Xiaoling张 越 Zhang Yue刘 英 波 ( 英 ) Lewis McCarthy莫 雷 ( 美 )Adam Morley经 营 部 总 经 理 石 净 ( 兼 )Marketing Department Director Shi Jing副 总 经 理 Deputy Director 白 义 峰 Bai Yifeng石 林 峰 Shi Linfeng项 目 经 理 Manager 游 万 龙 You WanlongTel:86-10-68027947 李 小 冬 Li Xiaodong高 嵩 Gao Song推 广 部 总 经 理 李 英 宏 ( 兼 )Distribution Department Director Li Yinghong项 目 经 理 Manager 王 石 Wang ShiTel:86-10-68069328 王 岱 凌 Wang Dailing秘 书 处 副 主 任Council Secretariat Deputy Director联 络 专 员 AssistantTel:86-10-68020773刘 晓 东Liu Xiaodong王 飞 Wang Fei于 洋 Yu Yang戚 英 杰 Qi Yingjie石 林 Shi LinGeneral Distributor For Overseas Subscribers国 外 发 行 总 代 理China National Publications Import & Export (Group) Corporation中 国 图 书 进 出 口 ( 集 团 ) 总 公 司Add: 16, Gongti East Road Beijing, ChinaPost Code:100020地 址 : 北 京 市 朝 阳 区 工 体 东 路 16 号Tel: 86-10-65066688-8822 65063082China International Book Trading Corporation中 国 国 际 图 书 贸 易 总 公 司 (GUOJISHUDIAN)Add: Box 399, Beijing 100044, China地 址 : 中 国 北 京 399 号 信 箱 (100044)国 内 邮 发 代 号 80-799国 际 邮 发 代 号 SM1581国 内 统 一 连 续 出 版 物 号 CN11-1020/F及 国 际 标 准 刊 号 ISSN0009-4498AD LICENCE No. JXGS/G-0249广 告 经 营 许 可 证 号Domestic Price 国 内 订 价Overseas Price 国 外 订 价设 计 制 作印 刷京 西 工 商 广 字 第 0465 号16 元 (RMB)US$5北 京 锋 尚 制 版 有 限 公 司北 京 瑞 禾 彩 色 印 刷 有 限 公 司License Mark of General Administration ofPress and Publication, the People’s Republic of China

FDI Dropsfor Six MonthsBy Yang WeiChart: China’s FDI growth from March 2011 to April 201240%30%32.90%20%18.57%10%0%Mar, 2011 Apr May Jun Jul Aug Sep Oct Nov Dec Jan, 2012 Feb Mar Apr-10%-20%-12.73%-6.10%Data Source: Ministry of Commerce, PRCThe FDI statistics issued by the Ministry ofCommerce on May 15 show that in Aprilthe paid-in foreign investment in Chinaaccounted for 8.401 billion USD, down by0.74% year-on-year. So far the FDI index has suffereda negative growth for 6 consecutive months.Experts say that the gloomy economies of the Europeancountries and the U.S., increasing costs andslower economic growth of China, and also competitionsfrom other developing counties will exertcontinuing pressures on China’s FDI condition. Itwill be a long trend that the inflow of investment willslow down.According to Ministry of Commerce, 7016foreign-invested companies have been founded fromJanuary to April, down by 13.94% on a year-on-yearbasis; the paid-in foreign investment reaches 37.881billion USD, down by 2.38% year-on-year. As of theend of this April, 745,000 foreign-invested companieshave been approved to establish, with paid-inforeign investment totaling 1.2 trillion USD.Meanwhile, the distribution of foreign investmentin China has been undergoing subtle changes.On the one hand, manufacturers with low profitmargin and higher costs have chosen to exit theChinese market; on the other hand, more and moreforeign companies have established R&D or marketingcenters in China to grab new opportunities in theemerging industries. Special Report of this issue willexplore more on what behind the falling FDI.8

Domestic reasons“Two factors have contributed to the continuousnegative growth of FDI”, said Shen Danyang,spokesman of the Ministry of Commerce, at aroutine press conference on May 15. One the onehand, the growth of the world economy has becomesluggish, exerting heavy impacts on the global FDI.According to a report issued by the trade and developmentcouncil of the UN, the scale of Greenfieldinvestment and transnational M&A have becomedropped during the first quarter this year, loweringglobal expectations about the FDI prospects. On theother hand, the U.S. and European countries haveencouraged the return of industries and some developingcountries have adopted more favorable investmentinviting policies, increasing the FDI competitions.If we explore further by industry, the manufacturingindustry in absorbing FDI in April experiencedthe largest drop, down by 4.4%, according toMinistry of Commerce. Also, the FDI of service industryand agricultural, forest, husbandry and fishingindustry have dropped by 3.1% and 0.9% respectively.If we look at the data by region, the FDI of China’swest region and east region have dropped by 15.2%and 2.5% respectively.To compound the situation, the rising of factorcosts of China have weakened its advantages inoperational costs. Bai Ming, deputy director of theinternational market research department of theMinistry of Commerce, said that “besides the Europeandebt crisis and other negative external factors,the Chinese economic adjustment has also loweredthe investment willingness.” According to up-to-datedata provided by the National Bureau of Statistics,the PPI (Producer Price Index) has dropped by0.7% on a year-on-year basis, showing the economicslump to the bottom.Also, the structure and quality of FDI, ratherthan its pure scale, have been given more and moreattention. “In many regions it is not about invitingforeign investment, but selecting the right investment,which may also impact the scale of foreigninvestments,” Shen said.Li Zhongzhou, a WTO expert, remarked thatbesides the above-mentioned reasons, the controland management of domestic real estate market haveconstitute another important reason for the shrinkingFDI. Data shows that the real estate industry hasaccounted for 25% in terms of paid-in foreign investment,while the control of the real estate market haslowered the paid-investment of real estate market forthe first quarter by 6.3%.Teng Tai, chief economist of Minsheng Securities,said that the quality has replaced scale as themost calculated factor in attracting FDI. The Chinesepeople have paid more attention to the productionand management technology when inviting theforeign investment, while some foreign companiesare unwilling to see the technological transfer, whichwill lower the amount of investment. Also, the competitiveadvantage in labor costs, less favorable FDIpolicies, and a more intense focus on environmentalprotection in China have pushed the adjustment offoreign investment structure, during which the FDIscale will naturally.External reasonsAccording to Xinhuanet.com, the re-Why FDI Falling Down?By Alice Yang9

cent “Global Investment Trends Monitor” issued by theUNCTAD (United Nations Conference on Trade AndDevelopment) on April 12, the global FDI in 2011 amountsto 1.66 trillion USD, up by 16% on a year-on-year basis, butstill 25% less than the peak of 2007. Also the FDI conditionhas improved this year; investors are still cautious facing thefragile world economy.It shall be noticed that the gloomy European economyhas delivered huge impacts on its investment in China. Datashows that during January to April the investment from 27European countries has greatly dropped, with paid-in investmentshrinking to 1.9 billion USD, down by 27.9% yearon-year,again leading to the negative growth of China’sFDI. “Because of the impacts from European debt crisis, theinvestment from the European Union to China has been fallingdown. Also, the bilateral exports and economic relationsbetween China and the European Union have also turnedgloomy under such a background.” said Shen.“The fragile recovery of the world economy has madethe pie of world FDI much smaller, while the EuropeanUnion and U.S. are encouraging the return of industries, andemerging countries including BRIC have promoted morefavorable investment policies, splitting the stream of internationalcapital.” said He Manqing, director of the TransnationalCorporation Research Center of the Ministry ofCommerce. She added that China is placing more focus onthe quality and efficiency of investment because of the risinglabor costs and restraints by environmental protections.Bian Weihong, senior analyst of the International FinanceResearch Institute of the Bank of China, commentedthat as the largest trading partner of China, the EU is sufferinga serious debt crisis with negative growth for 2 quarters.The recession of the European economy has lowered thelocal willingness to invest in China. Also, the U.S. growthrate for the first quarter is lower than expected, and therecent economic data also turns negative. These factors combinedhave contributed to the negative growth of China’sFDI.Zhou Yu, director of the international financial currencyresearch institute, Shanghai Academy of Social Sciences,said that the economic meltdown of the U.S. and EUhave made their companies unable to expand financially,leading to the decrease of FDI scale. Most companies haveto adjust their investment according to demands, but facingthe unclear economic prospects, most companies will chooseslowing down the investment and decrease the scale.Cheng Dawei, chief expert of WTO affairs center inBeijing, told reporter that “the current domestic economiccondition will make the investment slowdown continue,”she mentioned that this is mainly about the pressure fromthe world economic environment: the EU debt crisis has noappropriate solution, and the investment ability of Europeancompanies is decreasing. The policies adopted by the U.S.government to encourage the reflux of capital show that theU.S. economic recovery is not as rosy as the report describes.Besides, emerging countries are promoting more favorablepolicies to attract foreign capital, causing split of the internationalcapital.Rising labor costA responsible person at an American-funded electroniccompany in Suzhou shared with the reporters thatthe current rising speed and magnitude of China’s laborcosts would have been unimaginable three years ago. Theescalating costs and the high turnover rate it triggers havebrought huge pressures on the operation of foreign-fundedcompanies in China. But he also mentioned that the companyhe worked for will not exit from China in the shortrun, because the Chinese market still outperforms thoseat the Southeastern countries in terms of infrastructuralfacility and quality of human resources, although the laborcosts of the latter may be lower. But if the rise of laborcosts continues, they would consider moving the factoriesto other regions. Another Japanese-funded car companyin Zhejiang also said that it will place more focus on theR&D and design at the Chinese market, and move thecomponent R&D center to China.“Currently China still have labor cost advantage, butsuch advantage is shrinking. The rising labor costs herehave forced those low-cost investments into other markets,”Said Zhou Yu, director of the international financialcurrency research institute, Shanghai Academy of SocialSciences. The labor costs, technological ability, infrastructuralfacility and distribution of high-stream and lowstreamindustry chain are important factors considered byinvestors. Therefore, those small companies more susceptibleto the labor costs but less susceptible to the industrychain will easily move to regions where the labor costs arelow.Such change has been felt by many foreign-funded10

Changeof Foreign CapitalDistributionBy Economy Reference Newscompanies. In 2012 U.S.-China Commerce Chamber for the first timeraised the question “whether the labor costs will impact company operation”in the annual “Business Environment Investigation Report”. Theresult shows that 82% people think the labor costs will impact the companyoperation.But Zhou also mentioned that those companies who have highrequirements about high-stream and low-stream industry chain willchoose to stay. It is said that companies of this type would finally returnto China.Hu Ke, director of the trade development department of the ManagementCommittee of the Suzhou Industry Park, told reporters that thecompanies introduced into the industry park are mainly global top 500,whose core competency lies in their brand and technology. Once establishedin the industry park, these companies are stable and less sensitiveto costs. Hu added that his years of experiences in inviting commercialcapital show that those “migrant” companies mainly belong to companieswith low added values, weak competitiveness and high sensitivity to thechange of costs. The more comprehensive the company is; the more stableit will be. Many foreign-funded companies in the industry park not onlyfunction as production base, but also as corporate headquarter, R&Dcenter or design center.“They need this market”Zhang Xiangchen, director of the Policy Research Institute of theMinistry of Commerce, also discovered that it will be a natural processfor the low-end manufacturing business to maintain their investment levelin China or move to China’s middle and west regions or even overseas.For the medium-level manufacturing industry, the U.S. and Europeancompanies will expand their investments because they need the Chinesemarket.Zhang remarked that the U.S. government has adjusted its policiesby encouraging the development of local manufacturing industryand also the return of overseas capital.Boosted by such policy change, Ford,Carlyle and NCR Corporation havedecided to move its overseas capacitiesback to the U.S. He confessed that thiswill bring certain pressures to China,but the survey shows that the numberof U.S. companies moving back is smalland it is only restricted to those industriesor products highly dependent onthe U.S. market. Many big Americancompanies, including GE and Apple,will further expand their investmentand capacities in China. Therefore, “ingeneral, China’s market potential andindustry condition have huge attractionsto the overseas manufacturers.”But the “Business EnvironmentSurvey Report” issued by AmChamChina in 2012 also shows that althoughthe costs have been rising in 2011, morethan 75% people still predict the salesrevenue of foreign companies in Chinawill rise in 2012, 39% U.S. companiessay that the profit margin in China isstill highest in the world, and 78% U.S.companies listed China as one of thethree investment targets of the world.“Obviously the foreign-funded companiesdo not want to leave China.” thereport indicates.Shen Danyang also mentionedthat although the U.S. and some Europeancountries will call back the capitaland reduce their investments to Chinadue to the impact of the manufacturingindustry strategy, the Ministry of Commercesays there has been no large-scaleexit of foreign investors from the Chinesemarket.Shen added that “we are still optimisticabout the prospect of China’sinviting and using foreign investments,because the investment environmenthere has been improving.” He said thataccording to the “2011 QuestionnaireSurvey Report of Japanese ManufacturingCompanies’ Overseas Business”issued by JBIC, the Japanese manufacturersare speeding up their overseasexpansion, and China and India willbe their investment priority. Also, the“Medium-sized Company BusinessClimate Survey” issued by SingaporeUOB Group also shows that China willbe the primer choice for the business investmentof Singaporean medium-sizedcompanies.11

Future RemainsBleakBy Economy Reference NewsChinese government hasrecently introduced moreflexible policies on foreigninvestment, which can helpto partially restore the development offoreign inflows in China but can hardlyresume its previous growth speed.Bian Weihong, a senior analyst fromthe Institute of International Financeof the Bank of China, believed that,given the current conditions, the situationfor foreign investment absorptionin the second half of the year will stillstay complicated. Bian also pointed outthat in the previous phase, as the Europeandebt crisis stops deteriorating andthe U.S. sees a relatively fast economicgrowth and rapid decline in the unemploymentrate, foreign investment inChina is actually showing signs of stablerebounding. At this stage, however, theoverall situation is far from promising.If the European situation keeps goingdown, China’s foreign investmentdevelopment will be adversely affected.Therefore, within the coming months,the FDI in China is expected to remainin a slightly downward trend.At the same time, the continuousnegative growth of FDI and occasionalnegative growth of the monthly fundsoutstanding for foreign exchangealso confirms the judgment of a longtermslowdown in capital inflows onthe market. According to the statisticsreleased by the People’s Bank ofChina (POBC), after three consecutivemonths of negative growth inthe fourth quarter of 2011, from theFebruary of 2012, new financial institutionshas started to see a positivegrowth in their funds outstanding forforeign exchanges. However, the latestdata released on May 15 shows that by12the end of April, the balance of foreignexchange funds of financial institutionswas 25.589 trillion yuan, 60.571billion yuan less than in March. Thisis the first negative growth point inthe foreign exchange funds this year.Bian said, the variation of foreignexchange funds, to some extent, is correlatedwith the variation of the RMBexchange rate. Despite of the fact thatRMB continued to appreciate in April,the expectation of the market for the appreciationof RMB saw a reversal whileforeign investment is determined bythe expectation for RMB appreciation,besides, as western media continuouslymagnify the pessimism for the prospectsof China’s economic development,the capital inflow into China tends togradually weaken. “As for the growingsurplus in April, we must be clearabout whether it is an occasional singlemonthrebound or a trend for a continuousgrowth in the coming months. Inaddition, as the expectation for RMBappreciation has been lowered, someenterprises would not exchange RMBas rapidly as before and the foreign exchangeinflows would also be reduced.”Bian Weihong said in an interview withthe Economic Information Daily.The slowdown of capital inflow hasshowed the change of the long-lasting“double surplus” pattern in the balanceof payments. Liu Weiming, an internationalfinancial market expert fromChina CITIC Bank said, “as the globalfinancial markets are still volatile andthe European debt crisis still unstable,it will become quite complicated for thecross-border capital flow in the future.”According to the Cross-BorderCapital Flow Monitoring Report 2011released by the State Administrationof Foreign Exchange (SAFE), fundamentalfactors for the surplus in China’sbalance of payments still exist. However,due to the unprecedented complexityand severity of the internationaleconomic and financial situations, thecross-border net capital inflow may dropin China and suffer fluctuations. SAFEalso points out that the European debtcrisis is still evolving and the globalfinance is in a process of deleveraging,which will significantly increase therisks of large-scale cross-border capitalflows.Analysts believed that the continueddecline of FDI has releasedthe pressure of funds outstanding forforeign exchange, leaving room for thecentral bank to cut the deposit reserveratio in the future. Li Huiyong said,the European Central Bank (ECB) hasrequired European banks to raise theiradequacy ratios of core tier-1 capitalto 9% before June 30. To meet this requirement,the EU will become morecautious in overseas investment and itis expected that the FDI before Julywill continue a negative growth. FDIis a part of foreign exchange funds andits decrease will possibly lead to thedecline of these funds. In such cases,the government will need to loosen thedomestic monetary policy by cuttingthe deposit reserve ratio or resorting to areverse repurchase. Li also predicts thatthe central bank will cut the deposit reserveratio twice this year.Teng Tai believes that FDI declinewill become a trend within this year andthis will result in a decrease of domesticcapital. It is necessary for the governmentto lower the deposit reserve ratio,so as to further release the liquidity ofcapital.

In the past three decades, China, as anemerging market, has attracted the greatinflow of foreign investments. ForeignDirect Investment (FDI) has also becomean important tool promoting China’seconomic growth. Nevertheless, at present,FDI in China is continuously decreasing,which, on the one hand, indicates that theoverseas investment capacity of foreign investorsis declining, and on the other hand,shows the Chinese market is becoming lessattractive for foreign investments. As a matterof fact, both the external and internal environmentare posing a severe challenge on theFDI situation in China.In terms of the external environment,the ongoing global economic downturn in thewake of the financial crisis is slowing downthe pace of cross-border investments, especiallywith no hope of the European debt crisiswhich started at the end of last year beingresolved, EU investment in China decreasedby 31.3% in the first quarter of this year. The“Select USA” plan launched by the Obamaadministration is also causing an obviousreturn of worldwide investments, which alsoaffects the investments in China. At the sametime, some developing countries, especiallythe other four “BRICS” countries, are alsointroducing some favorable policies to attractcross-border investments, which will inevitablyresult in the diversion of cross-borderinvestments.As for the domestic environment, thedeepening real estate market is also affectingthe interests of foreign investors in China. Inthe past two years, China’s real estate sectorused one-fourth of the total foreign investments,but due to market regulation, foreigninvestments on this sector make no profits.The withdrawal ofthese investments hasbrought a direct impacton FDI.More importantly,with the adjustmentof China’s economicstructure, longlastingoverheatedinvestment in Chinais being curbed. Especially,the governmentlowered this year’sGDP growth target,basically abandoningthe previous system ofblindly pursuing GDPgrowth at the expenseof environment and public interests.The “labor dividend”, which was once agreat attraction for FDI, is also weakening.Various factors has made Chinaa less attractive destination for foreigninvestments.It is worth noting that these negativefactors affecting FDI in Chinacannot be possibly eliminated within ashort period. Some factors even appearto be irreversible. In the internationalenvironment, the financial crisis has leftthose western capitalist powers strugglingwith their own economic problemsand a few years after the crisis, theoutbreak of European debt crisis provesthat the prospect for the end of the financialcrisis is actually not as positiveas expected.As to the domestic situation,regulation of the real estate marketis far from the moment to wind upand as the government systematicallystrengthens the management of the labormarket and proposes to reform theincome distribution mechanism, theonce appealing “labor dividend” can nolonger bring high profit to foreign investorsinvesting in China. Apparently,China cannot attract FDI, like somelocal governments did in the past, byproviding super-national treatment andeven at the expense of public interestsany more. It has become an objectivefact that Chinese market is becomingless appealing to investors, whichwould inevitably cause FDI in China togo through a long-term decline.(Author: from BWCHINESE)A Long-Term Decline AheadBy Zhou Junsheng13

China Expectinga Long-Term Slowdownof FDI InflowsBy Liu XiaozhongIn recent years, the development ofFDI in China has demonstratedtwo major characteristics: the paceis slowing down, even continuouslyshowed negative growth; disguised foreigninvestments account for an excessivelyhigh proportion. Investors fromcountries and regions in Asia, especiallyHong Kong and Macau and some dutyfreeislands, have dominated the FDIin China for a long time. In the last twomonths, investing capital flowing outof these areas added up to US$15.379billion, accounting for 88.67% of thetotal amount of FDI in this period.However, a large proportion of FDIfrom these areas are “disguised FDI”,which comes from domestic sales ofcommodities originally produced for exports.It actually has greatly reduced theinternational technology spillover effectof FDI and affected the overall qualityof FDI entering China. As a matterof fact, China’s economic developmentand continuous growth of its total factorproductivity, since the reform and openingup, are the result of productivity liberationto some extent. But mainly, theyrely on the technology and managementspillover brought by FDI.The major cause for the ongoingnegative growth of FDI in China, wethink, is not the adjustment of China’sFDI policies. Instead, it is because thatthe marginal rate of return on investmentincome in China is graduallydecreasing to the level of other countriesand regions. To be specific, along withan aging population in China, some resourcemanagements have a high degreeof external dependence and under thehigh inflation pressure, wages and factorprices are also rising, especially the priceof some energies monopolized by stateownedenterprises, which is now closeto and even higher than the price on theinternational market. For example, thedomestic oil price is now significantlyhigher than that in Europe and theUnited States. Obviously, these factorshave greatly reduced the marginal rateof return on capitals in China, as well asthe appeal of China to foreign investors.After the global financial crisis,European countries and the UnitedStates suffer from an economic downturnand great loss of job opportunities.The relatively high unemployment hasreduced the wage level in these countries.Besides, other factors, such as therelatively higher labor productivity inEurope and the United States and thehigh cost for logistics and cross-bordertrade, have all made it economicallypossible for European and US manufacturersin China to return to theirhomeland. In the second half of lastyear, there was an obvious ref lux offoreign capital and decrease of FDI,mainly US investment. This year, EUinvestment reduction is more prominent.The latest statistics released by theMinistry of Commerce showed that, inthe first two months, the actual input ofUS capital was $525 million, a year-onyearincrease of 0.87%, but comparedwith the once input of $906 million, ithas decreased by 33.32 %. The reflux ofEuropean and US capital, on the onehand, has led to a continuing weakeningof offshore RMB exchange ratesince last September, and on the otherhand, slowed down the accumulationof China’s foreign exchange funds,even causing negative growth. This hasalso caused tight liquidity within thedomestic formal financial institutionsand finally pressured the central bank tocut the deposit reserve ratio to ease theliquidity of the financial system.In addition, other reasons whyChina is attracting less FDI includethat, in recent years, the state-ownedcapital becomes increasingly strong, reformof the key sectors lags behind, theturnover tax puts a heavy tax burden onforeign investors and the protection forintellectual property rights is not effectiveand sufficient. First, the expansionof state-owned enterprises has not onlycompresses the investment space of thedomestic private enterprises, but alsolimits the investment of foreign capital.Second, due to the monopoly of state-14

owned enterprises in financial and energyarea, the price of some factor resources issoaring, increasing the operation cost ofFDI, reducing the return on investment andthereby, impeding investors’ willingness toinvest in China. Third, the turnover-taxdominatedtax system in China puts a muchheavier burden on foreign investors than othercountries and once the return on investmentin China decreases, foreign investors have tocarry an excessively heavy turnover tax burden.Therefore, they are more willing to shifttheir investment to their own countries, orto Vietnam and India. Fourth, although inrecent years, China has strengthened the protectionof intellectual property rights, someintellectual property infringement are still noteffectively curbed, which also, to some extent,weakens the willingness of foreign investorsto invest in China.The weakening ability to absorb FDI ofChina also reflects the fact that, along withthe aging trend of the whole world, all thecountries are facing the common problems ofdropping savings rate and widening savingsgap. That means, the slowdown of FDI inflowin China will be a long-term trend, insteadof a short-term effect. In the future, allthe governments will take efforts to cut tax,release regulations and adopt other policies toattract foreign investment, so as to boost thedevelopment of the economy.Nowadays, as China’s vast population isaging rapidly, the continuous decline of thesavings rate in China is inevitable. Therefore,absorbing more foreign investment to boostdomestic economy is beneficial to the longterminterests of China. To effectively attractforeign investment and make full of externalsavings, China should deepen its domesticreform, break the monopoly of state-ownedenterprises in key sectors and guide theSOEs to withdraw from these competitiveareas. In the meantime, it should clarify theboundaries between the government and themarket, and ease government regulations, soas to reduce economic and social operationcost. Apparently, these pragmatic reformativemeasures will contribute to more foreigninvestment inflows and at the same time,stimulate the vitality of domestic capital andrestrain the outflow of domestic capital thatis caused by the lack of investment channelswithin the country.(Author: from The 21st CenturyBusiness Herald)In 2012, impacted by severalfactors such as changing domesticinvestment environment andinternational economic situation,China’s foreign direct investment(FDI) may slow down.Main factors affecting China's FDIFrom the perspective of domestic factors:First, the national economy has usheredin a new stage for development and thusrequires more stringent standard for foreigninvestments.In recent years, the national economyhas experienced rapid development withremarkable achievements. As early as 2011,China’s aggregate GDP totaled USD 7.3trillion, which consolidated China’s statusas the world’s second largest economy; witha per capita GDP over USD 5,400 in 2011,China was in the course of entering thehigh-income country rank from the medium-incomecountries; China’s foreign exchangereserve exceeded USD 3.18 trillion;the FDI utilized by China rose by nearly 2.5times to USD 116 billion from USD 46.9billion in 2001. Undoubtedly, FDI has madegreat contribution to the domestic economicdevelopment, industrial structure upgradingand industrial system construction.However, as China has become stronger ineconomic power, the “dual gap” at the beginningof the implementation of the reformand opening up policy has changed to “dualsurplus” and therefore China has naturallyAnalysis:China’s Utilization ofForeign Capital in 2012By Sang Baichuanunveiled stricter standards for foreign investments. Attracting foreigninvestments is not mainly for making up the “dual gap”, but for competingfor the highly competitive carriers defining by advanced technologies,management expertise and sound corporate governance system in a bid toserve promotion of technological progress, structural upgrading and institutiontransition.Second, “mode transformation and structure adjustment” has becomea significant topic for domestic economic development, which requires astructural transformation of foreign investments.To adapt to the requirements for transforming economic growthmode and adjusting economic structure, China will continue to encourageforeign investments to go into such industries as high-end manufacturing,new and high technological industry, modern service, new energy as wellas energy saving and environmental preservation, and China will still havestrict threshold for the high-energy-consumption, high-pollution andhigh-resource-consumption projects. Besides, China will encourage theforeign-funded enterprises to set up in China such functional headquartersas regional headquarters, R&D center, purchasing center, financialmanagement center, settlement center as well as cost & profit settlementcenter and more cooperation in terms of R&D between the domestic en-15

terprises and their foreign counterpartswill be encouraged. In the revision of“advantageous industry catalog for foreigninvestments in Central and WestChina”, more entries will be added forthe labor-intensive projects; the foreignfundedenterprises will be encouragedto develop in the central and westernareas the labor-intensive industries inline with requirements for environmentalprotection, and both the domesticenterprises and the foreign counterpartsin the western areas will continueto enjoy the preferential policies forcorporate income tax; more preferentialpolicies as well as technical and capitalsupport will be in place for the foreignfundedenterprises in the eastern regionsto shift to the central and westernregions. All of these will impact theindustrial structure and regional structureof foreign investments.Third, under such circumstance asstabilizing price and controlling housingprice, economic growth has sloweddown and investment cost faces upwardpressure, which dents the influx of foreigninvestmentsWith tight corporate capital chainand increasing risk for economic downside,although the domestic monetarypolicy has got looser this year, thenational economic growth will slowdown due to under high pressure forinflation no fast growth in money supply,persistent policy for housing pricecontrol and slower investment growthin real estate and related industries. Asa result, the time that a couple of yearsago foreign investors capitalized on thehigh housing price to massively nudgeinto the domestic housing sector hasgone. In the mean time, China’s risinglabor cost, high raw material price andRMB appreciation will push up investmentcost, which will inevitably deterthe growth of foreign investments.From the perspective of internationalfactors:First, the world economy isgloomy for recovery and great uncertaintiesexist for economic growth,therefore, foreign investors now becomecautious.In the wake of the financial crisis,the world economy has been strugglingout of the slump, but sluggish. Theunpredictable international politicalenvironment, turbulent situation in theMiddle East and North Africa, chaoticSouth Asia and South China Sea areas,as well as intense battle among big nationsacross the world have made thingsworse for the world economy to step outof the crisis. According to the IMF’sanalysis, the world economic growth in2011 did not live up to the predictionat the beginning of the year, decliningto around 4% from above 5% in 2010;the real GDP in the economic powersremains grim — the real GDP growthwas as low as around 2% in 2011 andthis year the real GDP is forecasted torise 2%. The depressed world economywill necessarily lead to lower enthusiasmand input for the foreign countries toinvest in China, which will be a majorconstraint for attracting inbound FDI.Second, the US economy is in adownturn and its “re-industrialization”strategy impact its investments in China.As the world’s largest economicpower, the US was heavily hit by the2008 financial tsunami with high unemploymentrate and fiscal deficit aswell as slowing economic growth. TheIMF forecasted that this year the USwould still have a high fiscal deficit, accountingfor as high as 6.1% in its GDP.The debt problem will be a mediumandlong-term constraint for the USeconomic recovery. On the one hand,the cap for issuing national bonds needsto be raised so as to avoid debt defaultsand then debt crisis; on the other hand,at the time for presidential election, economicdecline should be avoided, and aloose fiscal policy with higher corporatetax cannot be implemented. Consequently,the debt problem will be a longtermbottleneck for the US and thuseconomic recovery will be very slow.Unemployment is the biggestchallenge confronting the US. TheIMF’s prediction revealed that in 2011the US unemployment rate was 8.8%-9.1% and it would remain as high as8.3%-9% in 2012. In spite of a string ofpro-employment acts that the Obamaadministration has raised, the effects ofthese acts are not satisfactory enough.As a result, unemployment will becomethe biggest obstacle for the US economyto recover.Confronted with so many difficulties,the US economy has seen somegrowth, but it is still in the downturn.The IMF predicted that in 2011 the USGDP growth rate was 1.7%-2.1% andin 2012 it would probably rise to 2.6%-3.3%. Against the backdrop of the US“re-industrialization” strategy to rejuvenateeconomy, China’s inbound foreigninvestments will necessarily sink andeven backflow of some foreign investmentswill resulted.All in all, the US economic trendand its internal policies will become akey factor affecting its investments inChina this year.Third, as the European sovereigndebt crisis escalates, it will be difficultfor the EU economy to recover in ashort period and the EU will be weakerto invest abroad.In 2011, the European sovereigndebt crisis kept spreading, which meantthat the crisis passed on from the peripherycountries including Ireland andGreece to the core EU member countriessuch as Italy, Spain and Portugal.Three international credit rating agencieshave kept downgrading the creditgrade of the EU member countries andeven France, the core member in theEU has no way to be not involved.As the bailout mechanism the EUformulated can only solve the liquidityproblem for the countries trapped bythe crisis in the short run, but cannotimprove their solvency in the real sense,the default risk for these countries ismounting; the EU debt crisis maytransmit to medium- and large-sizedeconomic entities from small-sizedones. In particular, Italy’s debt problemhas tremendous potential risk; theEuropean banking sector, with a 53%asset in the global banking sector, holdsa huge amount of bonds worth morethan EUR 500 billion in the PIIGS(Portugal, Italy, Ireland, Greece andSpain), so there exist risks for the debtcrisis to evolve into a banking crisis. In2012, the EU is very likely to face a difficultyear for addressing the sovereigndebt crisis.The EU is deeply hit by the crisisand has no way to step out of the crisisby itself. The escalation of the Europeansovereign debt crisis this year willimpose persistent impact on the EUeconomy, making it hard to recover ina short time; even if the EU sovereign16

debt crisis will not escalate, theEU’s countermeasure — tight fiscalpolicy will decrease the publicfiscal expense in the EU, cut socialwelfare, deter growth in publicinvestments and consumption andeven result in frequent individualstrikes, which will impact the socialeconomic growth. All of thesewill slash the EU’s investments inChina.Outlook on China’s Inbound FDIDue to the changes and impactof both the domestic and internationaleconomic framework, it will not be optimisticfor China to attract FDI in 2012.First, the foreign investmentscale is projected to decline a bit on anoverall stable basis.In 2011, China’s actually utilizedFDI showed negative growth duringthe last two months, suggesting thatthe financial crisis and the Europeansovereign debt have imposed obviousimpact on China’s attracting FDI. In2012, as the world economy will remaingloomy and it will be hard for suchdeveloped countries as the US and Europeto rejuvenate economy in a shorttime, China’s inbound investmentswill continue to slow down; heavilyaffected by the US and European economicsituation, the 10 Asian countriesand regions that accounting for over80% of China’s FDI will also have aslowing economic growth and weakerpower to invest abroad; besides, Chinahas stricter requirements for FDI, butits own economic growth slows downand investment cost rises, therefore,we make such a prediction: in 2012China’s actually utilized FID will showa stable trend with a little decline, butif the world economy and political environmentworsen, foreign investmentswill drop dramatically.Second, the industrial structurefor FDI will be further adjusted.Since January 30, 2012, Chinabegan to implement the new IndustryDirectory for Foreign Investments,which will develop modern industrialmechanism by channeling inbound investmentsto such domains as modernagriculture, new and high technologicalindustry, advanced manufacturing,new energy and modern service. Theforeign-invested companies are encouragedto cooperate on R&D with thedomestic counterparts, and when utilizingforeign investments, China mayenhance its independent innovation capability.At the same time, China willstrive for energy saving and emissionreduction and will strictly constrain orforbidden the high-energy-consumption,high-pollution and high-resourceconsumptionforeign investment projects.Under the guidance of the nationalindustrial policy, more foreign investmentsare projected to go into agriculture,forestry, husbandry and fishing in2012, but the ratio in these industriesare still very low; constrained by itsown development level and affected bythe “re-industrialization” strategy inthe US and Europe, growth in foreigninvestments for manufacturing willslow down with a lower ratio; as suchdomestic service sectors as finance,logistics, tourism, medical service andcultural industry become more openand experience faster development, theservice sector will utilize much moreforeign investments than manufacturingto account for half of the total FDIChina has attracted and thus it claimsas the major player for FDI.Third, the regional structure ofFDI will be changed faster.The domestic regions attractingFDI are obviously out of balance. Themajority of FDI concentrates in EastChina, while the central and westernregions account for a smaller ratio.However, with improving investmentenvironment, the central and westernregions will attract foreign investmentsat a faster rate. Particularly, the revisedIndustry Directory for Foreign Investmentspoints out to bring the superiorityof the central and western regionsin terms of land, energy resources andlabor force into full play, and it encouragesthe foreign investors to developlabor-intensive industries in linewith environmental protection inthe central and western regions. In2012, it is projected that the centraland western regions will continueas last year to have greater attractivenessfor FDI and more foreigninvestments will go to the coreeconomic zones of the central andwestern regions, and the regionalstructure of FDI will be further optimized.Fourth, risks are increasing forforeign investors to withdraw investmentsfrom the labor-intensive sectorsin the coastal regions.Due to rising labor cost, highprices of raw materials and energy aswell as RMB appreciation, the foreigninvestedenterprises concentrated in thecoastal regions are under more pressurewith rising cost yet lower return on investment.It’s more likely for the foreigninvestments settling in the coastal areasto exit China. Besides, the depressedand unbalanced world economy confrontssome foreign-invested enterpriseswith capital shortage, which poses morerisks that these enterprises will exit theChinese market.Under complicated internal andexternal economic circumstances, Chinaneeds to further promote investmentliberalization and facilitation, keep attractivenessfor foreign investments andto strive for steady growth in foreign investments;the combination of economicstructure upgrading with utilizationof foreign investments will be helpfulfor the optimization of foreign investmentindustrial structure and regionalstructure; the local governments in theeastern and western regions are encouragedto become “twin governments” ina bid to help the labor-intensive foreigninvestedenterprises in the coastal areasshift to the central and western regionsespecially the core economic zones inthe central and western regions. In thisway, synergy effect will be achieved inthese core economic zones, promotingindustrialization in the mainland.(Author: Dean of Institute of InternationalEconomy of University ofInternational Business and Economicsand Council Member of ChinaAssociation of International Trade)17

