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									                                China News in Brief
                                     February, 2011

Compiled by Yimin Zhang, University of Shanghai for Science and Technology and distributed free of charge.




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Hard Landing for China, Hard Times for the U.S.
     As late as 2007 most believed that China and other Asian lands would decouple from U.S. consumers. They
could grow independently even if Americans retrenched and stopped buying the exports that had traditionally
driven Asian growth. The 2008-09 U.S. consumer cutbacks disproved that theory, so China implemented a $585
billion stimulus plan in 2009. It was twice the size, in relation to China's economy, of the American fiscal stimulus
that same year. The results were quick and spectacular. China's GDP growth leaped from a recessionary 6% in the
first quarter of 2009 to 12% four quarters later. But its exuberant bank lending spawned a property bubble and a
spike in CPI inflation from negative territory in 2009 to 5.1% last November. Politically sensitive food prices rose
10%. China then slammed on the brakes. The hard landing in China will spread throughout Asia and subdue global
growth. It will also prick the massive global commodity bubble, as investors realize the key buyer is withdrawing.
Agricultural prices will fall as speculators exit. Dreams of decoupling will turn into nightmares of worldwide
recession, and the shock could well push the U.S. into a downturn. A commodity collapse, of course, would take
heat off the American producers, wholesalers and retailers that have not been able to push higher costs through to
cautious consumers.
     The 20% decline in house prices I foresee over the next several years could also adversely affect the U.S.
economy. Blame excess inventories--the mortal enemy of prices. Some 1.5 million housing units over and above
normal working inventory levels are visible, with at least another half-million in the hands of owners who've held
them off the market but want to sell. Houses are now bad investments, and tight mortgage-lending standards and
high unemployment will continue to limit new buyers. A further 20% drop in house prices will push underwater
mortgages from 22% to 40%. Homeowners who can afford their mortgage payments but don't want to throw good
money after an underwater mortgage will default. It could become the "in" thing. I estimate that it will take at least
four years to eat up the excess inventory in the housing market.
Source: A. Gary Shilling: Hard Landing for China, Hard Times for Us, Forbes Magazine dated February 28, 2011


The Rise of China: Massive Population Lifts Nation's Growth
     China's rise as the world's second-largest economy highlights a new postindustrial reality: Population counts
as much as productivity in determining economic power. Since the industrial revolution, that hasn't been the case.
The productivity of workers in the U.S., Britain, Germany and Japan not only made those countries rich, but it also
made them the world's largest economies despite having far smaller populations than China and India.
China's rapid growth over the past 30 years has pulled hundreds of millions out of poverty and turned China into
the world's factory floor. But China's per capita gross domestic product is still just $4,300, according to the
International Monetary Fund. It is largely because of the population of 1.3 billion that China is moving to the top
ranks of economic powers. Look at the arithmetic. China has 11 times Japan's population. That is enough to propel
it ahead of Japan in the GDP rankings, despite a per capita income of little more than one-tenth the level of Japan.
"For the first time, you have this odd combination -- one of the world's largest economies is also one of the world's
poorest economies," said Qu Hongbin, an HSBC analyst in Hong Kong.
Source: Bob Davis: The Rise of China: Massive Population Lifts Nation's Growth, Wall Street Journal. (Eastern
edition). New York, N.Y.: Feb 14, 2011. pg. A.12


Big shake-up begins in China

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     Possibly the world's largest bureaucratic reshuffle has begun in China. In all, more than 50 million Chinese
Communist Party (CCP) cadres belonging to 44,000 party units at four administrative levels - township, county,
region and province - will be involved. Township-level changes will take place in the first quarter of the year,
county-level changes in the second quarter - and so on until the whole process is completed by early next year.
     This will pave the way for the selection of delegates to the CCP's 18th national congress, to be held in the
second half of next year. More importantly, there will be changes in the upper echelons of power - namely, the
Central Committee, which is the party's highest authority, and the Politburo, its smaller but powerful
decision-making body. This long process does not usually attract much foreign media attention, but the outcome
may have important implications for the region and the rest of the world.
     According to Professor Ye Duchu of the Central Party School, an expert on the CCP's organization, this year's
will be the fourth major reshuffle since China embarked on its reform drive more than 30 years ago. Each round
was precipitated by what the top leader at the time saw as an urgent need that had to be addressed.
     The first took place in 1986 under the late patriarch Deng Xiaoping, who was anxious to groom a new set of
leaders with the right revolutionary spirit, education and professional background to carry on his economic reforms.
The reshuffle allowed him to rid the party of ultra-leftist Maoists from the Cultural Revolution era.
     The second round came in 1992 during the rule of Deng's successor Jiang Zemin, who wanted to speed up
economic growth. Hence the focus was on recruiting cadres with the ability and willingness to grow China's
economy. The political motive, however, was to remove officials who remained sympathetic to the 1989
pro-democracy student movement and especially disgraced leader Zhao Ziyang.
     The third reshuffle did not come until 2006 under President Hu Jintao, who took power with a pledge to build
a 'harmonious society', balancing growth and equitable income distribution. This was a departure from Mr Jiang's
growth-at-all-costs model. Politically speaking, the reshuffle ensured that new office-bearers pledged their
allegiance to Mr. Hu.
     The corruption and rising prices of recent years, with sporadic social unrest breaking out across China, have
prompted Mr. Hu to carry out a new reshuffle. Left unchecked, these twin threats will undermine not only China's
development, but also the CCP's rule. Recently, Mr. Hu vowed to take more forceful steps to root out corruption in
government ranks and punish corrupt officials. The number of corrupt officials has jumped by 700 per cent since
1989, according to a joint study by Tsinghua University and the Beijing University of Aviation and Aeronautics.
China lost 30 per cent of its gross domestic product (GDP) to corruption in 2008, up from 10 per cent in 1998,
according to a study by Professor Hu Angang and Professor Wang Xiaoqiang. Most of the ill-gotten wealth was
channeled abroad.
Source: Ching Cheong: Big shake-up begins in China, The Straits Times. Singapore: Jan 28, 2011.


Caution as economy overtakes Japan's
     China still has a long way to go to improve its economy, despite formally overtaking Japan as the world's
second largest economy, experts said. However, economists pointed out that China's per capita GDP was only
about 10 percent of Japan's. China's per capita GDP was about $4,300 in 2010, and income levels have been falling
behind economic growth for years. Ma Jiantang, head of the National Bureau of Statistics, said in January that the
country has a huge population, a weak economic foundation, few resources and many people are mired in poverty.
"Therefore, while we take note of our expanding economic size and strength, we should also soberly understand

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that China remains a developing nation." The World Bank estimates that more than 100 million Chinese people -
nearly the size of Japan's entire population - live on less than $2 a day.
     The China Youth Daily described China's expansion as an "empty happiness" as the country's economic
development was at the expense of cheap labor and environmental degradation, while the quality of life, including
education, social security and healthcare, still lags far behind developed countries. Zheng Xinli, permanent
vice-chairman of China Center for International Economic Exchanges, also said the country should continue its
reforms and improve its economic structure to avoid the "middle-income trap". The term was coined by the World
Bank to describe stagnation in a country when its per capita GDP reached $3,000. He predicted urbanization will be
the biggest driving force for China's economy. One person moving into a city can create economic value of 100,000
yuan, he said. In the next 10 years, 200 million Chinese people will move into cities and towns, with a potential to
add 20 trillion yuan to the economy over the decade, he estimated.
Sustained economic growth in China also helps other economies in the world, including Japan. Japan's economy
has benefited from China's rapid growth, initially as businesses shifted production here to take advantage of lower
costs, and as local incomes rose, by tapping an increasingly lucrative market for Japanese goods.
Source: Li Woke and Wang Xing: Caution as economy overtakes Japan's, China Daily, 2011-02-15


China still a developing country despite fast GDP growth
     China remains a developing country despite rapid GDP growth, Chinese Foreign Ministry spokesman Ma
Zhaoxu said Tuesday. "China's GDP growth has remained relatively fast in recent years with expanding aggregate
economic volume and fruitful development. However, it must be noted that China's economy still has problems,"
he said. "According to data from international organizations like the International Monetary Fund, China ranks
around 100th worldwide in terms of per capita GDP, which is barely half the world's average," said Ma. China still
has a population of 150 million people below the UN poverty line of $1 a day per person, he said. "No matter what
path of development China chooses, as a responsible member of the international community, China will stick to
the path of peaceful development and play its due role in protecting world peace and promoting common
development," he said.
Source: Xinhua: China still a developing country despite fast GDP growth, 2011-02-16


