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EditorJamshed Ullah

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Research & Analysis

Wang AiguoHe Cheng

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EditorialA Powerful financial

indicator

Editor

According to a globally credible survey report,China has emerged as the most financially se-cure country in an index jointly launched by PICC

Property and Casualty Co Ltd, the largest non-life insur-ance company in the Chinese mainland, and Gen-worth Financial Inc, a Fortune 500 insurance holdingcompany.

The report that surveyed 13,000 households in 14 Eu-ropean countries, and five Latin American countries andChina. China scored 78 out of 100, the highest score ofany country and the highest since the index waslaunched in 2007.

Only 3 percent of Chinese households are finan-cially vulnerable, whereas the same figure for Germanyis 22 percent and 26 percent for France, according tothe report.

Of more than 1,000 households surveyed in Beijing,Guangzhou, Shanghai and Wuhan, only 1 percent saidtheir financial situation will worsen over the next 12months. Only 3 percent believed they were financiallyvulnerable, while 97 percent said that they have rarelyexperienced financial problems or had a positive out-look for the future.

Digging deeper into the survey's underlying results,some 39 percent said they had seen their total house-hold income fall due to several factors. Forty-eight per-cent reported it was due to a drop in level of income,20 percent reported it was due to stopping work forhealth reasons, and 12 percent said it was due to jobloss.

The majority of Chinese household assets were inproperty. PICC and Genworth's report cautioned thatChinese households were too focused on property in-vestments, and said their investment portfolio should bediversified.

We believe that this report is a very powerful indica-tor with regard to future of China’s economy and for-eign investments in this emerging financial capital of theworld.


26, 02 May 2013

Cover Story

Beijing to shutCoal-firedboilers to cleanup air

04

Three Big cities slip asmagnet for ChinaDream

06

Growth in Chinese investment in Germany

will maintain momentum in the near

future while experts call for more

cooperation in themanufacturing sector.

in this issueMagazine_Layout 1 6/11/2013 9:57 PM

in this issue'BlueEconomy'key to Qingdao's future

HongKong's

exports up by 9%

CHINA, USAGREE TOSHAREAUDITDETAILS

09 12

Lenovo posts record results


04

Society

Beijing to shutCoal-fired boilersto clean up air


CED Monitoring

BEIJING-Beijing has vowed to elim-inate most coal-fired boilers in thecity center by the end of 2015 toreduce pollution from fine particu-late matter, especially during theheating season.

After reducing coal use by700,000 metric tons last year, thecapital plans to cut another 1.4million tons this year and use nomore than 21.5 million tons, ac-cording to the 2013 coal con-sumption reduction plan releasedby the city's Environmental Protec-tion Bureau and Commission ofDevelopment and Reform.

The capital used 26.35 milliontons of coal in 2010, the environ-mental bureau said.

Beijing still has a large numberof coal-fired central heating boil-ers that give off large amounts ofcoal dust, and noise during theheating season.

Richard Saint Cyr, a familymedicine doctor at United FamilyHealth in Beijing, said he has no-ticed an uptick in discussionsabout the worsening air qualitywith many patients since winter.

He said that air pollution in thepast winter was unusually seriousand he had never witnessed suchcollective anxiety in Beijing.

Fine particulate matter posesa serious threat to people's heartsand lungs, he said.

Shang Wenchao, 28, a life-long Beijing resident, said he usedto clean his nostrils before going tosleep in winter because the air hebreathed was filled with soot fromburning coal.

"You have to wear a maskevery day while outdoors or youwould be eating coal," he said.

Shang said the situation ismuch better now, but the pollu-tion is still worse in the winter be-cause of the coal-fired boilers.

In response, the city's Environ-mental Protection Bureau is takingaction has said it will replace coal-fired boilers within the Fourth RingRoad with clean energy by theend of 2015.

All coal-fired boilers with a ca-pacity of generating 20 tons ofsteam per hour and above will bereplaced with clean energy bythe end of 2015, it said.

The last five coal-fired boilersat Shougang Machinery Co'sheavy machinery branch in theShijingshan district were shut downin March, making Shijingshan thethird city district without coal-pow-ered heating, after Xicheng districtand Dongcheng district.

05

"You have to wear a mask every day while outdoors or you would be eating coal


Society

06

Three Big cities slip asmagnet forChina DreamCED Moni to r ing

SHANGHAI-Usual ly Be i j ing, Shanghai and Guangzhou, the three most developed Chi -

nese c i t ie s , monopo l i ze th ree o f the f i r s t f i ve p laces in any rank ing o f economic

compet i t i veness .

They are commonly known as Be i Shang Guang fo r shor t .

Fo r a long t ime Be i Shang Guang has been a magnet fo r s tudents f resh out o f

un ive r s i t y . P romi s ing h igher pay and a b r igh te r fu tu re , the th ree c i t ie s a re p r ime

places to work and l i ve fo r ambi t ious young people , who are of ten n icknamed be i

p iao or ha i p iao, meaning migrants l i v ing in Be i j ing and Shanghai . There i s no cor -

responding te rm fo r Guangzhou.