ECONOMYFinancial Reform after theCrisis: An Early AssessmentBy Nicolas VéronFinancial reform has been a coredimension of the initial globalpolicy response to the financialturmoil of 2007–08. At thefirst G-20 summit of heads of state andgovernment in November 2008, morethan four-fifths of the action points inthe final declaration were about financialregulation. Obviously, the crisis isnot over at the time of writing, and thecycle of financial reform it triggered isvery far from complete. But it can besaid confidently that the crisis has beentransformational for financial regulatorypolicy, at least in the United States andEurope.One of the key lessons of the crisisis the close interdependence betweenthe detailed features of financial systemsand macroeconomic outcomes.Thus, the tight separation of financialand macroeconomic issues, which isentrenched both in academia and inthe policymaking community, needsto be overcome. Initiatives to betteranalyze “macro-financial” linkages andto conduct “macro-prudential” policyhave mushroomed since the start ofthe crisis, although they generally fallshort of a fully joined-up framework.From this perspective, the focus ofthis paper is financial regulation in anold-fashioned sense, understood as acluster of interrelated policies designedto ensure the proper functioning andintegrity of financial systems. This scopeincludes public regulation and supervisionof bank capital, leverage, liquidity,and risk management; control of moralhazard and financial industry incentives;protection of the customers of financialservices; and the regulation of capitalmarkets. Other reform areas such ascapital-f low controls, prevention ofmoney laundering, and the taxation offinancial activities can overlap with thisagenda, but are not considered here partof it in a strict sense.The general impetus of financialreform as a reaction to the crisis, in theUnited States and Europe, has been towardmore regulation, or re-regulation.This is admittedly too simplistic ageneralization: This policy area is multidimensionaland cannot be reducedto a simple choice between less or moreregulation. Nevertheless, there was aclear turning point in 2008 with the renewedrealization that financial systems,including banking systems, could not beleft to their own devices, both becauseof the large potential economic cost offinancial crises and because public expenditureis often a key component oftheir resolution. For a variety of reasonsthis age-old wisdom was neglected inthe preceding decade in both the UnitedStates and Europe more than in the restof the world, including Australia, Canada,Japan, and emerging economies.Financial regulation is a complexthicket of highly technical policy challenges,often subject to the use of mutuallyincomprehensible jargons even asthey are mutually interrelated. The devilis generally in the details, and elegant20

quantitative models of policy tradeoffsare rarely available. Analyticalframeworks tend to be similarly fragmentedacross different academic silos,including economics, financial research,accounting, political science, and sociology.From an economic research perspective,this is a less mature field thanother policy areas such as fiscal, trade,or labor. Hopefully, the crisis itself willresult in new avenues for research, theresults of which might start to becomeavailable in a few years’ time.The dynamics of financialreformIn the European Union, a distinctdriver of financial reform in the two decadespreceding the crisis was the effortto create a single market for financialservices, particularly after the introductionof the euro in 1999. Landmark correspondingpieces of legislation includethe 1989 Second Banking Directive,which encouraged the creation of crossborderbranches; the 1993 InvestmentServices Directive, which established asingle “passport” regime for investmentbanking operations throughout theEuropean Union; the 2002 Regulationon International Accounting Standards,which paved the way for the EuropeanUnion’s adoption of International FinancialReporting Standards (IFRS) in2005; the 2004 Markets in FinancialInstruments Directive (MiFID), whichbroke the monopoly of national stockexchanges and established the basis forEU-wide competition among tradingplatforms; the 2006 Capital RequirementsDirectives, which transposed theBasel II Accord and paved the way fora harmonized regulatory framework forbank capital requirements; and the 2009Solvency II Directive (the preparationof which started long before the crisis),which established a parallel capitalregulation framework for insurancecompanies.EU harmonization efforts havethemselves been a powerful stimulantor enabler for global regulatory projects.The two most prominent pre-crisis examplesin this respect are IFRS and theBasel II Capital Accord. In the case ofaccounting, the European Union’s decisionto adopt IFRS, made at the politicallevel in 2000, finalized through theabove-mentioned 2002 regulation, andimplemented in 2005–06, was the triggerfor their subsequent adoption by asignificant number of jurisdictions thatnow represent about half of the aggregatemarket capitalization of large companiesworldwide. In the case of BaselII, the European Union was instrumentalin the negotiation of the accord inthe first place, and was among the firstto implement it with the adoption of theCapital Requirements Directives andsubsequent rulemaking in individualmember states. According to the BaselCommittee on Banking Supervision, bySeptember 2011, implementation of theBasel II Accord was complete in 21 ofthe committees 27 member countries,with at least two more countries planningto join in 2012.The IMF and the FSBWhile the G-20 is by its very naturea political body, the coordination ofthe global financial regulatory agendaduring the crisis has been mostly thejoint preserve of the IMF and FSB,these being “the principal institutionsof governance of the global financialarchitecture”. The IMF has played asignificant role through its FinancialSector Assessment Program (FSAP).The FSAP, which is conducted by theIMF alone in developed economies andjointly with the World Bank in developingand emerging economies, is acomprehensive assessment of a country’sfinancial-sector stability. In September2010, the FSAP was made a moreregular feature for 25 jurisdictions, forwhich the assessment will be renewed atleast every five years. This meant an endto the de facto exception under whichsome large countries escaped the scrutinyof the FSAP until the crisis: Thefirst FSAP of the United States startedin June 2008 and was completed inJuly 2010; and the first FSAP of Chinastarted in August 2009 and was completedin June 2011.The FSB’s role is multifaceted andstill to a large extent, a work in progress.It has set up numerous working groupsand coordinates work on multiple fronts,often at the explicit request of G-20leaders. However, the actual work ofstandard setting and rule making generallyremains at the level of specializedglobal authorities. One case in point isthe FSB’s report on the “shadow bankingsystem,” published a week before the2011 G-20 summit in Cannes. Manyof this report’s recommendations areaddressed not to individual jurisdictionsbut to global bodies that are FSBmembers, particularly the Basel Committeeand the International Organizationof Securities Commissions. Suchpatterns mean that assessing the FSB’scontribution to the policy process is farfrom straightforward. In some cases,the FSB’s work can be little more thanreporting initiatives of its members; inother cases, FSB leadership is essentialfor pressing other bodies into taking action.In practice, there appears to be acontinuum of situations between thesetwo extremes.Challenges and outlookIt is far too early to present asettled picture of post-crisis financialreforms and their impact on the globalfinancial system. Huge challenges remainand it is still unclear how theywill be met. First and foremost, thecrisis has not yet been resolved, and theinteraction between crisis managementand long-term reform creates uncertaintiesof its own. Second, in spite ofwidespread calls for “macro-prudential”approaches, the interaction of financialsectorpolicy with other dimensions ofeconomic policymaking remains largelyunsettled. Third, how to effectivelyregulate cross-border financial firmsremains a fundamentally unansweredquestion. Fourth, other reforms will bedifficult to implement in an internationallyconsistent manner, raising concernsabout the possible fragmentation of theglobal financial space. Fifth, the reformswill affect the financial system’s contributionto economic growth in multipleways, which on the whole remain poorlyunderstood.Ongoing crisis managementThe most obvious uncertainty isthat the financial crisis is far from over.Although it was partly overcome in theUnited States in 2009, it is still worseningin Europe and could again spilloverto other parts of the world. This createsa triple risk of forbearance, populism,and irrelevance.21

ECONOMYConcerns about financial instabilityin jurisdictions where the financialcrisis remains unresolved, includingmuch of continental Europe at the timeof writing, can easily lead to excessiveforbearance as has been the case inseveral past episodes of systemic bankingfragility, such as in Japan in the1990s. For example, large continentalEuropean countries such as Germanyand France were widely reported as beingreluctant to tighten the definitionof capital and impose higher minimumcapital requirements in the negotiationof the Basel III Accord and in thesubsequent discussion of SIFI (systemicallyimportant financial institution)surcharges. Similarly, the first draft ofthe EU legislation transposing Basel IIIsoftens some of the Basel Committee’stightening of the definition of capital,and prohibits the voluntary applicationof higher capital requirements by individualmember states. The same factorwas at play when European policymakersforced the IASB in October 2008 toamend the IAS 39 standard on financialinstruments and allow more flexibilityin the classification of financial instrumentsby struggling European banks.This is especially important as the EuropeanUnion prepares to introduce legislationon banking crisis managementand resolution. A proposal is expectedfrom the European Commission inearly 2012. It is arguably impossible toeliminate moral hazard from bankingsector policy frameworks, but it is arguablyeven more difficult to prevent itwhen such frameworks are prepared in aclimate of systemic instability.The risk of populism complementsthat of forbearance, and the two canbe simultaneous. As the ongoing crisiscreates a political demand for action,and action at a fundamental level is preventedby the bias towards forbearance,policymakers can be tempted to adopta punitive attitude toward the financialsector, in response to popular perceptionsrather than in-depth policy analysis.This has arguably been the case withinitiatives, particularly in the EuropeanUnion, to put hard limits on the scope ofremuneration practices in the financialindustry and to impose specific taxationon aspects of financial activity. In certaincases, such impulses can be alignedwith strategies of “financial repression,”namely the forced investment of domesticsavings in government securities,or in other forms of repression of marketmechanisms for price setting andcapital allocation, such as the attemptsto discourage some forms of hedgingagainst sovereign risk or to suspend thepublication of credit rating decisionsaffecting troubled countries. Given thecomplexity of financial regulation, it canbe difficult to disentangle such populistmotivations from other drivers of financialreform. Nevertheless, they are likelyto gain in prominence if the Europeancrisis worsens and leads to more financialand economic dislocation.Furthermore, embarking in longtermfinancial reform while a majorfinancial crisis is still ongoing andunresolved creates a risk of irrelevanceof the corresponding legislative andregulatory initiatives, to the extentthat the eventual crisis resolution canbe expected to usher in a new round ofreform to ensure that “it never happensagain.” Examples in the EuropeanUnion are the successive rounds ofamendments to the Capital RequirementsDirective of 2006, or the threeconsecutive regulations to create atighter legal framework for the activityof credit rating agencies.Each of these three factors, incertain circumstances, can contributepositively to the quality of policymaking.Forbearance can be a rational calculationto minimize financial dislocation,even though it increases moral hazard.Populism can help assert the autonomyof financial reform against pressurefrom the financial industry. Successiverounds of regulatory reform can result ingradual improvements of the regulatoryframework and correction of past missteps.But each of them can also easilyhave negative consequences in terms ofthe sustainability and efficiency of thefinancial policy framework.Financial systems and growthFinally, one of the most openquestions of all is how the post-crisisfinancial reform agenda might affect theability of the financial sector to contributeto overall economic growth. Thisissue too has multiple dimensions.As mentioned above, the consequencesof tighter capital requirementson economic growth have been a matterof heated controversy in the context ofthe preparation of Basel III, with a starkcontrast between simulations conductedby the financial industry that predicted adevastating effect of the proposed ruleson future output (IIF 2010), and thoseof the supervisory community that forecasteda much milder impact (MAG2010 and BCBS 2010a). Ultimately, theG-20 leaders implicitly endorsed theBasel committee’s more sanguine assessmentwhen they adopted Basel III atthe November 2010 Seoul Summit.However, this quantitative argumentfails to capture the complexityof the impact of financial reform ongrowth. In most countries in the developedworld at least, large companieshave fairly easy access to internationalcapital markets, and their funding conditionsare not overly affected by domesticregulatory frameworks. Smaller companiesand other borrowers, by contrast,including younger firms which havethe greatest growth potential, have nosuch access, and their ability to mobilizeexternal finance is likely to be most affectedby financial reforms. What is atstake is not just the aggregate volumeof credit, but how this credit is allocatedby heterogeneous intermediariestowards heterogeneous firms and otherborrowers. Regulated banks are onlyone part of this picture, which includesthe loosely defined “shadow bankingsystem” and interacts with the broadereconomy in ways that existing economicmodels generally fail to describe comprehensively.In particular, the impact of the ongoingmovement towards re-regulationon global financial integration couldmaterially impact economic trends, tothe extent that financial openness is associatedwith higher levels of economicgrowth. Also, how regulation mightencourage or limit competition amongfinancial intermediaries, innovation infinancial services, and the allocation ofcapital to risky new ventures, remainspoorly understood, especially given thelarge number of interrelated recent orongoing financial reform initiatives.(Author: from Peterson Institutefor International Economics)22

ECONOMYSurvey on Chinese Enterprises’ OutboundInvestment and Operation (I)By Market Research Division, Economic Information Department, CCPITThe year of 2011 marked thebeginning of China’s 12thFive-Year Plan period, andalso the 20th year of thecountry’s implementation of its “goingglobal” strategy. In the past decade,Chinese enterprises’ outbound investmenthas witnessed the gradual transitionfrom rapid growth to steady growthand from quantity based growth toqualitative based improvement. In 2011,against the backdrop of increasing turmoilin the global political and economicenvironment, the ongoing deepeningof the European debt crisis, and anincreasing complex international investmentclimate, Chinese enterprises’ outboundinvestment maintained a stablegrowth momentum. Domestic investorsmade non-financial outbound directinvestment in 3391 overseas enterprisesin 132 countries and regions around theworld, and the cumulative direct investmentamounted to US$60.07 billion, up1.8% Y/Y. Going into 2012, domesticenterprises are actively more involvedin overseas investment. In January andFebruary, domestic investors madeUS$7.435 billion of non-financial outbounddirect investment in 706 overseasin 97 countries and regions around theworld, up 59.9% y/y.Since the initiation of reforms andopening-up, especially after China’saccession to the WTO, for both “attractinginwards” and “going global”,Chinese enterprises have become closelyrelated with economic globalization interms of operations and development.The Chinese market has been playingan increasingly important role in thereorganization of global industrial andproduction networks. Under the pressuresarising from the post-financial crisis,rapid domestic market development,and industrial transformation and upgrading,Chinese enterprises are enduringnew challenges, and becoming morewilling to consider new opportunities toenhance their prospects for survival anddevelopment. According to the questionnairesurvey on Chinese enterprises’outbound investment situation and intentioncarried out by the China Councilfor the Promotion of InternationalTrade (CCPIT) which was carried outconsecutively from 2007 to 2012, inorder to “go global”, Chinese enterprisesin the initial start-up stage strive for thebest investment modes, business philosophy,communication channels, andability to adapt in various investmentdestinations around the world. Quit afew of them have established favorablecooperation and win-win situation withforeign companies, and also made somecontribution to local economic development.In combination with the survey ofthe cases involving participation fromthe member enterprises of local subcouncilsof CCPIT, it is forecasted thatover the next few years, Chinese enterpriseswill see great changes in outboundinvestment targets, strategy, environment,risk and management. Therethe 2011 CCPIT Questionnaire Surveyof Chinese Enterprises’ Outbound Investmentshifted its previous focus fromexpert-oriented enterprises to the actualoperating conditions of those involvedin “going global”.The going-global trendand domestic developmentenvironment1. Improving the scope for developmentis the major reason behind enterprises’going global trendThe respondents evaluated the “degreeof restriction of domestic marketenvironment and policy environment onenterprises development”. Among thefactors for market environment, the topthree restricting factors are surging domesticcosts, the high degree of marketcompetition and difficult access to talent.Most of the enterprises going globalconsider they are greatly restricted ineight out of the 11 indicators underthe survey when it comes to domesticexpansion. This somewhat reflects thesuggestion that restrictions on domesticdevelopment and need for expandingthe scope for future development constitutethe major reasons behind whyChinese enterprises are going abroad.See Figure 2.1It is noteworthy that rising costtops the list of factors restricting domesticexpansion of enterprises. Apart fromthat, difficult access to talents, capital,technologies and raw materials are alsoamong the major factors hamperingtheir domestic development. In addition,Figure 2.2 shows the differencesbetween private enterprises and stateownedenterprises in the evaluation oftheir development prospects at home.A comparison indicated that privateenterprises find the domestic access tofinancing and raw materials much moredifficult than state-owned enterprises.See Figure 2.22. Drivers for the going global move byprivate enterprisesTo better understand the domesticbusiness environment of the surveyedenterprises going global, an investigationinto the performance indicatorsrelated to the domestic business ofsurveyed enterprises over the past threeyears was made. Figure 2.3 shows that57.5% of the respondents are satisfiedwith domestic sales, 49.3% satisfiedwith domestic market shares and 47%satisfied with profitability of domesticsales. In terms of growth rates, 53.3%24

of the respondents are satisfied withdomestic sales growth, 50.2% satisfiedwith domestic market share growth and44.5% satisfied with the profit growthrate of domestic sales.See Figure 2.3According to a comparison of thedegree of satisfaction with domesticbusiness development between privateenterprises and state-owned enterprisesillustrated in Figure 2.4, private enterprisesshow less satisfaction than stateownedenterprises in six aspects, namelydomestic sales, domestic sales growth,domestic market share, domestic marketshare growth, domestic profitability andprofit growth rate of domestic sales.See Figure 2.4In a conclusion, first, the enterprisesgoing global generally feel goodabout domestic business development,but nearly half of the enterprises are notso satisfied with various indicators ofdomestic business. This serves as a majorforce that drives them to go global.Secondly, private enterprises are obviouslyless satisfied with domestic businesswhen compared with state-ownedenterprises, showing that private enterprisesface more severe restrictions andcompetition in the domestic market. Itcan be said that the going global moveby private enterprises to some extent aremotivated by the pressure of developmentat home.Purposes of going global1. Chinese enterprises engage in overseasinvestment to expand market expansionrather than acquire resourcesEnterprises conduct outward directinvestment to optimize the allocationof resources worldwide and expandmarkets both at home and abroad.Chinese enterprises with potential inoverseas investment mainly includethree types: i) State-owned energy andresources enterprises, which the aim tostabilize domestic resource supply andbenefit from rising prices of raw materialsby mobilizing upstream resources; ii)High-tech enterprises, mainly includingthose in communications and ITindustries, which hope to participate inglobal competition and gain technologicalresources; iii) Enterprises with comparativeadvantages, mainly includingtextiles, clothes and home appliancesRising rates of production costsHigh degree of competition in the domesticmarketGreat difficulty to obtain high-levelpersonnel within the industryHigh degree of perfection of upstreamand downstream industriesGreat difficulty of financing fromthe domestic marketGreat domestic market growth potentialGreat difficulty to obtain the technologythat product innovation requiredHigh degree of government regulationGreat competitive pressure from foreignmultinational corporationsGreat access restrictions of the industryGreat difficulty of domestic accessto parts and raw materialsFigure 2.1 Evaluation of the enterprises going globalregarding their domestic development prospectsFigure 2.2 Evaluation of state-owned enterprises and privateenterprises regarding domestic development prospects38.9%46.1%45.9%51.0%65.6%63.6%61.7%59.1%58.8%73.1%76.8%30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80%High degree of competitionin the domestic market69.6%85.7%High degree of perfection of upstream73.1%and downstream industries58.1%Rising rates of production costsGreat difficulty to obtain high-levelpersonnel within the industry73.1%74.6%67.2%63.3%Great difficulty to obtain the technology64.2%that product innovation required56.4%Great domestic market growth potential62.9%56.9%High degree of government regulation55.9%53.0%Great access restrictions of the industry43.8%53.7%Great competitive pressure from50.7%foreign multinational corporations44.2%Great difficulty of financing48.5%from the domestic market66.1%33.8%Great difficulty of domestic access41.1%to parts and raw materials30% 40% 50% 60% 70% 80% 90%State-owned firmsPrivate firmsenterprises, which desire to penetrateinternational markets and circumventtrade restrictions. Investment motivesof the said three types of enterprises canbe further broken down into two types:overseas market-seeking and resourceseekingmotives.According to responses to surveyquestions measuring the importance ofvarious functions offered by overseasbranches of outward-investing enterprises,the most important functionsserved by these branches are aimed atcreating new market opportunities, includingmanufacturing and promotingproducts for parent companies (66.1%),providing after-sales services to parentcompanies (57.6%), improving thereputation of parents in host countries(54.2%), obtaining internationallyfamous brands (45.2%) and avoidingbarriers in major destinations of export(40%). Functions reflecting the motiveto obtain overseas resources, suchas obtaining parts or raw materials forparent companies (38.1%), manufacturingproducts of parent companiesbased on local cost advantages (35.8%),25

ECONOMYDomestic salesDomestic sales growthDomestic market share growthDomestic market shareProfitability of domestic salesProfit growth rate ofdomestic salesFigure 2.3 Proportions of the enterprises going global that are satisfied with domesticbusiness over the past three yearsDomestic salesDomestic sales growthDomestic market shareDomestic market share growthProfitability of domestic salesPorfit growth rate ofdomestic salesFigure 2.4 Proportions of state-owned and private enterprises going global whichare satisfied with their domestic business over the past three yearsSell the parent company'sproducts in the host countryProvide after-sales servicefor the parent productImprove parent company's reputationin the domestic marketObtain international famous brandsAvoid trade barriers from mainexport destination countriesObtain parts or raw materialsfor the parent companyUse local cost advantage to produceparent company's productsUse local technological advantagesto research and developmentUse local policy to reduce taxesfor domestic businessTo invest in the domesticmarket as foreign capitalFigure 2.5 Proportion of overseas branches of enterprises going global by importanceof functions44.5%47.0%49.3%50.2%53.5%57.5%40% 42% 44% 46% 48% 50% 52% 54% 56% 58% 60%44.6%46.6%46.9%State-owened firms49.1%51.7%55.2%54.0%Private firms56.1%55.2%59.1%64.2%68.7%40% 45% 50% 55% 60% 65% 70%20.9%40.0%38.1%35.8%34.3%31.6%45.2%57.6%54.2%66.1%0% 10% 20% 30% 40% 50% 60% 70%conducting R&D activities using localtechnological advantages (34.3%), andinvesting in the domestic market as foreigncapital (20.9%), are less important.From figure 2.5 we can see that all thefunctions that reflect market-seekingopportunities rank ahead of those thatreflect the motive to obtain overseasresources. Survey data show that theimportance of seeking market opportunitiesis greater than the importanceof obtaining overseas resources for surveyedChinese enterprises going global.This also shows that the Chinese enterprisescarry out overseas investmentwith the aim to expand markets ratherthan contend for resources.See Figure 2.52. Importance of internationalized operationsto private enterprisesBased on the comparison of stateownedenterprises and private enterprisesin terms of relative importanceof various functions undertaken bytheir overseas branches, we see that allthe functions, except the function ofobtaining parts or raw materials, aremore important to private enterprisesthan to state-owned enterprises. Thisindicated that for private enterprises, theimportance of either seeking for marketopportunities or obtaining overseasresources is greater than that for stateownedenterprises. This also signifiesthat the success of internationalizationis more important to the development ofprivate enterprises.3. Differences in purposes of investmentin European & American countries andin Africa.According to a comparison betweenoverseas branches established inEuropean and American countries andthose in African countries in terms ofthe importance of various functions,overseas branched in European andAmerican countries mainly aim to produceand promote products for parentcompanies, provide after-sales servicesto parent companies, improve the localreputation of parent companies andexplore other market opportunities.Reflecting strategic-asset seeking motives,overseas branched in Europeanand American countries mainly intendto conduct R&D activities using localtechnological advantages and invest inthe domestic market as foreign capital.By contrast, overseas branches in Africamainly hope to circumvent trade barriersin major destinations of export andmanufacture products for parent companiesby exploiting the cost advantagesof local areas.26

Why ChineseEnterprises’ Overseas InvestmentFails Sometimes?By Audrey GuoAccording to McKinsey’s report,67% of the domesticenterprises’ overseas investmentshave failed. Comparedwith other countries’ overseas investmentfailure proportion, is China’s67% high? Why does China have sucha high failure ratio? What kind of barriersdo the Chinese enterprises oftenencounter in transnational M&A andhow do they overcome these barriers?And how do Chinese enterprises dealwith those barriers? Mr. Tay WoonTeck, Director from Stone Forest CorporateAdvisory gave a detailed analysison Chinese enterprises’ efforts to goglobal.When the reporter asked whetherthis ratio is higher than that of otherdeveloped countries? Mr. Tay told thereporter that 67% was quite high, comparedto countries such as US, UK andSingapore. Mr. Tay said that the wholeM&A process was generally dividedinto three phases—preliminary phase,full investigation and negotiation phaseand post integration phase. Each andevery detail in every phase cannot beignored. Mr. Tay said, “the enterprisesin Europe and the US have detailedevaluation guidance and plans for everyphase whereas the Chinese enterprisesgenerally are not adequately preparedto undertake a comprehensive risk assessmentand investment evaluation ofthe target companies. They generallydo not conduct detailed analysis on theoperating synergies of acquisition andthe risk related to the acquisition. Theyalso do not spend sufficient time planningand organizing the appropriatelevel of resources to implement the postacquisitionintegration.Mr. Tay also pointed out that Chinaand the West differ greatly in negotiationstyle. “In negotiation among theBritish and Americans, they are morestructured and they focus on identifyingthe risks and operating synergies ofthe target companies. Chinese companiesgenerally look into how to achievea quick negotiation and didn’t spendenough time examining the risks andoperating synergies of the acquisition.Mr. Tay advised that the Chinese companiesbe better prepared and shouldspend more time examining the operationsand management qualities of thetarget companies.During the post-acquisition andintegration phase, Mr. Tay advised thatthe Chinese enterprises should spendmore time to understand and complywith the local rules, laws and regulationsand spend more time to build alocalized management team that canunderstand and deliver the vision of theChinese enterprises. He explained thatthe failure of some M&A cases lies innon-compliance by the Chinese enterpriseswith the local laws and regulations.At last, he stressed that it is importantfor the Chinese entrepreneursto look into how to decentralize powerto an appropriate degree to allow for innovation.He said, “It’s easier said thandone, but it’s a challenge for many domesticenterprises to go global.”27

ECONOMYData Watch:China’s Foreign Tradeand Investmentin the First Four Months of 2012China’s foreign trade in the first fourmonths of 2012According to statistics of the Customs,China’s exports and imports in the first fourmonths of 2012 reached $1.16718 trillion, upby 6.0% over the same period of last year. Specifically,exports stood at $593.24 billion, upby 6.9% year on year; imports $573.94billion,up by 5.1%. The four months saw a trade surplusof $1.93 million.Significant increase in trade with emergingmarkets. From January to April of the year,China’s bilateral trade with Russia and Brazilreported 27.7% and 14.4% increases over thesame period of last year to reach $28.69 billionand $25.07 billion respectively. The nation’strade with Europe jumped by 4.7% to reach$170.53 billion; that with the United States upby 9.2% to $146.1 billion; and that with theASEAN up by 6.7% to $117.65 billion. China’strade with Japan fell by 1.5% to $107.18.Significant increase in exports of centraland western China. Exports of Central andWestern China jumped by 23.6% and 39.9%respectively, compared with the 4.1% increase28

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in Eastern China. Exports of ChongqingCity, Henan, Guangxi, Sichuan andJiangxi Provinces expanded by 1.9 times,1.2 times, 29.3%, 62.8%, and 38.35 respectively.Guangdong exports increasedby 5.5% to $168.61 billion. Jiangsu andZhejiang Provinces and Shanghai Cityreported exports volume of $95.8 billion,$65.29 billion and $63.57 billion, increasesof 1.7%, 4.2% and 1.2% respectively.Exports volume of Shandong provincefell by 0.3% to $38.62 billon, while thoseof Fujian Province and Beijing City expandedby 7.6% and 2.9% to reach $27.3billion and $17.7 billion respectively.Steady increase in exports ofmechanical and electrical products. Inthe first four months of the year, Chinaexported $346.79 billion worth of mechanicaland electrical products, 8.5%higher than that of last year, 1.6 percentagepoints higher than the increaserate of the nation’s total exports. Inspecific, the country exported $140.29billion worth of electrical applianceand electronic products, an increase of5.5% over the same period of last year;exported $115.05 billion worth of mechanicalequipment, up by 11% fromthe same period of last year. Among thelabor-intensive goods, the country exported$39.97 billion worth of clothing,up by 1% year on year, $28.85 billionworth of textiles, down by 0.3%, and$12.4 billion worth of shoes, up by 4.2%.Slowdown of the expansion rateof exports under the general trade.From January to April of the year, China’sgeneral trade value jumped by 6.8%year on year to $617.06 billion. Specifically,exports reached $280.29billion, anincrease of 7.3% year on year; importsincreased by 6.5% to $336.77 billion.The country reported a general tradedeficit of $56.48 billion, an increase of2.7% over the same period of last year.The nation’s processing trade valuejumped by 3.3% year on year to reach$412.99 billion. Specifically, exportsrose by 5.3% to $266.11 billion, whileimports dropped by 0.3% to $146.88billion, resulting in a surplus of $119.23billion, an expansion of 13.1% from thesame period of last year.Utilization of foreigninvestmentIn the first four months of 2012,China approved the establishment of7,016 new foreign-invested enterprises,a decline of 13.94% year on year. Thenation utilized $37.881 billion worthof foreign capital, a decline of 2.38%from the same period of last year. InApril alone, China utilized $8.401 billionworth of foreign capital, a declineof 0.74% from the same period of lastyear. By the end of April, China hadapproved the establishment of 745,000foreign-invested enterprises on an accumulativebasis and received $1.2 trillionin paid-in foreign capital.Significant increase in the utilizationof foreign capital by some ofthe service sectors. In the first fourmonths of the year, the service industrymade an actual use of $17.71 billion,a decline of 3.1% year on year and accountingfor 46.8% of the nation’s totalutilization of foreign capital, morethan the share of the manufacturingindustry. Among the service industry,such sectors as software application,comprehensive technology and financinghave reported over 30% increase inthe utilization of foreign capital. Thesectors of agriculture, forestry, animalhusbandry, and fisheries made an actualuse of $610 million in foreign investment,a decrease of 0.9% year on yearand accounting for 1.6% of the country’stotal utilization of foreign capital.The manufacturing industry made anactual use of $17.02 billion in foreigninvestment, a decline of 4.4% over thesame period of last year and accountingfor 44.9% of the national total.Continuant increase in investmentin China from Japan; significantdecline in investment in China fromthe EU. Investment from Japan continuedto rise from January to April of theyear, amounting to $2.7 billion. Paidincapital from the 27 European Unionnations fell by 27.9% to $1.9 billion.Investment from the United States roseby 1.9% to reach $1.05 billion. Paidincapital from ten Asia nations andregions (Hong Kong, Macau, Taiwan,Japan, the Philippines, Thailand, Malaysia,Singapore, Indonesia, and SouthKorea) amounted to $33.08 billion, upby 0.6% year on year.Significant increase in paid-inforeign capital to central China. Inthe first four months of the year, thecentral regions made an actual use of$3.05 billion, an increase of 12.6% andaccounting for 8% of the national total.The western regions made an actual useof $2.47 billion in foreign investment,a decline of 15.2% year on year and accountingfor 6.5% of the national total.The eastern regions made an actual useof $32.36 billion in foreign investment,a decline of 2.5% year on year and accountingfor 85.4% of the national total.Overseas investment andeconomic cooperationChina’s outbound FDI In thefirst four months of 2012, China’sdomestic investors invested directly in1,445 overseas corporations in 109 nationsand regions, with a total of nonfinancialoutbound FDI of $23.16billion, an increase of 72.8% year onyear. $8.8 billion worth of direct investmentwas made in the form of merger,making up for 37.7% of the total FDI.By the end of April, China had made$345.1 billion worth of FDI on an accumulativebasis.Overseas-contracted projects Inthe first four months of the year, China’soverseas-contracted projects reported aturnover of $29.11 billion, an increase of17% year on year. April reported a turnoverof $8.22 billion, up by 4% from thesame period of last year. $35.34 billionworth of new contracts were signedfrom January to April, down by 19.1 %year on year. In April alone, $7.04 billionworth of new contracts were signed,down by 45.8% year on year. By theend of April, China had signed a totalof $877 billion worth of agreements oncontracting overseas projects, and realized$568.1 billion in turnover.Foreign labor service cooperationIn the first four months of 2012, thenumber of all kinds of labor sent abroadwas 132,000, a drop of 2,000 from thesame with last year. 66,000 of them areworking on overseas contracted projects,and 66,000 of them are for laborcooperation. At the end of April, therewere a total of 814,000 Chinese workingabroad, 39,000 more than the sameperiod of last year.(Source: Press Conference ofthe Ministry of Commerce of Chinaon May 15, 2012)29