China's Jan CPI up 4.9%; PPI up 6.6%
     The consumer price index (CPI) rose 4.9 percent in January year on year, the National Bureau of Statistics
(NBS) announced Tuesday. The figure is 0.3 percentage points higher than that of December, and is 0.2 percentage
points lower than the 28-month high in November. Although the figure is lower than market expectations of above
5 percent, inflation remains a daunting problem complicated by ongoing winter drought in the country's north,
migrant worker wage increases and global commodity price hikes. "The extremely cold weather and the Spring
Festival holiday spending pushed prices up 1 percent from a month ago," NBS said in a question and answer
statement on its website.
     The producer price index (PPI) rose 6.6 percent in January year on year.
     Food prices, which in the past accounted for a third of the basket of goods in China's CPI calculation, surged
10.3 percent year on year. The price of grain rose 15.1 percent year on year, and that of eggs was up 20.2 percent.
Fresh vegetables advanced 2 percent, while fruit was up 34.8 percent. The NBS also announced Tuesday it had

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reduced the weighting of food prices on the CPI by 2.21 percentage points and had increased that of living costs by
4.22 percentage points after the nation's home prices skyrocketed. The statistics agency said the adjustment added
0.024 percentage points to January's figure, denying media reports of a drag-down of 0.3 percentage points. The
NBS said it regularly adjusts the composition of the CPI basket.
Source: Xinhua: China's Jan CPI up 4.9%; PPI up 6.6%, 2011-02-25


China Raises Interest Rates To Counter Inflation Risk; [Business/Financial Desk]
     China on Tuesday raised interest rates for the third time since October, in the latest sign that the authorities
were trying to temper economic growth and prevent inflation from escalating further. The central bank in Beijing
raised its benchmark one-year deposit rate by a quarter of a percentage point, to 3 percent, and its one-year lending
rate by a similar amount, to 6.06 percent.
     In fact, many economists forecast still more increases and other measures this year as the battle to combat
price increases intensifies. "There are plenty of reasons to expect inflation to pick up further in the next few
months," Brian Jackson, an analyst at the Royal Bank of Canada in Hong Kong, wrote in a note after the rate
increase announcement Tuesday.
     Data released by the National Bureau of Statistics on Jan. 20 put the pace of growth at 10.3 percent for 2010,
up from 9.2 percent in 2009 and significantly above what analysts had expected. Inflation came in at 4.6 percent for
December, well above what the authorities are comfortable with, and could rise further, economists believe.
     Beijing has reacted with a range of tools aimed at containing price increases. These have included measures
aimed specifically at the hot real estate sector -- like property taxes recently announced for some cities -- and
instructions to the country's state-controlled banks to lend less. The reserve requirement ratio for state-controlled
banks -- which effectively dictates the amount that lenders have to set aside against loans, and thus affects how
much they can lend -- has been raised seven times since early 2010.
     Currency appreciation will also most likely be part of Beijing's efforts to curb inflation over 2011, said Mr.
Jackson, the R.B.C. economist. The pace of any such increases, however, is likely to remain muted, analysts and
bankers with knowledge of policy makers' views have said. The renminbi has already been rising at an annualized
rate of 5.7 percent against the dollar since China broke the currency's peg to the dollar last June.
Source: Bettina Wassener: China Raises Interest Rates To Counter Inflation Risk; [Business/Financial Desk], New
York Times. (Late Edition (East Coast)). New York, N.Y.: Feb 9, 2011. pg. B.3


CBRC to lend more to rural areas, SMEs
     China's banking regulator said Thursday that it would seek to increase loans from the country's banks to the
agriculture industry and rural areas, as well as extend more credit for small enterprises this year. The China
Banking Regulatory Commission (CBRC), regulator of the country's banks, said in a statement on its website that it
would guide financial institutions to expand their network in rural areas and increase their agriculture-related loans.
     According to CBRC's statistics, Chinese banks' new loans to agriculture-related businesses and rural
households topped 2.63 trillion yuan ($399.7 billion) in 2010, bringing the country's outstanding agriculture- and
rural areas-related loans to 11.77 trillion yuan by the end of 2010. As for bank loans to small businesses, the CBRC
said commercial lenders should ensure that the growth of new loans they give to small enterprises in 2011 must be
no less than the average level of credit growth this year. China's banks lent 1.84 trillion yuan to small enterprises

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last year, mainly in sectors of manufacturing, wholesale and retail, water resources, environmental protection and
public facilities management. Further, Chinese banks' outstanding loans to small businesses were 7.27 trillion yuan
by the end of last year, or about 24 percent of their corporate loans, 0.8 percentage points lower than in 2009.
        China's new yuan-denominated loans rose to 7.95 trillion yuan last year, exceeding the government's target of
7.5 trillion yuan. Compared with medium and large companies, agriculture-related businesses and small enterprises
have long been underserved by Chinese banks as commercial lenders were reluctant to issue loans to them due to
the high risks and, instead, preferred to lend to large state-owned companies.
Source: Xinhua: CBRC to lend more to rural areas, SMEs, 2011-02-25


Bank reserve requirements raised
        Banks' required reserves were raised by 50 basis points on Friday and further interest rate rises to tackle
                                                   inflation were not ruled out by Zhou Xiaochuan, governor of the
                                                   People's Bank of China. The move by the central bank was the
                                                   eighth hike since the beginning of 2010 to control inflation in China.
                                                   The measure will be effective from Feb 24, after which the reserve
                                                   requirement ratio for big commercial banks will be 19.5 percent.
                                                   The move is estimated to mop up about 350 billion yuan ($53.2
                                                   billion) from the market.
                                                        Zhou said raising the reserve requirement is just one weapon
in the fight against inflation. "We can't really say that it's the only method that we'll use to battle inflation, it's about
using all means including rates and currency," he was quoted by Bloomberg as saying. "One method doesn't
exclude the other," said Zhou, who was attending a gathering of G20 finance ministers and central bankers,
following the announcement.
        China's consumer inflation picked up to 4.9 percent in January from 4.6 percent in December. It hit 5.1 percent
in November, a 28-month high. The recent drought in some major grain-producing areas, together with
international grain price hikes, has led to increasing worries about rising inflation. Asset bubbles are also a major
concern for policymakers. New home prices rose in January from a year earlier in 68 out of the 70 cities monitored.
To soak up excessive liquidity to help curb increasing inflation and asset bubbles, the central bank raised interest
rates in February for the third time since mid-October. Further policy tightening is on the cards, a senior economist
said.
Source: Wang Xiaotian: Bank reserve requirements raised, China Daily, 2011-02-19


Shanghai plans insurance bourse
        Shanghai has applied for central government approval of its plans to build an insurance exchange, according to
one of the people responsible. The move marks another step in the eastern financial hub's drive to become an
international financial center by 2020. The city's intention to establish the exchange first surfaced in June last year,
when the deputy-mayor, Tu Guangshao, told the Third Lujiazui Forum that Shanghai is "conducting research and
working on a plan to establish a market for insurance products with the support of the central government". Tu said
at a forum on June 25 that the exchange will be a major market for reinsurance products.
        A report in the Security Times on Thursday said the exchange will initially trade liability insurance,

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reinsurance, and property and group life insurance products. It will offer risk securitization products, catastrophe
bonds and insurance derivatives, to spread the risk from the insurance market to the securities market, at a later date.
Life insurance, property insurance, reinsurers and insurance brokers will be among the main participants in the
proposed exchange, according to the report.
     Shanghai has vowed to become an international financial center by 2020, but the development of the city's
insurance industry - one of the three pillars of the modern financial industry - lags behind activity in banking and
securities. Xu Wenhu, director of the Insurance Research Center in Fudan University and head of the research
group for the proposed exchange said the exchange, if established, will be a watershed in the development of the
industry. "The insurance exchange is one of the most important components in the city's plan to become an
international financial center," he said. "Innovation in the trading system for insurance products will drive forward
the overall development of Shanghai's insurance industry."
     Two shipping insurance centers were set up in December, providing a boost to insurance services in the city.
The Shanghai-based China Pacific Insurance (Group) Co Ltd unveiled a shipping insurance center on Dec 30 to
provide insurance services covering vessels, cargo transportation, maritime energy, port property and marine
liabilities. A similar body was launched a day earlier by PICC Property and Casualty Co Ltd, a subsidiary of the
People's Insurance Co (Group) of China Ltd. The number of insurance companies in Shanghai increased to 110 at
the end of 2010 from 100 a year earlier, according to figures released by the Shanghai Bureau of the China
Insurance Regulatory Commission.
Source: Gao Changxing: Shanghai plans insurance bourse, China Daily, 2011-02-19