07


08

Society

Desp i te the f i nanc ia l

p res su re and s t re s s o f l i fe

in these c i t ies , as we l l as a

r i s k o f thwar ted asp i ra -

t ions , young peop le con-

t inued to be d rawn to

them l i ke p i lg r ims - un t i l

recent ly .

Las t year saw a se r ie s

o f news repor t s about

youths f lee ing the hus t le

and bus t le o f Be i Shang

Guang they once ca l led

home. A l l o f a sudden, i t

seems the fo rmer land o f

oppor tun i ty and hope has

los t much appea l . Co l lec-

t ive f rus t rat ion w i th rea l i ty

in b ig c i t ie s i s g i ven an

out let in "Be i j ing Be i j ing, " a

rock song w i ld l y popu la r

fo r i t s re f lect ion of the d i s -

tance between d ream

and rea l i ty in the Ch inese

capi ta l .

A recent l y re leased

su rvey a l so lent c redence

to the v iew that Be i Shang

Guang has s l id a l i t t le i n

te rms of at t ract iveness , o r

in the words o f the su rvey ,

"harmony. "

The outg rowth o f the

survey , conducted by Ch i -

nese Academy o f Soc ia l

Sc iences , i s a b luebook i s -

sued on May 19 , t i t led

"2013 B luebook on Chinese

C i t ie s ' Compet ivenes s -

New Cr i te r ia , Const ruct ing

Sus ta inab le , Compet i t i ve ,

Idea l C i t ies . "

The rather lengthy t i t le

o f the repor t be l ie s i t s

conc i se , unconvent iona l

f i nd ings . Fo r the ve ry f i r s t

t ime, Be i Shang Guang


09


10

Finance

wasn ' t sho r t - l i s ted among

the f i r s t 10 re su l t s . Be i j i ng

ranked 14 th , Guangzhou

came in 19th wh i le Shang-

ha i fe l l even fu r the r be-

h ind, at 21s t . The f i r s t and

runner -up p laces went to

Hong Kong and Macau.

On ly la s t year , the

th ree c i t ie s s t i l l en joyed

the p r ide o f p lace , w i th

Be i j ing rank ing 3 rd , Shang-

ha i 4 th and Guangzhou

6th , respect ive ly .

The th ree pos te r ch i l -

d ren of Ch inese economic

v i ta l i t y sco red so bad ly

th i s year ma in l y because ,

accord ing to Yang J ie , a

ch ie f autho r o f the B lue -

book , they sco red low in

harmony, a s tud ied top ic .

Yang named two reasons

fo r the lapses . F i r s t , the

hukou sy s tem, o r house-

ho ld reg i s t ra t ion , i s much

more r ig id in Be i Shang

Guang than in second-

and th i rd- t ie r c i t ies , resu l t -

i ng in le s s equa l oppor tu -

n i t y . Second, c r ime i s

h igher i n the "B ig Th ree "

c i t ies than in other s .

The second reason i s

not hard to unders tand, as

h igher c r ime rate i s a nat -

u ra l byproduct as c i t ie s

grow in s i ze . As fo r the f i r s t

reason, lack of harmony, i t

i s born of a quandary con-

f ron t ing the th ree mega-

lopo l i ses .

On the one hand, they

need mig rant s , no t j u s t

young ta lent , but laborer s

as we l l , to keep them

going. But the in f lux o f mi -

g rant s i nev i tab ly leads to

soc ia l and f i sca l tens ion ,

as the newcomers share a

s l i ve r o f the soc ia l we l fa re

p ie . Th i s p i t s them agains t

the loca l s , the ves ted in -

te res t s , who oppose any

new ar rangements that d i -

lu te the i r benef i t s .

A g raph ic in s tance i s

the schoo l ing row that

e rupted in Shangha i la s t

year . Due to hukou , the

ch i ld ren o f m ig rant s can-

not par t ic ipate in loca l

un iver s i ty and h igh school

ent rance exams . They

have to t rave l back home

to s i t the g rue l ing tes t s , a

requ i rement that many

perce ive as unfa i r .

P rompted by a migrant

schoo lg i r l ' s on l i ne cam-

pa ign fo r what she ca l led

"equa l r igh t s to educa-

t ion , " many peop le la s t

year a t tacked Be i Shang

Guang fo r shu t t ing the

door on m ig rant s and re -

se rv ing the i r p res t ig ious

schoo l s , a rguab ly the na-

t ion ' s bes t , d i sp ropor t ion -

ate ly fo r the loca l s . I t i s a

lo t ha rder fo r a s tudent

f rom, say, Henan Prov ince,

to be admi t ted to T s -

inghua and Pek ing un iver -

s i t ie s , p ract ica l l y Ch ina ' s

Harvard and MI T , than fo r

h i s o r he r Be i j i ng counte r -

par t . Wh i le such a r range-

ment s do favor re s ident s

o f Be i Shang Guang and

are r igged aga ins t m i -

g rant s , they a re f ie rce ly

suppor ted by the loca l s

who refuse to y ie ld ground

to migrants .