Industrial WatchAGRICULTUREChina reports spike in agricultural trade with AfricaIndustrial WatchAccording to Xinhua on May20, China-Africa trade onagricultural products has gonethrough years of fast growthand the trade volume reachedUS$4.78 billion in 2011, a Chineseofficial said.The figure marked a 40.2percent rise from the trade volume of the previous year andwas 7.7 times that of 2001, said Wang Ying, the director ofthe Department of International Cooperation of the Ministryof Agriculture.Wang delivered a speech during the China-AfricaBusiness Cooperation Forum, which was held on May 19 toencourage further cooperation on agriculture between thetwo sides.China exported US$2.45 billion in agricultural prod-ucts to African countries in 2011, up 35.7 percent year-onyear,and imports increased 45.2 percent to reach 2.33 billionU.S. dollars, according to Wang.To help Africa raise local agricultural productivity andenhance food security, China has also set up 25 agriculturaldemonstration centers and trained more than 4,000 agriculturaltechnicians and practitioners there since 2006. Thebilateral trade value exceeded US$160 billion in 2011, accordingto a document presented at the forum.Comment As Africa’s largest trading partner, aswell as the continent’s top FDI source,China will continue to promote cooperation onfarming technology and personnel training andencourage more domestic companies to invest inAfrica.China farm produce prices rebound slightlyXinhua reported on May 2 that China’s farm produceprices mostly rebounded, ending a five-consecutiveweekdownward trend as persistent rainfall limited marketsupplies, new data has shown.The wholesale price of 18 types of vegetables rose2.4% during the week ending April 29, with prices of whiteradishes, rapes and tomatoes up 14.4%, 11.8% and 9.8%,respectively, the Ministry of Commerce said in a statementon its website.The wholesale price of eight staple aquatic productsedged up 1.1% last week, while those of peanut oil, colza oiland bean oil increased 0.6%, 0.1% and 0.1%, respectively.Meanwhile, rice prices inched up 0.2% and the price offlour stayed unchanged, according to the ministry.However, pork and eggs prices continued to decline.Pork went down 0.1% week on week and 14.1% cumulativelysince late January, while eggs dropped 0.5% last weekand 8.9% cumulatively since the beginning of the year.Food prices have a one-third weighting in the calculationof China’s consumer price index (CPI), the major gaugeof inflation. China’s CPI rebounded to 3.6% in March, aftereasing to a 20-month low of 3.2% in February.CommentFood price is still one of the most importantelements for the governmentto manage inflation.China invests 600 bln in farmland improvementAccording to Xinhua on April 24, China’s governmentwill invest around RMB600 billion (US$95 billion)between 2011 and 2015 in turning the nation’s scatteredand dilapidated rural lands into efficient farming areas, underMinistry of Land and Resources plans unveiled.Dong Zuoji, director of the ministry’s planning department,said at a press conference that the fund will helpestablish 400 million mu (around 26.7 million hectares) ofefficient farmland across the country by 2015.The investment will also help newly create 24 millionmu of agricultural land in the period, Dong said. The officialestimated the campaign will boost the nation’s grainoutput by 25 million tonnes.The government will optimize the layout of constructionland in rural areas and urge local regions to use landmore frugally, according to the plans. Meanwhile, farmlanddamaged by construction will be reclaimed, Dong said.Comment To ensure grain security, Chinastrives to keep at least 1.8 billion muof farmland for grain production. However, the nationfaces increasing challenges to maintain thequota as official data has showed the country’stotal acreage of farmland stood at 1.826 billion muin 2010, down from 1.945 billion mu in 1998.32

METALSChina grants extra quotas for rare earth exportsThe Ministry of Commerce announced on May 17 additionalexport quotas for rare earth minerals totalling10,680 tonnes, as China.org.cn reported.Of the added quotas, 9,490 tonnes were light rareearths, and 1,190 tonnes were medium and heavy rareearths, a statement on the MOC website said.The added quotas would be provided to a total of 12companies which had recently passed examinations by theMinistry of Environmental Protection, the statement said.The companies included Baogang Group, the country’slargest light rare earth producer, and the AluminumCorporation of China, the statement said.The quotas would be addition to the nation’s first batchof rare earth export quotas, the statement said.On December 27 last year, the ministry announcedthe country’s first batch of rare earth export quotas totalling10,546 tonnes for 11 qualified companies in 2012.The ministry also noted that companies that had yetto pass the environmental examination would not get theexport rights if they failed to meet the second round of environmentalexaminations before the end of July.China supplies more than 90 percent of the world’srare earth metals, but its reserves only account for aboutone-third of the world’s total.Comment Faced with widespread environmental challenges, it is justified for China to set production caps,stricter environmental standards and an export quota system for rare earth metals in recentyears to protect the environment and preserve the exhaustible resource.New platform gives iron ore traders muscleAn iron ore trading platform madeits China debut on May 8 as the world’sbiggest buyer of the commodity soughtto enhance its price-setting influence,according to China Daily report.Trading volume is expected toreach approximately 100 million tons bythe end of this year. This will accountfor about 14 percent of China’s annualiron ore imports, said Xu Xu, chairmanof the China Chamber of Commerce ofMetals, Minerals & Chemicals Importers& Exporters, one of the organizersof the platform.Just a few minutes after its officiallaunch, the platform saw its first transactionwith 165,000 tons sold for $145a ton, including freight. This was in linewith market expectations, analysts said.China, with a leading role in themarket, has long argued that it shouldhave a greater say in pricing.The platform helps it wrest somecontrol from top miners such as Vale,Rio Tinto and BHP Billiton.The exchange said the platformwill offer contracts settled in US dollarsand yuan. The exchange will chargea commission fee for both buyers andsellers of 0.125 yuan or $0.02 per ton.The exchange has said banks andfinancial firms would not be allowed toparticipate in a bid to stem speculation,and there will be no trading of derivatives.Currently, trading in the spotmarket for seaborne cargoes is done directlybetween buyer and seller. Globalminers e-mail or fax prospective buyerswhenever they sell cargoes via spot tenders,a system deemed efficient and freeof broking fees.Traders say unless China offersincentives, such as tax rebates or commissiondiscounts, they are unlikely tomigrate to the platform anytime soon.The platform has more than 150companies as members so far. Topinternational mining conglomerates,along with major Chinese steel producersincluding Baosteel, Hebei Steeland Wuhan Steel, have all signed up asmembers of the electronic platform operatedby China Beijing InternationalMining Exchange.Zhang Lin, senior researcher ofLange Steel Information ResearchCenter, forecast that the platform willcome into its own when it can attractabout half of China’s imports.Angang Steel, which is a memberof the platform, will put up to 30 percentof the company’s iron ore for tradeon the platform, said Li Daguang, deputygeneral manager of Angang GroupInternational Trade Corp.Foreign miners were adopting await-and-see approach.“We believe the new system willbring more transparency because pricesare not created by the platform, but reflectreal transactions,” said Luiz Meriz,president of Vale Minerals China CoLtd. “So, we are very supportive.”Comment With growth inChinese demandfor iron ore this year slowing,along with the overall economy,the pricing dynamic is changingto China’s advantage, whereasthe last few years have verymuch been a sellers’ market.33

Industrial WatchENERGYSeveral iron ore exporting countries raised tariffsIndustrial WatchIt is learned from oversea reports that, Indonesia launched a20% tariff on 14 mineral products including iron ore sinceMay 6th. It is reported, in addition to Indonesia, other countrieswill lift tariffs or limit the export of mineral resources.Among them, India, Vietnam will increase iron ore exporttariffs, and Australia will levy carbon tax and mineral resourcerent tax since July 1st, said National Business Daily.An industry participant said during an interview withNational Business Daily, rising taxes will not only bring ahigher cost to Chinese steel enterprises, but also restrain theirinvestments in oversea mineral resources. “China has realizedthe necessity to invest in oversea mines or acquire ore miningrights, but at the same time, resource protection consciousnessin foreign countries is gradually strengthening.”This is impeding Chinese steel enterprises’ “overseasmine acquisition”. In recent years, to break the monopoly ofthree leading ore traders, Chinese steel enterprises have triedto diversify the sourcing channel, and made some progress.According to Lange Steel Information Network, althoughAustralia is still a major exporter of iron ore, the first twomonths of 2012 witnessed an increase of African ores, withthe ratio up from 6.04% at the same time in 2011 to 6.95%.Meanwhile, imports of South American ores increasedslightly, up from 24.27% to 25.92%.“As the three leading miners monopolize global ironore market, China try to break the monopoly by expandingimports of other ores. However, when more and morenon-traditional countries begin to limit exports of mineralmeasures, China will encounter challenges.” Umetal iron oreanalyst Tang Jing said.Comment With many countries carrying out in succession policies to increase tariffs or restrict exportsof certain mineral resources, Chinese steel enterprises will face more challenges in acquiringoverseas mines. Therefore, how to avoid foreign policy barriers, and explore oversea market effectively, is theproblem facing Chinese steel enterprises.Oil and other five minerals have an externaldependence of over 50%Beijing Business Today reported that while the foreign dependence ofoil and iron ore continue to rise, exports of refined aluminum, refinedcopper, sylvite and other bulk minerals are increasing because of insufficient“domestic supply”, resulting in an increase of external dependenceof bulk minerals in the past 15 years. Minister of Land and Resources,Xu Shaoshi said, the above five minerals all have a foreign dependence ofmore than 50%. And with the global competition for mineral resourcesbecoming fiercer, the cost and risk of utilizing oversea mineral resourceswill increase gradually.Lin Boqiang, director of China Energy Economics Research Center,said, it is a fact that China has a high dependence and demand forforeign mineral resources, and increases in mineral prices in recent yearshave pushed up the costs for Chinese buyers. Excessive dependence onimports will certainly affect China’s economic security, so it is quite necessaryfor China to strengthen mining of mineral resources.Last October, the State Council approved the ProspectingBreakthrough Strategy Platform for Action (2011-2020), makingclear the strategic roadmap for prospecting in next 10 years.Comment Along with the rapid development of emergingeconomies, national economic gamesand global competition for mineral resources will increase,and the costs of utilizing oversea mineral resources risesharply, so the risk of excessive dependence on imports ishigher and higher. China should focus on developing localresources while exploring oversea markets.Coal conversion in an era ofhigh oil pricesAccording to China Petrochemical News, the 12 thFive-Year Plan for National Energy Science andTechnology (2011 to 2015) lists coal processing andconversion as national energy strategy for the first time,providing technical support and assurance for China tofurther reduce dependence on imported crude oil.Low oil prices era has gone. Due to geopolitical,debt crisis in Europe and America and other factors,crude oil prices in international market hiked continuouslyin recent years. Industry experts expect thatinternational oil prices will stay high. China has richcoal but poor oil reserves, and high international oilprices will boost coal conversion into clean fuel, in orderto replace petroleum. It has an important strategicsignificance.Comment This move not only reflectsthe focus on coal conversion,but also suggests that coal conversion andutilization will be a key direction for coal industryin next five years, and that China willcontinue to increase the input in coal conversionscience and technology. The planespecially emphasized energy saving andemission reduction in coal conversion process,which is the key to coal conversion.34

ENVIRONMENTSolar insiders upbeat on industry’s futureSolar industry insiders remain optimistic about the sector’sfuture, despite the recent challenges it has faced from asupply glut and weak demand, China Daily reported.Shares in solar power companies are falling and somebig players have even gone to the wall. But many insiders saythey are confident that the market will revive, especially withthe growth in Asia and the Americas.“I believe the market will revive in 12 to 18 months,”Brian Lau, director of DEK Solar, said at the Sixth SNEC PVPower Expo.Oversupply of polysilicon,a key componentin manufacturing solarpanels, has been furtherdepressing the price ofsolar cells. Meanwhile,European countries,formerly big consumersof solar products, areslashing subsidies for theindustry due to the financial crisis.Lau said the production capacity surplus is driving solarprices down, which makes manufacturers suffer. But it willpush the industry to go forward, as once prices become lower,there will be more customers.“After all, the industry cannot always rely on subsidies,”he said.“It is painful for manufacturers, as the price falls. But itis a good thing, as a lower price means solar will be able tocompete with other energies like natural gas or coal. It willbecome self-sustained,” said Rhone Resch, CEO of the SolarEnergy Industries Association, the national trade associationof the solar energy industry in United States.Manz AG, a Germany-based manufacturer of productionsystems for making crystalline solar cells and thin-filmsolar modules, established its biggest plant worldwide in Suzhou,an eastern city close to Shanghai.“Almost all companies are losing money because ofovercapacity in the sector across the country, including us,”said Dieter Manz, the company’s founder and chief executiveofficer.“But the user market is growing really fast so we stillsee great opportunities. You need quite some investment toachieve economy of scale, which is notably critical to the industry,”he added.Due to technological advances, the cost of solar powerhas substantially lowered so he foresees a quick pickup indemand in the near future, with thin-film solar modules reboundingfirst, because its potential for cost reduction is farbigger than crystalline solar cells.Comment The growth of solar energy in Asiaand the Americas and the price fallingis good news for solar power companies thoughthey are still suffering from overcapacity.China’s nuclear industry reelingJapan’s nuclear emergency of last year has left a mark on Chinesenuclear manufacturers, which have since seen billions ofyuan worth of orders postponed, a senior industry official wascited as saying by China Daily.“Work stalled on 14 of the 27 reactors that were underconstruction before Japan’s nuclear emergency, causing ordersworth 50 billion yuan ($7.9 billion) to be delayed,” said SuiYongbin, chief engineer of the China Machinery IndustryFederation, an industrial organization that represents machinerymanufacturers.The country suspended giving approvals to nuclear projectsfor 14 months starting on March 16, 2011, in responseto the nuclear leak that occurred at a Japanese nuclear plantfollowing the earthquake and tsunami that struck the islandcountry in the same month. Work on recently approved projectswas also stalled to give the government time to conductsafety inspections.Shanghai Electric Group Co Ltd, one of the three largestnuclear equipment makers in China, said it received no orders in 2011.“China’s nuclear industry was expanding too quickly beforethe nuclear crisis last year and that will ultimately end indiminished quality,” Sui said.The engineer also warned that Chinese nuclear manufacturersare now dealing with overcapacity as the world nuclearindustry enters a trough, adding that strong competition alreadyexists among Chinese manufacturers.“Manufacturers can produce 20 pressure vessels everyyear and they are competing with each other by offering lowerprices,” Sui said. “In the meantime, we are still importing certainkey components from foreign companies.”China can manufacture 12 nuclear reactors sets annuallywhereas the industry needs only 40 sets before 2020, accordingto Sui.Comment Japan’s nuclear crisis has left a shadowover the use of nuclear energy inthe world. China is no exception.35

Industrial WatchTEXTILEDomestic textile shoes and hats export lose USD 5.5 billion due to technical barriersIndustrial WatchChina Light Textile News reported that on May 14, theGeneral Administration of Quality Supervision releasedthe sample survey data of the impact imposed by the overseastechnical trade measures on 2,600 domestic export enterprises.The data indicates that the domestic export textile shoes andhats industry is among the top five industries severely impactedby overseas technical trade measures and the direct loss of theexport textile shoes and hats throughout the year stood at USD5.541 billion, accounting for 8.9% of the total direct export loss.The industrial insiders hold that the Chinese textile shoes andhats export departments and enterprises need to timely takeeffective measures and positively respond to overseas technicalbarrier measures in a bid to ensure the healthy export of the domestictextile shoes and hats.It is learned that in 2011, 35.16% of the export enterprisesare impacted by the overseas technical trade measures to differentdegrees; the direct loss from export reached USD 62.259 billionlast year, USD 4.018 billion more than 2010, accounting for3.27% of the export volume during that period, and 0.42% lessthan that in 2010; in response to the overseas technical barriermeasures, the domestic enterprises spend USD 25.962 billionmore, up by USD 1.571 billion over that in the previous year.The sampling shows that the technical barrier measuresimplemented by the major trade partners impacting the Chineseindustrial products exports can be categorized into five classes—certification requirement, technical standard requirement, limitof toxic and hazardous substances, label identifying requirementas well as packaging and materials.Comment Confronted with more impact from various overseas technical trade measures, the Chinese foreigntrade enterprises should keep abreast of the latest development and the new regulations of theoverseas technical trade measures and timely formulate targeted countermeasures so that the impact on thedomestic foreign trade imposed by the overseas technical trade measures can be minimized. In the mean time,relevant governmental departments are supposed to establish sound technical trade barrier warning and speedyreaction mechanism in a move to create favorable conditions for the exports of the domestic enterprises.Household textile and clothing enterprises seeking new development potentialby turning to E-commerceT h e Household Textile and Clothing Exhibition washeld during May 1 to 5 at the 3rd Session of theCanton Fair. Due to the declining macro economy, in thefirst three months the household textile industry saw thebiggest negative sales growth over the past 10 years. Steppinginto such a trough, how can the domestic householdtextile export enterprises react? At the Canton Fair, thereporter found in interviews that some traditional householdtextile enterprises began to turn to e-commerce. Thedomestic export enterprises need to address the industrialdilemma by transformation and upgrading through channelinnovation.Shanghai Homes Household Textile Co,. Ltd. (hereinafterreferred to as Homes), well known as China’s “supermarketking” in the domestic household textile sector, begins to fullyenter e-commerce sales. On the occasion of the opening ofthe 3rd Session of the 111th Canton Fair in early May, DongFulong, President of Homes and Vice Chairman of ShanghaiHousehold Textile Products Association, announced thatHomes reaped RMB 10 million from online sales in April,achieving sales channel transformation and upgrading. Dongsaid that so far Homes had successfully combined online saleswith offline sales and in future supermarket supply and exportOEM ratio will decrease, while online sales will increase to accountfor a ratio of around 50%.Industrial insiders point out that at this year’s Canton Fair,Homes, the “supermarket king” in the Chinese household textileannounced in a high profile its launching into e-commerce alongwith its operation objective, which undoubtedly has landmarkimplications in the household textile sector. This signals that thedomestic textile sector begins to accelerate sales channel transformationand upgrading and that the household e-commerceera has already come.At the 111th Canton Fair, the gloomy industrial situationmade many household textile enterprises feel stressful and beginto turn to e-commerce so as to respond to industrial changes.Such brands as Lovo and Fuanna have opened their own B2Ce-commerce business and set up flagship shops on Jingdongand Taobao shopping platform. It is an inevitable trend for thehousehold textile enterprises to nudge into online sales on a fullscale.Comment Entering e-commerce provides morepotential market for the traditionalhousehold textile export enterprises and in the upcomingyears, the proportion of e-commerce salesvolume of the household textile industry will graduallyrise to 10% in the entire sales volume. In moreyears to come, the proportion may jump to 50%.36

AUTOChina readies more incentives for EV developmentChina, the world’s biggest emitter of greenhousegases, said it will take additional steps to promote developmentof electric cars and plug-in hybrids, according toBloomberg report.The government will broaden pilot programs, build rechargingfacilities and develop a plan to recycle batteries, theState Council said in a statement on its Web site in April.The subsidies are part of the government’s drive to have500,000 such vehicles by 2015, rising to 5 million units by2020.“This clarifies the direction for all participants, carmakers,consumers and regulators,” said Thomas McGuckin,the Shanghai partner who oversees the AsiaPacific automotive practice at PricewaterhouseCoopers.“The pricepoint, infrastructure andconsumer usage patternsultimately will determineadoption.”General Motorsand Volkswagen AGhave announced plans tointroduce EVs and hybridsin China, which seeks to cutsmog and its reliance on imported oil. BYD Co., the Chinesecarmaker partly owned by Warren Buffett’s Berkshire HathawayInc., this week will introduce the first EV model developedby its venture with Daimler AG.The State Council said in the statement that developmentshould be built on existing production capacity and thatthe industry should guard against “blind, low-quality investmentand wasteful construction.”The government wants to lower the average fuel consumptionof passenger cars to 5 liters per 100 kilometers by2020, according to the statement.Government subsidiesBuyers of energy-efficient cars in Shanghai, Shenzhenand four other Chinese cities qualify for a 60,000 yuan ($9,500)subsidy.This has happened even though the central governmentoffers a paltry 3,000 yuan ($475) subsidy for conventionalhybrids. By contrast, the government offers subsidies up to60,000 yuan for an electric car and 50,000 yuan for a plug-in.Electric-car sales in China are forecast to exceed thosein the United States by 2020, Boston Consulting Group Inc.said in a report last June. Such cars may account for as muchas 7 percent of total auto sales in China, the world’s largest vehiclemarket, by 2020, Boston Consulting said in the report.China imports more than half of its crude oil consumption,and it is the world's second-largest importer of oil afterthe United States, giving it incentive to encourage use of morefuel-efficient vehicles.The country also is trying to reduce smog. Air quality inall of the 32 Chinese cities that track pollution falls short ofWorld Health Organization guidelines, with Beijing amongthe world’s most polluted cities.GM, the largest foreign carmaker in China, introducedits Chevrolet Volt plug-in hybrid car in the country on Nov.21. The Volt will complement an all-electric car that GM isdeveloping with its Chinese partner, SAIC Motor Corp., theautomaker said.Volkswagen plans to mass-produce EVs in China in2018, VW China CEO Karl-Thomas Neumann said onFeb. 14. Nissan Motor Co., which leads Japanese carmakersin China sales, plans to export its all-electric Leaf car to thecountry for fleet sales, Nissan said in last September.Comment It is Chinese government’s goal thatChina would be the world’s largest EVmarket. However, it is still far away from the target.China ranked fifth globally behind Japan, the UnitedStates, France and Germany in the adoption of batterypoweredvehicles, falling from third place in 2010, accordingto a McKinsey & Co. report released April 20.A lack of consumer demand, limited modelsand inadequate charging stations were other reasonscontributing to the decline, McKinsey said.Also, China built about 16,000 charging points lastyear, less than 5 percent of the government’s 2015target for 400,000 charging stations, according toMcKinsey.“Consumer sales of electric vehicles in Chinaface the same obstacles as in the United States:high prices, limited driving range, and an inadequaterecharging infrastructure.” said Alysha Webb,a former China correspondent for Automotive News.“In the near future, most of those EVs will be ownedby the government fleets, not consumers. It’s unclearwhen, if ever, Chinese consumers will warm toelectric vehicles,” Webb said.37

Industrial WatchCONSUMERChina’s wine investment market cools downIndustrial WatchChina, the world’s fifth largest wine consumer, has shownthe sign of a cooling wine market, the Oriental MorningPost reported on May 14.Shanghai, China’s main distribution center for importedwines, have seen declining wine imports for five consecutivemonths, Xinhua News Agency reported.The Shanghai Customs District imported 29.63 millionliters of wine in the first quarter of this year, and the averageprice dropped to $9.8 per liter. March imports were 7.35 millionliters, a month-on-moth decrease of 11.3 percent accordingto the Xinhua report.By contrast, in the second half of last year, the domesticwine market was extremely hot, and the average price reached$11.6 per liter.According to industry insiders, China’s wine market isreturning to rational, said the Oriental Morning Post report.Affected by the cooling high-end wine investment market,prices of products from Chateau Lafite Rothschild, a topnotchFrench vineyard plummeted. As of May 8, the bondedprice of a 2008 Lafite product tumbled 53.4 percent to 7,230yuan ($1,143.79) from 15,500 yuan and the bonded price of a2004 Lafite product fell to 2,850 yuan from 4,900 yuan.The report also quoted Wang Jiaqi, business developmentdirector of Shanghai Wine Exchange, as saying that beforeFebruary 2011, prices of Lafite products had been skyrocketing,with buyers from China being an important force for itsboom.According to previously published data from the FrenchBordeaux Wine Industry Associations in 2010, China replacedthe United Kingdom and Germany for the first time to becomethe largest importer of Bordeaux wine in 2010.CommentChina’s booming wine market is returningto rational after the marketfrenzy.CommentChina’s e-shopping market to top world in 2013The transaction size of China’s online shoppingmarket will surpass Japan in 2012, and exceedthe United States by 2013, becoming the world’slargest online trading market, reported EconomicInformation Daily on May 17.The report cited the China Business DevelopmentReport Forecast (2011-2012) released by theNational Academy of Economic Strategy of ChineseAcademy of Social Sciences (CASS).The report noted that even if China becomes theworld’s largest online trading market in the next year, thethriving online shopping market is not enough to cover up problems in the generalChinese circulation industry.According to Jing Linbo, vice-president of the National Academy of EconomicStrategy of CASS, the fundamental reason lies in unclear positioning ofChina’s circulation industry.He stated that other problems include market segmentation, enterprisesscattered with low concentration, a less competitive market, a lack of theoreticalresearch to guide the practice, and the need for improvement of personneltraining.Though the online shopping market is thriving inChina, it has to confront with many problems, includethose in the circulation industry.CommentChina’s online third-partypayment booms in Q1China’s online third-party paymentmarket reached 758.3 billion yuan($120.49 billion) in the first quarter of2012, a major tech and Internet informationprovider was quoted as saying by Xinhuaon May 7.The figure represents a 90.9 percentyear-on-year increase, and 2.7 percentincrease compared to the last quarter of2011, according to the results of a seasonalsurvey of China’s online third-party paymentmarket conducted by Analysys International.The quarter-on-quarter decline in theindustry’s growth rate was due to the holidayseason and the overdrawn consumingability in the previous year-end sales promotion,said Zhang Meng, an analyst withthe firm.The burgeoning onlineshopping drivesthe growth of thirdpartypayment.38

ELECTRONICSFoxconn builds Chinese mainland headquarters in ShanghaiXinhua reported on May 10 that the Foxconn TechnologyGroup, a main supplier of electronic components forApple, started construction on its Chinese mainland headquartersin Shanghai.The headquarters, located in the Lujiazui financial district,will function as a research and development center andfacilitate the company’ step toward a new business model,Gou said, adding that the company also plans to set up an e-business center in Shanghai’ Minhang district.Foxconn is the world’ largest maker of computer componentsand is responsible for assembling products for Apple,Sony and Nokia.Comment The construction of the headquartersrepresents a shift for the company, asit will focus more on the domestic market and lesson exports.ZTE sets its sights on EuropeAccording to China Daily on May 1, ZTE Corp plans tostrengthen its position in the European market in thefields of telecom infrastructure, smart phones and governmentand enterprise solutions, according to company officials.Since being established in China’s southern coastal city-Shenzhen in 1985, ZTE has grown into a telecom-hardwaregiant, the fourth-largest mobile phone maker by shipmentsand fifth-largest telecom equipment maker by sales - competingwith the likes of Sweden’s Telefon AB L.M. Ericsson andParis-based Alcatel-Lucent.Because of a global decline in telecom carrier spendingon network construction, ZTE diversified its core businessesin recent years to explore new markets, such as mobile phonesand enterprise IT solutions.Last year, its overseas revenue was nearly RMB 47 billion(US$7.5 billion), 54.2 percent of its total revenue. TheEuropean and North American market grew the most lastyear, 42.2 percent year-on-year to RMB 20.45 billion.With nearly one-fourth of its revenue coming from Europeand the US, it has become increasingly dependent on thegrowth there, Dai Shu, director of corporate branding andcommunications at ZTE, said.“ZTE aims for a steady increase in market share in Europeancountries,” Dai said. The European market is matureand well-regulated. Meanwhile, many European-based telecomoperators, such as Telefonica and France Telecom, conductbusiness globally, and may introduce extensive businessopportunities for ZTE.“Since European-based telecom carriers combined occupymore than half of the world’s telecom network market,ZTE will benefit in the short and long run from cooperationwith those multinational operators,” Dai said.As early as 2000, ZTE had set up offices in various Europeancountries. However, they didn’t really take off until2006 to 2007, when it finally won the trust of the major Europeantelecom carriers.ZTE employs around 1,000 people in Europe, more than60 percent of whom are citizens of the countries where they work.ZTE’s telecom system equipment has been imple-mented by nine of Europe’s top 10 operators, according to its2011 financial report. The company is also seeking to providetelecom operation services to European customers, said HeShiyou, ZTE’s executive vice-president, at the company’s annualanalyst conference in Shenzhen last month.But ZTE’s most notable business in Europe remainsin consumer devices. It was the world’s fourth mobile phonevendor in the fourth quarter last year, shipping 18.9 millionunits, according to research firm Gartner Inc.It could be shipping 100 million smart phones a yearby 2015, according to Reuters. Europe will be a major targetmarket for its mid-level to high-end smart phones as it triesto reverse a decline in its gross profit margin, He said.“We’ll do more promotions for our mobile phones in Europethis year,” Dai said. ZTE is boosting advertising becausemany European consumers still know little about the company.By cooperating with local carriers, it has securedabout a 10 percent share of the mobile phone market inmany European countries. Sales of the Blade 880, a ZTEentry-level smartphone, have approached 10 million unitsworldwide since it debuted in the United Kingdom in late2010.ZTE’s third focal point in Europe is said to be the governmentand enterprise businesses, specifically, in telecommunicationand IT solutions to clients from governments andthe energy, transportation and education industries.Xu Ming, ZTE vice-president, said the company isaiming for more than US$6 billion in government and enterprisebusiness sales by 2015, up from $1.6 billon last year.Overseas markets are likely to contribute more than 60 percentof its total government and enterprise business sales by2015, he added.Comment The construction of the headquartersrepresents a shift for the company, asit will focus more on the domestic market and lesson exports.39

Industrial WatchCREATIVITYShort films show strong life during fairIndustrial WatchMore than 1,000 short films from the Chinese mainlandand overseas were assembled in Shenzhen, Guangdongprovince, on May 17 and 18 for the third China InternationalNew Media Shorts Festival and KingBonn Award Competition,China Daily reported.The annual event, put on by the State Administration ofRadio, Film and Television and the Shenzhen government since2010, attracted almost 30,000 short films from 63 countries thisyear. Awards in 11 categories will be given to the best of them,going to the films deemed to be the best dramas, animations anddocumentary shorts, among other superlatives.The biggest award will go to “the Best Short” and willcome with 300,000 yuan ($47,000) in prize money.Beyond winning awards and gaining international exposure,film producers who attend the event are also looking forbusiness opportunities.Zheng Dingwen, deputy general manger of ShenzhenMedia Group, the main organizer of the festival, said, “I havea feeling that people came last year just to be onlookers but thisyear have come with more real intentions to buy. The potentialbuyers are mainly traditional TV stations, big video websites,and the most popular products are short dramas and animations.“Short films are a new offering and have only become popularin the last two or three years, but the future for them is verybright. It’s a trend that is keeping up with changes in our lives.”Zheng said China Mobile in 2010 introduced a programcalled GkerGshooting, which allows subscribers to shoot videosusing their mobile phones and then upload them. The programgenerated 5 million yuan in revenue in its first year and morethan 60 million yuan in its second.“It (the film festival) presents a good opportunity,” said LiXusheng, general manager of Shenzhen BOX Digital Animation.For a second year in a row, he has come to the festival topromote his short 3D animations, which he makes money fromby implanting ads in them.“Several companies and organizations contacted me afterthe event last year with the intention of cooperating, includingsome from France and Hong Kong,” he said. “They want to selltheir short films through our channel.”Comment In the fast-paced society, the appearanceof short films satisfies people’svarious needs with their flexibility.Animation industry “still lagging”T h e animation and cartoonindustry is booming in Chinabut experts say there is still a longway to go before it will make a bigimpression on the internationalmarket, according to a ChinaDaily report.A total of 260,000 minutes ofanimation material was producedin the country in 2011, an increaseof 18 percent from 220,000minutes in 2010, according to theState Administration of Radio,Film and Television. The growth isalmost twice as much as the increase in China’s gross domesticproduct last year of 9.2 percent.However, experts said the gap between Chinese andforeign markets remains huge and the domestic developmentis not only constrained by lack of talented and creative peoplebut also the absence of a complete industrial chain.“We have seen significant growth in quality and quantityof the made-in-China products. However, there is a long wayto go to before the nation can take a strong role in the internationalmarket,” said Jin Delong, director of the publicitymanagement department at the State Administration of Radio,Film and Television during the 8th China InternationalCartoon and Animation Festival.The festival is the largest of itskind in China and involves seminarsand exhibitions. It is held annually inHangzhou, Zhejiang province. Thisyear’s event ended on Thursday.“Many products can be furtherimproved in terms of content anddesign. Currently we have very fewproducts that qualify as special. Manyare mediocre,” Jin said.In 2011, the cartoon and animationindustry garnered a revenue of 60billion yuan (9.52 billion U.S. dollars).In contrast, the sales reported by Walt Disney Co reached 40billion U.S. dollars last year.Experts said the lack of a complete value-making chainhas become problematic for Chinese animation and cartoonmakers seeking profitability. Currently, many companies expectprofits to come from broadcasting.Comment China is a large country of animationworks, but not a strong one. To speedup the development of this industry, a completevalue-making chain is necessary.40

FINANCEChina to buoy QFII inbound investment more aggressivelyAccording to Xinhua on May 20, China will grant investmentquotas by overseas funds in its domestic securitiesmarkets in a more swift and aggressive way before the countryfully opens up its capital market with a convertible currency,according to the foreign exchange regulator.The State Administration of Foreign Exchange (SAFE)will adopt fast-track procedures to approve investment quotasby medium- and long-term overseas funds, such as investmentfunds with foreign government background, overseas pensionfunds and insurance capital, the SAFE said in a statement onits website.All overseas investment funds will be approved under thescheme of the Qualified Foreign Institutional Investor (QFII),which is launched in 2002 by the Chinese government to allowlicensed foreign investors to buy and sell the A-shares whencapital accounts are still controlled in the country.To encourage the inflow of overseas investment funds, theSAFE promised to allocate more quotas for those mediumandlong-term QFII funds when they first apply, while appropriatelysimplify the management process of foreign currencyand Renminbi capital accounts.The SAFE’s bolder move came after the State Council,or China’s Cabinet, hiked the country’s total QFII quotasfrom previously 30 billion U.S. dollars to 80 billion dollars lastmonth.According to the QFII scheme, the China SecuritiesRegulatory Commission grants QFII licenses and market accessto foreign investors, while the SAFE approves quotas forindividual QFII funds.“The QFII operations over the past 10 years showed thescheme is an important measure to facilitate the open-up of ourcapital market and promote the yuan’s convertibility,” Sun Lujun,director of the Capital Account Management Departmentwith the SAFE.Investment quotas totaling 26.01 billion U.S. dollars for138 QFII funds have thus far been approved in China as of lastweek, according to SAFE data.Comment QFII scheme has played an active rolein helping improve China’s institutionalframe work, investment concept, corporate governance,risk control, technologies and custodian andbrokers’ service quality.New yuan lending drops, monetary loosening expectedXi n h u a r e p o r t e don May 11 thatChinese financial institutionslent less-thanexpectednew loans inyuan in April as theeconomy continued toslow, strengtheningexpectations for furthermonetary loosening.New yuan-denominatedloans reached RMB 681.8 billion (US$108.2 billion) inApril, down RMB 61.2 billion compared with a year earlier,China’s central bank said.The figure was far below market estimates of aroundRMB 800 billion, following weak monthly data on investment,industrial output and consumption released.April’s yuan lending was also the lowest this year, comparedwith RMB 1.01 trillion loaned in March, RMB 710.7billion in February and RMB 738 billion in January, accordingto the People’s Bank of China (PBOC).Financial regulators should unleash liquidity, drive downmarket interest rates, reduce corporate financing costs andspeed up bank lending.China’s imports edged up only 0.3 percent year-on-yearin April while exports climbed 4.9 percent, both well belowmarket estimates.Urban fixed-asset investment rose 20.2 percent from theyear before in the first four months, the slowest pace since the17.4 percent growth recorded in 2002, the National Bureau ofStatistics (NBS) said.In April, industrial value-added output grew 9.3 percentyear-on-year, its lowest pace in nearly three years, while retailsales climbed 14.1 percent, lower than the 15.2-percent increasein March.The PBOC reiterated its stance of maintaining a prudentmonetary policy in the months ahead, saying inflationary risksstill deserve attention.Analysts expect more reductions in the reserve requirementratio for banks in the short term and interest rate cutsin the second or third quarter, but note that the central bankremains wary of price rebounds.China’s consumer price index, a main gauge of inflation,rose 3.4 percent year-on-year in April, easing slightly from the3.6-percent rate registered in March, the NBS said.Comment Of the new yuan lending, medium- andlong-term loans now account for lessthan 25 percent, well below the 50 percent level inprevious years, showing large companies’ borrowingdemand has shrunk markedly.41