Rate hike 'aims to help tame inflation'
     The central bank on Tuesday raised interest rates for the third time since mid-October by another 25 basis
points, to help mop up liquidity and tame surging inflation. Effective on Wednesday, the benchmark one-year
lending rate will increase to 6.06 percent from 5.81 percent, and the one-year deposit rate will rise to 3 percent from
2.75 percent, the People's Bank of China (PBOC) said in an announcement on its website.
                                                               The tightening measure was announced right at the
                                                          end of the Spring Festival holidays and one day before the
                                                          markets open. The CPI rose 4.6 percent in December after
                                                          jumping to a 28-month high of 5.1 percent in November.
                                                          The figure for January has yet to be disclosed. China saw
                                                          its growth expand by 9.8 percent in the fourth quarter of
                                                          last year, compared to 9.6 percent in the third quarter. "The
                                                          risk of rising inflation cannot be neglected because major
                                                          economies are expected to shore up their growth by
maintaining an easy monetary stance. As a result, a large amount of capital flows into emerging economies," the
PBOC said in a report published on Jan 30. It added that rising costs for labor and resources also contribute to
inflation. To combat inflation, China raised the reserve requirement ratio for banks six times and increased interest
rates twice in 2010. The reserve ratio was again raised on Jan 14. To curb inflation and control financial risks, the
central bank announced earlier that it had set the growth rate target for M2, the broad measure of money supply that
covers cash in circulation and all deposits, at 16 percent for 2011. M2 rose by 19.7 percent in 2010 over the

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previous year, exceeding the officially set target of 17 percent, according to the central bank on Jan 11. The PBOC
also vowed to strengthen control over yuan lending, corporate debt and equity financing, to combat inflation.
Source: Wang Xiaotian: Rate hike 'aims to help tame inflation', China Daily, 2011-02-9


Labor shortage in China reflects shifting situation
     After a tiring journey, Zhang Zhifeng, a migrant worker from the mountainous Guizhou province in Southwest
China appeared at a job fair with his huge red suitcase. Zhang, 27, went there directly from the railway station after
arriving at Guangzhou, the capital of the prosperous Guangdong province in South China. Two hours later, Zhang
signed a contract with a computer factory, which promises to give him 1,800 yuan ($273) a month, as well as a
dormitory with an air-conditioner and an annual bonus that is as much as his monthly salary.
     Many of the traditionally prosperous regions, like the Yangtze and the Pearl river deltas, however, are
experiencing labor shortages after the holidays. In Guangdong, more than one million workers are needed, which
counts for about five percent of the total number of laborers in the province, said Ou Zhenzhi, head of the human
resources and social security department of the Guangdong provincial government. In Yiwu of East China's
Zhejiang province, which is a well-known manufacturing hub for small commodities, representatives of 11
companies which needed nearly 1,000 workers went to northwestern China to seek workers, but they brought back
only eight workers.
     The population of migrant workers in China stands between 220 to 230 million, among whom 140 million had
worked outside their hometowns. Many large enterprises have also set up branches in central and western parts of
China, which have created more job opportunities for migrant workers in their hometowns. Foxconn, the world's
largest electronics contractor, for instance, opened a plant in Chengdu, the capital of Sichuan, last October and one
more in Zhengzhou, the capital of central China's populous Henan province, in December. Both Sichuan and Henan
are traditional labor bases in China.
     On the other hand, the change in the mindset of migrant workers has also affected their decisions about where
to work. Apart from the salary, self-improvement was another consideration for migrants. Peng Jiulin, 22, "I want
to work in an automobile store," said the man from the countryside of Sichuan. "In my hometown, more and more
people have bought their own car. I hope I could learn something from the job and then go back to start my own
career." Peng said he could have landed a job with a higher salary but he refused. "For me, it is the priority to learn
more. We shouldn't be short-sighted," he said.
     Children are also a reason why migrants refuse to work far away from home. People born in the 1980s used to
be the main force of migrants. But as they entered marrying age and started having children, they became reluctant
to leave home. To retain workers, the hometown of the migrants has taken measures to create job opportunities. In
Luyi county, a clothing factory promised the same salary for migrants that they would receive in Guangdong. It
also offered free accommodations and dinner, as well as social security subsidies and an annual bonus. This
reinforced their determination to stay at home.
Source: Xinhua: Labor shortage in China reflects shifting situation, 2011-02-19


Bosses battle it out for workers
     Coastal and inland cities are fiercely competing to attract migrant workers as China's labor shortage spreads to
less-developed central and western regions. In Southwest China's Chongqing, many firms have set up booths at

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railway and bus stations to persuade workers to stay home instead of returning to the coast. Tens of millions of
migrant laborers travel by train or bus during the Spring Festival break, which ends on Feb 17. At the city's North
Railway Station on Friday, about a dozen workers told China Daily that they will stay in their hometown if they can
get similar wages. Migrant workers in the east earned an average of 5 percent more than those in western regions in
2009, yet the disparity was 15 percent five years earlier, show figures from the National Bureau of Statistics.
On-site recruitment consultants from three leading manufactures in Chongqing, including Foxconn, refused to
speculate on whether the municipality will face a labor shortage this year. However, on its website, the city's labor
bureau on Wednesday posted an open letter urging workers to find jobs close to home. Many coastal cities have
strict requirements that make it difficult for migrant workers to send their children to public schools. As of
Wednesday, 71,000 of the 576,000 workers who returned to celebrate the Spring Festival in Chongqing had
decided to stay, according to labor officials. Enterprises in coastal areas are not giving up, however. Firms in
Shanghai have dispatched almost 400 buses to bring in workers from Anhui, Henan and Hubei provinces. Officials
in Shaoxing, East China's Zhejiang province, reportedly contacted authorities in labor-rich Chongqing and Sichuan
province for help in hiring more workers, only to be turned down. The shortage of manpower is a major problem
for the labor-intensive manufacturers on the coast. At Guangzhou Railway Station in South China's Guangdong
province, many company representatives held placards on Friday to grab the attention of arriving workers.
The migrant workforce has shrunk by about 20 million people in the past three years, China Business News
reported. Ou Zhenzhi, director of Guangdong's labor bureau, estimated the province will be short by about 1
million workers this year. To deal with the problem, his authority has done deals with Guizhou province and the
neighboring Guangxi Zhuang autonomous region to import more migrant workers. Zhang Yi at the Chinese
Academy of Social Sciences' institute of population and labor economics, attributes the labor shortage to structural
changes in China's demography. The country's family planning policy, which has been running for 30 years,
resulted in decreasing numbers born in 1980s and 1990s, which is problematic, he said, as young people make up a
vast proportion of the migrant workers. Another reason for the shortage, said Zhang, is that many enterprises have
moved to less-developed central and western regions, causing a greater demand for workers there. Chongqing
attracted $6.3 billion in foreign direct investment last year, while Chengdu, Sichuan's capital, received $6.4 billion,
according to China Business News. Enterprises also need to offer more training to workers to improve their skills
and help them to better adjust to the production upgrade, he added.
Source: Chen Xin, Wang Huazhong and Zheng Caixiong: Bosses battle it out for workers, China Daily,:
2011-02-12


Green' financing channels for green industry
     China will establish easy financing channels for companies that manufacture energy-saving and
environment-protecting equipment, the Shanghai Securities Journal reported Friday. The government will issue its
12th Five Year Plan (2011-2015) for this sector soon, Zhou Changyi, director of the Energy Saving and
Comprehensive Use Department of the Ministry of Industry and Information Technology, told the Shanghai
Securities Journal. Zhou said China will set standards for the equipment or products manufactured to save energy
and protect the environment, aiming to help this sector develop in an orderly way.
Source: Song Jingli: 'Green' financing channels for green industry, China Daily, 2011-02-11


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China to promote energy-saving building materials in rural area
     The Ministry of Housing and Urban-Rural Development's (MOHURD) Department of Village and Township
Construction set plans to provide subsidies for energy-saving building materials, the Shanghai Securities News
reported Monday. The plans are part of the expansion of the "building materials going to the countryside" pilot
project in 2011. Industry experts said although the project is still in its early stages, its potential market is huge,
according to the report. Last October, six ministries including MOHURD chose Shandong province and Ningxia
Hui autonomous region as the pilot regions for promoting cement products in the countryside. The pilot program
aims to seek specific measures, operational methods and working modes. The results showed that the project can be
carried out on a larger scale, the newspaper said.
Source: Qiang Xiaoji: China to promote energy-saving building materials in rural area, China Daily, 2011-02-22