Industrial WatchHEALTHIndustrial WatchTaintedSpirulina InvestigationChina is stirred with spirulinainvestigation by governmentand media. Early this year,many doubts rose from mediaand public on spirulina products in themarket, concerning if these productscontained lead, arsenic, and mercury.The concerns were directed at some veryfamous brands in China, such as Byhealthand Green A.State Food and Drug Administration(SFDA) conducted a special investigationinto the spirulina products inFebruary, and released its official reporton its website on March 30. This reportclaimed that they investigated 13 brandsof spirulina products, and three of themare fake products (from Conice, Onice,and Hongyangshen), and one productfrom Cont-healthy had high-levels ofheavy metals. Among them, Coniceand Cont-healthy were advertised as USbrands, and Onice from Australia.The other spirulina products includingthose from Green A, By-health, Jinaoli,Chenghai Lake, Green Classic, B&H,Shengaolikang, Gaozhi, and Shiruian,were claimed to be within national limit, i.e.2.0mg lead in 1kg of product, which wassaid to be the standard for health productsmainly based on algae.However, that was not what themedia expected to see. On February 29, itwas reported in an internal SFDA noticeto state and provincial levels that all thenamed 13 products failed to meet China’sstandards and thus were classified asadulterated. However, when SFDA releasedits final report on March 30, manywere shocked to see that nine of the companiesthat failed were now considered upto standards. This followed by rumors ofcorruption and finger pointing.Many speculated that prior toMarch 30, these nine companies mostlikely visited SFDA, and persuadedthem to revise their findings. Somedoubted that the independent testingBy Alice Yangcenter was fair and objective in conductingtheir tests and that SFDA played toomuch of an influencing factor. Everyonequestioned why the final results landedwhere they did.The Economy Reference, a localnewspaper within Xinhua national newsagency group, also reported that onMarch 5, another notice inside SFDAsystem on fish oil products stated thateight products were disqualified, howeverwhen it was officially released on itswebsite on March 30, there were onlythree left and all of them were titled asfake products. They were Ruideli fishoil capsule, Amway fish oil capsule, andOlilailuomai fish oil soft capsule. TheEconomy Reference asked, “Where arethe results for the rest of products?”The national standard regulationthat should be followed is the GeneralStandards for Health/Function Food,issued by the former State Bureau ofTechnical Supervision in 1997. It says,for general products, the lead limitshould below 0.5mg/kg; for general capsules,1.5 mg/kg; for the drink powderand capsules based on algae, 2.0mg/kg.“How about the spirulina tablet?”The Beijing News asked in its report. Thereis no clear standard for the tablet so far.“If we use 0.5mg/kg as the national limit,Green A and Jinaoli spirulina tablets weretested to contain 0.9mg/kg lead, which is80% over the standard, By-health whichcontains 1.0mg/kg exceeds the standardfor 100%,” the report explained.SFDA can hardly keep silent in thiswave of media probing. On April 10, theyreleased a statement in reference to theresults of the spirulina products they madedays ago, arguing that the 2.0mg/kg aslead maximum limits for spirulinatablets was approved by manyindustrial experts, who view thetablet as the same dose as drinkpowder. They also quoted that theEU uses 3.0mg/kg as the standardfor their dietary supplements.“But, just one month ago,officials from SFDA told reportersthat they used 0.5mg/kg as thestandard,” the Economy Reference saidin its report, which also pointed out thatmany spirulina manufacturers and someprovincial food and drug administrationdepartments understood they should befollowing the 0.5mg/kg standard.Tong Min, Director of HealthProduct and Cosmetics Department ofSFDA, said in an interview with TheEconomy Reference that, “Once a problemcomes, the first responsible personis the enterprise itself, the second, localsupervision department, and the thirdis SFDA.” Another anonymous industrialperson remarked in the report that,“SFDA can easily push aside its responsibilityto local level, or they can fudge theresults of reports which can put-off its supervisionresponsibility and at same timeensure the involved enterprise no-harm.”The report questioned that “If allthe steps and power, including regulationestablishment, administrative licensing,approval, market supervision, testing,penalty and sanction, are all in SFDA’shand, how can there be transparencyand efficient regulation in China?”Wang Lianglan, the spokespersonof SFDA stated on April 11 that SFDAwould study the related report from mediaand promised to be more open andtransparent in the future work.However, the public credibilityof SFDA has already been questioned.Some discussion on the internet asked athird testing party to redo the investigationand release an authorized report toget to the bottom of the situation.42

ICTAs China gains more regional superiorityand its economy keeps surging, Chinawill achieve another key indicator: itwill surpass Japan to become the largestconsumer of IT products and services in AsiaPacific. The IDC’s latest IT forecast shows thatChina’s IT expense is gradually reaching Japan’slevel; by 2013, China’s IT expense will total USD173 billion, 4% more than that in the Japanesemarket. The IDC attributes China’s IT expensegrowth to two key factors: consumers’ increasingIT demands and the IT opportunities brought bythe “12th Five-year Plan” proposed by the Chinesegovernment.“Individual consuming electronic productswill become intelligent day by day and will expandinto the medium- and small-sized cities. Consumptionupgrading, intelligent home furnishing,intelligent cars as well as intelligent housing andproperty management will drive rapid growth inmanufacturing, retail business and the service industryalong the industrial chain, which will eventuallystimulate staggering IT demands. Drivenby the growth engine — intelligent terminal, theindividual IT consumption market is expectedto gain a 29.8% growth this year; such individualappliances as intelligent smart phones and tabletPCs will keep the momentum for rapid growth.End-users’ application demand will promote thedevelopment of the corporate-level IT market, andconsumers’ use of mobile application and corporateindividual consumers’ mobile application will drivethe development of corporate-level hardware, softwareand integrated services,” said Wu Lianfeng,Assistant Vice President of IDC China.“The major programs in the Chinese government’s12th Five-year Plan have brought lotsof IT opportunities. For instance, in order toenhance the overall informationization level ofthe society, the government will be in support ofthe steady and fast development of e-commerce.E-payment and online shopping will driveinvestments in infrastructure of the bankingsector. Online shopping will not only stimulateinvestments from the professional e-commercecompanies, but it will also spur investments ininfrastructure in manufacturing, retail, tourism,finance and other sectors,” added Huo Jinjie,General Manager and Research Vice Presidentin Great China of IDC China.On the other hand, the national demandshave constantly raised new requirements forthe IT sector: the cloud scheme in the regionalmedical service sector will create tremendous demands;the intelligent cities or digital urban planningintroduced by the municipal governmentsat all levels have become a major drive for thegrowth of the IT market, which have enabled theIT suppliers to increase resource input in order toexpand their urban markets; breakthroughs havebeen made for the integration of the “threenetworks” (telecommunication network, Internetand television network); the digitalbusiness based on broadcasting network hasbegun to develop and intelligent television hasbeen initiated. Some provinces and cities suchas Jiangsu and Beijing have begun to establishcharging system for this kind of services; thesmart grid will stimulate IT investments. Bythe end of 2011, the first two batches of smartgrid pilot projects have been accomplished andin 2012 the smart grid project will be implementedin a larger scope across the country,all of which will drive the development of theIT market; the Internet of things has entereda stage for rapid development, stimulating integrationof information systems and growthin various IT products and promoting the fastdevelopment of embedded system and communicationsystem markets; in the domain ofenergy saving and environmental preservation,IT has ushered in speedy developmentand the development of the Internet of thingswill promote upgrading of energy saving solutionsfeaturing information and technologies.Huo concluded that, “The growth in thetotal investments in the IT sector during the12th Five-year Plan period will surpass that inthe 11th Five-year Plan period. With the government’ssupport and consumers’ increasingdemands for IT products and services, China willrise to become the largest IT consumer in AsiaPacific (including Japan) in 2013.”China’s IT Expense toSurpass Japan in 2013By Yu Ruili43

Industrial WatchCONSTRUCTIONIndustrial WatchBuilding Energy Conservation Presents bothDemand and MarketBy Guo Yanenergy conservation presentsboth demand and market,”said YaoBing, deputy director of China Energy-savingAssociation, on the Sixth “BuildingOverseas Investment Forum for Chinese Enterpriseswhich has ended recently. It is estimated that theglobal demands for environmental-protecting productsand services have reached 1.3 trillion USD. Asthe scientific consensus of reducing greenhouse gasemission is translating into real actions, the worldeconomy is undergoing a remarkable transformationinto low-carbon development model.Globally speaking, the EU, U.S. and Japanhave listed architectural industry as the developmentfocus of low-carbon and green economy. InOct. 2008, Al Gore the U.S former vice presidentwrote an article, in which he mentioned that 10%of the world’s carbon dioxide emission is causedby architectural low efficiency, and it is necessaryto change the heating-shielding and sealingperformance of the buildings. In 2009, the Britishgovernment released a plan of “constructing lowcarbon,highly energy-saving buildings”, aimingto achieve zero carbon emission by the year 2050.Since February, 2006, the German government hasbegun to test new technology ideas about buildingenergy conservation and heat preservation, to havea better control of energy consumption and buildingconservation structure. China has issued aseries of documents and requirements on buildingenergy conservation. In 2009, PresidentHu Jintao gave a commitment to the worldon the World Climate Change Forum, saying thatChina will save 620 million tons of standard coaland reduce emission of carbon dioxide by 1.5 billiontons in the future five years.Yan Libing, vice director of the Economic InformationDepartment of the China Council for thePromotion of International Trade, pointed out thatin recent years, China’s “Twelfth Five-year Plan”gave priority to developing emerging strategic industries,which combine high-end technologies withemerging industry, and represent the future trendof technological innovation and industry development.The building industry is an industry whereChina has been long involved into global competition,and has accumulated strength. The integrationof the building industry and emerging industry willfocus on the building energy conservation featuringnew material and new sources of energy. This is thefuture development trend of international buildingindustry and also the international cooperation.Yao continued that energy-saving building materialis an industry which includes industrial heatinsulatingmaterial, glass door and window industry,walling material industry and other associatedindustries, like water proof sealing industry. Strictlyspeaking, the building materials shall meet thedemands of energy saving and gas emission. Currently,the building energy conservation has madeclear requirements on the climate conditions ofdifferent regions, and these requirements have becomestricter as the building energy-saving industrydevelops, so the energy-saving building materials44

are more and more important. However, Ye Jingthinks that nowadays China is strong in heat insulatingmaterial and has low production costs, butstill lags behind the developed countries in termsof product quality. Many developed countries havemade use of the tax subsidy policy to promote solarpower generation, and feed the electricity into thenational electricity grid. Ye also mentioned thathis company will introduce the foreign advancedtechnology into its production process.Now China is the world’s largest solar waterheater producer, with the annual production twiceof Europe and four times of North America. Itkeeps an annual growth rate of 20%. Also as theworld’s largest PV producer, China boasts 40% ofthe world total production, with 96% of its productsfor export. The renewable energy has been used tobuilding process to solve the high energy consumptionproblem. Director Yao said that if the buildingscould transform the solar power into electricity, andform a photo electricity building industry, it shouldrequire the integration of technologies in both PVand building industries, and there is still a lot ofwork to do.Also, Yao said that new buildings will be themost worthy of investments. The commercial residentialbuilding, indemnificatory housings shouldalso consider the energy savings. There were 10million newly-built houses last year, and this yearit will be 7 million houses. During the “TwelfthFive-year Plan” period, we still have 36 million setof houses to build. The construction or reconstructionof large public facilities will be the sectionwhere we will have largest energy-saving potentials.Both developing and developed countrieswill have such demands.Li Zheng, vice director of the constructionindustry sub-council, China Council for the Promotionof International Trade, told reporters thatsince the reform and opening-up policy was implemented,the international trade has been undergoinga rapid growth, especially the constructionindustry. The value of foreign contract projects hasbeen growing from 450 million in 1983 to 103.4billion in 2011, growing by 239 times and evenfaster than the export growth rate. This shows thegreat role that has been played by the constructionindustry in the international trade. Now Australiastill has 200 thousand houses in deficit, whichmight impact the residential needs of the people.Demands for houses will be much higher in developingcountries, especially the affordable housesprovided by the government. Take the relocationof city slums in Brazil for example, Li said that theBrazilian president has promised to build 2 millionlow-price houses before 2014, which is very difficultfor local governments. Salvado plans to build75,000 houses with 24-30 sq. m floor space and3,000 USD in price. The western countriesare unwilling to undertake such projects but wecould construct these houses with renewable resources.Now we are signing a cooperation agreementwith them, which is being implemented.According to Li’s introduction, our countryis now providing integration buildings, whichare assembled on site in the production factories.Compared with Japan, we use more light woodstructure, low-cost straw and phosphorous ormagnesia cement. The container housing has beengrowing very fast in recent two years. For example,at the Guangzhou Model Exhibition, the exhibitionspace of container housing has doubled. Mostof the survived houses in the Japanese earthquaketriggeredtsunami are belong to container housingor steel structure housing. Regarding demands forhouses, the China Council for the Promotion ofInternational Trade organized a foreign exhibitionof domestic houses in 2010, in which the strawmadehouse (15 sq. m. model) is very popularamong local public. Our houses even captured theheadline of local papers, showing great potentialdemands for such products.Li thinks that nowadays the foreign markethas the following demands for the constructionindustry products: the first, the building materialproducts, which should be manufactured by factories.Some products displayed and sold at the exhibitionfeature roof with solar panel and glass thatabsorbs solar power to generate electricity. Productslike this will have huge market demands. Second,City construction products that include water orgarbage treatment products and equipment, twicepurification factory, sewage water factory. Third,city greenery products featuring multi-layer greenerytechnology or equipment, which will play animportance role in city environment improvement.Fourth, urban traffic products, in the scientific exhibitionlast year, which is broadcasted by CCTV,one of our business partners bring the multipledecker bus, with the upper decker holding walkingpassengers, and the below decker for automobiles.We will also present a multi-layer parking lot in anew parking facility exhibition in November. Fifth,the solar energy products featuring solar powerequipment.As a conclusion, Li said that our countryhas huge demands for the construction industryproducts. So we have to organize the industryand pave the way leading to the global market.If our products could be exported to foreigncountries, it will greatly change the productstructure of our country’s export.45

Industrial WatchEXPOIndustrial WatchChina Sports Goods Industry:Big but Not StrongBy Cui XiaolingChina, though not the largest consumermarket of sports commodities, has20,000-plus producers of sports goods.A reshuffle of the industry to retain thestrong ones and eliminate the weak is going on,said Ma Jilong, vice-Chairman of China Associationof Sports Goods Industry, during the 30thChina Sports Show held from May 17 to 20 inBeijing.Asked about the unique features of thisexpo, Ma said that it has grown from a pure showof sports goods into one that features sports culture,financing, release of trade standards, andauction of sports collection. Yao Ming attendedthe show, as an investor instead of a sportsman.Yao said he was interested in some creative masssports programs initiated by young entrepreneurs.The first day of the show received 20,000visitors, most of whom are professionals in theindustry. There are also foreign visitors, mainlyfrom India, Pakistan, Turkey and the Middleeast.The reporter learned that most of the largecompanies participated in the show to showcasetheir strength and boost their company image.While, small ones were there to make real business.“I have attended three China Sport Shows.I met with 50 potential clients a day on averageduring the show. A quarter of them became myclients after further contact. I am very satisfied,”Zhang Yi, deputy manager of Shenying CarbonFiber Bicycles told the reporter.“In order for a small sports goods enterpriseto survive, it has to focus on a market niche, havea narrow business scope, and offer the best qualitypossible,” Hebei Galaxy Sports Goods Corporationtold the reporter. “In Galaxy, we focus onPing-Pong bat and rubber, and take more thanhalf of the market share.”Olympic atmosphereOne of the highlights of the show is the displayof the Olympic spirit as the London Gamesapproach. Famous brands such as Li Ning, Anta,361, Double Fish, Double Happiness had all integratedthe Olympic elements into their booth.China Sports Delegation released at the show theclothes to be worn by Chinese players when acceptingprizes during the London Games. Theywere sponsored by Anta. “The majority of mycompany’s budget for advertisement goes to sponsorshipof major sports events. This is the mosteffective way to boost our brand recognition. Ourtables will be used for the table tennis test eventsduring the London Olympics,” Liang Zhixiong,marketing director of Guangzhou Double FishSports Group, told China’s Foreign Trade.46

Blossom of fitness and family healthcare equipmentAnother major feature of the exhibition isthe impressive presence of the fitness and familycare equipment, which took half of the 10,000square meters exhibition space in the New ChinaInternational Exhibition Center.As the natural environment deteriorates,and the work pressure increases, Chinese peopleare growingly aware of the importance of sportsand health, resulting in the blossom of the fitnessand family health care equipment industry. TheU.S. economist Paul Pilzer said the health industryis becoming the 5th wave of wealth after theIT industry. Faced with tough competition, companieshave to focus on innovation and technologydevelopment. The reporter learned from theexhibition that established companiesin the industry are those withinnovative, high-tech products.Chinese sports goodsindustry pressured toupgradeThe Report on China SportsGoods Industry in 2010 and 2011was released during the exhibition,the first one of its kind. According to thereport, China-made products take 65% of theworld’s sports goods market. However, theChinese sports goods industry is big but notstrong.Due to high inventory and rising costs, theexpansion rate of the industry is declining, whichwill intensify competition.A good thing to note is that China’s sportsgoods industry is increasingly concentrated inGuangdong, Fujian, Jiangsu, and Zhejiang provinces,Beijing and Shanghai, with a concentrationrate of over 85%.The report said that sports equipment hasoutrun sports shoes and clothing in terms of salesand growth rate. In 2010, the eight sports goodslisted companies reported a revenue of 16.146billion yuan in the sports clothing business, anincrease of 25.89% year on year; 13.198 billionyuan in the sports shoes business. While, sportsequipment enterprises above the designated sizerealized a revenue of 83.043 billion yuan. Sportsequipment also made the greatest contribution toChina’s exports of sports goods. In 2011, Chinaexported $15.916 billion worth of sports goods,with a trade surplus of $15.24 billion. Sportsequipment contributed 28.87% to the exportsvolume.The high-end sports shoes and clothingmarket is dominated by foreign brands. But localbrands have started to participate in the competition,and some of them are competitive. The hugemid- and low-end market is dominated by localbrands. In contrast, the sports equipment marketis dominated by local brands, with foreign oneshaving little voice.The report pointed out the challenges facingthe industry. First, Chinese enterprises are in lackof core competitiveness, and recognized brands.They are still at the bottom of manufacturing ofthe global ladder of labor division. Second, shoddyand counterfeit products are rampant, and thecompetition among companies has overheated.With the erosion of the advantages in labor cost,Chinese sports goods producers have to upgradetheir industrial structure.Li Ning, Anta and other Chinese sportsbrands should design more function-specificclothes and shoes, according to Weijishan, chairmanof the World Federation of Sports GoodsIndustry. Currently, the Chinese market doesnot have a huge demand of functional clothesand shoes, which are often expensive. However,with the growth of the economy, people will havemore professional needs and function-specificproducts will be in need. He added that he wasglad to see the growing popularity of mass sportsin China.47

China’s Aging PopulationBrings Opportunitiesfor InsurersBy Richard ZhuThe rapidly aging populationin China is a greatchallenge for the country’sdevelopment and socialsecurity system, while it presents opportunitiesfor insurance companies,according to a recent report by TheBoston Consulting Group (BCG)and Swiss Re.“Insurance companies must developa concrete plan for where andhow to participate to take advantageof the challenges and opportunitiesof aging,” said the report.The aging populationAging is a global phenomenon,and China is no exception. For decades,China has benefited from a“demographic dividend.” Its robustpopulation structure has driven aprolonged period of socioeconomicgrowth. However, as China’s workforceages and moves towards retirement,the country will join manyothers in facing up to the challengesof supporting an aging population,said the report.Over the next five years, thegrowth of China’s workforce, whichhas long contributed to the expansionof the country’s booming economy,will finally slow down and eventuallybecome negative. The workingage population will peak in size in2015 and then begin to decline.Indeed, the silver segment isgrowing fast in China. By 2050, thisgroup will represent more than onethirdof the country’s total population,an eye-popping 439 millionpeople, a far greater number thaneven in Japan, another nation facingsevere demographic shifts.“By 2050, China will be most‘aged’ among BRIC countries with amuch larger 60-and-over populationsize,” said Robert Wiest, President ofSwiss Re China.The scale of China’s aging populationis much greater than that ofother RDEs. The silver segment as apercentage of the total population willnearly triple from the current 12 percentto 34 percent by 2008, a muchhigher increasethan those forecastfor other BRICcountries and far exceedingthe estimated increase indeveloped countries.In China, as elsewhere, theaging population is driven by bothlower fertility rates and increasedlongevity. Life expectancy at birthincreased from under 45 years of agein 1955 to 73 years of age in 2010,a level approaching that of developedcountries. Four specific factorsare responsible for the fact that theimpact of aging in China will beparticularly severe: the rise of themiddle class, the “One Child Policy”,the 4-2-1 (four grandparents, twoparents, one child) family structureand urbanization.Overall, the report pointedout that China’s aging populationwill have three major implicationsfor companies and for the country’seconomy:Historically, China’s economic48

growth has largely been driven byworkforce increases and productivityimprovements. Without furthermajor breakthroughs in productivity,economic growth is expected to slowdown due to a much lower or evennegative workforce growth.Both the mix and profile ofconsumers in China will change substantiallyas the population ages. Inparticular, the silver segment and thelower socioeconomic class possessdistinct needs. Companies seeking tothrive in the coming decades must beprepared to cater to these segments andwin their loyalty.An altered and flatter populationstructure will increase the inter-generationalburden on both a family andnational level, testing the sustainabilityof the current pension system.The current social securitysystem amid challengesAccording to the report, China’saging dynamics will place major pressureson the country’s social securitysystem. In the pension system, themandatory social insurance scheme’sbenefits will not keep pace with therising cost of living, yet the marketfor voluntary pensions is still underdeveloped.In health care, the systemis stymied by limited coverage and alack of adequate resources, particularlyregarding long-term care which willbecome increasingly important as thepopulation ages. Finally, demographicshifts have led to a weakening of thetraditional family support network dueto the mass rural-urban migration andthe 4-2-1 family structure.China’s social security systemfaces pressure on two fronts: the rapidlyaging population and increasedlife expectancy. In the coming decades,the system will be expected tocope with large numbers of retireesdeparting the workforce—people whowill require long-term pension payoutsand health care. Without majorreform, the current social security systemappears unsustainable. But reformwill come. The alternative millionsof Chinese people spending their oldage without adequate pensions, healthcare, or family support — is unthinkablefor government planners.China’s pension system is basedon three pillars: mandatory social insurance, voluntary employer enterpriseannuity and group pension schemesand voluntary personal pensions, includingcommercial pension insurance,supplemented by the government’sminimum-livingstandard guarantee(Dī Băo), personal savings, and familysupport.The report indicated that comparedto mature markets, China’s PillarII and III are largely underdeveloped.As of February 2011, these two pillarscombined were estimated to have USD$80 billion to $100 billion in assetsunder management, equivalent to 1.7percent of China’s total GDP and approximatelythe size of Pillar I individualaccounts. This figure is significantlylower than that of developed countries,such as the Netherlands with (134 percent)and Switzerland (126 percent).The report expected substantialgrowth potential for Pillar II and IIIgoing forward. This expansion will bedriven by inadequate coverage of PillarI, the rise of Chinese middle-class andaffluent consumers, and the weakeningof the family support network. But itexpected changes to be gradual. Concertedaction from both the governmentand insurers will be required todevelop this market.China’s healthcare system hadachieved roughly 95 percent coverageof the population by the end of 2010,up from around 15 percent in 2000.However, this system is still limited interms of the scope of treatments, services,and medicines. Notably, there isno long-term care (LTC) componentin China’s current healthcare system.As the size of the silver segmentincreases in China, so will the demandand costs for health care. This demandwill add to the government’s financialburden and in turn reduce the fundingavailable for seniors and affect thequality of healthcare services.The LTC gap has not gone unnoticed,however. Unless LTC is rolledout in the near future, Chinese peoplewill need to rely on commercial insuranceto provide them with protection.And most LTC products currently sold49

in China offer a fixed sum rather thanthe coupling of commercial insurancewith caring services and do not eliminatethe risk of potential price increasesin LTC services.“China’s ability to deal with thesechallenges will have a significant impacton its prosperity level for decadesto come,” said Richard Huang, a BCGpartner based in Beijing. What is more,failure to address the difficulties couldhave dramatic consequences such as anonerous public-deficit burden, a delayedretirement age, and a reduction in retireebenefits. The worst-case scenariowould be a full-scale rupture of thecountry’s social security net.The scope of this problem shouldnot be underestimated. Finding solutionswill require a concerted effortamong the public and private spheres.Indeed, the Chinese government willneed to drive meaningful reforms ofthe social security system and corporationswill have to take more initiativein providing post-retirement services.Consumers, for their part, will needto adopt a longer-term view on savingsand investments.“It takes the efforts of all stakeholders— the Chinese government,corporations, and insurers — to meetthe challenges posed by China’s agingpopulation,” Jia Jingwei, Head of ChinaBusiness Development of Swiss Re.“Insurance companies, in particular,will need to play a larger role.”Implications for insurersChina’s social security system isunlikely to be able to cope with thechallenges of an aging population.Therefore, the report suggested the followingsolutions.Proactively Lobby for Reformand Educate Consumers. The role ofcommercial insurance must be expandedthrough the development of voluntaryemployer and personal pensionsystems (Pillars II and III) in order toaddress the shortfalls of the mandatorysystem.The same principle applies to commercialhealthcare and long-term careinsurance (to complement the nationalhealthcare system).Regulatory reform must be undertakento create a more robust pensionand health care system. Insurers shouldproactively drive and support reforms,particularly changes that could be catalystsfor the development of voluntarypension systems. Such reforms couldinclude tax incentives, the portability ofpensions, and the construction of a risktrading platform for insurers, reinsurers,and other investors.The importance of fiscal incentivesin prompting corporations and individualsto join voluntary, complementaryinsurance schemes is widely recognized.Indeed, Germany provides a goodexample of the impact that fiscal incentivescan have. Since the beginningof 2002, Germany has carried out aseries of pension reforms known as theRiester plan to foster the developmentof private personal pensions (equivalentto China’s Pillar III).Under this plan, private retirementsavings are promoted both bystate subsidies and by tax-deductionsfor contributions and purchases of bankand insurance investment products.As a result of this plan, the Germancommercial pension market has growntremendously — from around four millionpension contracts in 2002 to over14 million in 2011.At the individual level, the mostcritical necessary change in China isthe adoption of a longer-term view onsavings and investments. Currently,Chinese people tend to focus moreon short-term profit opportunities,neglecting investing in their post-retirementincome, health care, and longtermcare needs. Insurers can play a keyrole in educating individuals about theincreasing challenges that they will faceto sustain their standard of living andhow they can successfully clear thesehurdles through personalized financialplanning and investment/savings offerings.The good news is that China’ssavings rates, standing at an averageof around 50 percent of GDP, are veryhigh, representing huge opportunitiesfor insurers that can successfully channelthese savings into the right investmentand insurance products.Cooperate with the Social SecuritySystem. Besides lobbying the governmentfor reforms, insurers shouldalso collaborate with the social securitysystem to help the government manageits pension and healthcare systems atlower levels of risk and cost.China’s national pension funds, aswell as corporate pension schemes, areexposed to different degrees of longevityrisk. By Swiss Re’s estimation, anadditional mortality improvement of1 percent per annum would increase apensioner’s liabilities by roughly 5 percentto 6 percent. Insurers, reinsurancecompanies, and capital markets canplay a significant role in helping transferpart or all of the longevity risks ofChina’s national pension system.“Joint risk management” betweeninsurers and the government canstrongly support the development ofhealthcare system in China. Some local50

governments with limited experiencein health insurance have decided toinvolve insurers in managing and limitingtheir risks. In exchange, insurersare allowed to increase their premiums(or limit their coverage and payouts)whenever the medical claims reacha certain threshold. In the event thatinsurers make a profit, the governmentcan claim a share of the profits. Suchpublic-private partnerships have helpedenhance the management of socialmedical funds. We have already witnessedgood examples of cooperationsuch as the ZhanJiang social medicalsystem, in which a specialized healthinsurer contributed expertise in termsof claims management and risk control,giving the local government a cushionfor its liabilities.Further Understand CustomerInsights and Innovate with Productsand Channels. Shifts in demographicstructure directly change the profiles ofmainstream consumers and their needs.The fast-growing group of relativelyyoung middle-class and affluentconsumers that will become the silversegment in 20 to 30 years time willbecome more and more inf luential,with substantial purchasing power andunique needs. To succeed in the futurewith this segment, insurers should activelyexplore innovations in products,marketing, and distribution.For example, insurers may considerde-averaging customer groupsthrough segmentation, which couldenable them to identify niche segmentswith distinct risk-pricing profiles, allthe while bearing in mind the differencesbetween more-developed andless-developed provinces. For customersin each segment, insurers can also customizevalue propositions to differentiatetheir strategies.Overall, innovative products canbe developed to meet the silver segment’shigher expectation for life qualityand security after retirement.Finally, insurers could try to establishdedicated pension sales andcooperate with HR consulting firmsto address the key needs of the risingsilver segment. Innovative distributionchannels could also be adapted to thissegment’s lifestyle (e.g., distributingthrough hospital networks, or collaboratingwith pharmaceutical companies’distribution networks).Develop Managed Long-TermCare Services. There is a significantgap in long-term care insurance, services,and facilities in China. Investing inlong-term care can offer synergies andadvantages for insurers. The clearest advantageis the ability to offer long-termcare products with services, rather thanfixed payments, as benefits. Also, insurers’investments act as a natural hedgeagainst the risk of increasing costs inlong-term care services.Manage for Profitability andRisks. Economic growth is expected tobe hindered by a shrinking workforceand associated productivity losses.A prolonged climate of low realinterest rates is a likely scenario, whichwould have an adverseimpact on insurers’profitabilitylevels. Looking atJapan’s experience,several insurancecompanieswent bankruptdue to a prolongedlowinterest ratesenvironment,while others managedto adapt andthrive. Chineseinsurers can learnfrom the Japaneseexperience andtake steps to better prepare themselves inasset/liability management and in companyoperations. Several levers are availableto mitigate the impact of prolongedlow rates, including:The other major risk that insurersin China will be facing is longevityrisk. In order to assess this risk, insurersshould consider adopting robust forecastingapproaches and disease-basedactuarial models. A potential solutionto limit longevity exposure on insurers’portfolios is to pass some or all of thisrisk to another insurer or reinsurer withbetter funding and resources to meetthe long-term commitment.The entire insurance industry,including reinsurers, should pushthe public sector to create diversifiedcapital-market solutions, which wouldpotentially allow the transfer of longevityrisk in their annuity/pensionportfolios.Prepare for the Impacts of Agingon Their Own Workforce. Insurers inChina will face challenges in their ownhuman resource management. With astagnant workforce inflow and a muchfaster workforce outflow, insurers willfind it more and more difficult to recruityoung talent and maintain a stableemployee structure.Insurers have a vital role to play inreducing the negative socio-economicthreats from aging in China. Ongoingreforms are encouraging privateparticipation in pension and healthcareprovision, and insurers need to positionthemselves to take advantage of thiswindow of opportunity. Developingprovincial and nationallobbying strategies willbe critical, as will educatingconsumers. Morefocus needs to be put oninnovating product anddistribution channels tobetter serve unmet needs,and better access customers— either as individualsor through employers.And building robust datato support accurate pricingof both medical andlongevity risks will be anessential strategy.In addition, insurerswill be grappling withtheir own challenges. Some of these,like workforce demographic risk, aresimilar to those that other industrieswill face. However, others — such asa prolonged period of low real interestrates — will have direct impact on insurers’profitability.In conclusion, the report proposedthat insurance companies should developa concrete plan for where andhow to participate to take advantageof the challenges and opportunities ofaging. They need to start building thecapabilities and relationships that willbe required to win. And they need toput in place HR strategies to managethe impact on their own workforce.Those that move fast and boldly cancatch the wave — and truly turn silverinto gold.51

case StudyHow to AddressPrivacyConcerns of Internet Users?— An overview of China’s Legal Regime for Online Privacy ProtectionBy Liang Tao52When walking into a familiarrestaurant nearyour home, you mustbe glad to see a waiterknowing your name, calling you by itlike an old friend, and furnishing yourmost favorite dishes and beer withoutyour specific instructions. However,how would you feel if you were in alarge crowd and a stranger called yourname loudly and exactly? You mightfeel shocked and offended. If finallyfinding that such person is a sales agentwho totally didn’t have any connectionwith you before, you might feel unsafe,angry, or even desperate when it happensrepeatedly. This story reflects thedifference between customized servicesprovision and privacy infringements.Where does law enforcement draw theline between privacy infringementsand legitimate data collections aimedat providing tailored services, especiallyunder the internet environment?What’s going on?According to the China InternetNetwork Information Center, the statenetwork information centre of China,driven by strong economic growth, thenumber of internet users in China hit anew record high of 513 million and thenumber of websites operated in Chinareached 2.3 million by the end of 2011.However, fierce and unregulated competitionsamong commercial websites operatorsand weak protection for personalinformation have put hundreds of millionsof users’ online privacy right at risk.In December 2011, personal informationof over 6 million registered usersof China Software Developer Network(one of the biggest online communityof software developers in China, or“CSDN”) was leaked. Many famousinternet companies in China, such asRenren Network, a Chinese socialnetworking service provider similar toFacebook, were involved in such hackingcase. It is reported that the personalinformation leaked from the CSDN hasbeen used to seek profit by cheating andadvertising.On April 23, 2012, Pony Ma,founder and CEO of Tencent whichis the most popular instant messagingservices provider in China, said he washighly concerned about the risk of privacyinfringements, while he was havinga public conversation with Kevin Kelly,co-founder of Wired which is a magazinereporting on impact of new and developingtechnology. Indeed, Pony has a goodreason to pay attention to the online privacyprotection. Since 2010, Tencent hasbeen involved in a high-profile and painfullegal battle with Qihoo, an antivirusgiant in China’s internet market. Amongother charges, Tencent is accused ofscanning users’ computers and uploadingusers’ personal information for the purposeof driving its corporate profits. Suchdispute and legal battle between Tencentand Qihoo further draw public attentionto the protection of personal informationand online privacy.China currently has not enacted acomprehensive law specifically addressingthe issue of personal informationand privacy protection, or a nationallevel law that delineates how an internetcompany can legally collect, process,retain and utilize users’ personal information.However, many important rulesrelating to online personal data and privacyprotection are scattered in diverselaws, regulations, industry rules and localordinances. Although the foregoingrules do not address the privacy issuesin a direct, coordinated and systematicway, such legal authorities shall be carefullyassessed and considered when carryingon online business in China.Criminal LawOn February 28, 2009, the SeventhAmendment to the PRC CriminalLaw (“Criminal Law Amendment”) waspromulgated and became effective. Thisis the first law criminalizing the saleor unlawful provision of certain kindsof personal data. The Criminal LawAmendment imposes criminal chargeson governmental officials and employeesin the financial, telecommunications,transportation, education or medicalsectors who sell or illegally provide anycitizen’s personal information obtainedin the course of performing their dutiesand responsibilities. Additionally,under the Criminal Law Amendment,obtaining citizens’ personal data by theftor other illegal means also constitutes acrime.