Housing market expected to cool under strict purchasing limits
     China's surging housing market is expected to cool, at least for a while, as a new package of policies that
include purchasing restrictions, property taxes, and the availability of government-subsidized flats are implemented
nationwide, analysts say. With the government's latest tightening measure, more than a dozen Chinese cities,
including Beijing, Shanghai, and Tianjin, have capped the number of apartments a family can buy, especially
raising the level of difficulty for non-residents to buy apartments for investment. The central government also
raised the down-payment requirement for second home purchases and the lending rates, while Chongqing and
Shanghai introduced the country's first-ever property taxes.
     The government previously rolled out a series of tightening measures, but property prices remain high since
2009 in the wake of the global financial crisis as large amounts of speculative capital stayed in the property market.
The National Bureau of Statistics of China last week reported that under its readjusted calculation system, prices of
new properties in the country's 70 major cities continued to rise in January. Ten of the 70 surveyed cities reported
increases of more than 10 percent from a year ago, the National Bureau of Statistics said. Six cities also saw
second-hand home prices go up by at least 10 percent. Revenue from land sales is a major source of local
government income in a number of Chinese cities. But soaring housing prices have become a key source of public
complaints in recent years, prompting the government to cut reliance on land sale revenue.
     Aside from purchase limits and property taxes, the government also vowed to provide 10 million subsidized
affordable apartments nationwide to low-income families this year. That figure roughly translates into half of the
housing floor space sold on the market in 2010. But for families who have money, property is one of the few
available investment options whose long-term gains can beat inflation.
     Chinese residents have traditionally favored saving over consumption and investment when it comes to the
disposal of income. But a survey conducted by the People's Bank of China, the central bank, late last year found
that more respondents have opted for investment than keeping their money in banks. Home purchases remain the
most popular choice of investment, the survey finds.
Source: Xinhua: Housing market expected to cool under strict purchasing limits, 2011-02-23


Chinese SME Leaders Forum kicks off in New York
     The Chinese small medium enterprise (SME) Leaders Forum was held here on Wednesday, with over 100
Chinese entrepreneurs attending the meeting. Bill Clinton, the former US president, was invited by the forum to

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give a speech. He said the 21st century was challenging for the world because we have to deal with unstable issues
from financial sectors, climate change and terrorist threat.
     He pointed out that the relationship between the US and China is vital to the world. "The question of 21st
century is whether or not U.S. and China will have basically positive and cooperative relationship economically and
politically," Clinton said. "If we do, I think we will increase the chances that the world will deal with the problems
and take advantage of the opportunities," he added.
     He said the private sectors are very important for creating new jobs. "When I was president, 92 percent jobs
were created by private sector, not by government." He emphasized that the presence of Chinese private business
leaders is "very important," because he thought the US and China should needed to "make more good things
happen by working together." "Business to business contacts are growing, I think it's in China's interest and it's in
the interest of US and it's really in the interest of everyone in the world who wants 21st century being more
peaceful, more stable and more prosperous."
     In the session of conversation with representative of Chinese business leaders, Yan Jiehe, chairman of China
Pacific Construction Group, said small and medium enterprise in China played an important role in the transition of
China's planned economy to market economy. "China's economy has made a great progress after the reform and
opening up in late 1970s," he said, "small and medium enterprises' growth has helped Chinese economy a lot in the
way of manufacturing and export."
Source: Xinhua: Chinese SME Leaders Forum kicks off in New York, 2011-02-10


CBRC to give more tolerance to small firms' bad loans
     The China Banking Regulatory Commission (CBRC) indicated they would gradually carry out a differentiated
regulatory policy on small-sized enterprises' financial services, stcn.com reported Friday. That includes
appropriately softening the terms for small-sized enterprises to apply for entrance in the financial service market. It
will also include widening the liability channel of small-sized enterprises by issuing special financial bonds,
encouraging commercial banks to develop financial services for small-sized enterprises and give more tolerance to
small-sized enterprises' bad loans.
     Data provided by the CBRC shows that by the end of last year, 109 banks had set up financial service agencies
exclusively for small-sized enterprises. That includes the five State-owned commercial banks and twelve national
joint stock commercial banks. The amount of newly increased loans from financial service agencies exclusively for
small-sized enterprises run by the major banks has exceeded 60 percent of the amount of newly increased loans for
small-size enterprises from all the banks. Some of the banks' loans for small-sized enterprises account for more
than 80 percent of its total loans.
Source: Zhi Yun: CBRC to give more tolerance to small firms' bad loans, China Daily, 2011-02-25


Shanghai hopes to become int'l tourism hub
     Shanghai, China's financial and business center plans to build itself into an international tourism destination
and is setting the goal of increasing revenue from tourism by 70 percent within five years. Revenue from tourism
totaled 305.3 billion yuan ($46.4 billion) in 2010, a 30 percent increase over the previous year, according to figures
from the Shanghai Tourism Industry Development Conference. By 2015, however, it hopes to generate 520 billion
yuan annually, a 70 percent jump compared with 2010. The city aims to attract 240 million domestic and 10 million

                                                                                                                    12
foreign visitors by 2015. Shanghai wants to develop tourism into a strategic industry, expecting it to create 300,000
jobs and contribute 8.5 percent to the city's GDP by 2015, said Yu Zhengsheng, head of the Shanghai Municipal
Committee of the Communist Party of China, at the conference. Local media reported that the municipal
government will invest more than 40 billion yuan in 13 municipal-level tourism projects, including a planned
Disneyland theme park, over the next five years. "Disneyland and the second phase of Happy Valley will be the
two most important construction projects in the next few years," said Shanghai Vice-Mayor Zhao Wen.
     However, Zhao Huanyan, a tourism industry expert from the Shanghai Academy of Social Sciences, believes
that the investment in Disneyland, along with associated supporting projects, will exceed the 40-billion-yuan mark
reported by local media. "The investment for constructing Disneyland and its nearby resorts will be more than 100
billion yuan, not including operating costs. I expect the total investment will be more than what we paid for Expo
2010 Shanghai," Zhao said. "Local government will pay most of it." Zhao also said the city's tourism revenue goal
for 2015 might be too high. "Last year, Shanghai's tourism revenue contributed 19 percent of the national (tourism)
revenue because of the Expo, but such a high contribution isn't necessarily going to be sustainable," said Zhao.
"The 520-billion-yuan revenue target will be difficult to achieve."
     In addition to plans for a suburban theme park and beach resort, Shanghai intends to focus on developing its
downtown district as a Meeting, Incentive, Conference and Exhibition (MICE) destination and an international
shopping center. "In the wake of the Expo, Shanghai plans to turn itself into a famous international MICE
destination," said Chen Meihong, vice-director of the Shanghai Municipal Tourism Administration. The city is also
working on applying for a tax-rebate policy - like the one implemented on the southern island of Hainan - to benefit
foreign travelers and visitors from Taiwan, Hong Kong and Macao.
Source: Shi Yingying: Shanghai hopes to become int'l tourism hub, China Daily, 2011-02-24


Tourism spending to see a big surge: survey
     Tourist spending from the Chinese mainland is expected to see a big surge this year, with sightseeing and
ecotourism topping the list, a survey has found. About 80 percent of holidaymakers from the Chinese mainland, 70
percent from Hong Kong and 65 percent from Taiwan said they intend to spend more on leisure travel this year,
according to the latest findings by Travelzoo Asia Pacific, a US-based Internet media company.
Mainland subscribers to Travelzoo, it appears, will spend more on leisure travel this year than their counterparts
from Hong Kong and Taiwan, with an average spending of $3,780 a person this year. Hong Kong and Taiwan
subscribers will spend on average $2,670 and $1,782 each, said the survey, which interviewed its 4,200 subscribers
over the period between Jan 4 and Jan 12. The fast-growing economy and the appreciation of the Chinese currency
have boosted domestic and overseas travel in the country.
     During the recent seven-day Spring Holiday "Golden Week", about 153 million people traveled in the country,
up 22.7 percent year-on-year, and producing revenue of 82 billion yuan ($12 billion), a growth of 27 percent
year-on-year, according to the National Holiday Tourism Office. The office said about 67,500 people left Beijing
for overseas trips during the holidays, a 60 percent rise year-on-year. Quality and sophistication are vital in the
designing of travel products, said tourism insiders. Travelers from the Chinese mainland have become increasingly
sophisticated in their travel inclinations. Sightseeing vacations consistently top the lists, followed by ecotourism,
the Travelzoo survey said. Despite their well-known preference for shopping, a new phenomenon the survey noted
is that 46 percent of interviewees from the Chinese mainland cited eco-adventures among their "wanna-dos", well

                                                                                                                  13
ahead of wining, dining and dancing, shopping, or theme park vacations.
Source: Wang Zhuoqiong: Tourism spending to see a big surge: survey, China Daily,: 2011-02-11


More Chinese tourists take foreign vacations
     More Chinese tourists decided to spend their Spring Festival holidays overseas this year, despite a sharp rise in
the cost of such foreign vacations. Data released by the National Holiday Tourism Office on Wednesday showed
that 67,500 people left Beijing for overseas trips during the holidays, a 60 percent rise year-on-year. The spike
came in spite of such trips costing more. Prices of vacations to Hong Kong, Europe and the Middle East rose by 15
percent on average, and excursions to Thailand's Phuket Island and Saipan Island in the western Pacific rose by 30
percent.
     "Chinese tourists are looking for more quality and flexibility when making such overseas trips," said He Jing,
Ctrip's communications manager. They are increasingly unsatisfied with pre-arranged travel plans and want their
personal interests and preferences to be included, he added. "We will follow the market trends and offer more
customized travel to Chinese tourists in the future," Yao said.
     China's tourism sector grew quickly during the past five years, with revenue increasing by 15 percent each
year on average, said Shao Qiwei, director of the National Tourism Administration. By 2015, the number of
Chinese tourists traveling abroad for their holidays is expected to top 83.8 million and total revenue generated from
the sector is estimated to be 2.3 trillion yuan, according to Shao.
Source: Li Yao: More Chinese tourists take foreign vacations, China Daily, 2011-02-10


Logistics missing the boat
     E-commerce is the fastest-growing Internet activity in China, a nation with the most netizens than anywhere in
the world. The number of online shoppers increased by almost 50 percent to 160 million in 2010, the China Internet
Network Information Center said last month. The Chinese online-shopping market grew by more than 370 percent
year-on-year in terms of sales, reaching 520 billion yuan ($79 billion) last year, according to research company
Analysys International.
     But logistics development in China lags far behind the e-commerce industry, said Chen Shousong, an analyst
with Analysys International. Amid the growth in online shopping, 2.4 billion packages were delivered in 2010, an
increase of 30 percent year-on-year, according to statistics from the Chinese Logistics Association. Logistics sales
revenue in 2010 reached 60 billion yuan, a 20 percent year-on-year increase. However, delivery capacity could not
accommodate the gigantic demand from the 370 percent growth rate in e-commerce.
     "Logistics is an important part of e-commerce so many e-commerce giants, including, Joyo Amazon, the
Chinese subsidiary of US-based online retailer Amazon.com Inc, have started to build their own logistics network
to contend with the increasing orders," said Chen from Analysys International. The gap between e-commerce and
logistics provides opportunities to e-commerce giants and VC investors. Last month, Alibaba announced that it
plans to cooperate with its financing partners to build a network of warehouses nationwide to improve logistics for
its online trading business. The company is going to invest 20 to 30 billion yuan in the logistics project. "Hopefully,
within 10 years, anyone placing an order online from anywhere in China will receive their goods within eight hours,
allowing for the virtual urbanization of every village in the nation," said Jack Ma, chairman and chief executive
officer of Alibaba Group. Chinese VC Investment Company Legend Capital Ltd recently confirmed that it will

                                                                                                                    14
invest in China's third-largest courier company Yunda Ltd. "Stimulated by the rapid growth of e-commerce, now is
a good time to invest in logistics in China," said Chen.
Source: Tuo Yannan: Logistics missing the boat, China Daily, 2011-02-18


China’s digital revolution
     China’s 457m internet users are rapidly becoming a key target audience for online marketing, McKinsey says
in a new report released on Wednesday. The consultancy estimates that the country’s mobile web users will
increase by almost 50 per cent to 333m over the coming year and its total internet population balloon to 750m by
2015.
     25 per cent of China’s online population are moderate users, but probably the most promising target group for
online marketing right now. These users consist of higher-income professionals and executives who tend to
research and communicate – the ‘info-centrics’ – and the early adopters of mobile devices. They tend to be
influential in forums and they spend on cosmetics and luxury goods,” says Yuval Atsmon, one of the report’s
authors.
     A whopping 60 per cent of China’s online population is only light users of the web – high school students,
blue collar workers and less educated residents of smaller cities. However, this segment is by no means lost for
marketers as its members are gearing up to buy everything from digital music players to Netbooks and e-readers,
says McKinsey.
Source: Kathrin Hille: China’s digital revolution, Finacial Times, February 20 2011
http://www.ftchinese.com/story/001037140/en


Overseas online purchasing comes into fashion
     Jia Huiyi, a 27-year-old woman working in Beijing, explored a new way of shopping when she used an
overseas purchasing service to buy a pair of popular UGG boots. She paid 557 yuan ($85) for her boots from a
Chinese Australian who runs an online store for Chinese mainland customers. The same boots in a franchised store
on the mainland would have cost more than 2,000 yuan, Jia said. Jia is one of millions who have been attracted by
overseas purchasing services, most of which provide online agents. The primary attractions are price, selection and
quality, including the safety aspect of some products. And the results are lucrative.
     Use of the services by mainland customers via the Internet last year was worth 12 billion yuan ($1.8 billion), a
140-percent increase from 2009. The total is expected to double this year, said the Monitoring Report on the Data
of China's E-commerce Market in 2010 by the China E-commerce Research Center (CERC). Consumers can buy
directly from other foreign websites, but Chinese mainland consumers rarely use them. Foreign online shops are
unfamiliar to them. Plus there are language barriers, shipping restrictions and requirements that bank cards be set
up for international use.




                                                                                                                  15
                                                    Brands from outside the Chinese mainland are the shoppers'
                                               primary targets because of big price differences between goods found
                                               in the mainland and other markets, including Hong Kong and Taiwan.
                                               They also have more to choose from. "Many products are not sold in
                                               the mainland and there are more styles in foreign stores. CERC's
                                               report shows that cosmetics and powdered milk, produced under
                                               higher safety requirements overseas, were the most popular products
                                               of online overseas purchasing services in 2010. They were followed in
                                               popularity by luggage and handbags, hats and shoes, clothing, and
                                               electronics.
       The increasing popularity of overseas purchasing services has led to business opportunities for new agents -
and, in its own way, China Customs. A Web search for shops related to "US purchasing agent" at taobao.com,
which is owned by Alibaba Group Holding Ltd and is China's largest e-commerce site, yields 3,937 shops. A search
for "South Korea purchasing agents" yields 8,240 shops. That means more and fiercer competition for the agents. A
regulation that China Customs introduced in September is adding price pressure for overseas purchasing agents,
most of whom are individual operators. Previously, customs duty on mailed personal items was waived if it was
500 yuan or less. Now, the exemption limit is 50 yuan. And the duty on cosmetics, the most popular type of
overseas purchase, is 50 percent. The duty exemption is higher, at 5,000 yuan, for agents who personally bring the
overseas products from abroad rather than mail them. But customers still come out ahead. Even with the import
duty included, the ultimate price of most products bought from overseas is still lower than the price in domestic
franchised stores, CERC said it in its report. The domestic price is higher now because it includes the import tariff,
too.
       It will, however, lead to a shuffling in the market, said CERC analyst Fang. And CERC's report said that will
mean an improvement over time, because it will eliminate small agents who cannot guarantee product quality or
provide service after the sale. Some foreign brand owners are moving to e-commerce on the Chinese mainland to
cut the cost of distribution, said Wang Rulin, the standing deputy director of the Committee of Experts on Mobile
Commerce at China E-Commerce Association. These international brands are looking to cooperate with Chinese
websites so they can hand over the sales process to websites that can directly sell products to consumers without the
involvement of dealers. Nokia and Motorola are already working with EC3S, an e-commerce provider that runs a
commercial website for mobile phones. As the websites gain support from the foreign brand owners, the quality
and maintenance of products sold by these agent websites can be guaranteed, Wang said.
Source: Gao Qihui: Overseas online purchasing comes into fashion, China Daily, 2011-02-25


China group-buying market to expand to $3.6b
       China's group-buying market is expected to post strong growth this year as more people look for bargains
especially with rising inflation, China Electronic Commerce Research Center said Friday. The market size is
projected to almost triple to 24 billion yuan ($3.64 billion) from 8.86 billion yuan last year, it said in a statement.
Source: Xinhua: China group-buying market to expand to $3.6b, 2011-02-25


Penalties against tainted food ramped up

                                                                                                                          16
     The latest draft amendment of the Criminal Law, which was submitted to the top legislature for third reading
on Wednesday, calls for heavier punishments for people who produce and sell tainted and poisoned food. The draft
is being heralded as another step in the country's efforts to address the issue of food safety and protect people's
health. The changes specifically call for the minimum penalty for such activities to be raised from short-term
criminal detention to prison terms of up to five years.
     Last July, a milk powder produced in Northwest China's Qinghai province was found to contain excessive
levels of melamine. The substance is a toxic chemical normally used in the manufacture of plastics and had been
added to watered-down milk to falsely boost protein readings during quality checks. The case was the latest in the
country's list of tainted milk scandals. Melamine-tainted dairy products killed at least six babies and caused kidney
problems in another 300,000 children across the country in 2008, according to official figures.
     The latest draft amendment of the Criminal Law also stipulates longer minimum jail terms for criminal
offenders convicted of serious felonies. Criminals sentenced to life imprisonment should serve a minimum of 13
years, instead of the current 10, it says. And those given a death sentence with a two-year reprieve must serve at
least 20 years, instead of the current 12, according to the draft. The new provisions will only be applied to
recidivists and inmates convicted of serious crimes such as murder, rape, robbery, kidnapping, arson, bombing,
poisoning and organized violence.
Source: Zhao Yinan: Punishments against tainted food ramped up, China Daily, 2011-02-24