In summary, persons or entitieswho engage in the following three activitieswill be subject to criminal liabilityup to three year’s imprisonment and/or criminal fines: (i) sale of citizens’ personalinformation; (ii) illegal provisionof citizens’ personal information; and(iii) illegally obtaining citizens’ personalinformation. In April 2012, China’spolice authority launched a campaignto crack down on infringing on citizen’sright of personal information, with 1,936suspects arrested. In August 2011, theBeijing Second Intermediate People’sCourt issued its ruling on a famous caseconcerning selling, illegally providingand obtaining personal information. Inthis case, 23 defendants were accusedof engaging in illegal actions leading toselling, illegally providing and obtainingpersonal information, and would faceprison terms or suspended sentences.Particularly, among these 23 defendants,5 defendants were employees of ChinaMobile, China Unicom and ChinaTelecom which are the three biggest telecommunicationscarriers in China. Thesecases indicate China’s law enforcementagencies are increasingly taking measuresto protect personal information.Civil LawAt present, a unified and overarchingcivil law has not been codified inChina. Over the past twenty-six years,the General Principles of Civil Law(“Civil Law Principles”) has played animportant role governing the civil relationshipsamong civil entities. The CivilLaw Principles do not provide for aseparate right of privacy or personal information,while the Supreme People’sCourt merges the privacy right withthe reputation right by interpreting theprovisions of the Civil Law Principles.That means a victim can not sue to protecthis/her privacy right unless his/herreputation has also been damaged.Such rules was overturned whenthe Tort Liability Law (“Tort Law”)was enacted on December 26, 2009.Under Tort Law which entered intoforce on July 1, 2010, the privacy rightbecame a unique type of right independentfrom other civil rights. A victimwhose privacy and personal informationhas been infringed is entitled to sue todemand cessation of such infringement,reputation rehabilitation, eliminationof adverse impact, issuance of apologyand payment of damages. The mostimportant provision under the Tort Lawfor the website operators is the Article36, stipulating that a victim whose civilrights are infringed due to informationdisclosure via internet may ask relevantwebsite operators or internet serviceproviders to delete or block such informationin order to avoid any furtherloss. If the website operators or internetservice providers fail to take necessaryactions on a timely basis, they mayjointly and severally bear any additionallosses caused to such victim.Besides typical civil laws andregulations, other laws or rules alsoshed light on the privacy and personalinformation protection. Although theConsumer Rights and Benefits ProtectionLaw (“Consumer Law”) issued bystate-level lawmaker does not contain aprovision relating to consumers’ privacyor personal information protection, localconsumer protection regulationsin China have extended protectionover customers’ personal data. Certainprovincial-level rules implementingthe Consumer Law have impacted thecollection and use of customers’ personaldata, by prohibiting commercialenterprises from disclosing customers’personal information without their consentor collecting consumers’ personalinformation irrelevant to the goods orservices they purchase. Additionally, itis reported that a draft amendment tothe Consumer Law creates an explicitright to privacy of consumers.Rules specifically applicable tointernet industryIn addition to complying by thegeneral criminal or civil laws, websiteoperators or internet service providersneed to pay attention to the privacy andpersonal information protection rulesissued by regulators specifically for theinternet industry. With respect to theonline privacy protection, the ComputerInformation Network and InternetSecurity, Protection and ManagementRegulations (“Computer Regulations”),which was issued by the Ministry ofPublic Security and became effective in1997, stipulated that the freedom andprivacy of internet users is protected bylaw and can not be infringed by any entityor person. The Computer Regulationsalso urge entities connected to theinternet to take solid measures to ensurethe security of information.Recently, the Ministry of Industryand Information Technology (“MIIT”)promulgated the Several Provisions onRegulating the Market Order of InternetInformation Services (“MarketOrder Provisions”) which entered intoforce on March 15, 2012. Under theMarket Order Provisions, the issue ofusers’ personal data protection is highlighted.Pursuant to the Market OrderProvisions, website operators are prohibitedfrom providing users’ personalinformation to third parties, unless otherwisespecified in laws or regulations.Website operators are also prohibitedfrom collecting users’ personal informationwithout users’ consent. Websiteoperators are requested to duly retainusers’ personal information and takeremedial measures immediately whenusers’ personal information has beenleaked or may be undermined by therisk of leakage. Since other key ruleskeep silent on the internet privacy issue,the Market Order Provisions will havea pro-founding impact on China’s internetprivacy protection practice.FutureGiven the rapidly changing landscapeof the internet industry, it is difficultfor lawmakers to devise rules whichcan always address upcoming issuestimely and soundly. It is reported thatChina will issue the Guideline for PersonalInformation Protection as a noncompulsoryindustrial standard in late2012. But, there is no sign showing acomprehensive personal data protectionlaw will be adopted in the near future.In order to contain potential risksassociated with online privacy and personalinformation protection, websiteoperators or other market players in theinternet industry may develop a set ofbest practice, such as assessing the typesof personal data collected, keeping theproper internet security measures inplace, scrutinizing the purpose of useof personal data, obtaining necessaryconsent regarding data collection, andlimiting scope of persons who have accessto personal information database.53

Regional Trade & InvestmentBy Hu WenxiuASIA-PACIFICConsensus Outweighs Divergence on theChina-Japan-Korea Free Trade AreaOn May 13, heads from China, Japanand Korea held a 5th conference inBeijing, where they agreed to officiallylaunch talks within this yearon the China-Japan-Korea Free Trade Area(CJKFTA). The substantial achievement of theconference was the three countries’ signing ofthe Agreement on Promoting, Facilitating andProtecting Investments, which was the firstagreement on investments among these threecountries.Since 2007 when talks on an investmentagreement among China, Japan and Koreawere initiated, 13 rounds of official negotiationsand several unofficial consultations havebeen held over the past five years and the negotiationswere eventually rounded off in lateMarch. Some exporters have once commentedthat nearly 10 years had gone for initiatingthe CJKFTA negotiations and now time wasmature, which signals that Northeast Asia willstep out of the backwardness in regional economicintegration.The China-Japan-Korea InvestmentAgreement in total consists of 27 articles and 1additional protocol and it covers all the importantcontent that the international investmentagreement generally includes, including suchprovisions as investment definition, scope ofapplication, most-favored-nation treatment,national treatment, expropriation, transferring,subrogation, taxation, general exceptions anddispute settlement. The signing of the Sino-Japan-Korea Investment Agreement has landmarkimplications for the economic and tradecooperation among these three countries. Theinvestment agreement is the first legal documentand institutional arrangement for thesethree countries to boost and protect investments,which serves as an important basis forthe construction of the CJKFTA.The investment agreement, a significantoutcome of this year’s conference, was highlyvalued by the heads of the three countries andit was appreciated by the Chinese Premier Wen Jiabao as “animportant strategic decision”. The Japanese Prime MinisterYoshihiko Noda regarded the investment agreement as “a talkfor close Sino-Korea and Sino-Japan cooperation”. The KoreanPresident Lee Myung-bak held that the decision concluded atthis year’s conference “had profound implications for the future”.According to incomplete statistics, So far there are morethan 1,200 FTAs across the world, including 425 in 15 developedcountries and 775 in 67 developing countries. The influentialones include North American Free Trade Area (NAFTA),Free Trade Area of Americas (FTAA), Central EuropeanFree Trade Agreement (CEFTA), ASEAN Free Trade Area(AFTA), EU-Mexico Free Trade Area as well as China-ASE-AN Free Trade Area (CAFTA).If China, Japan and Korea can establish a free tradearea, advantages will be very obvious. Once the CJKFTA isestablished, covering a population of 1.5 billion and representing70% of the Asian economic aggregate, it will be the thirdlargest FTA only next to the North American FTA and theEU. The FTA will greatly promote intra trade and personnelexchanges among these three countries. Specifically, thesethree countries are highly complemented, as China is featuringlabor-intensive industries, while Japan and Korea are dominatedby technology-intensive industries. China’s industrial andcommercial enterprises are believed to benefit a lot from theFTA. The FTA will also become an important procedure forestablishing the East Asian FTA in future, which is good newsof great importance for the economic development of the entireEast Asia.Zhang Jiuheng, CPPCC Member and Former Director-General of the Asian Affairs Department of the Ministry ofForeign Affairs, and Director of the Asia-Pacific Studies Centerof China Foundation for International Studies, introducedto the reporter that as a matter of fact China, Japan and Koreahad spent as long as 10 years to prepare for initiating the FTAnegotiations. As early as 2002, the three countries had conductedfeasibility research on the FTA negotiations. Seven yearslater, the three countries drew a preliminary conclusion in early2009 that the establishment of the FTA would be conduciveto eliminate trade barriers, expand intra-regional market, driveregional economic development and to achieve a triple-win result.Therefore, the three countries resolved to push forward thejoint research on the CJKFTA participated in by the govern-54

ASIA-PACIFICment, industrial sector and the academic domain.Eventually, the three countries reacheda consensus in early 2012 that it was time toinitiate the FTA negotiations as all the conditionsfor initiating the FTA negotiations hadmatured. “We should say that this is a verynatural process,” said Zhang.According to Zhang, China, Japan andKorea have all signed free trade agreementswith the ASEAN. However, there exist nobilateral or multilateral free trade agreementsamong China, Japan and Korea, andinter-country investments among the threecountries merely account for 6% of the threecountries’ aggregate outbound investments,which does not match the three countries’status in the global economy and which alsoreflects the Northeast Asia’s backwardnessin regional economic integration. At thisyear’s conference, it was determined to initiatethe FTA negotiations, which is a stepforward and which is of great significance toboost economic integration and to achieve acommonly beneficial result among the threecountries.It is learned that China, Japan and Koreaboast an aggregate GDP of USD 14 trillionand a total foreign trade volume worthUSD 6.3 trillion. However, the economicintegration course in Northeast Asia is relativelybackward, and the inter-country investmentsamong China, Japan and Korea onlyaccount for 6% of these three countries’ totaloutbound investments.Ten years later, China, Japan and Koreahave eventually signed the investment agreementwhich however does not mean thatfree investments can be immediately realizedamong these three countries. The investmentagreement’s taking effect requires thethree countries to transfer the content of theinvestment agreement into their own lawsand regulations and to accordingly formulateinternal legal procedures. Only in this waycan the investment agreement come into forceand then take effect.Will the establishment of the CJKFTAimpact some domestic industries, what willbe the economic and social cost, and whetherwill the opening issue of the sensitive sectorsbecome an obstacle for the three countries todeepen trade. The investment agreement wassigned firstly, which may be in the benefit ofJapan and Korea, while as China is less competitivein the service and investment domainand its commodity trade may be impacted.Although China, Japan and Korea haveannounced that the FAT negotiations willbe initiated, the negotiation process is destined to be long and it may be evenpossible for the negotiations to last for another 10 years. Japan and Koreafear the impact imposed by China’s farm products, while China concernsthat Japan and Korea will squeeze the domestic service and investment sector.Agriculture is the most severe challenge in the FTA negotiations. Japanand Korea put much protectionism on agriculture, and if they insist on notopening the agricultural products market, China will have no way to bringits comparative advantage on agricultural products into full play. If China,Japan and Korea cannot reach a consensus on the agricultural issue, it will bea bottleneck for the establishment of the FTA.Fukukawa Shinji, Chief Japanese FTA Negotiator stressed in the interviewthat China, Korea and Japan needed to initiate the FTA negotiations assoon as possible, as against the backdrop of the sluggish world economy onlythe establishment of the CJPFTA can power the recovery of the world economyand promote economic integration in East Asia. In the course of negotiations,a comprehensive framework is definitely ideal, which however is notthat easy to be achieved. But it is unnecessary to stubbornly require the “onepackage”approach to solve all the problems at one time. The negotiations canbe flexibly carried out by tackling the easy section prior to the difficult sectionand by focusing on consensus to gradually expand the FTA plan. In themean time, to develop industrial cooperation, inter-corporate connection isthe source of economic dynamism. Therefore, it is of great importance to createfair competition conditions and to attach great importance to innovation.According to Zhang Jianping, Director of the International EconomicCooperation Department of the Foreign Economic Research Institute ofthe National Development and Reform Committee, it is a breakthrough forChina, Japan and Korea to officially sign the investment agreement, whichdeepens regional economic cooperation, makes the ties among the threecountries closer and delivers a trip-win result. The signing of the agreementreflects respect to the objective economic law and also the trend for internationalindustrial transfer. The three countries unanimously agree to initiatethe FTA negotiations within this year—which have been prepared for nearly10 years—and each step is not easy. Zhang suggested that the FTA can notonly be treated by which country and industry are benefited most, but by anew strategic perspective on the long-term development of the three countries.The establishment of the FTA is of great significance to stimulate tradeand investment, make the three countries more competitive and to facilitateeconomic structuring of the three countries.55

Regional Trade & InvestmentEUROPEGreece Starts theDominos ?By Li MingzhuDiscussion about Greece’s secession from the Eurozoneis officially put on the table. Several economistscommented that if Greece secedes from theEurozone, other countries in the same boat mayfollow suit, in which case stability of the EU will become impossible,global financial markets will be affected remarkably,and emerging markets like China also can’t be spared.Greece’s secession from the Eurozone willtrigger a chain reactionTing Lu, the chief economist in Greater China of Bankof America Merrill Lynch believes that Greece’s secessionfrom the Eurozone is a possible, but there is no exact timetablefor it. Once Greece decides to secede from the Eurozone,it may be confronted with financialchaos and loss of investor confidence.Meanwhile, Greece’s secession will causea chain reaction in the Eurozone, furtherdeteriorating the debt crisis.Pu Yonghao, the chief investmentstrategist in the Asia Pacific region ofUBS Wealth Management predicts thatin the next 12 months the probability ofGreece’s secession from the Eurozone isabout 20%~30%, and that Greece will still be very likely tosecede in the next two or three years.Haibin Zhu, the chief China economist in JP Morganalleges that there is a probability of over 50% that Greek willsecede from the Eurozone, and that Spain may be the next.Greece’s secession from the Eurozone will provide momentumfor its economic growth in the short term, as the internalcompetitiveness will be gradually built up with the devaluationof its national currency. However, after the secession ofGreek, other countries may follow suit, which can be a disasterfor the Eurozone.China’s exports may be affected adverselyZhu Haibin, the chief China economist in JP Morganreveals to Securities Times that according to internal researchdata, China’s exports to the Eurozone will decline by 7% witha decrease of 1% in European economic aggregate. Negativegrowth of European economy will have an extremely adverseimpact on China’s exports.Ting Lu points out that once the debt crisis in Europeexacerbates again and affects China’s exports adversely,China’s economic growth this year will be further hindered.China’s economy may continue to decline in thesecond quarter, and the quarterly Gross Domestic Product(GDP) will witness a year-on-year decrease from 8.1% to7.6%.Pu Yonghao also holds that Europe is a major exporterof China, and once happens, the negative growth in China’sexports to Europe will directly affect China’s economy; interms of capital supply, as Eurobank has been providingcredit supply to the Asia-Pacific region and Hong Kong, thecredit funds will be withdrawn to Europe along with thede-leveraging of the Eurobank; if the debt crisis in Europecontinues to deteriorate, it will encumber the development ofthe global financial markets and ultimately affect the stockmarket of the Asia-Pacific region.Emerging markets may become new engines foreconomic developmentSpeaking of the future global economic situation, PuYonghao claims that the scenario of global economic growthis crystal-clear: Europe suffers a negative growth, and theEuropean economy falls into a recession; the economic situationin the United States is relatively optimistic with an increasingrate of 2%~2.5%, but the fiscal contraction followingthis year’s presidential election will bring about uncertaintiesto next year’s economy; growth in emerging markets will befavored, but it’s not wise to intensively stimulate the economybecause internal inflation pressures inChina, wage increase pressure for instance,are still tremendous.Jian Chang, Asia economist in Barclaysbelieves: the global economy willbottom out in the next few months, andwill slowly recover in the second halfyear; the U.S. economy will be all righton the whole with its decreasing unemploymentrate, and gradually growingconsumption and real estate markets; the Eurozone will beconfronted with greater risks and its economy is bound to decline;as for the Asia-Pacific region, his prediction on China’seconomic growth is still 8%~8.1%, and he is optimistic aboutthe emerging markets. It is predicted that China's exportgrowth rate this year will be 10%, which is based on a 2% increasein exports to the United States and a negative growthof 0.4% to the Eurozone; in case of slower growth than predicted,China’s export growth rate may be single-digit.American economists of Merrill Lynch indicate thatthe U.S. economy is recovering, but the pace is still very slow.The United States will be confronted with fiscal retrenchmentresulting from expiration of tax cuts policy, which will haveadverse impacts on the U.S. economy, thus this year the U.S.economy will increase in the first place and then decrease;the global economic growth engines are still China and otheremerging markets, yet the emerging markets are not likely tobe spared in case of severe recession in developed economies.(Author: from Securities Times)56

EUROPEThe ripple effect of Greece’ssecession from the Eurozonemay combine with thefueling of external forcesto lead to a multi-lose situation inthe Eurozone. If a big upheaval takesplace in the Eurozone, the recoveryof the world economy will face evengreater uncertainties.The mode of “paying old debtswith new debts” is not sustainable, andGreece may be the first to default in a real term amongthe debt-stricken European countries.Recently, as Greek President Karolos Papouliashas failed in forming the cabinet and the radical leftistalliance is against joining in the unity government,central bank officials in the Eurozone have begun todiscuss how to deal with Greece’s potential secessionfrom the Eurozone for the first time. In an interviewwith Greek media, Weidman, the German centralbanker alleges: “if Greece secedes from the Eurozone,it will be faced with much severer consequences thanother countries of the Eurozone”.In case that Greece does secede from the Eurozone,for countries of the Eurozone there will behardly any real winner.First of all, both the political and economic situationsin Greece will be increasingly severe. Whetherrestarting its old national currency or employing a newcurrency after seceding from the Eurozone, Greek willinevitably suffer from a sharp currency depreciation.Consequently, debt service pressure of internationalborrowing will rise in no time, both public and privateeconomic sectors will face the threat of bankruptcy,welfare of domestic citizens can’t be guaranteed, andthe so-called left-wing’s political stunt of protectingthe interests of the people will be hobbled.Secondly, for European countries which shoulderdebt in intermediate level like Spain and Italy, Greece’ssecession from the Eurozone may mean a chain reaction.The international community, especially the U.S.hedge fund has long been planning to short the euro,and Greece’s secession may become its long-awaitedtiming for action. Countries like Spain and Italy thatare in precarious situation and rely on euro for shelteringwill be directly exposed to the threat of internationalshorting selling. As a result, the economic andpolitical conditions of European countries with debtproblems will plummet, though the Eurozone is notlikely to fall apart.Thirdly, core countries such as Germany andFrance with adequate immunity will also have theirinternational influences greatly reduced. For Germanyand France, even if the Eurozone collapses, all theyhave to do is to restart their national currencies, andthere will be not really much of a fatal injury in theireconomy. Relying on the geographical advantages,Germany and France can still maintain a certain influenceon their close neighbors,namely the South-Eastern Europe countries.However, seeing from amore fundamental point ofview, decline of the Eurozonereflects that Germanyand France’s great attemptto make the Europe “speakwith one voice” encountersgreat obstacles. Thereafter,synergy and cohesion of the Eurozone will be greatlyreduced. The European countries, having their owneconomic and political interests in mind are muchmore likely to ignore the EU and act alone, and it isvery difficult for Germany and France to find a reasonableexcuse to dominate other European countries.With the decline of the Eurozone, all the otherparties, the United States in particular will reinforcetheir influences in Europe; without Eurozone as the“amplifier”, Germany and France can hardly be onan equal footing with the United States, and they canneither continue to use the European Commission asa big stick to attack their competitors. The ripple effectof Greece’s secession from the Eurozone may combinewith the fueling of external forces to lead to a multilosesituation in the Eurozone.As for China, on the one hand, it needs to reassureits trading partners in the Eurozone, because asthe largest trading partner of China, EU’s chaos ineconomy and politics will make China’s declining exportsworse still. On the recent Canton Fair, a certaindegree of decline has taken place in the number ofinstitutional and individual participants from the EU,as well as the trading volume. In addition, if a big upheavaltakes place in the Eurozone, the recovery of theworld economy will face even greater uncertainties.One the other hand, China also needs the powerof the Eurozone to contend with America, Japan andother forces. Now it is the most optimal timing forChina to step up its negotiation with the EU; if theEurozone lifts its control over its high-tech productexports to China and admits China’s market economystatus, China is able to greatly enhance its initiativein the negotiations with the United States and Japan.Moreover, China can also take this opportunity toreinforce its “going out” to the Europe, and improvedomestic industrial structure through management,technology and service update.From another perspective, the contentions withinthe Eurozone can only be regarded as a political gamingbecause Greece’s secession from the Eurozone willlead to a multi-lose situation; currently, it’s not wise tocome to a conclusion on Greece’s secession from theEurozone.(Author: Researcher in the Gold ResearchCenter of Bank of Communications)Multi-Lose Eurozone if Greece SecedesBy Lu Zhiming57

Regional Trade & InvestmentEUROPEGerman Companies Confident withChinese Market amid ChallengesBy Zhu ZijunGerman companies are confidentwith the growing Chinesemarket and are aimingto further expand theirbusiness operations locally, according toa recent report by Euro Asia Consulting(EAC) and the German Chamberof Commerce in China (GCC).The further expected growth inChina is fueled by an increased demandfrom Chinese customers. 70 percentof the German companies interviewedexpect a growing demand, either dueto the Renminbi appreciation or overallgrowing economy and increasing wealth,said the study based on 30 Germancompanies doing business in China.However, they also realize thatdomestic competition will increase significantly,mainly due to a better accessto foreign markets and technologiesand improved domestic cost structures.Domestic companies have gainedin number and size and have also beenable to significantly improve their productquality in the past.“Local companies are getting betterand better (often through trial anderror) and also more innovative. Theyhave managed to greatly improve theirquality level already,” said a companyrepresentative of the chemical industry.The Renminbi appreciation forcesChinese enterprises to become morecompetitive in an international comparison.“Made in China” can no longeronly be competitive based on costadvantages due to rising prices abroadcaused by the strengthening Renminbi.Local companies can also benefitfrom the Renminbi appreciation bygetting cheaper access to foreign technologyas well as potential acquisitiontargets and international markets.58Investments of Chinese companiesabroad will increase significantly toget more presence in and access to internationalmarkets as well as to acquiremore technology and know-how.“Local competitors have lookedat a number of different technologiesabroad and have applied them to theirown processes afterwards,” said a companyrepresentative of the electricalindustry.Apart from the domestic competition,the foreign competition is alsoexpected to increase in China. Theinterviewed company representativesexpect growing foreign investments inthe Chinese market. Many also see themarket saturated to a certain extent already,said the report.As such, the companies involvedin the study agreed that they have tobecome both, more efficient and innovativein the future to stay competitive.Being highly localized, manyGerman companies in China have adjustedtheir China strategies to the localmarket and do therefore barely see anymeasures to be taken due to the past,present and future Renminbi appreciation.Due to the growing market inChina however, many see the need tonot only focus on the high-end marketsegments anymore, but rather move towardsa broader mid-end market.Most companies talked to in thesurvey are also strongly focusing onfurther increasing their market sharein China. They all see a huge growthpotential of the Chinese market, wantto be a part of it and further profit fromsuch development.In order to realize such goals, anumber of strategies measures havebeen introduced by the companiesincluded in the survey. Such strategicmeasures include a variety of differentattributes, covering aspects of localadaption, process improvements andexpansion.However, many enterprises talkedto in the course of the study realizedthat in the past they have not alwaysworked on constant improvement oftheir China strategy. For many years,the operations in China grew simplybased on the significant economicgrowth in China. With rising operationalcosts described earlier however,those companies have in the past 2 – 3years again focused on China as theirmajor growth engine, the report said.“We have been in this market formore than 10 years already, but didn’treally focus on actively growing untilthe last 3 years. Now we have a realstrategy and are trying to achieve anannual growth of about 20 per cent,”said a company representative of themachinery industry:However German companies arestill confident of themselves with theiridentified specific advantages, such ashigh quality, service & reliability, highbrand image, technological know-howand innovation. Many German companiesinvolved in this study still seethemselves ahead of local competitorsby at least 2 years and up to 10 yearsdepending on the industry.“China will gradually move awayfrom its image of being a low-cost/low-wage country, and will increasinglydevelop towards a country focusing onR&D and innovation. Hence, over thelong-term, China will catch up, for nowhowever, made in Germany still wins,”said a company representative of theautomotive industry.

Industrial WatchIndustrial WatchThe first Sino-US Innovation andEntrepreneurship Summit of Carnegie MellonUniversity held in PittsburghJointly organized By Sino-US Innovation and EntrepreneurshipSummit Organizing Committee of CarnegieMellon University (CMU), the Chinese Studentsand Scholars Association (CMU-CSSA), and HuayuanScience and Technology Association (HYSTA), the firstSino-US Innovation and Entrepreneurship Summit ofCarnegie Mellon University was held on April 28-29 inCarnegie Mellon University, Pittsburgh, Pennsylvaniastate of the United States. A great number of talents of scienceand business from both China and the United Statesattended the summit, exchanged in-depth ideas on Sino-US innovation in such fields as information technology,new energy, health care industry, and financial industry,as well as gave valuable suggestions on how to stimulateentrepreneurial enthusiasm of Chinese students studyingin the United States and guide them to make better useof their own advantages in improving the success rate ofentrepreneurship.This summit was sponsored by well-known enterprisessuch as Sinopec, and Verizon, and got muchsupport from Mr. Kai-fu Lee, a famous alumni and thecurrent CEO of the Innovation Works and Mr. Xu Xiaoping,the founder of Zhen Fund and co-founder of NewOriental. In addition, many leading figures in such fieldsas IT, finance, medicine, biotechnology, energy & environment,and entrepreneurship & investment participatedin this summit, including Mr. Huang Shu, a ManagingPartner of Yuandu Investment and Consulting Inc., Mr.Song Anlan, China Managing Partner of Softbank, Mr.Jiang Xiaodong, China Managing Director of NEA, andCharles Kennedy, Chief Investment Officer of CarnegieMellon University. Six sub-forums was set up in the summit,and more than 30 industry elites will discuss with theaudience on the following topics respectively: informationand digital entertainment technology, cloud computingand security technologies, energy and environment, financialand capital markets, medical and biotechnology, andinnovation and entrepreneurship.Ma Rui, founder and Chairman of the summitholds that the mission of this summit is to make institutionsfrom both China and United States get together viaCMU, the leading global education platform, in a viewto enhancing better mutual understanding, creating po-tential business opportunities, boosting pragmatic Sino-US cooperation, promoting the popularity of CMU andPittsburgh in China as well as improving their regionalinfluences.Chairman Ma tells reporters that in the past few decades,China has successfully transformed into the focusof global political and economic development. The rapideconomic growth has made China the world's secondlargest economy only second to the United States, andat the same time established China’s important positionin international relations. Rapidly growing middle class,well-educated graduates, as well as the world’s leadinginnovative companies indicate that China will usher ina better future. Although the U.S. economy has beengreatly affected by the financial crisis in recent years, theUnited States remains a major driving force in the globaleconomy. Therefore, it has become a common understandingthat sound Sino-US cooperation will benefit theglobal economic growth.At last, he indicates that depending the mutualunderstanding between China and the United States willfurther promote bilateral cooperation, which helps toproduce a comprehensive solution for problems and challengesfacing both countries. Therefore, the high-profilesummit becomes an excellent platform for bilateral exchanges,as it brings together famous entrepreneurs, corporateexecutives, venture capitalists, and researchers fromboth countries to discuss and resolve major economic andtechnological issues, and seek for new partnerships. Tothis end, the Carnegie Mellon Summit and the China-USInnovation and Entrepreneurship Forum came into being.Carnegie Mellon University was established in 1900by Andrew Carnegie. Andrew Carnegie also producedCMU’s school motto “My Heart is in the Work” whichenjoys popular favor and has become a firm belief of thestudents and teachers in the pursuit of truth. Meanwhile,innovation and entrepreneurship is an eternal hot topic onCMU campus.Pittsburgh was praised by U.S. President BarackObama as the model for economic development in the21st century. After the successful G20 summit in 2009,Pittsburgh has drawn more and more attention. And now,Pittsburgh is ready to bridge China-US exchanges.32

Regional Trade & InvestmentNORTH AMERICA2012By Lesley CuiState of AmericanBusiness in ChinaAmid rising costs and moderating economicgrowth, there is increasing urgency for Chinato enact market reforms in order to transitionto a more innovative and sustainableeconomic model, according to the 2012 State of AmericanBusiness in China White Paper released by theAmerican Chamber of Commerce in China (AmChamChina).The annual White Paper, now in its 14th edition,is written by representatives from over 1,200 membercompanies of AmCham China. It outlines key developmentsand challenges across a wide range of industriesin which US member companies operate in China, fromagriculture to financial services to retail. It also containssuggestions for both the US and Chinese governmenton how to improve the business climate.As China’s economy grows, market conditions remaingood for business, and AmCham China membersreport strong revenues and good profit margins. Am-Cham China members remain strongly committed tobusiness growth and participation in the China market.However, the 2012 White Paper identifies growinguncertainties over the future pace and directionof economic reform and the impact on operations inChina.China’s progress toward a market economy hasslowed in recent years and the outcome of ongoingefforts to rebalance the economy to create a marketbased on domestic demand and sustainable innovationremains uncertain. “AmCham China commends thegovernment for the many successes it has achieved, butthe transition to a new economic growth model presentsnew challenges. A new commitment to deepen marketreforms and extend a truly market economy to additionalsectors of the economy will ensure more sustainableeconomic growth in the future and create new opportunitiesfor companies and consumers,” said AmChamChina Chairman Ted Dean.As China enters a transition phase in its economicdevelopment, the 2012 White Paper outlines policy recommendationsthat will benefit China’s economy andadvance China’s development goals. “To position itselffor the coming decades of growth, we believe Chinashould promote more vibrant competition. It coulddo so by opening up market access across the manyindustries that remain restricted to foreign investors,completing the transition to a market economy, andpromoting greater consistency and transparency in governmentpolicies around the country,” said Ted Dean.Specific policy recommendations in the 2012White Paper for improving the business and investmentenvironment include a focus on human resource challenges,improving regulatory coherence across China, increasinglicensing opportunities for member companiesand improving intellectual property rights protection.Rising labor costsEighty nine percent of member companies believeChina is losing its competitive advantage due to risingcosts, up 11 percent from last year. 82 percent of respondentssaid the cost of social benefits would hurt theiroperations, compared to 53 percent a year ago.Management-level human resources are seen as theleading business challenge and nonmanagement-levelconstraints rank third, while other inputs such as thecost of land, rent, raw materials and transportation arealso rising. China is losing its competitiveness in laborcosts and that will eventually lead to a structural changein manufacturing and trade, but it is also a positiveoutcome of ongoing efforts to rebalance the economy,AmCham China said.Strong commitment of US companies to the Chinesemarket is subject to China’s future policy choicesand development path, as well as external risks such asanother global economic slowdown, according to TedDean, chairman for AmCham China.Stronger competition from ChineseenterprisesThe growing strength of Chinese companies -both State-owned and in the private sector - has beenhighlighted in the report. 68 percent of respondentssaid they had faced increased competition from Chinesefirms, with a third saying that this competition had“increased greatly”. The period measured was between2011 and 2010.60

NORTH AMERICAAmCham claims some of the competition unfair,saying that Chinese companies often receive preferentialtreatment in terms of credit, taxation and regulatorypolicy.However, regulatory factors are unlikely to be theonly reason for increased competition.Some argue the financial crisis, which has forcedmany Western companies to cut back on investment,has caused a shift in the balance of power. MeanwhileChinese companies, often cash-rich and less dependenton capital markets to raise funds, have taken advantageof depressed asset prices in Europe and the UnitedStates and have strategically bought companies to boosttheir competitiveness.A new factor, however, is that China's private sectoris rapidly upscaling from low-tech export-orientedmanufacturing to more high-tech sectors, which wasonce solely the preserve of foreign companies. TheChinese private sector is being driven into making thischange largely by rapidly rising labor costs.Concern over China’s long term growth pathThe report showed that the chief concerns of UScompanies have shifted from the investment climate tothe country’s medium-term economic growth path.China’s course over the next decade as it seeks astructural shift has become a big concern for the foreignbusiness community. They may think that there aresome ambiguities and uncertainties, but in fact, Chinahas given clear information, AmCham said.“The government is on track to make progresstoward a market economy by actively promoting theliberalization of interest rates and further improvingthe exchange rate mechanism, as well as deepening thereform of State-owned enterprises,” Dean said. “Chinahas no doubts about sticking to opening-up and graduallyadvancing its reforms in a cautiously optimistic way.A ‘shock type’ reform, expected by some people, is impossiblein China.”IPR enforcement to be strengthenedSeventy nine percent of respondents rate China’senforcement of intellectual property rights as ineffective.The percentage of respondents who rated China’sIPR enforcement as effective declined 9 points from lastyear. “At the time of the survey, respondents reportedseeing little progress on IPR protection, though newgovernment initiatives announced last year may yieldimprovements,” said AmCham China Chairman TedDean.Continued commitment to ChinaAfter several years of strong growth, US companiesin China have begun to temper their growth outlookdue to increasing concerns about slower economicgrowth, rising labor costs, tougher competition andfuture uncertainties.Despite these pressures, China is increasinglyviewed as a major growing market: 82 percent of respondentssurveyed plan to increase investment in their China operationsin 2012, with 66 percent saying their goal is to produce goodsand services for China, an 8 percent increase from two yearsago.U.S. companies remained relatively optimistic about China’smarket, while most of the surveyed companies expected togrow faster than China's real GDP this year, as they did in 2010and 2011.Besides, nearly three quarters of respondents believe thatslow or unstable Internet access affects their ability to efficientlyconduct business in China.The White Paper is AmCham China’s most importantand authoritative policy document. It is widely distributed andreferred to by officials in the Chinese and US governments, andwill be used by AmCham China as a basis for policy discussionand dialogue for the next 12 months.AmCham China is a national non-profit organizationrepresenting the interests of nearly 1,200 companies and 3,000individuals doing business throughout China. Headquarteredin Beijing, it has chapters in Tianjin, Northeast China (Dalian)and Central China (Wuhan).61