Industry contributed 49% to economic growth in 2010
     The industrial added value of all above-scale industries increased 15.7 percent year-on-year in 2010, 4.7
percentage points higher than last year's figure, the Securities Times reported, citing a report released Thursday by
the Ministry of Industry and Information Technology and Chinese Academy of Social Sciences. Industry
contributed 49.3 percent to the economic growth rate in 2010, an increase of 9.3 percentage points from the
previous year, the newspaper reported. Statistics showed that the profits from above-scale industries hit 3.88 trillion
yuan ($590.2 million) in the first eleven months of 2010, up 49.4 percent year-on-year, according to the newspaper.
Source: Cai Muyuan: Industry contributed 49% to economic growth in 2010, China Daily, 2011-02-25


China economy: A rising star
     Chengdu, the provincial capital of Sichuan, has become a favourite destination of manufacturers and service
providers fleeing the high overheads of China's coastal export bases. Although the prefecture lacks a major port,
foreign direct investment (FDI) growth has been extremely strong over the past two years, especially in the
information technology (IT) sector. FDI rose nearly 57% year on year in the January-November period of 2010, to
US$3.85bn, compared with an increase of around 25% in 2009. Foreign investors are attracted to the city's
relatively low costs of labour and land, and in particular to the availability of a sizeable pool of well-educated
workers.
     Chengdu benefits from a national policy (Go West) to spur growth in the western regions, covering 11
provinces and the provincial-level municipality of Chongqing. The Go West policy, launched in 2000, seeks to
bridge the gap between the economies of the eastern seaboard and the landlocked interior through infrastructural
development, talent retention and foreign investment. Foreign investors were at first discouraged by the poor
infrastructure of those areas and resisted relocating their operations there despite the tax and investment incentives.

                                                                                                                    17
However, with massive government funding, transport and power facilities in those regions have been vastly
improved.
     More money poured into Chengdu and the surrounding areas in the aftermath of a devastating earthquake
(which was felt as far as Beijing and Shanghai) in May 2008 that killed around 70,000 people. Wenchuan, the
epicentre of the earthquake in northern Sichuan, was only about 80 km away from Chengdu. The central
government announced later that year that it was spending Rmb1trn, or US$153bn, (over three years) to rebuild the
quake-damaged areas. In May 2010 an Rmb13bn high-speed inter-city railway connecting Chengdu with
reconstructed Dujiangyan (a popular stop for tourists on the way to breathtakingly scenic Jiuzhaigou) started
operations, cutting travel time between the two cities to just 30 minutes. Another high-speed inter-city link between
Chengdu and Chongqing is under construction and when completed (possibly in 2014) will reduce travel time to
under an hour.
     The city faces competition from Chongqing, which is also seeking to become the main business centre in
western China, but rivalry between the two should help to make their administrations more transparent and forward
looking.
 [Table] Economic forecast: Chengdu prefecture




 [Table] Industry: Recent projects




[Table] Infrastructure: Recent projects




                                                                                                                  18
[Table] Operating charges




Economy--The city is ranked slightly lower than Chongqing as a result of its lower overall levels of GDP and its
slower growth rate in GDP per head.
Market opportunities--Chengdu ranks lower than Chongqing in this category, at 13th. This is because Chongqing
has higher income levels as well as higher growth in retail sales.
Infrastructure--The city is ranked tenth in this category, as operating costs are low and the city offers
comprehensive flight connections.
Labour--The city has a relatively high overall number of adults enrolled in tertiary education. It has a larger cheap
high-skilled labour pool than Chongqing.
Environment--Chengdu treats more of its industrial wastewater and emits less sulphur dioxide than Chongqing.
Chengdu maintains more green spaces as well.

                                                                                                                  19
Source: EIU ViewsWire: China economy: A rising star, New York: Feb 14, 2011.


China economy: Shenyang lifts sights to industrial innovation
     Shenyang, capital of Liaoning province, is at the heart of a long-running national plan to revitalise the
north-east (comprising the provinces of Liaoning, Heilongjiang, Jilin and the eastern parts of Inner Mongolia).
Consequently, Shenyang enjoys strong central support for its development plans, which have recently included the
expansion of its city-proper boundaries. The prefecture has administrative jurisdiction over nine districts
(comprising five urban core and four suburban areas), one satellite city and three rural counties. The five urban core
districts have had their boundaries enlarged, with the Tiexi and Dadong districts the biggest gainers, expanding to
around 484 sq km and 101 sq km respectively. Much of the land appears to have come from the suburban districts
of Dongling and Yuhong.
     The city faces competition for foreign investment from Dalian (the second-largest city in the province) which
is more cosmopolitan, and is also more efficiently run. The competition, however, has prodded Shenyang to
improve its business environment. Shenyang has also diversified its industrial structure, which should provide a
cushion against severe economic downturns. Although its property market is not as developed as that of Dalian,
which offers a higher standard of living, housing prices are also more stable and affordable.
     Shenyang is promoting itself as an automotive and equipment manufacturing centre. After falling out with
Yang Rong, the high-profile founder of Brilliance China Automotive--Mr Yang fled China in 2002 for the US
where he remains active in auto investment--the Liaoning government took over Brilliance China and injected
some of the provincial vehicle making assets into the company, which has a listing in Hong Kong. Brilliance China
attracted international interest when it set up its first joint venture with Germany's BMW Group in 2003 to produce
BMW sedans in Shenyang's Dadong District. It also produces domestic brands under a 51%-owned subsidiary
 [Table] Economic forecast: Shenyang prefecture
                                                                                    Shenyang       Brilliance        Jinbei
                                                                                   Automobile,     which    also       has
                                                                                   manufacturing       facilities        in
                                                                                   Dadong. Shenyang boosted its
                                                                                   automobile      output       by      an
                                                                                   estimated    35%    in   2010,        to
                                                                                   approximately 653,000 vehicles.
[Table] Industry: Recent projects




                                                                                                                        20
[Table] Infrastructure: Recent projects




[Table] Operating charges




                                          21
Economy--Shenyang ranks 12th in this category, helped by relatively rapid GDP growth.
Market opportunities--The city is weak in this area, at 35th place, owing to sluggish growth in retail sales and low
demand for luxury imports.
Infrastructure--Shenyang's transport facilities look mediocre when compared with its rival city, Dalian, a thriving
port in the south of Liaoning province. However, inter-city links are likely to improve following the creation of the
experimental Shenzhen Economic Zone.
Labour--The labour market is competitive, reflecting low wages and a good number of national-level universities in
the city.
Environment--Shenyang's heavy industrial background gives it one of the worst air-pollution index ratings of the 44
cities ranked, at 30th.
Source: EIU ViewsWire: China economy: Shenyang lifts sights to industrial innovation, New York: Jan 31, 2011.


Rising yuan will not solve US economic woes
     The G20 is aiming to root out the causes of the global financial crisis, rather than a series of discussions which
single out the economic policies of any specific country, said French Finance Minister Christine Lagarde at the
meeting of finance ministers. During the two-day meeting, which started on Friday, the attendees will hammer out a
common mechanism for measuring global economic imbalances. "Once we have these indicators, and that's being
debated at the moment and will continue to be debated during the next couple of days, then we will move on to
agree guidelines," Lagarde said in Paris prior to the meeting. "What we do not want is to dictate to any one country,
'Stop being competitive, stop exporting, stop consuming'," she said. "The goal is to try to reach a better equilibrium
that will be beneficial to all from an inflation point of view, for instance, or from a social fabric point of view," she
added. Some analysts said the meeting is designed to reach an accord on assessing countries' current accounts,
exchange rates, currency reserves, public budgets, and private savings. The results of the meeting's deliberations
will be announced on Saturday afternoon.
     French President Nicolas Sarkozy has pledged to reform both the global monetary system and the
commodities markets during his country's presidency of the G20, with the intention of defending the world's
less-developed economies from currency and trade turbulence. The United States has tried in recent weeks to
encourage some developing economies, such as Brazil and India, to pressure China into an acceleration of yuan
appreciation during the meeting.
     However, the Governor of the People's Bank of China, the central bank, Zhou Xiaochuan said on Thursday
that Beijing will decide the pace of the appreciation in accordance with its own economic conditions, and that
external pressure cannot be the main driving force for exchange rate reform, according to reports from Reuters.
"External pressure has never been an important factor of consideration and we have never paid special attention to
it," Zhou said on the sidelines of the G20 session. The US has long urged China to appreciate the yuan as it suffers
a significant trade deficit with the world's largest exporter. Washington has claimed that yuan appreciation would
also help to create more jobs, but analysts said that an appreciation of China's currency won't alleviate the economic
woes in the US.
Source: Fu Jing, Zhang Chunyan and Zhang Haizhou: Rising yuan will not solve US economic woes, China Daily,
2011-02-19


                                                                                                                      22
World News: U.S., Brazil to Press China on Yuan
     Treasury Secretary Timothy Geithner, on a visit Monday to Latin America's biggest economy, urged Brazilian
officials to help the U.S. pressure China to allow its currency to appreciate. Though officials in public shied away
from specifics of any plan to coordinate calls for a stronger yuan, a person familiar with the discussions said Brazil
and the U.S. may speak with a common voice on the issue in a coming meeting of the Group of 20 major
economies. Both countries and other big exporters have argued that China's intervention to keep the yuan weak
leads to artificially low prices for Chinese exports and unfair competition in global trade.
     Brazilian officials say any efforts to join the U.S. on the issue don't diminish the country's unease with the
U.S.'s monetary policy. Brazil's currency, buoyed by massive flows of speculative capital, has soared more than
35% against the dollar in the past two years. Because that, too, hurts the country's exporters, Brazilian officials
have called for the U.S. to take steps to fortify a dollar that remains weak by historical standards.
Source: Paulo Prada: World News: U.S., Brazil to Press China on Yuan, Wall Street Journal. (Eastern edition).
New York, N.Y.: Feb 8, 2011. pg. A.11


Inflow of 'hot money' hits $35.5b
     China witnessed a "hot money" inflow of $35.5 billion in 2010, accounting for a relatively small part of the
increase in foreign exchange reserves, the State Administration of Foreign Exchange (SAFE) said in a report
published on Thursday. The figure accounted for 7.6 percent of the increase in foreign exchange reserves from
2009, SAFE said. Wang Tao, head of China economic research at UBS Securities, told China Daily that the official
figure of $35.5 billion is very close to their estimates. In the past 10 years, the "hot money" inflow has shown a
                                                                     slight upward trend, with $25 billion, on average,
                                                                     which amounts to roughly 9 percent of the
                                                                     increase in foreign reserves over the period. "The
                                                                     continuous capital inflows were mainly attracted
                                                                     by stable and rapid economic growth in China,"
                                                                     SAFE said in the report. The influence of "hot
                                                                     money" on the economy is reducing as the
                                                                     country maintains rapid economic growth, China
News Service quoted a SAFE official as saying on Thursday.
     China has been worried by the prospect of surging capital inflows that could indicate rising speculation in the
real estate sector and the volatile stock market. Some analysts said that the loose monetary stance of the United
States could have led to a new round of inflows, leading to an increase in inflation. Zhou Xiaochuan, the central
bank governor, said in November that he was confident the country's solid measures can manage the inflow risks
posed by US quantitative-easing policies.
Source: Wang Xiaotian: Inflow of 'hot money' hits $35.5b, China Daily, 2011-02-18


China's Experience in Dealing with WTO Dispute Settlement: A Chinese Perspective
     The year 2009 witnessed the rise of China as one of the major players in World Trade Organization (WTO)
dispute settlement since it alone accounted for half of the fourteen new WTO disputes initiated in that year. This
paper examines China's growing involvement in major WTO dispute settlement activities and concludes that

                                                                                                                    23
China's participation has been a gradually evolving process. This article explains that China's defensive and
offensive positions are generally balanced and argues that China seems to approach WTO disputes on a
case-by-case basis rather than by applying any preset litigation avoidance strategy. When faced with negative
rulings, China has so far been quite restrained in its reactions and has generally maintained a good record of
compliance, but China's future behaviour in this regard may not always be as consistently positive. As to overall
performance, this paper demonstrates that China's record has been typical of the bigger WTO Members. Finally, it
would be unfair to assess this record only with reference to the global ranking of China's trade volumes and
economic size while ignoring China's short period of WTO membership and lack of historical experience in
international dispute settlement proceedings.
Source: Wenhua Ji, Cui Huang: China's Experience in Dealing with WTO Dispute Settlement: A Chinese
Perspective, Journal of World Trade. New York: Feb 2011. Vol. 45, Iss. 1; pg. 1, 37 pgs


The 'Specificity' of Cultural Products versus the 'Generality' of Trade Obligations: Reflecting on 'China -
Publications and Audiovisual Products'
     Cultural products present themselves dually, as both commercial objects and assets that convey values and
identity. The recently decided WTO case of China - Publications and Audiovisual Products provides an opportunity
to examine the interface between the 'specificity' of cultural products and the 'generality' of trade obligations. Based
on the DSB reports, this comment centers its analysis on four key issues: the UNESCO Convention as cultural
defense, the application of the 'public morals exception' to cultural products, the distinction and overlap between
cultural goods and services, and the degree to which culture can determine the likeness' between imported and
domestic cultural products. This comment concludes with remarks on the case decisions, lessons China might have
learned, and the necessity of reconciling free trade with cultural diversity in the context of economic globalization.
Source: Jingxia Shi, Weidong Chen: The 'Specificity' of Cultural Products versus the 'Generality' of Trade
Obligations: Reflecting on 'China - Publications and Audiovisual Products', Journal of World Trade. New York:
Feb 2011. Vol. 45, Iss. 1; pg. 159, 28 pgs


Import taxes to be lowered
     China is to cut import taxes on some products, including formula milk and cosmetics, as part of a series of
reductions aimed at balancing international trade, the Nanfang Daily said Monday. The newspaper quoted an
unidentified official with the State Administration of Taxation (SAT) who said the tax bureau is planning the cuts
because of concerns over possible tax evasion, although there was no official comment on Monday.
     In January, the Ministry of Finance said the nation's tax revenue jumped 23 percent year-on-year to 7.32
trillion yuan ($1.1 trillion) in 2010, partly boosted by import taxes. The authorities collected 1.05 trillion yuan in
value-added and consumption taxes for imported goods, a rise of 31.1 percent year-on-year, the ministry said.
Import tariff revenue jumped 52.8 percent year-on-year to 202.75 billion yuan. In January, the ministry announced
that it will cut import duties for computers, digital video recorders and cameras by between 10 and 20 percent.
Bloomberg reported that the Ministry of Commerce said it was hoping to encourage future imports of resources and
high-tech goods.
     The move comes after just days after the Group of 20 meeting in Paris, at which China came under pressure to
increase imports and lower its trade surplus as a means of reducing global trade imbalances. Data from the General

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Administration of Customs show that China's trade surplus decreased by 6.4 percent year-on-year in 2010. That
was partly due to the growing volume of imports, which increased 38.7 percent year-on-year to 1.39 trillion yuan in
2010, outpacing export volume growth, which was 31.3 percent.
Source: Li Woke: Import taxes to be lowered, China Daily, 2011-02-22


Huawei U-turn on US deal saves blushes
     Huawei’s unexpected decision to capitulate to US demands to unwind a $2m patent deal has spared the
Chinese telecommunications equipment maker from a potentially devastating judgment from President Barack
Obama on the threat the company posed to US security. Huawei revealed on Friday night that it would comply with
the recommendations of a secretive US government panel that reviews foreign transactions, known as Cfius, and
divest patents it acquired from 3Leaf, a small US company, last May.
It was a reversal from the company’s position less than a week earlier, when it declared that it was seeking a final
ruling on the deal from Mr Obama, who has the sole legal authority to issue such decisions on foreign deals under
US law. Huawei officials declined to comment on why the company changed its mind but independent observers
said it may have realised just how damaging a declaration by Mr Obama would have been to the company’s
business both in the US and internationally.
Source: Stephanie Kirchgaessner in Washington: Huawei U-turn on US deal saves blushes, Finacial Times,
February 20 2011


China boosts efforts to tackle trade surplus
     China will increase efforts to expand imports this year to help balance trade, and to maintain the
surplus-deficit ratio at below 3 percent of GDP on the nation's current account, said the Ministry of Commerce on
Thursday. Yao Jian, a ministry spokesman, said the government will take measures to further balance trade. Last
year, the surplus-deficit ratio of GDP in the current account was 3.2 percent, and Yao said the ratio will "fall to
below 3 percent" when the import-driven measures are launched.
     China's large trade surplus has been cited as one of the root factors that caused the global financial depression
in 2008. In 2010, during a meeting of G20 finance ministers and central bank chiefs in Gyeongju, South Korea, US
Treasury Secretary Timothy Geithner proposed the ratio of surplus and deficit on the current account of a nation's
GDP should be set at 4 percent, as a means of solving global trade imbalances. However, that proposal was
opposed by many participating nations.
     Customs statistics showed China's trade surplus in January decreased by 53.5 percent year-on-year to $6.46
billion. Imports surged by 51 percent to $144.3 billion while exports rose by 37.7 percent to $150.7 billion.
Source: Zhou Siyu and Ding Qingfen: China boosts efforts to tackle trade surplus, China Daily, 2011-02-18