Regional Trade & InvestmentBy Zhu ZijunLOCALHelen Clark and Wen JiabaoUNDP Chief Values China’sSustainable Developmenttainable development, Wen was quoted assaying by Xinhua News Agency, addingChina is ready to strengthen exchanges andcooperation with the UNDP.“China has enjoyed a period of tremendousgrowth and has learned many lessonsalong the way,” said Clark.“It is important that we work togetherto share these experiences in a way that ismost beneficial to developing countries, andI have been encouraged by China’s willingnessand commitment to do so,” she added.Clark also met with Xie Zhenhua,Vice-Chairman of the National Developmentand Reform Commission (NDRC),in order to gain a better understanding ofhow UNDP can help promote balancedsocio-economic development in China.Later, she attended the launch of theChina-India Country Study on Low CarbonDevelopment, a joint initiative thatbrings the National Development and ReformCommission of China and the Energyand Resource Institute of India (TERI)together to examine existing barriers andsolutions to promoting low carbon developmenton a global scale.In her other engagements, Clarkheld discussions with Wan Gang, Ministerof Science and Technology, on South-South Cooperation for poverty alleviationChina had made great achievementsin sustainable development,and China’s experiencecan be shared with otherdeveloping countries, said Helen Clark,Administrator of the United NationsDevelopment Program (UNDP).She made the remarks during herfour-day official visit to China fromMay 16. Clark met with Premier WenJiabao to discuss the vital role that Chinawill play in determining the successof the sustainable development agenda,as well as UNDP’s strengthened partnershipwith China.Earlier in 2010, Clark signed anagreement with Premier Wen whichsignaled out further strengtheningSouth-South Cooperation and sharingChina’s development experiences as oneof her key priorities as UNDP Administrator.China has outlined plans to cut itscarbon intensity by 40- 45 percent by2020 and enhance its natural resourcesmanagement.However, China still has a longway to go in realizing modernization.China will continue to open up to theworld, conduct reforms and promotecomprehensive, coordinated and susthroughtechnology exchanges andthe development of a green economy;and with Li Liguo, Minister ofCivil Affairs, to discuss China’s experienceof and expertise in disasterrisk management and sharing withother developing countries.During her visit, Clark alsoattended an event to promote a newUNDP initiative aimed at encouragingthe private sector to enhancetheir Corporate Social Responsibility(CSR) profiles, as well as integratingthe three pillars of sustainabledevelopment – economic, socialand environmental – within theirbusiness operations.“To succeed in the 21st century,businesses must pursue a ‘triplebottom-line approach’, namely,businesses must see the economic,social and environmental dimensionsof their operating costs,” Clarksaid in her speech.At this event, UNDP announceda new mechanismdesigned to assist Chinese enterprisesin enhancing their ability toperform CSR by facilitating theexchange of successful experienceswith other developing countries underthe framework of South-SouthCooperation. Amid China’s growingoverseas business interests, thisinitiative will pilot “pre-departure”CSR training for Chinese companiesintending to invest in otherdeveloping countries.Clark also interacted with themembers of media and the public.For the first time, she engaged in amicroblog (weibo) chat with the onlinecommunity in China, sharingher thoughts on sustainable developmentand the future she envisionsover the next 20 years.It is the fourth time Clark hasvisited China since her appointmentas UNDP Administrator in 2009.She previously served as New Zealand’sprime minister for three termsfrom 1998 to 2008.As China prepares to engagewith the world at the Rio+20 Conferenceon Sustainable Developmentin June, Clark’s visit signalsthe importance she attaches toChina.62

LOCALAn international cooperative demonstrationzone is to be built in Northeast China’sJilin Province to boost cross-bordercooperation in the region, according to apress conference held in Beijing on May 21.The zone, named Tumen River Area (Hunchun)International Cooperation DemonstrationZone, is located in Hunchun, a port borderingRussia and DPRK. It covers 90 square kilometersand includes four functional zones in terms of foreigntrade cooperation, international industrial cooperation,Sino-DPRK and Sino-Russia economiccooperation.The zone is centered in Hunchun facingNortheast Asia, with the city group Changchun-Jilin-Tumenjiang as the supportive base. It willfunction as a major transportation hub and a logisticscenter in Northeast Asia. Also, in future, thelivable and ecological city clusters with prosperouseconomy and enjoyable environment will be agrowth pole of Northeast China.“The construction of the zone will furtherthe development and opening-up in TumenjiangRiver area, accelerate the revitalization of the oldindustrial base in Northeast China, and upgradethe opening-up in China’s border areas,” saidShen Xujian, deputy regional development directorunder the National Development and ReformCommission, adding that “It will promote China’seconomic and trade cooperation with neighborcountries, especially with DPRK and Russia.”The zone is to mainly promote trade, logisticsand cross-border tourism, with the priority in atransportation network facing the Northeast Asia.It is expected to serve as a model for internationalcooperation in Northeast Asia and for the developmentand opening-up of border areas in China.The construction of the zone will be aided byvarious supportive policies, including those relatedto fiscal, industrial layout and investment, land usage,infrastructure construction, finance, customssupervision and port construction,technology innovation and talent cultivation,customs clearance facilitationand special funds.The Tumen River in Hunchunstraddles the borders of China, Russiaand the DPRK. In April of this year,the Chinese government announcedthat it has approved the establishmentof the demonstration zone.It can date back to 1992, whenChina, Russia, DPRK, ROK, andMongolia jointly initiated the TumenRiver Region Cooperation and DevelopmentProject.In 2009, the State Council approvedand implemented the outlinefor the development of Tumen River Region, withChangchun-Jilin-Tumen as the development andopening-up pilot zone. Progress has been made onregional cooperation and development in TumenjiangRiver region in the past 3 years.The construction of Rason Economic andTrade Zone jointly developed and managed byChina and DPRK was launched in June 2011.China-Russia Channel of road and port wasimplemented. Great Channel between China andMongolia are under speedy construction. Activeprogress has been also made in the construction ofChangchun-Jilin-Tumenjiang Development andOpening-up Pilot Zone. Changchun and Jilin areintegrated in terms of urban planning, investmentattraction, infrastructure construction and informationsharing.“Hunchun plays a better role as a windowto the outside. It has started the establishment ofRussia, Japan, ROK and Jigang Industrial Park,and has a good foundation for the development ofexport-oriented economy,” said Chen Weigen, ViceGovernor of Jilin Province.The railway between Hunchun and Kameshovayaof Russia will resume operations in June.A passage that connects Jilin with Busan andNiigata via Zarubino was developed. It then willtake only 1.5 days from Jilin to Busan, and 22hours to Niigata. In the past, it took 5 days and3.5 days respectively. The main part of the reconstructionof Won Jing Ri-Rajin port road wasfinished. Commodities can now be transportedfrom Hunchun to Shanghai (Ningbo) Port viaRajin Port, charting an economical and convenientsea transportation channel for northeastChina.“In the future, we will reinforce infrastructureconstructions, establish international logistics systemand introduce more foreign direct investment,”said Li Longxi, Mayor of Yanbian where Hunchunis located.Int’l Cooperation Zoneunder Construction in JilinBy Zhu Zijun63

This inspiring story reminds us that well-rounded success– in business, family, and community – need not be elusive,especially when diligence, imagination, and love are inabundance. Leeshan Birney, an immigrant from Taiwan, sawher dreams come true in America. She successfully createda growing business, nurtured a lasting marriage of 44 years,raised three talented children, and became a leader androle model in her community. In addition, she inspiredher husband and son to join her in the business,creating a family company led bystrong shared values. Now herdream is to inspire other womento become entrepreneursthemselves, while also findingsuccess and happiness in theirfamilies and communities.An Oriental RoseBlossoming in the U.S. Real Estate Industry— Leeshan Birney, founder and chairman of Stone Mountain PropertiesUS postageChina postageBy Alice YangThirty-one years ago, an immigranthousewife fromTaiwan, with three youngchildren and no previousbusiness experience, decided to start acompany. She found her way into realestate, creating Stone Mountain Properties.Her determination, drive andcan-do attitude resulted in major successes,attracted her husband and sonto join her in the business, and eventuallyled to her recognition, domesticallyand internationally, as a leadingentrepreneur and role model. This isthe story of Mrs. Leeshan Birney, anaward-winning Chinese Americanentrepreneur, who amongst those whoknow her, is legendary for her extremedetermination, inexhaustible dedication,and warm kindness.East meets west: A love story inAmericaLeeshan Chuang was born inTaiwan. Leeshan was passionate aboutschool, and her passion rewarded herdramatically when her employer encouragedher to study abroad. In 1963,she headed to New York City for anexciting new life journey. While studyingnutrition at Columbia University,she met a tall American named JamesBirney. They fell in love, and in August1968, despite the disapproval ofhis family, James married Leeshan at asimple but solemn wedding ceremony.Determined to prove herself, she eventuallywon not only her in-laws’ acceptancebut also their love, and she helpedthe Birney family to prosper.Her eldest son Ceyan was born onChristmas Eve in 1970. One year later,she received her second master degree,an MBA degree in Economics fromNew York University. Her two daughtersMayling and Shanlenn were bornover the next several years. To care forher growing family and provide a goodstable home, she decided to become fulltimedevoted mother and wife. Leeshansays, “I never regretted my decision to66

stay home for ten years. My children arevery happy, and I could share that timewith them. This is more important tome than anything else.”Innovation and focus: Thechallenge of starting a businessMore than ten years later, Leeshanwoke up one day to find herselfan entrepreneur. She had not intendedto start a business, but simply to helpher sister in Taiwan find a real estateinvestment in US. After significantanalysis and evaluation, they hadidentified a modest 18-unit apartmentbuilding located in South Orange, NJ,adjacent to Seton Hall University. Theyhad also identified a property manager,but just one day before the closingdate, the agreement with the managerfell through. Leeshan couldn’t sleepthat night. She did not want to losethe deposit and a good investment. Sowhen she woke on May 1, 1981, shehad made a sudden decision that wouldchange her destiny. Despite her completelack of business experience, shewould manage the property by herself.Working quickly, she arranged forher father to help them to buy out theproperty manager’s share. Then, bravely,Leeshan called her husband to jointhe closing at 4pm that day. James wasproud of her, but extremely busy in hisown firm, so she knew she would haveto manage her new real estate businesscompletely on her own.At the beginning, the revenue wasunstable and challenges significant. Theday after she took over the business,a tenant complained about necessaryrepairs. Leeshan called some names shefound in the phone book and quietlyobserved how they handled the repairs.After watching various repairs, shesoon started going to the hardware shopto buy materials and tools so that shewould handle similar problems, such asrepairing a toilet or leaking water, notasking for outside help unless absolutelynecessary.During the following five years,with financial assistance of James, Leeshanwas able to purchase more than ahundred apartment units, which laid thefoundation for the future Stone Mountainempire. The new acquisitions included28 units in Hoboken in 1982, which sheextensively renovated in 1984; 44 units inSouth Orange, New Jersey in 1983; and afurther 56 units in South Orange in 1985.Although the company was still smalland resources limited, Leeshan ran it welland the occupancy rate was high. Shealso made improvements, renovating theinteriors and exteriors, and profits pouredin due to increasing revenues and sensiblecost controls.Encouraged by her husband, whowould always tell Leeshan to think bigger,she seized on an exciting chance tomore than double the company assets in1985. A large apartment complex with133 units and 10 acres of land was forsale and conveniently located near theprimary school her youngest daughterattended. If she purchased the apartments,it would be easier for her to carefor her littlest one, and this part reallytempted Leeshan. However, the sellingprice was quite high for the companythen – nearly $10 million. And the additionalchallenges were significant:if they purchased the property, theywould have to spend more money tomake much-needed renovations; finally,the banks would only offer a 50% loan,thereby requiring an additional largecapital investment. From a conventionalreturn on investment analysis, the projectdid not seem worth it.Despite the challenges, and especiallyexcited by the possibility of morequality time with her little daughter,Leeshan decided to imagine the possibilities.She saw its growth potential,even though it was unclear to others,and she set to work trying to round upthe serious capital required to buy theapartment complex.Eventually she was able to gatherenough. Her agents gathered the seller,the buyer and their respective lawyersto see if a deal could be reached. After9 hours of negotiations, they finallysigned the deal. The agent offered tolend her the commission, and the selleroffered $2 million loan to Leeshan.But the rest of the $7.4 million had tobe funded through bank loans, andthe banks still had to be convinced toprovide the loans. Leeshan found experiencedreal estate experts to makeappraisals, and they pointed out thegreat potential value increase throughtheir analysis of the market, rental demand,and the community’s top schoolsystem. Leeshan approached the bankwith this appraisal report, arguing thatcurrent low rent would increase byabout $200 per unit to align with marketprices. Leeshan also promised torenovate the apartment with fundingfrom her husband’s successful career.She joked that the bank could easilyoversee the management and operationof the apartment as their offices overlookedit! Touched by Leeshan’s enthusiasmand persistence, as well as herlove for her daughter, the bank finallyagreed to issue a $6 million loan to her.Using money from the refinancingof her other properties in South Orangeand Hoboken, she was finally able toraise the rest of the capital to purchasethe property. Her innovation and focushad paid off. These apartments, ShortHills Terrace, have since served as theNJ headquarters for Stone MountainProperties. They are also a finesymbol of Leeshan’s brave efforts andSunBlossom Cottages Apartments Leasing office SunBlossom at Woodlake Apartments67

determination, her smart business senseand most fundamentally, her love as amother.Business expansionBy 1989, Stone Mountain ownedmore than 300 rental units in New Jersey,spread throughout four cities. Theoperation scale was more than enoughfor the management capacity of Leeshanand further business expansioncame to a standstill. This timing alsocoincided with when her husband Jamesdecided to leave his job on Wall Street.The U.S. real estate market hit anew low then, which provided a goodopportunity for large scale purchase ofproperties. As James joined the managementof Stone Mountain, the coupledecided to expand their business toHouston, TX, as the real estate marketthere was poised for a quick recoveryand long-term growth. As a harbor citywith many immigrants, Houston hasstrong demand for renting housing. Asthe fourth largest city in the U.S. andthe largest city in the southern U.S., italso demonstrated strong developmentpotential with interesting niches fueledby diverse multicultural elements, largecongregations of foreign consulates, andrenowned medical centers.Since their first purchase inHouston, Walden of Westchase property,they expanded to include morethan 2,000 apartment units. TheSunBlossom International Villagein Chinatown has become the primechoice for Asian immigrants due to itsconvenient location, fair price and carefulservice. Leeshan has even becomeknown as the “Queen of Apartments”in the overseas Chinese circles.During the past three decades,Leeshan has successfully expanded thebusiness of Stone Mountain Propertieswith her excellent wisdom, great enduranceand smart investment strategythat endures in any market condition.Today, besides the properties she ownsin New Jersey, she also owns nineapartment complexes in Great HoustonArea, two commercial centers, two officebuildings and several undevelopedcommercial lands, with the total rentalarea exceeding 2 million square feet.The business is poised to continue itssuccess into the next generation of herfamily.Unique operation conceptsStone Mountain Properties wouldnot become a well-established brandwithout the unique operation approachesused by Leeshan.It is rather difficult to managean apartment featuring multi-ethnicdwellers, but Leeshan holds the viewthat kind and honest care can bridgethe gap among any ethnic groups.When selecting employees, Leeshanwould hire multilingual talents whocould speak Chinese, Vietnamese, Burmese,or Spanish, to make the communicationwith residents easier.Leeshan and James drew upontheir own personal passions andstrengths to imbue their propertieswith distinctive identities. After joiningthe management in 1987, James vastlyupgraded the technology and corporatemanagement systems at Stone Mountain,as well as investing significantcapital into the refurbishment of firstclassapartments in New Jersey andTexas. These assets proved critical afterbuying the properties in Houston, especiallyafter the market turned sour.James used his knowledge and passionfor computers to create a unique rentalenvironment at Walden targeting thehigh tech community, resulting in aNew York Times feature story. In addition,Leeshan learned how to leverageher knowledge of Asian immigrants, toprovide valuable services and productstargeting their unique needs.James is very fond of landscapingdesign. Whenever the company wouldbuy a new piece of land, he woulddevelop a blueprint of a unique newlandscape design theme and beautifullytransform the environment. He oftenincluded Asian cultural elements inhis design, creating gardens and officeenvironments with distinctive orientaldesign elements. The exceptional landscapedesign of Walden of Westchasewon the National Landscape DesignGold Medal Award.The Birneys later developed Sun-Blossom International Villages, whichprovides beautiful apartments and innovativeservices that appeal to new immigrants,such as high-speed internet andeducation, orientation and communityprograms. SunBlossom Gardens was chosenas a principal community model forthe Asian community tour of The NeighborhoodU.S.A. Conference hosted by theCity of Houston in May 2002.Whenever a resident of a newcountry moves into the InternationalVillage, a flag of their country is raisedon the property, helping to provide asense of belonging to the new guests.Today, dozens of flags proudly waveoutside along the front of the propertygreeting guests. The Stone Mountainstaff is especially skilled at helping newimmigrants, who have never lived inthe United States, settle into their newhome, helping them with everythingfrom applying for a telephone line toapplying for driving licenses. They alsoprovide other services, such as freeEnglish language classes, job trainingclasses, and cultural orientation services.Leeshan understands that her talentedstaff is one of the most invaluableassets of the company, and she treatseach employee as part of an extendedfamily. For example, if an employeecomes to her with an urgent need, thecompany will offer no-interest loansuntil the employee can pay. Sometimesthe company also offers employees freeairline tickets to allow them to go backhome to visit their families or relatives.The staff can also qualify for rent-subsidizedhousing as well. As evidence ofthis family nature, the staff often callsLeeshan “Birney Mother.”Continuity: Stick with yourcareer and strive forward againstthe windAs the world financial crisis wassweeping through the U.S. in 2008,Stone Mountain Properties also facedthe most difficult period in its history.Facing potentially difficult challenges,68

James and Leeshan took further measuresto competitively differentiate theirapartments through renovations andservice improvement. For example,many of their apartments are equippedwith the highest internet network speedpossible, which attracts high quality andprofessional residents. They also spendsignificant time in shaping the apartmentenvironment, including speciallandscape design and bold, bright paintcolors on the buildings. The differentiationworks well, catching people’s eyesas they drive by and clearly distinguishingtheir properties from the masses.Other thoughtful changes alsomake a difference. To better matchresidents’ preferences, Leeshan installedceramic tiles and laminate wood floorsin the apartments, instead of carpet, asthe latter is often thought to be harderto clean, hot and a source of allergies.These improvements helped to dramaticallyincrease the properties popularity,competitiveness, and most importantly,their occupancy rate.The economic slowdown also ledto higher unemployment rate, and manypeople living in the Birneys’ apartmentslost their jobs, finding it hard to paythe rent. Leeshan was sympathetic tothe residents’ predicaments and workedhard to try and create job opportunitiesfor her residents. She opened up morepositions within the company and usedher network to help residents find jobs.She also worked with several charityorganizations to help apply for rent subsidiesfor the residents when they qualified.For those new immigrants whodo not speak English, Leeshan wouldfind ways to provide jobs that need noEnglish knowledge, like mowing grassor painting. Leeshan also hired aroundthe-clocksecurity guards, to improvethe security of residents returning homelate at night. As a result of these efforts,she won the “Golden Lantern Award”from Asian American Family Services.Noting that people’s needs werechanging, Leeshan adjusted the closingtime of the work day to 7pm in the highrental season in summer, to help clientswho need to rent houses after work. Shealso studied the financial reports to cutunnecessary costs when maintainingthe housing quality. Moreover, takinginto consideration the instability of theSelected Press Reports on Leeshan Chuang Birney* Chinese21.com – Outstanding FemaleChinese- American Entrepreneur(2012)* S-B-S.Net & China.com – Entrepreneurand Role Model Award, US PortraitPostage Stamp and Post Card – LeeshanC. Birney issued by US Post Bureau(2011)* Asian American Family Services –Golden Lantern Award (2011)* International Leadership Foundation– International Leadership Award(2011)* World Chinese Venture Model Association- World Chinese Top 10 EnterprisingModels / World Chinese Model CelebritiesPortrait Stamp issued by China StatePost Bureau (2011)* World Chinese Model EntrepreneurAssociation - The Title of Chinese Star Top100 (2011)* Chinese21.com – Outstanding ChineseEntrepreneur Award (2011)* International Leadership Foundation– Regional Leadership Award (2010)* The State of Texas – Yellow Rose ofTexas (2010)* Chinese Community Center – TheExcellence of Community DevelopmentAward (2009)* Texas State Representative – Commendation:SW Houston and ChinatownImprovements (2009)* Chinese Professional Club – CorporateImpact Award (2008)* University of Houston Law Center- Arrivals Awards for Immigrant Achievement(2007)* The New York Times – “A Real EstateMogul’s Unusual Path” (2005)* Houston Chronicle –“Stone MountainBreathes New Life into Area ApartmentCommunities” (2009)* Chinese Fortune – “RenownedSouth US ‘Apartment Empress’ LeeshanChuang Birney” (2010)Awards of Leeshan Chuang Birneycurrent economic climate, Leeshan cancelledthe 6-12 month contract system,to offer more flexible short-term leasesto dwellers. She also provides temporarycorporate housing that includes homefurnishings and extra services.Always an entrepreneur, Leeshandiversified her investments into* Chinese Community Center – Saluteto Asian American All Stars Family Award(2006)* OCA (Overseas Chinese Association)- Honors outstanding Asian Americans(2006)* State of Texas Governor’s Award –Global Business Achievement Hall of FameRecipient (2005)* Asian Chamber of Commerce (Houston)Entrepreneur of the Year Award (2002& 2005)* Mayor Bill White Award for publishingCrime Prevention Booklet in Chineseand English (2004)* Global Federation of Chinese BusinessWomen (GFCBW) – the Top 10Chinesebusiness women in the world. – Taipei,Taiwan (2001)* American Association of UniversityWomen International Fellowship, 2 years* NYU-GBA Research Assistantship;NYU-GBA Tuition Academic Scholarshipother areas during the financial crisis,including mineral water projects inChangbai Mountain, China. Also thereputation of her enthusiasm for publicservice has helped Stone Mountainto withstand the financial crisis andmarch on towards a path of furthergrowth.69

PeoplePierre Cardin:Surprise Myself ConstantlyBy Guo YanCube in Beijinga new fashionshow called “Cityof Light”, wherehe designed byhimself all thegarments for theshow, including120 female and60 male dresses.Prior to the pressconference, thereporter was luckyto interview Mr.Pierre Cardin,who shared histhoughts in a widerange of aspects includingthe themeof show, his designhistory, Chinesefashion show developmentand therelationship betweendesign andcommerce.design and included the heat-preservingsponge, a normal material in interiordecoration, with the elastic fabrics in thedesign of the bottom of the skirt. As themodel walks, a three-dimensional effectwill be created, featuring the dynamicshape of sculpture.Most of the clothes for the fashionshow use lycra material, which haverich and shining color and creates eyecatchingeffects with the lights.Q: You mentioned the “City ofLight” is not just a fashion show. Inwhat way do you mean this?Pierre Cardin: I am not justa fashion designer. I have a wide rangeinterests in movie and drama, but theseitems account for different proportionsof my life. I am very fond of architecture,and I have planned many projectsin the Drama Theater, ancient castle andsphere architectures. The “City of Light”not only serves as background of thePierre Cardin, the French famousdesigner, is not only the first Europeandesigner to hold a fashionshow in China, but also the firstone to educate the Chinese on fashion.Three decades ago he had predicted thecommercial potentials of this ancient civilizationand China, in his opinion, wouldbecome a competition arena featuringvarious international brands.Some people say that every fashionshow by Pierre Cardin is like an internationaltour that brings people to differentsceneries of every corner of the world; otherpeople say that the fashion show by PierreCardin is like a great feast where peoplewill enjoy the legendary lives of creativity.In early April, 2012, which was also the33rd year since Pierre Cardin’s fashionshow entered China, he hosted at WaterQ: what is special about this “Cityof Light” show at Water Cube?Pierre Cardin: Well, thetheme of this fashion show is to combinelife and nature with people’s feelings andcreate wonderful scenes.The first series would be “invisibledress”. When all the lights went out, themodels will step on the catwalk wearing“dress of light”. The audience would onlysee the moving of five-color lights, whichsketch the flower-shape patterns on thedresses; the second series would feature“Pierre Cardin Classics” daily dresses,which use classic but newly-designedgeometrical patterns. The last two seriesinclude little black dress and eveninggown, to bring out the sculpture modelingof the skirt dresses. I have integratedarchitectural materials into the fashion70

show, but a comprehensive building featuringthe functions of hotel, apartment,shopping mall, entertainment and villa.The underground construction has 240meters in deep and the part on the floorhas 250 meters in height. The wholebuilding is equipped with the solarenergy system, and it is a revolutionarybreakthrough in the construction of ecologicalbuildings featuring energy savingand low-carbon environmental protection.This is the first-of-its-kind buildingin the world that uses solar power as itsenergy. The 1/5 of all the energy used by“the City of Light” will come from thesun, while the rest 4/5 will derivefrom the wind power. I intend tobring the city of light projects intoHainan, Qingdao and Xiamen,and I am talking about thiswith local authorities.Q: Y o uare 90-yearoldthis year.How do yousustain yourinterests intowork?P i e r r eCardin: I have alot of interests, but myjob is still focused on fashiondesign. Some people say that I am old,or even dead, but I am still alive in thefashion circle. I am one of the youngestdesigners when I entered the fashionfield, and many of my contemporarieshave passed away. So I become oneof the oldest in the circle. I have beenworking for 70 years, and please don’tworry about my old age, because I havea very young and excellent design team.The “City of Light” project is run bymy nephew. My motto is “always createsurprises”, and I am aware that I will dosomething to make my life full of vigorand vitality.Q: Do you think the Pierre Cardinbrand will win the heart of youngpeople?Pierre Cardin: I visited Beijing30 years ago to host a fashion show, andthat was my first visit here. China thenhad experienced great transformations,but it was rather difficult for me to bringmy brand into the Chinese market. NowP i e r r eCardin hasbeen undergoingsteady growth in China andthe rest of the world.The fashion clothingmarket is highly competitive,but I think I am still capableof those things difficult forothers. Many of my designwork was so creative that manyof the concepts were hard tounderstand then. I am not thetype of person copycatting otherpeople or themselves. I knowmuch better about the past and presentof the fashion industry than mostdesigners. They think their wearingrepresents the fashion and I appear quiteold-fashioned in their eyes. I don’t knowhow social culture becomes this and Ifeel responsible for awakening the publicconsciousness.Q: How do you evaluate Chinesefashion designers?Pierre Cardin: China is a verylarge country and I am happy to see soma ny you ngdesigners aregrowing. I believeyou Chinesepeople arealso proud ofthis, and in thefuture the Chinesedesignersw i l l ac h ievehigh accomplishmentsinthe world. I amalso an longtimeadmirer ofChinese people’scourageand capability,and also Chinathe great nation.The newgenerationof desig nersrepresents thehope of China’sfashion industry’sfuture. 32years ago when I came to China for thefirst time, the Chinese market was likea grain of sand in my eye, but now it is ahuge pie for almost every brand.Q: How do you achieve balancebetween design and commercial business?Pierre Cardin: I have beeninvolved in various industry plansassociated with fashion, and accumulatedrich working experiences ina wide range of areas. I use more ofmy capability and power to chase mydream, not the help from others. Ineed more time to be alone. As masterof the Pierre Cardin brand, I work formyself and this is not like other luxurybrands, whose creator has sold out thebrands to other people. I am differentfrom other designers in the way thatI not only do the designing, but alsohave certain knowledge of many technicalfields. For example, I have triedto make buttons before. Every dayduring the past 70 years I have alwaysbeen working, and work is the largesthappiness of my life. I never feel tiredfor work and on the contrary, I willfeel very exhausted to travel or be involvedin so-called entertainments.71

PeopleWang Xiaoling’s Love withWing Lai YuenWang Xiaoling (far left)By Richard ZhuIn Hong Kong, there have beenmany small restaurants. However,few of them can last three generationsand become well-known inthe world. Wing Lai Yuen Chan FungYing Limited (hereinafter referred toas Wing Lai Yuen), with its 64 years ofhistory, is an exception. It has turned toan international catering group from afamily run operation.With its historical and traditionalcooking style, Wing Lai Yuen becomesone of the most famous Sichuan restaurantsacross the world. It is Wang Xiaoling,CEO of Wing Lai Yuen, has madeit a great success.Wang Xiaoling’s fame has thusbeen widespread. Her various titles includestate-level judge for China’s hotelindustry, honorary president for WorldChinese Food Chef Exchange Association,2010 APEC Top 10 leader, the 6thChina’s Top 10 outstanding entrepreneurin 2008…Nearly 20 honors and awardsshowcase the successful entrepreneur.People may be impressed by herlegendary success. While, it is her 30years’ efforts and hard work that contributeto her success with Wing Lai Yuen.The prelude of the restaurantWing Lai Yuen was set up in 1947.Mr. Yeung Din–wu, the apprenticeof the chef of Qing Dynasty and thefounder of Wing Lai Yuen, created lotsof particular dishes. The best of all andthe most popular is the Dan Dan Mian(handmade Sichuan-style noodles).In her young days, Wang Xiaolingsometimes visited Wing Lai Yuenfor the delicious noodles. With the timepassing, she became familiar with thefamily who run the restaurant. Andlater, she became a wife of the son of theowner.In 1988, the village where Wing LaiYuen was located had to be removed as atunnel was to be built there. Hence manyof the village restaurants were affected,including Wing Lai Yuen. Luckily, WingLai Yuen was one of the 10 percent of therestaurants which were left. At first, therestaurant could earn only HK$300 perday. It was difficult to survive.72

Wang Xiaoling knew it was becauseof the removal that left the villageout of recognition. Many customersmight believe the restaurant had beenremoved. Then she managed small freebuses to pick up the customers and offereddiscounts for them. Since then thebusiness got better and better.In 2000, the restaurant had to beclosed due to the removal of the wholecountryside at last. Hearing the news,Wang Xiaoling was not intended to continueher business at first thought. However,at her mother-in-law Chan FungYing’s deathbed, she promised to operateWing Lai Yuen instead of her. She kepther words and the restaurant was able tocontinue.Catering to customersIn addition to her promise, customers’support was also a driving force ofWang Xiaoling’s continuing operation.Just before theclose of the oldWing Lai Yuen,she conducteda questionnairesurvey among 100customers. Theresult turned outthat all of themsaid they wouldvisit the restaurantagain if it couldrestart its businesselsewhere. Wang Xiaolingwas so moved that she keptthe questionnaire in a safeafterwards. Thus, the story ofWing Lai Yuen could go onand on.At the opening of thenew Wing Lai Yuen, oldand new customers pouredin. The long queue, coupledwith other reasons, addedtheir waiting time. Someeven complained. In faceof the complaints and criticism,Wang Xiaoling did notretreat. She found the rootcause of the problems andsolved them.Wang Xiaoling wasknown for her innovation. Despitekeeping the delicious taste of thenoodles, she also pursued continuousimprovement. She invited first-classchef in the mainland to Hong Kong forcuisine innovation and development ofnew cuisines.“In the first years since the openingof the new restaurant, I kept myselfin the kitchen day and night for theresearch of how to keep the products’quality. Sometimes I was too busy to eatanything,” said Wang Xiaoling.Winning world fameUnder the leadership of Wang Xiaoling,Wing Lai Yuen has won manyinf luential awards across the world,including the Champion of Hong KongSichuan-style Restaurants and InternationalChinese Restaurant.The Dan Dan Mian of Wing LaiYuen was praised by the Japanese paperAsahi Shimbun as owing world standard,even much better than the noodles’birth land—Southwestern China’s SichuanProvince.Once the ViceGovernor ofSichuan paid avisit to WingLai Yuen duringhis stay inHong KongAfter a tasteof the food, hekept praisingthat “The noodleshere is sodelicious that we shouldlearn from it.” Hearingthese praises, WangXiaoling felt happy andproud. Her years of hardwork had paid her.Furthermore,Wing Lai Yuen frequentlybecomes thewinner in lots of internationalcookingcompetitions. Chickenwith dumpling soupin casserole, deep friedmarinade duck, deepfried sweet and sour fishin squirrel style, slicedloin in spicy Sichuansource and the steamedwax gourd with chicken soup are all itschampion dishes.Wing Lai Yuen had since thenWith its historicaland traditionalcooking style,Wing Lai Yuenbecomes oneof the mostfamous Sichuanrestaurants acrossthe world. It isWang Xiaoling,CEO of Wing LaiYuen, has made ita great success.enjoyed more fame in and beyond HongKong, thus attracting many politiciansand celebrities. They also brought withthem some cooperation opportunitiesonce in a while. In August 2005, its firstoverseas branch was opened in Macau.Presently, Wing Lai Yuen has set upbranches in Japan and Australia, andwill open new branches in the US andthe mainland.However, when choosing cooperationpartners, Wang Xiaoling was cautious.“If the partner with huge fundsdid not care about the operation, I willnot consider it,” said she.Caring for employees andcharityA restaurant’s success is closely relatedwith employees except the leaders.Wang Xiaoling attributes her success tothe employees. In addition to materialrewards, she still concerns the employees’personal needs. Hence she is alsoloved by the employees.According to her, Wing Lai Yuen’sachievements today contribute only 10percent to herself, with the Heaven, thehardworking employees and the HongKong people each taking 30 percent. Tothank the customers’ years of support,she had not raised prices during the past15 years though the cost of the noodleswas five-fold. Only since last year, theprice has been raised from HK$18 to 20due to the rent rise.Wang Xiaoling is also known forher benevolence. She often offers freenoodles for the old and the handicapped,and subsidizes for nonprofit organizationsfor such people in Hong Kong.Still, she also donates for schools andwelfare agencies in the mainland.A few years ago, she was praised forher donation in the recovery of the GreatWall. But she attributed this honor to allthe Hong Kong people.She is intended to establish a foundationin the name of Chan Fung Yingto help the old and the handicapped indifferent areas.Wang Xiaoling spends years of herlife in Wing Lai Yuen, where she hasgone through countless hardships andalso has made many achievements. Shewants to tell those youngsters to understandthe true meaning of success, whichis no pains, no gains.73

PeopleYang Bingqing:Oil Industry Is Her Lifelong CareerIn 1998, Yang Bingqing went toAmerica with her husband andfinally acquired her bachelor degreein California State University.After graduation, Yang Bingqing tookpart in many interviews but provedhard to find her ideal job as a matter oflanguage and cultural differences. Influencedby her family from childhood,Yang Bingqing hoped to do somethingchallenging and creative, thus decidingto start her own business. From startupin 2005 to a huge success in 2012,the story of Yang Bingqing deserves ourcare.Hard beginningIn 2005, Yang Bingqing worked asa foreign exchange trader in a companylocated in San Francisco. Six monthslater, Yang Bingqing felt that the foreignexchange industry was extremelyrisky, and she must endure overwhelmingpressure everyday. In an accidentalchance, Yang Bingqing encountered anAmerican oilfield development companyselling oilfield while attending aforeign exchange exhibition.Born and bred in Sichuan oilfield,oil industry was not new to Yang Bingqing.Yang Bingqing contacted this companyand displayed her interest whenshe was home. In the meantime, YangBingqing began to study oil industryin America with the convenient help ofInternet, from tax law, ownership andgovernment regulation. In that period,Yang Bingqing went to Jim Rogers’speech about how to profit from commodityinvestment, which made herdetermined to start oil business. Whenshe met Jim Rogers afterwards, she toldhim that his speech totally changed herlife.After making up her mind, YangBingqing started her own business journey.At first, Yang Bingqing telephonedmany oil companies and showed herwill and interest to help them tap overseasChinese market in San Francisco.As most of the American oil companiesare located in south and middle Americawhere information was not spread asfast as possible, even many companiesdid not have their own websites. WithYang Bingqing’s painstaking efforts, acompany finally promised to give YangBingqing a chance.From then on, Yang Bingqingworked as an agent of the company inSan Francisco. Though with no fixedincome, Yang Bingqing was full of passionand motivation to do the job well.To find investors as quickly as possible,Yang Bingqing began to make speecheseverywhere. She still rememberedvividly her first speech. It was held ina conference room in Hilton nearbythe headquarter of Luca InternationalEnergy Group. More than 70 peopleBy Li Zhenattended that speech which made YangBingqing realized the great potential ofoil market.Clear investors’misunderstandingsIn that process, Yang Bingqingconducted a great deal of studies onAmerica’s oil industry. She constantlycarried out field investigation withinvestors and gradually attained theirrecognition. When exchanging with investors,Yang Bingqing discovered thatthere was a lack of basic knowledge ofoil industry in America among overseasChinese. Even misunderstands existedin many aspects. For example, oil wasprohibited from exploiting in America.Oil industry was full of risks. Oil industryin America was monopolized byseveral big companies. But this was notthe case.According to Yang Bingqing,investing in oil industry was a strangetopic for most of the people. However,investment in oil exploration in themainstream of American society hasbeen popular for nearly a hundred years.The United States is a private ownershipcountry, the vast majority of mineralresources are privately owned. Drillingfor oil on private land was protected bylaw, and also encouraged by the government.In the U.S., individuals have theopportunity to own oil wells.First, the exploitation of oil wellsis not only a high-risk but also highreturnbusiness due to the use of theadvanced technology of explorationand development of mining technology.In the United States, up to 90% ofoil wells are successfully exploited. Inother words, the probability of investorslose all their investment cost is 10%.Second, investment in oil explorationin the United States is encouraged and74

supported by the State and Congress.Congress passed a special tax law to exempt15% of the income of the oil fromtaxes. Relative to other investments,investors in oil exploitation do not haveto participate in the daily management,and can enjoy 100% tax relief. Third,due to the private ownership of oil field,exploitation is a capital-intensive industry.It is hard to form an oil monopoly inthe United States, therefore the UnitedStates has no national oil companies,SMEs produce 50% of U.S. oil and 60%of the gas.It is known to all that more than80% of global energy supply consistsof coal, oil and natural gas. Oil is nonrenewableresources, so far no otherresource can be completely replaced bythe extensive and efficient use of oil, andno one industry can be relatively easy tobridge a huge gap between supply anddemand as the oil industry.As far as Yang Bingqing is concerned,investment in oil exploration isa very profitable choice, but also quitestrange for the Chinese community.Fortunately, Luca International EnergyGroup, as a pioneer of oil field development,provides a platform for overseasChinese to enter the U.S. oil industry.Luca International Energy Group hasits own well-organized team of experts,including geological experts, geologists,petroleum engineers, accountants,investment analysts, and professionalmanagement. Luca International EnergyGroup is a professional, efficientand trustworthy company.Hard work paid offTo accommodate the rapidly expandingbusiness in 2008, Yang Bingqingdecided to move out of her homeoffice to an A-level office. But it was difficultto find one, since she, as a studentback then, had no credit record or bankdeposit. Luckily, amidst the start of theburst of the housing bubble, a companywanted to lease one of their offices tocut costs. After some time, Yang Bingqingfelt the office was not spaciousenough and started looking for a biggerone in the building. She was startled tobe asked by the landlord to move out ofthe office immediately, with all of herdeposit confiscated. Yang Bingqing hadno choice but to seek legal help. Herclaim upheld, Yang Bingqing drove thelandlord away and got the office back.This event taught Yang Bingqing thedifficulty and risk of doing business inthe U.S., and how to respond to them.In early 2009, the plummeting ofthe oil price from $148 to $35 a barreldented investors’ confidence in oilexploitation, putting Yang Bingqingin severe liquidity shortage. All of herfour employees left. Facing the greatestadversity since the start of the company,Yang did not back off, and managed toweather the crisis. Things started to getbetter since the later half of 2009. Thecompany evolved into Luca InternationalEnergy Group.Yang Bingqing introduced China’sForeign Trade reporter to the state ofLuca International Energy Group in2012. It holds five oil-gas fields whichare worth $2.6 billion, with stakes rangingfrom 60% to 1000%; a RegionalCenter approved by USCIS to developoilfield, which could help 400 familiesimmigrate to the States by way of investment;11 subsidiaries, with licensesto develop oilfields in Texas and Louisianastates. The group company focuseson oilfield prospecting and exploitation,and at the same time sells andbuys oilfield assets, offers investmentand financing services, imports andexports oil equipment. Headquarteredin the United States, Luca InternationalEnergy Group is present in MainlandChina, Taiwan, Hong Kong, Japan, andEurope, with offices in San Francisco,Oakland, Los Angeles, Huston andBeijing.Optimistic about the Chinesemarket and Luca’s FutureLuca International Energy Groupset up a subsidiary company in Beijingin 2010, to tap into the Chinese market.Yang is optimistic about Luca’s marketpotential in China. In recent years, thecountry has developed from strength tostrength, transitioning from a capitalimportingnation to an exporting one. Itis playing an increasingly important roleon the world stage. This is why Yangstarted to do business here. However,she noted that the Chinese have yet tofully understand the oil exploitation industryin the U.S., and it takes time forthem to appreciate the business modelof Luca International Energy Group.Yang Bingqing is not complacentabout the great progress Luca has made.She has a clear vision of its future. Shehopes that it goes public within fiveyears. Yang told the reporter that Lucastrives to be a leader in oil exploitationin the United States, and is committedto promoting exchanges between Chinaand the States in oilfield development,offering the most professional service,and achieving win-win outcome with itsclients.75

INFORMATION2012China MarketSuppliers ListCompany Name: ShenzhenNewest Industrial Co., LtdCompany Profile: ShenzhenNewest Industrial Co., Ltd is specializingin manufacturing and exportingdaily porcelain. Guangxi Baian PorcelainFactory is a large joint-stock manufactoryenterprise with self supportingright of export, which was found byShenzhen Newest Industrial Co., Ltdin Guangxi China in 1996. After 15years active operation and development,it has become a large-scale exporter andmanufacturer with annual output ofmore than one hundred million pieces.Now we have already come out on thevery front of the list of all Guangxi porcelainfactories.Our products are selling well incoutries from Europe, South America,Middle East and Southeast Asia.Meanwhile, Shenzhen Newest IndustrialCo., Ltd is the most importantopening window directly towards theinternational market. We offer our professionalmanners with high efficiencyto our customer, and we also have enjoyeda satisfaction and good reputationfrom our customers for not only goodquality products but also competitiveprices, excellent service and punctualdelivery. All friends and customers arewarmly welcomed to visit our office andfactory to have business discussion formutual-benefit cooperation and brightprogress together.Add: Rm.90, Block A, 9th Rd,Tairan, District Futian, Shenzhen,ChinaTel: 0755-25693000Fax: 0755-25693999Company Name: Shenzhen SupertecoTechnology Co., LtdCompany Profile: Superteco isthe Shenzhen-headquartered company,recognized as the professional globalone-stop-shop supplier of householdappliances and IT products & accessories.The Company provides sophisticatedsupply chain solutions relateto design, development, sourcing anddistribution. Best price, perfect service,wonderful product are what we’d like toalways present to our customers.Superteco is committed to thehighest operational standards to meetcustomers’ specific needs, it conductsour business with integrity and goodcorporate governance practices. Overthe years, Superteco has won numerousaccolades for its performance, governanceand sustainability. Sustainabilityconsiderations are embedded into ourcorporate policies and risk managementsystems. Security and efficiency are thepermanent performance what we’d alwaysdone for our customers.Add: Honglong Century Plaza,No. 4002 Shennan Road East, Luohu,ShenzhenTel: 0755-82388070Fax: 0755-82388525Company Name: TangshanBestmee Ceramics Co., LtdCompany Profile: TangshanBestmee Ceramics Co., Ltd. whichwas established in 2009, is engaged inthe designing, developing, producingand distributing fine bone china. Ourcompany is located in hi-tech developmentzone, Tangshan, Hebei Province,China. We own 164 feet full automaticbisque tunnel kiln and an automaticglazing tunnel kiln as well as a 124 feetstamping kiln reaching a capacity of8,000,000 pieces of product per year.Our products are mainly targeted atsuper department stores in medium andlarge cities, star hotels and governmentoffices.We are commonly recognized ofsuperb quality in our products, whichcontains bone charcoal as much as45.7%. We have been engaged in developingand producing lead-free productsusing sophisticated technology and thishas earned us a good reputation all overthe world. We believe that a good enterprisemust base on a good reliabilityand high quality in the products.Add: No. 57, Ronghua Road,Tangshan City, Hebei Province, ChinaTel: 0315-3851218Fax: 0315-3851966Company Name: ShenzhenGodsend Stationery Co., LtdCompany Profile: ShenzhenGodsend Stationery Co., Ltd is a professionalmanufactory which producesseveral of stationery such as set-packingstationery, office stationery, and stationerytape and so on. We have morethan ten years experiences in designand manufacture so have mature technology.More than 90% of our productsare exported to international marketand all of them are welcome by ourclients. We're taking ISO9001 QualitySystem seriously and will always giveyou high quality products on best price.With your support we'll have a bettertomorrow!Add: Rm.1302, KINT Building,No.238, West Zhongshan Avenue,Tianhe District, GuangzhouTel: 020-85571080 /18927594387Fax: 020 - 85571050Company Name: Foshan RuixinNon Woven Co., LtdCompany Profile: Rayson NonWoven is a excellent brand under RaysonGlobal Inc, Established in 2007 , itis a Sino-US joint venture company, hasmore than 400 workers, located in thecentre of Guangdong-Nanhai DistrictFoshan city with space over 80,000 sq.mt, and only 30 mins driving Distanceto Guangzhou Baiyun InternationalAirport and Canton Fair ExhibitionHall.Rayson mainly produces spunbondednon woven fabric ,non wovenproducts( like non woven bag ,giftbag ,storage bag ) , mattress innersprings, and mattress. Rayson has itsown import-export authority, Closed76

SUPPLY INFOby Foshan port, Guangzhou port andShenzhen port, 90% of the products areexported to oversea markets with theexport volume more than 100 millonRMB per year. Relied on good prestigeand service, we have been well-knownas a trustful supplier and partner inAsia, Australia, Europe, Africa, alsohave built up a link with famous salesnetwork. Rayson is a preferred supplierfor purchasing the non woven fabric,mattress inner springs, non woven bagand mattress, its product quality is convincedby the oversea customers day byday.Add: Rayson Industrial Zone.Hongxing Villiage,Guanyao,NanhaiDistrictTel: 0757-81196638Fax: 0757-81192378Company Name: Shandong OrcalHousefitting CO., LtdCompany Profile: ShandongOreal Housefitting Co., Ltd is establishedin 2007, and it is located in thebeautiful city of Jinan springs. It’s aprofessional company which is specializedin kitchen glassware; we have agroup of highly educated, high-qualityprofessionals. We can design a varietyof household glass products and followupprocess by ourselves. Our companymain products are glass candleholder,lantern, container, storage jar, spicebottle, oil and vinegar bottle, all kindsof condiment bottle, glass mug, glassbottle, glass plate As well as other glassware,etc. more than 30 series and morethan 1,000 varieties of products, cansupply decorated, hand-painted, sets ofskin, carving and other deep-process.The company has strong technicalstrength of professionals and only 3-7days of new product development. Thecompany has numbers of decorated,painting, outline in gold, hand painted,thermal transfer and many other productionlines. Shandong Oreal Housefittingadhering to the “innovation,quality, service” business purposes, andwon the trust and support of customers,products exported to Europe, America,Southeast Asia, the Middle East, morethan 20 countries and regions. OrealHousefitting always for the majority ofmerchants set up to provide the latestideas, the most high-quality products,the most perfect service.Add: No.149, Jiqi Road, HuaiyinDistrict, JinanTel: 0531-82665279Fax: 0531-85991571Company Name: Haining XingYing FurnitureCompany Profile: HainingXing Ying furniture limited companyis located in Haining Jianshan newarea, is Sen Bridge Group Holdings ofthe Sino-foreign joint ventures, coversan area of 1500 acres, more than 3000employees, with an annual output of100000 sets of the living room and80000 sets of solid wood bedroomfurniture production enterprises, isChina’s largest solid wood furnitureexport enterprises. The company paidgreat attention to product quality, notonly by the person featured in Europeand the United States production oak,beech, birch, birch and other high profilewood as raw materials, and the investmentfrom Germany, Italy, Taiwanand other countries and regions of theintroduction of advanced equipmentmore than 300 Taiwan, built 6 modernproduction lines, cutting boards, logsfrom the blanking, molding, paintingand machining process are the realizationof automation, product qualityand the production efficiency can begreatly improved. Companies pay attentionto the core competitiveness ofenterprises. Namely uses the old withthe new, the division with only traditionalpractices, and implement themanagement by objectives, ISO9001quality management system, budgetmanagement and advanced managementmethods, improve the managementlevel. And with an efficient andpragmatic, innovation, has the senseof responsibility of the managementteam, the team determined to makeprogress, innovation, with advancedhardware and excellent managementteam to support, it is with the marketoriented, strain every nerve to meetcustomer demand.Add: NO. 8 Jinniu Road JianshanHainingTel: 0573-87800335Fax: 0573-87801660Company Name: Shenzhen TenasElectronic Co., LtdCompany Profile: Founded inDec 1998, is a hi-tech enterprise engagedin the research, production andmarketing of high frequency electronictuners, radio-frequency modulators, andDVB-S/T/C which are widely used insuch fields as cable TV, digital TV, satelliteTV, bus AV and multimedia.Located in Baotian, Bao’an District,Shenzhen, the company has astandard plant with 5800 square meters,over 500 workers and more than30 researchers. Introducing the productiontechniques from Philips and theautomatic insertion production lines,high-precision inspection instrumentsand intelligent production lines fromJapan, Tenas has annual production capacityof up to 10 million products.Based on the tenet of “Focusing ondigital products to better meet the marketdemands” and the quality philosophy of“Customer first, quality uppermost”, weare striving to be a celebrated brand namein this industry. With innovation as themotivation, key technology as the base,platform as the main business, Tenas is nowconstructing its advantage by introducingmodern management philosophy to balancethe hardware and software environments.The sound performance, excellentquality, competitive price and perfectafter-sale service of our products havebrought us enormous prestige fromour customers. Along with expandingdomestic markets, Tenas is also activein developing oversea markets. TodayTenas is proud to expand its businessthroughout more than 30 countriesand regions in Europe, South America,North America, and Southeast Asia.In the digital-oriented future, Tenaswill create more value for customers anddiversify in digital products. To buildTenas a famous multinational enterprisein the world is what all Tenas peoplehave been striving for at all times.Add: Mid-Wing LER Building,South Area, Hi-Tech Industrial Park,Shenzhen, ChinaTel: 0755-26016881Fax: 0755-26016881( Source: Canton Fair Online)77

InfoRMATIONChina Fairs& ExposEnergy and Resources, MiningIndustry, Metallurgy, Welding,Electric Power2012 The 15th Asian InternationalElectronic Engineering and EnergyTechnology ExhibitionDate: June 6-June 8, 2012Venue: Hong Kong Convention andExhibition CenterExhibits: Cable, cable tray and circuitbreakers, etc.Email: exhibit@hkesallworld.com2012 The 9th China (Xinjiang) InternationalCoal Industry ExpoDate: June 6-June 8, 2012City: UrumqiFrequency: YearlyExhibits: Coal, coal chemical, coalbedmethane development project display,etc.Tel: 86-991-2330537Fax: 86-991-2330537Email: maillipeng58532688@163.com2012 China International AluminumIndustry ExhibitionDate: June 6-June 8, 2012Venue: Shanghai New InternationalExpo CenterFrequency: YearlyExhibits: Raw materials, semifinished,aluminum production andprocessing and surface treatment machinery,etc.Web: www.aluminiumchina.comTel: 86-10-59339000Fax: 86-10-59339333Email: alu@reedexpo.com.cn2012 The 9th Guangzhou ElectricalPower Transmission and DistributionTechnology and Equipment ExhibitionDate: June 9-June 11, 2012Venue: Poly World TradeCenterExhibits: Communicationand information technology,networking technology, etc.Web: www.expo-cn.com2012 The 8th China(Ningxia) International Coal and EnergyIndustry ExpoDate: June 12-June 14, 2012Venue: Yinchuan International Conventionand Exhibition CenterExhibits: Energy, corporate imagedisplay, financing, focus, energy, coal,etc.Tel: 86-951-6084155Fax: 86-951-5058159Email: 13629588110@163.comContact: Liu Jia2012 The 3rd Shenzhen InternationalWire, Insulation Material ExhibitionDate: June 23-June 25, 2012Venue: Shenzhen Convention andExhibition CenterExhibits: Copper clad steel wire, barecopper wire, glass envelope, etc.Web: www.cn.made-in-china.comTel: 86-20-37599008Fax: 86-20-37599151Email: ex36008@126.comFurniture, Household Decorations,Woodwork Floor Decorations2012nThe 3rd China (Chengdu) FloorHeating Technology and EquipmentExhibitionDate: June 2012Venue: Chengdu New InternationalConvention and Exhibition CenterExhibits: Decorative doors, solidwood doors, steel doors, paint doors,security doors, etc.Tel: 86-28-86080319Fax: 86-28-86080309Email: chengtian@126.com2012 The 8th China (Chengdu) BuildingDecoration Material ExhibitionDate: June 7-June 9, 2012Venue: Chengdu New InternationalConvention and Exhibition CenterFrequency: YearlyExhibits: Paving materials, cabinetsand bathroom products exhibition, etc.Tel: 86-28-86080319Email: chengtian@126.comMachinery, Machine ToolsCIMES 2012Date: June 12-June 16, 2012Venue: China International ExhibitionCenterFrequency: YearlyExhibits: Machine, tools and machine,metal forming machine, sheer metalprocessing technology, etc.Web: www.cimes.net.cnAdd: Room 15, Floor 5, Xinyuan PingAn International Finance Center,No.1-3, South Road, Chaoyang District,Beijing, 100027Tel: 86-10-59339072Fax: 86-10-59339099Email: cimes@reedhuayin.com.cnAuto Tools and Fittings2012 The 14th China (Chongqing) InternationalAutomobile ExhibitionDate: June 7-June 11, 2012Venue: Chongqing International Conventionand Exhibition CenterFrequency: YearlyWeb: www.autochongqing.comTel: 86-23-68634132Fax: 86-23-686313882012 International China (Xi’an) AutomobileExhibitionDate: June 15-June 17, 201278

FAIR & EXPOSVenue: Xi’an International ExhibitionCenterExhibits: Automobile, parts, car derivatives,etc.Tel: 86-29-88862066Fax: 86-29-88862066Email: blackscreen@163.com2012 China Shanghai InternationalAutomobile Parts, ManufacturingEquipment, Maintenance Equipmentand After-sale Service After-marketProducts ExhibitionsDate: June 12-June 15, 2012Venue: Shanghai New InternationalExpo CenterFrequency: YearlyExhibits: Auto parts, components,accessories and fittings, auto-relatedmanufacturing equipment, materialsand tools, car-related measurement,testing, diagnostic equipment, etc.Web: www.autopartschina.orgTel: 86-21-61457953Fax: 86-2161457952Email: shanghailvge@vip.163.comThe 16th South China InternationalIndustrial Automation ExhibitionDate: June 20-June 22, 2012Venue: Shenzhen Convention and ExhibitionCenterExhibits: Industrial automation, informationtechnology and software, etc.Email: 61198879@iaexpo.orgGlass, Ceramics, Plastic, Rubber2012 Shenzhen International CeramicsIndustry Forum/ExpoDate: June 2012Venue: Shenzhen Convention and ExhibitionCenterExhibits: Fine ceramics, alumina ceramics,etc.Web: www.zj123.comTel: 86-20-62371251Fax: 86-20-62371259Email: xqexpo@126.comPublic Security and Fire Control2012 The 8th Xinjiang InternationalPublic Security Products & TechnologicalEquipment ExpoDate: June 6-June 8, 2012Venue: Xinjiang International ExhibitionCenterFrequency: YearlyExhibits: Human safety equipment,explosion-proof safety inspectionequipment, counter-terrorism equipment,etc.Web: www.china360.cn/exploir_detail51775.htmTel: 86-20-23362358Fax: 86-20-23362358Email: anfang2011@sina.comElectronic IntelligenceThe 18th China International Powerand Electronic Transformer ExhibitionDate: June 2012Venue: Shenzhen Convention and ExhibitionCenterExhibits: Electronic power supplycomponents, printed circuit boards,power management IC, etc.Tel: 86-20-62371251Fax: 86-20-62371259Email: xqexpo@126.com2012Shanghai New High-End ElectronicProcurement ExhibitionDate: June 26-June 28, 2012Venue: Shanghai New InternationalExpo CenterFrequency: YearlyExhibits: Entertainment, video, mobilephone, etc.Email: visit@globalsourcingfair.comInformation Technology, Network,Communication, Broadcast2012 International FPD ExhibitionDate: June 11-June 13, 2012Venue: Taipei World Trade CenterFrequency: YearlyExhibits: FPD Panel/ Module, processequipment, software and service, etc.Tel: 86-755-369511552012 Shenzhen International Innovationand Application of Integrated CircuitExhibitionDate: June 21-June 23, 2012Venue: Shenzhen Convention and ExhibitionCenterExhibits: IP providers, IC design,EDA tools, etc,Email: info2011@siridamedia.com2012 The 8th China (Shenzhen) InternationalTouch Screen ExhibitionDate: June 28-June 30, 2012Venue: Shenzhen Convention and ExhibitionCenterExhibits: ITO conduction glass, conductivefilm, touch panel, etc.Web: www.5icmp.comTel: 86-20-85556058Fax: 86-20-85551758Email: 18933913659@189.cn2012 The 4th Shanghai InternationalSignage ShowDate: June 27-June 29, 2012Venue: Shanghai World Expo PavilionExhibits: Digital signage, networkadvertising, multimedia informationsystem, etc.Web: www.chinadigitalsignage.orgTel: 86-21-34080278Fax: 86-21-54306576Email: info@chinadigitalsignage.orgWedding Dress, Photography2012 Taiwan Photonic FestivalDate: June 19-June 21, 2012Venue: Taipei World Trade CenterNangang ExhibitionFrequency: YearlyExhibits: Compound semiconductor,photovoltaic element components, optics,etc.79

InfoRMATIONTel: 86-755-82821135Fax: 86-755-83288453Email: folate@126.comTextile and Clothing2012 Hong Kong Fashion Week SpringSummer FairDate: July 4-July 7, 2012Venue: Hong Kong Convention andExhibition CenterFrequency: YearlyExhibits: Men and women, infantsand children clothes, sports and leisurewear, handbags, fashion magazines,testing inspection and certification services,etc.Tel: 852-22404056Fax: 852-28240249Email: exhibitions@tdc.org.hk2012 China (Qingdao) InternationalSewing Equipment ExhibitionDate: June 26-June 28, 2012Venue: Qingdao International ExhibitionCenterExhibits: Sewing machines, sewingand finishing pre-treatment equipmentand system, etc.Tel: 86-532-85011486Fax: 86-532-85012624Email: qdfzz@qdhaiming.comFur, Leather, Shoes2012 The 13th China InternationalLeather, Shoe Machine ExpoDate: June 26-June 28, 2012Venue: Qingdao International ExhibitionCenterExhibits: Leather, synthetic leather,shoe, shoe lining, etc.Tel: 86-532-85011486Fax: 86-532-85012624Email: gaikeyan@qdhaiming.comToys, Gifts and CraftworkHKTDC Summer Gifts, Houseware &Toy FairDate: July 4-July 6, 2012Venue: Hong Kong Convention andExhibition CenterExhibits: Gifts and premiums, householditems, home decorations, toys andgames, holiday and party decorations,etc.Tel: 852-22404056Fax: 852-28240249Email: exhibitions@tdc.org.hk2012 Chengdu Home, Leisure Productand Gift ExhibitionDate: June 15-June 17, 2012Venue: Chengdu New InternationalConvention and Exhibition CenterExhibits: Household items, home textiles,home decoration, etc.Tel: 86-755-33989238Fax: 86-755-33989239Email: lx178@126.comContact: Li Xiaolin2012 The 3rd China International Gift& Craft Home Product ExpoDate: June 15-June 17, 2012Exhibits: Creative life, low-carbongreen gifts, artistic gift with Chinacharacteristics, etc.Venue: China Import and Export FairCenterWeb: www.cghhe.comFood and Additives, Beverage,Drinks, Seasonings, Dairy Products2012 The 6th Guangxi Food Trade FairDate: June 2012Venue: Guangxi Exhibition CenterExhibits: White wine, red wine, ricewine, fruit wine, etc.Tel: 86-771-50853392012 Weihai Food FairDate: June 18-June 20, 2012Venue: Weihai International ExhibitionCenterWeb: www.weihaishipin.comTel: 86-631-5335149Fax: 86-631-5182509Email: weihaishipin@126.comThe 14th Asian Food IngreModldntsChina ExhibitionDate: June 26-June 28, 2012Venue: Shanghai New InternationalExpo CenterFrequency: YearlyExhibits: Food additives and ingreMoldnts,healthy natural ingre-Moldnts, health food ingreMoldnts,etc.Tel: 86-21-64371178Fax: 86-10-58036317Email: jessica.lin@ubmsinoexpo.comMedical Care, Health Care2012 China Shanghai Oral Care andEquipment ExhibitionDate: June 7-June 9, 2012Venue: Shanghai World Expo PavilionFrequency: YearlyExhibits: Toothpaste, tooth powder,dental floss, etc.Web: www.jtmedexpo.comAdd: Room 2203, No.6259 HuminBuilding A, Shanghai, 201100Tel: 86-21-54133201Fax: 86-21-64126798Email: shzhangya@126.com2012 Home Medical Supplier SourcingFairDate: June 7-June 9, 2012Venue: Shanghai World Expo PavilionExhibits: Child blood pressure, bloodglucose monitoring device, etc.Web: www.jtmedexpo.comTel: 86-21-54133201Fax: 86-21-64126798Email: shzhangya@126.com2012 17th China International Dentaland Seminar Material ExhibitionDate: June 9-June 12, 2012City: BeijingVenue: National Convention CenterExhibits: Dental shared device class80

FAIR & EXPOSdevice class of oral medicine, oral surgeryequipment category, etc.Web: www.sinodent.com.cnAdd: Wudongdalou ChegongzhuangBlock B3, Xicheng District, Beijing,100044Tel: 86-10-88393922Fax: 86-10-88393924Email: info@sinodent.com.cnContact: Zhang HaixiaThe 12th CPHI ChinaDate: June 26-June 28, 2012Venue: Shanghai New InternationalExpo CenterFrequency: YearlyExhibits: Pharmaceutical raw materials,active intermediates, fine chemicals,excipients, animal and plant extracts,custom manufacturing, etc.Web: www.cphi-china.cnTel: 86-10-58036298Fax: 86-10-58036317Email: zhangxiong@cccmhpie.org.cn2012 The 47th National Trade & SpecialProduct FairDate: June 28-June 30, 2012Venue: Nanjing International ExpoCenterExhibits: Prevention and treatment ofmajor infection diseases, protein drugs,generic drugs, etc.Web: www.newdrugschina.comEmail: weibin.guo@reedsinopharm.comPackaging, Paper, Printing andPublication2012 China World PharmaceuticalMachinery, Packaging Equipment andMaterials ExhibitionDate: June 26-June 28, 2012Venue: Shanghai New InternationalExpo CenterFrequency: YearlyExhibits: Pharmaceutical machineryand auxiliary equipment, etc.Tel: 86-21-64371178Fax: 86-21-64370982Education, Training, Cultureand Art2012 The 6th China (Shanxi) InternationalEducation FairDate: June 11-June 13, 2012Venue: Xi’an Qujiang InternationalExhibition CenterHost: Shanxi International EducationExchange AssociationChina (Taiyuan) International CultureCollection Expo 2012Date: June 9-June 12, 2012Venue: China Taiyuan Shanxin CoalMuseumFrequency: YearlyExhibits: Antique furniture, rosewoodfurniture, rosewood furniture, antiquescreen, etc.Web: www.bjth.netCommercial Trade, Chain operation,Agency, Import andExport2012 The 20th China Kunming Importand Export FairDate: June 6-June 10, 2012Venue: Kunming International Conventionand Exhibition FairTel: 86-871-6998973Others2012 The 7th China (Xi’an) InternationalHi-tech FairDate: June 2012Venue: Xi’an International ExhibitionCenterExhibits: Hi-tech, new industries, etc.Tel: 86-29-88350391Fax: 86-29-88350391Email: pianhua@126.comThe 5th China (Shenzhen) InternationalAdhesive Trade and Protective FilmExhibitionDate: June 25-June 28, 2012Venue: Shenzhen Convention and ExhibitionCenterExhibits: Industrial tape, optical tape,electronic tape, cloth tape, adhesivelabels, etc.Web: www.dgjzd.cnTel: 86-20-85554957Fax: 86-20-85554957Email: lm@dgjzd.com2012 The 3rd Shenzhen InternationalWire and Industrial Material ExhibitionDate: June 18-June 20, 2012Venue: Shenzhen Convention and ExhibitionCenterExhibits: Micro-motors, small motors,fractional horsepower motors, etc.Tel: 86-20-62371255Fax: 86-20-37599151Email: ex36008@126.com2012 The 9th China InternationalVending Systems ExhibitionDate: June 27-June 29, 2012Venue: Shanghai World Expo PavilionExhibits: Automatic Vending, ticketing,etc.Web: www.selfservicechina.comEmail: zhangjiang@tiansheng.com.cn81

InfoRMANTIONInvestments Projectsin Fuding City, ChinaProject Name: Nanpai Industrial Project Area inBailin TownProject Organizer: Bailin Township GovernmentProject Location: Wangxingtou Village, Bailin TownPerson in charge: Huang Yinxing 86-593-737606686-13706022898Contact Person: Zhan Huashou 86-593-7371455 86-13959386006Fax: 86-593-7371154Project Overview: Bailin Town is a key industrial townof east Fujian Province and features a coastal highway andWenfu Railroad extending in north-south direction. NanpaiIndustrial Project Area is only 5 (a second-class roadis connected with the inter-linking exit, which enables adirect and convenient transportation to the Project Area)and 15 kilometers away respectively from highway interlinkingexit at Bachimen and the city center. Bachimen1000-dwt Terminal which is the inner part of ShachengPort and where the Project Area is located links withall ports at home and abroad and thus enjoys convenienttransportation on land and in water. This Project Areacovers an area of 1500 mu and various supporting facilitiesfor water and power supply here are under construction.Besides, pollution-free and high-tech enterprises will beinvited to build plants for production as is planned.Construction Scale: land for project is planned to coveran area of 1500 muTotal Investment: RMB 1.5 billionCooperation Mode: Sole investmentPreliminary Work: A controlling detailed planning hasbeen completed and procedures for the approval of usingthe land and waters are underwayProject Name: Dongqi Industrial Project Areain Dianxia TownProject Organizer: Dianxia Township GovernmentProject Location: Dongqi Village, Dianxia TownPerson in charge: Hong Rong 86-593-729308886-13509591199Contact Person: Liu Xinquan 86-593-729105586-13950510566Fax: 86-593-7292777Project Overview: Dianxia Town is the central townin Fuding’s coastal economic zone. 42 kilometers awayfrom downtown, the market town is planned to cover anarea of 12 square kilometers with Yangqin second-classroad and Bachimen-Yangqi road running though it. WithShacheng Port in the east and joining to Yangqi Terminal,Berth 16 of a 50000-dwt terminal in Yangqi workzone of Shacheng Port has been under construction. ThisIndustrial Project Area is planned to cover an area of4000 mu. At present, overall planning of land has beencompleted and road construction within the area is underway.The introduction of first-class and second-classenterprises is welcomed.Construction Scale: land for the project is planned tocover an area of 4000 muTotal Investment: RMB 4 billionCooperation Mode: Sole investmentPreliminary Work: The overall planning of the land hasbeen completed and procedures for the approval of usingan area of 1800 mu are underwayProject Name : Long’an Project AreaProject Organizer: Management Committee ofLong’an Development ZoneProject Location: Long’an Development AreaPerson in charge: Chen Shixiao 86-593-7283366 86-l5259328866Contact Person: Zhang Dehe 86-593-7285828 86-l3905938088Fax: 86-593-7297661Project Overview: Located in the southeastern coastof Fuding and with Shacheng Port in the east, Long’anProject Area is 14 kilometers away from Taimu Mountaininter-linking exit of Shenhai railroad, 12 kilometersaway from Qinyu railway station of Wenfu railway. It is acoastal industrial new town which is multifunctional withstorage area of terminal operations, industrial park andbusiness area gathering here. The Project Area possesses a5000-dwt land-island terminal, a 3000-dwt terminal pierat war and a 500-dwt mixed terminal, and additionally a50000-dwt terminal is under construction. Currently, thearea has developed and utilized land of 200 hectares, andhas introduced 41 above-scale projects, including mainlychemical engineering, synthetic leather and upstream anddownstream products. There are 170 hectares of industrialland open for the enterprises of plastic, chemical engineeringand PU leather fine processing to invest and buildplants here.Investment Intensity: RMB 1.5 million-2 million per muCooperation Mode: Sole investmentPreliminary Work: Part of the infrastructure constructionsuch as road network and hydroelectric power hasbeen completed.82