China Solidifies Renminbi's Role In International Trade
     Commonly known for adopting a slow and measured approach to major reform, China has surprised markets
with the speed of its moves to internationalize its currency. Its latest move, to allow mainland Chinese enterprises
to use yuan in overseas direct investment, follows on the heels of two landmark decisions taken in December to
ensure the continued supply of the currency in Hong Kong and to extend a cross-border trade settlement scheme to
67,359 domestic exporters from the original 365. The renminbi will go global at a faster-than-expected pace with

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the most potent potential lying in emerging markets, says Qu Hongbin, co-head of HSBC's Asian Economics
Research.
     The offshore yuan market remains small and concentrated in Hong Kong, where deposits totaled 279.6 billion
yuan ($42 billion) as of November. Nearly 80% of this was newly added during 2010. It is also mostly a one-way-
outward- flow, aimed partially at tackling domestic inflationary pressure. With the relaxation of investment rules,
Chinese companies, which are already the world's fifth largest source of foreign direct investment, could take the
yuan to emerging markets, the destination of nearly 90% of China's outward investment totaling $56.5 billion in
2009 and $22.4 billion in the first half of 2010.
Source: Shu-Ching Jean Chen: China Solidifies Renminbi's Role In International Trade, Global Finance. New York:
Feb 2011. Vol. 25, Iss. 2; pg. 6, 1 pgs


China Foreign Direct Investment: Greenfield, Mergers & Acquisition, Or Joint-Venture
     Foreign investment in China is once again beginning to grow as the economy sees signs of recovery.
                                                       Companies looking to establish a presence in mainland
                                                       China, have three options to evaluate and choose between
                                                       1) entering into a joint-venture, 2) acquiring an existing
                                                       company, or 3) developing an organization via Green Field
                                                       development. This paper delves deeper into these three
                                                       options, outlining the benefits and pitfalls of each approach.
                                                       The purpose is to provide the reader with a general
                                                       overview of investment vehicles available in China and to
                                                       guide the business professional in a course of action,
including the social impact of these options.




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                                                         Source: J T Norris Jr.: China Foreign Direct Investment:
                                                         Greenfield, Mergers & Acquisition, Or Joint-Venture, The
                                                         International Business & Economics Research Journal.
                                                         Littleton: Jan 2011. Vol. 10, Iss. 1; pg. 51, 11 pgs




Chongqing, Chengdu among top investment destinations
The southwestern Chinese cities of Chongqing and Chengdu are among the best investment destinations in that
country, several US business executives agreed. Chongqing and Chengdu have enough labor forces to support the
economic sector, especially some export-led industries, according to David J. Hofmann, director for North America
at Inter-China Consulting , who has 30-year business experience in China. The two cities are also good places for
innovators as they boast rich talent potentials, he added. There are good universities and well-educated students in
Chongqing and Chengdu who can play the operating and managing roles for investors' companies, said the business
executive.
     Hofmann was echoed by Gene Huang, chief economist and vice president of FedEx, who said China's strategy
to develop its western regions is very supportive for doing business in Chongqing and Chengdu, which would
remain attractive for U.S. investors "for quite some time."
Source: Xinhua: Chongqing, Chengdu among top investment destinations, 2011-02-04


For some U.S. companies, China sales rule; robust growth there is unlikely to reverse soon
     A growing number of U.S. companies are seeing their bets on China pay off big. Yum Brands, a Louisville
company that operates fast-food restaurants including KFC and Pizza Hut, reported Wednesday that its mainland

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China division has overtaken the U.S. as its top profit generator. General Motors' China sales exceeded U.S. sales
for the first year ever in 2010. Meanwhile, casino operators Wynn and Las Vegas Sands are seeing net revenue in
China grow to as much as triple that of their U.S. properties.
     Still, the Chinese market's robust growth is a trend that's unlikely to reverse anytime soon, analysts say, given
China's swelling middle class and that group's spending power. The effect can be seen across a wide range of
American industries: China has become the second-largest market for computer maker Dell and the fastest-growing
one for bag maker Coach.
     Yet doing business in China is still far from easy. Ted Dean, chairman of the American Chamber of
Commerce in China, says its members are "confronted on a daily basis with the challenges and opportunities of this
market." While a majority of companies are doing well in China, the group remains concerned about market access,
protection of intellectual property rights and China's preference for local companies, Dean says. American
companies also struggle with recruiting talent and getting business licenses, according to a 2010 survey by the
US-China Business Council.
Source: Kathy Chu: For some U.S. companies, China sales rule; Robust growth there is unlikely to reverse soon,
USA TODAY. McLean, Va.: Feb 3, 2011. pg. B.1


Fair to encourage Chinese enterprises to invest abroad
     China will hold a trade fair this year to encourage investors to go abroad, said an official with the China
Industrial Overseas Development and Planning Association (CIODPA) Wednesday. The Third China Overseas
Investment Fair, approved by the National Development and Reform Commission, would be held in Beijing on
Nov 8 and 9, said Fan Chunyong, vice chairman of the CIODPA, which is organizing the event. The fair would
offer around 10,000 investment opportunities abroad, Fan said. Representatives of multinational companies,
overseas financial institutions and enterprises that carry out investment projects would be invited, he said. About
10,000 Chinese enterprises, including centrally administered enterprises, private enterprises and listed companies,
would also attend the fair.
     Fan said the fair would focus on helping participants to gain understanding and build mutual trust through
activities such as high-end meetings, theme lunches and investors clubs. He said China's outbound direct
investment in non-financial sectors, which rose 36.3 percent to $59 billion last year, was playing an increasingly
important role in the international direct investment sector. More Chinese enterprises would join multinational
corporations over the course of the country's next Five-Year Program (2011-2015) period, he said.
Source: Xinhua: Fair to encourage Chinese enterprises to invest abroad, 2011-02-23


Chinese MNCs as China's New Long March: A Review and Critique of the Western Literature
     Chinese outward foreign direct investment (COFDI) has captured the imagination of international business
academics, journalists, and analysts of Chinese foreign economic policy. While these students of COFDI have
added greatly to our knowledge, they have not adequately considered the politico-economy of COFDI. Specifically,
they have not sufficiently evaluated the degree to which COFDI is driven by political versus economic
considerations, the extent to which political considerations influence the overseas operations of Chinese
multinational corporations (MNCs), or the political ramifications of COFDI for host countries, international
institutions, or China's interactions with third parties. Reviewing the Western literature, this article provides useful

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background information about COFDI, distills two general schools of thought about the politico-economy of
COFDI--i.e., the "Beijing as Puppeteer" camp and the "Business of Business is Business" camp, and highlights a
number of shortcomings with each. As well, it suggests a number of ways in which the extant literature can move
forward and makes clear the importance of tracking the development of Chinese MNCs.
Source: Jean-Marc F Blanchard: Chinese MNCs as China's New Long March: A Review and Critique of the
Western Literature, Journal of Chinese Political Science. Dordrecht: Mar 2011. Vol. 16, Iss. 1; pg. 91


Chinese Firms Get Their Day in Sun
     In 2008, when Harrah's Entertainment Inc. pulled out of a multibillion-dollar casino resort in Nassau, a
Bahamas development company scrambled to find investors and financing to rescue it. Three years later, the
Chinese rolled the dice. On Monday, Baha Mar Resorts Ltd. is set to break ground on the $3.4 billion hotel, casino
and resort project. Its unlikely partners: China State Construction Engineering Corp., the country's largest
construction company by revenue, and the Export-Import Bank of China, a state-owned bank with the mission to
help Chinese companies expand overseas. Chinese banks, providing hard-to-find financing, are helping to make
such big bets abroad, especially on cheap real estate and infrastructure projects amid a recovering economy.
In the Bahamas, the Export-Import Bank of China is providing a $2.5 billion loan, which it intends to syndicate to
other Chinese banks. In exchange, China State Construction will import as many as 8,000 Chinese workers to build
the resort. China State Construction also will make a $150 million equity investment in the project, with the rest,
$800 million, coming from Baha Mar. The 1,000-acre Bahamas project envisions some 2,250 hotel rooms, a
100,000-square-foot casino and an 18-hole golf course.
Source:Lingling Wei, Alexandra Berzon: Chinese Firms Get Their Day in Sun, Wall Street Journal. (Eastern
edition). New York, N.Y.: Feb 16, 2011. pg. C.1


CHINA/EU: Beijing seeks leverage via bond purchases
     China's 'bond diplomacy' in the EU: China's purchase of European sovereign debt has positive economic
benefits for Europe but also provides China with new leverage over individual countries and consequently over
European policy.
Source: CHINA/EU: Beijing seeks leverage via bond purchases, Oxford Analytica Daily Brief Service. Feb 10,
2011. pg. 1




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