INVESTMENTProject Name: White tea Industrial Science andTechnology Park in Diantou TownProject Organizer: Diantou Township Government ofFuding CityProject Location: Dashanxia, Mayang Village, DiantouTown, Fuding CityPerson in charge: Zhan Zhaoyu 86-593-7675175 86-15859323366Fax: 86-593-7675675Project Overview: Diantou town is a main producer ofwhite tea in Fujian province. With more than 150 tea processingenterprises, the current tea plantation here covers anarea of more than 30 thousand mu and produces more than21 thousand tons of tea leaves in a year. In order to give fullplay to the advantage of being the origin of white tea andpromote the development of tea industry further, the townsets the development of a characteristic tea industry with “scalebase, standard plantation, cluster process” as its goal and plansto establish a high-tech first-class fine processing park of teain large scale and introduce a group of brand-mark tea processingenterprises of above-scale, raising the technical levelof tea processing and competitive capability of tea products.Construction Scale and Content: Land for project is plannedto cover an area of 1000 mu. 20 above-scale white tea fineprocessing enterprises are going to be introduced and a standardwhite tea science park will be established.Total Investment: RMB 300 millionEconomic Results Analysis: Once the project park isput into operation, annual processing output is estimated toRMB 1 billion, annual profits and tax paid may reach RMB80 million, more than 2000 jobs will be created. The projectwill bring about outstanding economic, social and ecologicalbenefits.Cooperation Mode: Foreign investmentPreliminary Work: Land pre-requisition is underway andprocedures for approval of land use are carried out.Project Name: Annual Production of 150 thousandtons of Synthetic Resin and Additives inLong’an Project Area.Project Organizer: Management Committee of Long’anDevelopment ZoneProject Location: South Industrial Road of Long’an IndustrialProject AreaPerson in charge: Chen Shixiao 86-593-7283366 86-l5259328866Contact Person: Zhang Dehe 86-593-7285828 86-l3599189996Fax: 86-593-7995733Project Overview: Long’an Industrial Project Area plansto cover an overall area of 22.3 thousand mu. The Project Parkundertakes the industrial transfer from the developed arealike south Zhejiang and Yangtze River Delta, establishing anindustrial zone with local features. Currently, the project areahas developed and utilized land of more than 3500 mu andintroduced more than 41 above-scale projects which include 31synthetic leather projects. The synthetic leather processing basehas been initially established and 300 thousand tons of resinsare demanded annually. Waterborne resin is an economicaland environmental friendly new product which replaces DMFwith water as its solvent. The introduction of the project will bea great innovation in synthetic leather industry.Construction Scale: Land for project is planned to coveran area of 100 muTotal Investment: RMB 110 millionEconomic Result Analysis: The project will bring aboutconsiderable economic and social benefits.Cooperation Mode: Sole investmentPreliminary Work: Project planning and land submissionhave been completed.Project Name: Baisheng New District ConstructionProject, Fuidng City.Project Organizer: Construction Headquarter of BaishengNew District, Fuding CityProject Location: Baisheng village, Shanqian street, FudingCityPerson in charge: Wen Yuezhong 86-593-7809399 86-13905932166Fax: 86-593-7809399Project view: Baisheng New District is 3 kilometers awayfrom downtown with Shuangyue Project Area of FudingIndustrial Park in the east, Chaoyin Island DevelopmentZone in the north, Ziguo Tourist Resort in the west andChaoyin Island Development Zone in the north. Enjoyingan advantage in geographical location, the project focuses ondeveloping and utilizing resources of mountain and sea. OnDecember, 2007, in order to promote the strategy of “expandingeastward, moving southward and forwarding to the sea”,municipal party committee and municipal government havedecided to develop Baisheng New District to be an auxiliaryservice area of finance, business and residence for ShuangyueIndustrial Park. The latter covers an area of ten thousand mu.Construction Scale and Content: The land for Baisheng Districtis planned to cover an area of 3000 mu. The total constructionarea covers about 2 million square meters, amongwhich residential building covers 14 million square meters.Total Investment: RMB 6 billionCooperation Mode: Sole investment for business projectsand Build Transfer (BT) model for public infrastructure constructionPreliminary Work: Constructions of trunk road, sea fillingand part of platform excavation have been completed and proceduresfor the approval of land use are carried out. The basiccondition for development and construction has been provided.(Source: Investment Attraction Department of FudingMunicipal Government, Fujian Province, China)83

ART & GALLERYLifestyleBy Audrey GuoContemporary Art and Classical ArtShining at the Same Art Fair84As one of the most influentialart fairs in Asia, “Art Beijing2012” was closed on May 2in Beijing Agriculture ExhibitionCenter. This year, “Art Beijing- Contemporary Art Fair” and “ArtBeijing - Classical Art Fair” were heldjointly.According to the statistics fromArt Market Research Center (AMRC),the four-day Art Beijing 2012 art fairhad an exhibition area of 20,000 squaremeters (with a year-on-year growth of46%), 160 exhibitors (35%), with the ratioof domestic and overseas exhibitorsbeing 5:1. This year, the number of visitorstotaled 52,000 person times, up by30%. More than 90% exhibitors madedeals, and the contract amount came to300 million RMB in total, up by 57%from a year ago, accounting for 85% ofthe gross contract amount of art fairs inChina during the first half. Meanwhile,these art fairs generated an economicbenefit of nearly 500 million RMB forthe related sectors. At Art Beijing 2012,five top Asian auction companies organizedauction previews, and held 12art lectures. Two charity projects raisedfunds of 700,000 RMB, which will beused to fund autistic children and leftbehindchildren in poverty-strickenareas, winning praises from the public.Galleries had a great sales result.For example, Leng Jun’s BundledRhino presented by Triumph Art Spacewas sold at 5.5 million RMB, and Starsby Zhao Erjun presented by ShanghaiGrand Theater Gallery was sold at 1.8million RMB. By the evening of MayDay, Beauty Tao International ArtInstitution had had a turnover of approximately4 million RMB. EastationGallery, Hanmo Art Gallery, GalleryCinquini, Hagemann (Germany) Gallery,Xiang Xie Shan Fang, LanLi Gallery,and other exhibitors all had gooddeals.Art Beijing always takes promotingand introducing young Asian artistsas the duty, and this art fair has morethan 30 young artists from China andSouth Korea who are active in contemporaryart. Image Beijing theme exhibitionexhibited works of contemporaryartists from China, USA, UK, Italy,Japan, South Korea, Vietnam and othercountries. These works and the subtlespace design together with a uniqueexhibition visiting way — watchingimage art by lying down, bring a newvisual and space experience.Art Beijing continuously focuseson both the academic and commercialinfluence. This year, Art Beijing joinedPhoenix Art Palace for “Beyond Painting- Invitation Exhibition of ChineseOil Painters”, which exhibited key artworks by 18 contemporary oil paintingartists including He Duoling, WangKeju, Yan Ping, Wang Yuping and soon, who integrate oriental spirit withwestern oil painting. Three ink paintingspecial exhibitions, “Standing Apart -Chinese Contemporary Ink Paintinginvitational Exhibition”, “Quintessenceof Nature - Xu Longsen Shanshui ArtExhibition” and “The East -the East,Chinese Contemporary Ink Paintingof Guan Yuliang”, exhibited works ofmore than ten representative contemporaryink painting artists, demonstratingthe creation and achievements in inkpainting.A principal from Beijing MunicipalBureau of Culture said, Beijing artmarket is in the core of Chinese artmarket, taking a market share of 70%to 80%. It’s their target to make “ArtBeijing” to have a greater influence, attractmore social attentions, and reachhigher contract amount, therefore formunique and distinct features of its own.

ART & GALLERYBuddha Jumps over the Wall-ZHANG Ding Solo ExhibitionDuration: Jun 2- Jul 1, 2012.Opening: 4PM-7PM, Jun 2, 2012.Venue: Top Contemporary Art Centre, Room 101, Bldg. 5, 18 Wuwei Rd.,ShanghaiArtists: ZHANG DingOn June 2nd 2012, ZHANGDing’s Solo Exhibition Buddha Jumpsover the Wall will be on view in TopContemporary Art Centre (Building 5,18 Wuwei Road, next to ShanghARTTaopu Warehouse). The exhibition lastsuntil July 1st during which viewerswill once again be able to experiencea unique atmosphere a la ZHANGDing.The abundant content of ingredientsand the complex production processesin the cuisine Buddha Jumps overthe Wall become the starting point ofthis time’s ZHANG Ding Solo Exhibition.From 2007 until today, the artisthas been continuously pursuing theself-consistent evolution of his aestheticsystem. Both biological and societalcharacters of eating as a daily behaviourare constantly interspersed throughoutthis exhibition. From getting food to afeast on carnival, from a disorderly partyto energy dissipation, Buddha Jumpsover the Wall involves a simple systemwith an abundantly dramatic character.The exhibition continues the traditionof controlling force on the site sinceZHANG Ding solo exhibition Openingin 2011. At the same time, neitherthe implementation of the performersnor the participation of the viewers candefault the relations and effects on thesite. Buddha Jumps over the Wall willbe a genuine art feast which shouldn’tbe missed this June in Shanghai.Close to the Sea and TheRevival of the SnakeYANG Fudong Solo Exhibition:12th May to 15th June2012 in ShanghART Beijing andARTMIA Gallery. This showwill be Yang Fudong’s first Beijingsolo show and the premiereof the works in China.The Revival of the Snake(2005)This work tells the endof the story of a soldier goinginti exile. On a sunnywinter’s day, the icy groundis stared with snow and lifeseems as peaceful as theweather. A soldier, escapingfrom a battlefield, comes to this deserted place which isplagued with the smell of death, He is wandering, attemptingto leave this uninhabited world. The only option left to him,however, is walking, ceaselessly and endlessly. What is waitingfor him? A hibernating snake is startled awake from its nicedreams and then sees a human, eyes blindfolded and handsbound on the back, kneeling on the freezing ice-covered lake.Who is sentenced to death by the sound of gunshots reverberatingaround the mountains?All That Is Solid Melts into Air-SHI Qing SoloExhibitionDuration: 1PM-6PM, May 26–Jun 30, 2012.Venue: ShanghART H-Space, Bldg 18, 50 Moganshan Rd.,ShanghaiArtists: SHI QingAll That Is Solid Melts into Air, a solo exhibition ofSHI Qing, will be presented in ShanghART H-Space onMay 26th, 2012. The exhibition title is a sentence which isfrequently quoted from Karl Marx’s work. And it is a seriesof artist’s practical clues about art productions and exhibitionsin recent years, as well as intervention and criticismfor today’s art consumption system. In exhibition, artistdisplays work materials from studio, experimental models,semi-finished works, and reproduced exhibited works together.All these are mixed in the space and partly coveredby green plants. Through paths across the exhibition, everyviewer becomes a referee to identify and redefine the artworks. The work forms come from landscape images indifferent historic timeor from public experience.Using a stagelike setting, it pushesthe background-likedisplay to the frontdesk after the subjectof work was takenaway.85

ON STAGELifestyleNCPA Drama Jane EyreTime: 2012/6/13-6/24Venue: NCPA-TheatrePrice: VIP/580/500/420/300/180 RMBTickets are available at 64177845NCPA Drama Jane EyreProduction: National Centre for the Performing ArtsCo-produced by National Centre for the Performing Arts, National Theatre of ChinaPresenter: National Theatre of ChinaThe silent piano, closed suitcase...under the spotlight, Jane Eyre, in a long grey skirt, burstsinto the still life-like stage. In the misty fog, standing outside the Thornfield manor gate, JaneEyre unintentionally starts the fate engine of the people in this old manor.In June 2009, Jane Eyre pioneered by NCPA was staged for the first time, and this was alsothe first interpretation of Charlotte Bronte’s classical novel of the same name on the stage of dramain China. Wang Xiaoying and Yu Rongjun served as the director and the writer respectively.With undiluted poetic language and excellent stage effect, thousands of audiences were immersedinto the amazing 160-minute play, and quickly identified with the characters of the play.Since the premiere, the play has been staged for 56 times and toured in major cities includingChongqing and Shanghai in 2011. It enjoyed a full house in every performance and washighly praised by media and experts.China National Opera House TannhauserTime: 2012/6/27-6/29Venue: NCPA-Opera HousePrice: 100/180/280/400/460/520/580/VIPTickets are available at 64177845Richard Wagner’s opera T annhauser with three acts was created during 1842-1845. Itsfull title is Tannhauser und der Sangerkrieg auf der Wartburg, for which Wagner wrote a scriptaccording to the ancient legend. This opera was premiered at the Dresden Court Theatre on October19, 1845. Tannhauser is free from the influence of Italian opera, without encoding form ofItalian opera. Its various parts adopt transitional approach as mentioned by Wagner. Story plotsare full of dramatic conflicts, while every character has distinct personality. Since this opera,Wagner began to pay attention to comprehensive integration of dramatic ideas and music, andstarted to focus on the effect of stage design. It can be said that Tannhauser is a typical masterpiecewith Wagner’s style.Animal Carnival: Family Concert at CCOMTime: 2012/6/09-6/10Venue: CCOM Music HallPrice: 150/200/300/540(200*3)/720(300*3)Tickets are available at 64177845Dress your kids up, enjoy the classic music and have fun - This is one concert where the audiencewon’t have to sit still!At Concert Hall of Central Conservatory of Music, Director/Conductor Wing Ho andRadetzkymo Chamber Orchestra invite your family to join the journey through the timeless classicmusic tailored for young listeners. Audiences young and old will recognize these classical favouritessuch as Hungarian Dance No.5, Carnival of the Animals, Flight of the Bumble Bee, Dance of theFour Swans.Warm up with pre-concert face painting (free), pattern hunting of Chinese architectural detailsand dress-up competition, and see how a violin is made - Learning about music should alwaysbe this much fun!86

FEATURE“Charming Women”make contests more interestingBy Audrey GuoIn recent years,we saw more andmore Chinesefaces in internationalT stage shows,and they shine amongthe blondes like angels.“Angels” stand outthrough various modelselection contests, and thenstep on international stages.As the only contest held duringChina Fashion Weekeach year, China Super ModelCompetition, provides a greatnumber of great new models tothe fashion world.Not long ago, the 7th TopModel of the World, which washosted by China Fashion Associationand Guangxi Television Station,jointly sponsored by ChinaBentley Culture DevelopmentCo. Ltd, Guangxi TV CityChannel, China Fashion AssociationProfessional FashionModel Committee, and namedby Shanghai Gold Partner BiologicalTechnology Co., Ltd. (“Gold Partner”)was held during the famous domesticfashion event, “China International FashionWeek”.This contest broke the traditionalmode, and made innovation in the evaluationprocedure and the content. Andfor the first time the contest adopted apromotion method, instead of traditionalselection approach. Usually, juries gradeplayers according to their performanceand then elect winners. For this contest,30 players were promoted throughknockout match, and they competed fortop three super models and individual awards by severalshows including opening suit, swimsuit, fashion dress, eveningdress, etc.Besides, the contest introduced the popular micromovies to present the different beauty of models throughoutdoor scenes. Action T, a micro movie of “Spy War ofBeauty”, displayed a story of “women gang”, which featuredthe contest and integrated stage lighting and fashionshows. At the same time, the movie brought back boldinnovation to the transition and rhythm of different partsof the contest. The mysterious code case, the target of spypretties, was taken to the stage and opened, answering audiences’puzzle.The juries of the contest were selected from fashion,movie and television, media and other sectors, and they canassess the performance of players in different aspects, whichhad a higher requirement on the comprehensive abilities ofthe players. Finally, No. 28 player, Zhang Jing from InnerMongolia competition area won the champion. Song Kexin,No. 8 player from Beijing, ranked the second, and No. 16player Li Jiayi the third. In addition, the competition hadtwo other awards: namely “Wonderful ok Star” by No. 28player Zhang Jing, and “Gold Partner Charity Ambassador”by No. 15 player Wang Yibo from Tianjin.The five winners of the competition will participatein the year’s Asian super model final contest on behalf ofChina, and compete for Asian Top Models with 36 professionalmodels from other ten Asian countries and regions.87

THIS ISHINAFascinatingChina Sceneriesin Blockbuster FilmsBy Lesley CuiIt feels good to watch a well-made film with touching plotand enchanting scenes, and only better to see in real theimpressive images it leaves in your head. This issue of ThisIs China will take you to the beautiful places where belovedfilms Avatar, Kong Fu Panda, Crouching Tiger Hidden Dragon,and Hero were shot.88

Zhangjiajie National Forest Park-AvatarThe Zhangjiajie National Forest Park is located inZhangjiajie City in northern Hunan Province in the People’sRepublic of China, covering an area of 4,810 hectares. It wasrecognized as the country’s first national forest park in 1982,and listed as a UNESCO Global Geopark in 2004.The most notable geographic features of the park arethe pillar-like formations that are seen throughout the park.One of the park’s quartz-sandstone pillars, the 3,544-footSouthern Sky Column, had been officially renamed “AvatarHallelujah Mountain” in honor of the eponymous film inJanuary 2010. According to park officials, photographs fromZhangjiajie inspired the floating Hallelujah Mountains seenin the film. The film’s director and production designers saidthat they drew inspiration for the floating rocks from mountainsfrom around the world, including those in the Hunanprovince.The sandstone pillars are the result of many years oferosion. The weather is moist year round, and as a result, thefoliage is very dense. Much of the erosion which forms thesepillars is the result of expanding ice in the winter and theplants which grow on them. These formations are a distincthallmark of Chinese landscape, and can be found in manyancient Chinese paintings.Phoenix Ancient Town-Kong Fu PandaPhoenix is regarded in the Chinese culture as a mythicalbird of good omen and longevity that is consumed by fireto be re-born again from the flames. Phoenix Ancient Townis so called as legend has it that two of these fabulous birdsflew over it and found the town so beautiful that they hoveredthere, reluctant to leave.The town is situated on the western boundary of HunanProvince in an area of outstanding natural beauty wheremountains, water and blue skies prevail. Upon entering thetown the visitor will be impressed by its air of mystery, eleganceand primitive simplicity. The bridges over the waterand unique houses built on stilts display a harmony that isso often portrayed in traditional Chinese paintings. This isparticularly true when mist pervades the scene in the earlymorning or after rain. It soon becomes apparent that theclaim to being one of the two most beautiful towns in thewhole of China is more than justified; the other town isChang Ting in Fujian Province.Phoenix Ancient Town is a wonderful example ofwhat villages were like prior to the onset of modernization.Here dozens of alleys paved with flagstones run between thehouses, each showing wear caused by the feet of generationsof local people who have used them when going about theirdaily business. For the visitor, these alleys are the way to seethe typical high gabled wooden houses built on stilts alongthe banks of the Tuo Jiang River at close quarters.In many ways, life has not changed here for centuriesand this is typified by the tough, hard working yet simpleheartedpeople. Phoenix Ancient Town offers visitors fromboth home and abroad a view of a quite different China fromanything experienced in the modern cities and large conurbationsthat are more widely known.89

THIS ISHINAHong Village-Crouching Tiger,Hidden Dragon90es. A three-hour drive from Shanghai,the county has gone against the trendof modern development. 75 percent ofits land is forested.Bamboo is such a big part of Anjithat a “bamboo culture” has evolvedand a museum displays how folk artistsuse different parts of bamboo to createsculptures, statues and even paintings.Bamboos are practically everywhere.Even the restaurants serve a variety ofdishes featuring bamboo.And if the scenery looks familiar,it’s probably because you’ve seen a filmthat was shot in Anji. Many movieshave been filmed here including partsof the Oscar-winning film CrouchingTiger, Hidden Dragon. In this film, aspectacular fight scene amongst a bambooforest takes place between charactersplayed by Chow Yun-Fat andZhang Ziyi.Going deeper into the county, touristsmay be interested in the She ethnicminority group and their unique tradiorama,show the area at the entrance tothe village where the stream and waterchannels flowing through the villagecollect in a small lake.Much of the architecture datesback to Ming and Qing Dynasties(15th to 17th centuries) and is said tobe the best of its kind in China. ChenzhiHall, one of the larger propertieswithin the village, is open to the publicand contains a small museum.Tourism to Hong Village hasgreatly increased, aided by the designationof the village as a World HeritageSite and also because much of the filmCrouching Tiger, Hidden Dragon wasshot here.Anji County-Crouching Tiger,Hidden DragonKnown as the “hometown ofbamboo”, Anji County in ZhejiangProvince is blessed with mountainscovered with bamboo forests, ripplingstreams, tea terraces and quaint villag-Hong Village is a historic, picturesquevillage on the slopes of MountHuangshan in the southern part ofAnhui Province in China. The villageis a popular tourist destination and,together with Xidi, has been declared aWorld Heritage Site.The village is built next to JiyinStream and nearby are Nanhu and QishuSuiku lakes. Four bridges cross thestream in Hongcun forming a networkjoining the 150 or so buildings in thevillage. Most pictures, like this pan-

tions. If you’re lucky, you may be invitedto participate in a She wedding ceremony.According to tradition, the groom has topass four challenges - solve a riddle, drinkbowls of Chinese liquor, catch a chickenand win a folk song singing competition- before marrying his bride. She peoplelove to get tourists involved in the fun, butdon’t worry, it’s not an attempt to trick youinto marriage.Ejinaqi Banner-HeroWith his 2002 film Hero, directorZhang Yimou made the then unknownEjina Banner an instant star.Audiences throughout the world weremesmerized by the county’s goldenleaves flying all over the sky.In the northwest corner of InnerMongolia, Ejina Banner is one of theonly three extensive poplar forests inthe world and home of 30,000 hectaresof poplar trees. Included in Ejina’sdiverse terrain are vast expanses of theGobi Desert along with gorgeous poplarforests. Considered a camel hub ofInner Mongolia, Ejina is also home toa lengthy history and fascinating nomadiccustoms.Tall poplars and thick rose willowsflourish in Ejina’s vast wilderness.Flocks of sheep roam down slopes ofsand dunes and through the woods asthe setting sun produces a glowing silhouetteof passing camels. It’s no wondersuch scenery attracts picture-takersfrom near and far.From October to November isthe best time to enjoy poplars becausethe sudden temperature drop paintsthe forests golden. In only a few days,the woods completely transform fromlush green to radiant shades of yellow.With the backdrop of blue skies andvast expanses of desert, the vistas canbe stunning. As the temperature continuesto drop, falling leaves becomeanother big attraction for photographersand tourists. Ejina hosts an annualpoplar festival in early October,during which the photography contestis a central event.91

China as anImportant Partnerof MacedoniaBy Slavica KrstevaIhave been in China for18 years. Every momentChina is changing.When I decidedto move from my countryMacedonia to China for myuniversity education in 1995,the unanimous reaction fromfamily and friends was an incredulouslook accompaniedwith expressions like: “Whyon Earth China? What gotinto you”? At that time everyonewas looking towardthe West especially the USand Western Europe as placeswhere careers were madeand dreams could come true.Asia and especially Chinawere an afterthought. Chinawas this mythical place onthe map, which no one knewanything about, apart frompossibly images of bicycles,kung fu and the Great Wall.92Such a contrast to today, where the same peopleare congratulating me on my foresight incoming to China “early” to learn the languageand understand the culture.Arriving in Beijing was both exhilaratingand frightening. Wide streets with buildingsand signs in Chinese seemed daunting.At that time no one spoke a word of Englishon the streets of Beijing, often leading tocomical situations. I had to use hands, weirdfacial expressions and repeated the words inEnglish as a way of communicating but it wasa fun way of discovering Beijing.Beijing was changing so rapidly. It actuallystill is. In July every year we would leavefor summer holidays to Macedonia, and whenwe came back in late August we would beamazed at the change in the city in such ashort time.Those summer holidays were also a wayfor us to stack up on goodies not found inBeijing, so our suitcases were bursting withdifferent spices, cheeses, cold cuts, chocolatesand other delicacies. Today the shops andmega stores seem to hold all the world’s treasuresand at times I find myself in a reversesituation, buying international brands I cannotfind at home and taking them back to mycountry.Furthermore, 10 years ago it was notpossible to find decent pizza or a western restaurantin Beijing, but today every cuisine isrepresented in this city and it is becoming agourmet’s paradise.The rapid development is maybe mostevident in the expansion of the infrastructure.In the mid 90s the 3rd ring road marked theborders of the city; today we have the 6th ringroad. There were only 2 subway lines, so goingfrom Hadian to Sanlitun meant taking a busand subway, and now there are over 10 subwaylines, making it possible to use the subway toget to any part of the sprawling city.Still, though these developments werenotable, they could not be compared to thegiant leap which Beijing and the whole countryof China made with the organization ofthe 2008 Olympic Games, intended as ashowcase to the world of China’s and Beijing’snewfound confidence and progress, as well asits rich heritage and culture.The spirit of the Olympics still prevailstoday in this City which is fast becoming oneof the leading economic, political and culturalcenters in the world, but also still retaining itsunique charm and appeal amid the rapid tempoof change which is still a work in progress.Apart from within China itself, thesedays Chinese development can be feltthroughout the globe. Many Chinese businessesand organizations are looking to expandin different regions all over the world.It would seem that Europe is one the mostattractive places for Chinese businesses. Furthermore,the Chinese people are looking forundiscovered travel destinations for them.Today with all the experience that Ihave gained by living in China and with theknowledge of the Chinese language and itshistory, I am working for the Government ofMacedonia aiming to increase the investmentsand business between China and Macedonia,as well as to increase the number of Chinesecitizens that visit Macedonia.The Chinese companies can get a footholdon the European market by investingand establishing themselves in Macedonia.Many of them have realized the potentialof Macedonia already, particularly the factsthat Macedonia is a safe and friendly place toinvest and our government is committed togive all its support to make Macedonia a greatdestination for Chinese investment.These 18 years I have spent in Chinahave been the most exciting years of my lifebut I feel that the coming 10 years are goingto see a bigger change in China. I look forwardto continuing my journey with Chinaand its people together into the future. Andit is indeed a pleasure for me to be able to usemy knowledge and experience of China tohelp further improve and develop the Sino-Macedonian relationship.(Author: Head of International Office- China Agency for Foreign Investmentsand Export Promotion of the Republic ofMacedonia)

Trust or Not?In recent press there have been variousreports alluding to the conductof foreigners in China. These haveranged from the disgraceful and unseemly,notably the behaviour of a Britishman who drunkly molested a Chinese girl,to the frivolous, best illustrated in the anticsof a rude Russian cellist refusing to movehis feet on a train – something that bewilderinglyreceived nationwide coverage in acountry the size of a continent.The increased reportage and interestin such stories, which are also findingtheir way into social media platforms suchas Weibo, suggests that the Chinese maynow be saying out loud what they havebeen thinking privately for some time, thatthose who are guests in the country shouldbehave as such and not abuse the privilege.Some say that an uncharacteristic impatienceis emerging exemplified by the startlingremarks of Yang Rui, one of CCTVNews 9’s foremost hosts who outlashedagainst ‘snakehead’ foreigners and aimeddirect expletives towards a respected femalejournalist. This was particularly surprisingas his presenter role is with a foreignlanguage CCTV station and is essentiallymeant to help facilitate understanding ofboth Chinese and foreign culture.Undoubtedly a small minority of foreignersdo take advantages and libertiesthat they would not attempt at home. Atthe same time, we shouldn’t overlook thebehaviour of some Chinese who look to exploitforeigner’s naiveties and wallets. Mostforeigners would say that a local businesspartner is not only essential but desirable.But I have heard others say that they are reluctantto trust Chinese partners. We needto explore why. Is this genuine mistrust oran anxiety about language or cultural exclusion.Many Chinese business people believethat with an international business partneror overseas presence, their business gainscredibility, yet others dismiss the idea asforeigners can never “understand” the localmarketplace.So, what does all of this mean for business?Should business partners of differentnationalities, or more importantly cultures,be trusted? Can they be trusted? Unfortunatelythe nature of the media is that storiespeddling bad experiences sell better thangood ones – so you rarely hear of the manyand far more common successes and benefitsthat such joint ventures and cooperationenjoy.Recently a Chinese prospective businesspartner approached me, he cited thatin his view I ‘understand’ China as the reasonfor doing so. In a literal sense, this is ofcourse untrue, it would be wildy foolish ofeither of us to believe I understand China,having only lived here for two years. Whathe meant however, was that I was makingthe effort and trying to ‘understand’ China.From a man who has established a successfulcareer in developing links with Chinaand foreign countries it was my endeavoursand enthusiasm to learn about China andlocal business practice that attracted hisinterest. It was intent rather than achievementthat provided the foundation of histrust and what could grow into a long termbusiness relationship.This experience is probably atypical.Trust is usually established over a periodof time rather than immediately and this isevident in international and local Chinesebusiness behaviour. It is quite natural to favourpeople of your own culture and everyonehas heard horror stories of trade scams,missed payments, financial default and latedeliveries. Too often these are wrongly attributedto the cultural aspects of partnershipwhen in fact the fault lies with thenaive and the dishonest. Individuals, notculture, not language. Yet an initial basisand opportunity must be allowed for peopleto demonstrate dependability. Whetherthe relationship goes on to develop frompersonal likeability, robust financial performanceor professional capability is almostincidental, it is probable that as long asthere is fair treatment between the parties,and an enduring effort to understand andwork together there will be trust.When frivolous stories such as the oneconcerning the Russian cellist are givensensationalist news coverage in an attemptto exploit or distort more serious issues, weforget that economies and cultural exchangegrow and rely on cooperation with peopleBy Lewis McCarthyfrom different backgroundswho may also behave differently.Singling out for disproportionateattention theactions of a handful of fecklessforeigners can do widerdamage to our perceptionsof and our trust in our (potential)foreign partners.Of course, this exampleis something of acaricature but you get thedrift….a local businessmanor a small enterprise may beinfluenced by such nonsenseto think again about workingwith foreigners whothey come to regard as notfit for partnership or purpose.So let us have morepositive news, a bit moretrust and a more enlightenedinsight into the unreportedskills and talents offeet planting foreigners.93

Culturesān shí liù jì三十六计Thirty-Six Stratagems (I)The Thirty-Six Stratagems( 三 十 六 计 sān shí liù jì) is a Chineseessay used to illustrate a series of stratagemsused in politics, war, as well as incivil interaction, often through unorthodoxor deceptive means. No one reallyknows who the author was; instead, theprevailing view is that the Thirty-SixStratagems may have originated in bothwritten and oral history, with many differentversions compiled by differentauthors throughout Chinese history.The Thirty-Six Stratagems hassix chapters containing six stratagemseach. The first three chapters generallydescribe tactics for use in advantageoussituations, whereas the last three chapterscontain stratagems that are moresuitable for disadvantageous situations.They are in the form of four-characteridioms. Each proverb is accompaniedby a short comment, no longer than asentence or two, that explains how saidproverb is applicable to military tactics.These 36 Chinese proverbs are relatedto 36 battle scenarios in Chinese historyand folklore, predominantly of theWarring States Period and the ThreeKingdoms Period.The Culture column of this issuewill share with you the first three chaptersof the essay, (to encourage you towin), and then the rest three chapters inJuly issue, (in case you stand in disadvantageoussituation in a battle).Chapter Ⅰ 胜 战 计 shèng zhàn jìWinning Stratagems瞒 天 过 海 mán tiān guò hǎiDeceive the heavens to cross theoceanComment: 备 周 而 意 怠 , 常 见 则不 疑 , 阴 在 阳 之 内 , 不 在 阳 之 对 。 太 阳 ,太 阴 。bèi zhōu ér yì dài, cháng jiàn zé bùyí, yīn zài yáng zhī nèi, bú zài yáng zhīduì. tài yáng, tài yīn.Prepare too much and you losesight of the big picture; what you seeoften you do not doubt. Yin (the art ofdeception) is in Yang (acting in open).Too much Yang (transparency) hidesYin (true ruses).围 魏 救 赵 wéi wèi jiù zhàoBesiege the state of Wèi to rescuethe state of ZhàoComment: When the enemy istoo strong to be attacked directly, thenattack something he holds dear. Knowthat he cannot be superior in all things.Somewhere there is a gap in the armour,a weakness that can be attackedinstead.借 刀 杀 人 jiè dāo shā rénKill with a borrowed knifeComment: Attack using thestrength of another (in a situation whereusing one's own strength is not favourable).Trick an ally into attacking him,bribe an official to turn traitor, or usethe enemy's own strength against him.Stratagem以 逸 待 劳 yǐ yì dài láoLeisurely await for the labouredComment: It is an advantage tochoose the time and place for battle. Inthis way you know when and where thebattle will take place, while your enemydoes not. Encourage your enemy toexpend his energy in futile quests whileyou conserve your strength. When heis exhausted and confused, you attackwith energy and purpose.趁 火 打 劫 chèn huǒ dǎ jiéLoot a burning houseComment: When a country isbeset by internal conflicts, when diseaseand famine ravage the population, whencorruption and crime are rampant, thenit will be unable to deal with an outsidethreat. This is the time to attack.声 东 击 西 shēng dōng jī xīMake a sound in the east, then strikein the westComment: In any battle the elementof surprise can provide an overwhelmingadvantage. Even when faceto face with an enemy, surprise can stillbe employed by attacking where heleast expects it. To do this you must createan expectation in the enemy's mindthrough the use of a feint.94

Chapter Ⅱ 敌 战 计 dí zhàn jì Enemy Dealing Stratagems无 中 生 有 wú zhōng shēng yǒuCreate something from nothingComment: A plain lie. Makesomebody believe there was somethingwhen there is in fact nothing.暗 渡 陈 仓 àn dù chén cāngOpenly repair the gallery roads,but sneak through the passage of ChencangComment: Advancing secretlyby an unknown path. Deceive the enemywith an obvious approach that willtake a very long time, while surprisinghim by taking a shortcut and sneak upto him. As the enemy concentrates onthe decoy, he will miss you sneaking upto him.隔 岸 观 火 gé àn guān huǒWatch the fires burning across theriverComment: Delay entering thefield of battle until all the other playershave become exhausted fightingamongst themselves. Then go in at fullstrength and pick up the pieces.李 代 桃 僵 lǐ dài táo jiāngSacrifice the plum tree to preservethe peach treeComment: Palming off substitutefor the real thing. There are circumstancesin which you must sacrificeshort-term objectives in order to gainthe long-term goal. This is the scapegoatstratagem whereby someone elsesuffers the consequences so that the restdo not.笑 里 藏 刀 xiào lǐ cáng dāoHide a knife behind a smileComment: Charm and ingratiateyourself to your enemy. When you havegained his trust, move against him insecret.顺 手 牵 羊 shùn shǒu qiān yángTake the opportunity to pilfer a goatComment: While carrying outyour plans be flexible enough to takeadvantage of any opportunity thatpresents itself, however small, andavail yourself of any profit, howeverslight.Chapter Ⅲ 攻 战 计 gōng zhàn jì Attacking Stratagems打 草 惊 蛇 dǎ cǎo jīng shéStomp the grass to scare the snakeComment: Do something unaimed,but spectacular ("hitting thegrass") to provoke a response of theenemy ("startle the snake"), therebygiving away his plans or position, orjust taunt him. Do something unusual,strange, and unexpected as this willarouse the enemy's suspicion and disrupthis thinking. More widely used as"[Do not] startle the snake by hittingthe grass". An imprudent act will giveyour position or intentions away to theenemy.借 尸 还 魂 jiè shī huán húnBorrow a corpse to resurrect the soulComment: Take an institution,a technology, a method, or even anideology that has been forgotten ordiscarded and appropriate it for yourown purpose. Revive something fromthe past by giving it a new purpose orbring to life old ideas, customs, or traditionsand reinterpret them to fit yourpurposes.调 虎 离 山 diào hǔ lí shānEntice the tiger to leave its mountainlairComment: Never directly attackan opponent whose advantage is derivedfrom its position. Instead lure himaway from his position thus separatinghim from his source of strength.欲 擒 故 纵 yù qín gù zòngIn order to capture, one must letlooseComment: Cornered prey willoften mount a final desperate attack.To prevent this you let the enemy believehe still has a chance for freedom.His will to fight is thus dampened byhis desire to escape. When in the endthe freedom is proven a falsehood theenemy's morale will be defeated and hewill surrender without a fight.抛 砖 引 玉 pāo zhuān yǐn yùTossing out a brick to get a jade gemComment: Bait someone bymaking him believe he gains somethingor just make him react to it ("toss out abrick") and obtain something valuablefrom him in return ("get a jade gem").擒 贼 擒 王 qín zéi qín wángDefeat the enemy by capturing theirchiefComment: If the enemy's armyis strong but is allied to the commanderonly by money, superstition or threats,then take aim at the leader. If the commanderfalls the rest of the army willdisperse or come over to your side. If,however, they are allied to the leaderthrough loyalty then beware, the armycan continue to fight on after his deathout of vengeance.95