Wh i le there i s some re-

lax ing of hukou loca l ly , i t s

sweep ing re fo rm i s h igh ly

compl icated and thus a

long way o f f . D ras t ic

measu res to wa ive i t w i l l

open the f loodgate fo r

mass m ig ra t ion , to the

chagr in o f c i t y manager s

concerned about s tab i l i t y

and p rov i s ion o f pub l ic

goods .


11

But harmony i s not the

on ly category in wh ich Be i

Shang Guang d id poor l y .

They a l so lagged beh ind

in government opennes s ,

t ransparency and good

governance. Th i s was a

su rp r i s i ng conc lu s ion , as

the count ry ' s most cosmo-

po l i tan c i t ie s , the i r o f f i -

c ia l s a re be l ieved to be

more open-minded and

l ibera l .

The fact that Be i Shang

Guang was unseated f rom

pos i t ions o f g lo ry by a few

second- and th i rd - t ie r

c i t ie s in the b luebook has

spawned cont rove r sy .

Af te r a l l , the la t te r ' s need

for popu lat ion to fue l the i r

g rowth has natu ra l l y

p rompted schemes to

re lax hukou as par t o f

the i r charm o f fens i ve to

woo ta lents . But does that

more equa l t reatment

br ing "harmony"? Not nec-

essar i l y .

X inhua repor ted la s t

year that a f te r many f led

Be i Shang Guang, on ly to

f ind more nepot i sm back

home, they re tu rn to the

b ig c i t ie s where upward

mobi l i ty enta i l s g reater e f -

fo r t s and le s s c rony i sm.

The s i tuat ion i s remin i scent

o f acc la imed wr i te r Q ian

Zhongshu ' s nove l , "We i

Cheng, " ( "Bes ieged C i ty " )

i n wh ich the wr i te r fa -

mous ly says "people w i th in

the c i t y want to leave i t ,

wh i le people f rom wi thout

want to get in . "

Fo r a l l the par t ia l i t y o f

i t s c r i te r ia , i n genera l the

b luebook i s a p rogres s i ve

deve lopment , in that i t as -

ses ses the ach ievement s

o f u rban Ch ina f rom a

brand new per spect i ve ,

takes i n to account more

human- interes t factors l i ke

equa l oppor tun i t y and in -

te rpe r sona l re la t ionsh ips ,

i n s tead o f the usua l key -

words o f indus t r ia l output ,

GDP and growth rate .

A t the same t ime, the

b luebook i s a deve lop-

ment in keep ing w i th the

buzzword "Ch ina D ream, "

a b ra inch i ld o f P res ident

X i J inp ing . A t a recent

seminar , famed B r i t i sh

scho la r Mar t in Jacques ,

the author o f "When Ch ina

Ru les the Wor ld , " i n te r -

p re ted "Ch ina D ream" as

rep resent ing a pos s ib i l i t y

o f w ide ho r i zons and a

broad v i s ion , such as a

bet te r re lat ionsh ip at work

or ba lance of l i fe fo r aver -

age Ch inese.

When th i s pos s ib i l i t y i s

encumbered and shat -

te red by the r ig id i t y o f

hukou , peop le ' s potent ia l

becomes t rapped, a

t ragedy fo r the ind iv idua l

and the nat ion at la rge.

Late ly med ia repor t s

have zeroed in on the d i f -

f icu l t y o f f re sh co l lege

graduates i n land ing a

job . So fa r th i s year , on ly

44 percent o f them repor t -

ed ly have rece ived o f fe r s

f rom employe r s . I n Be i

Shang Guang, where com-

pet i t ion i s more in tense ,

the employment

headache i s acute.

In a speech on May 4 ,

a day when a l l o f Ch ina

commemorates the pat r i -

o t i sm o f youths p ro tes t ing

Wes te rn par t i t ion ing o f

Ch inese sove re ignty 94

year s ago, P res ident X i

sa id the nat ion mus t i n -

sp i re hope in the youth ,

who in themse lves em-

body hope fo r the fu tu re .

Indeed, i f a la rge ma-

jor i ty of the nat ion ' s young

peop le a re unemployed,

the consequences are un-

p leasant , both fo r soc ia l

s tab i l i t y and fo r a count ry

on i t s way up in the wor ld .

That ' s why the re su l t s

of the b luebook are a l l the

more wor thwh i le and im-

por tant . More e f fo r t s a re

needed to d i spe l some

young people ' s g loomy v i -

s ion o f the i r p rospect s .

And th i s job can s ta r t w i th

mak ing c i t ie s l i ke Be i

Shang Guang more youth-

f r iend ly , and to a la rge r

ex tent , m ig rant - f r iend ly .

Inc lu s i ve g rowth , a man-

date o f the new leader -

sh ip , p rov ides dynamics

fo r the soc ia l ha rmony

pol i t ic ians c rave.

A l though long- runn ing

obs tac les to th i s new

growth goa l won ' t go

away overn ight , and any

prec ip i tous re fo rm o f

hukou w i l l l i ke l y e sca la te

the conf l ic t o f i n te res t s

between loca l s and m i -

g rant s , we t ru s t ou r po l i t i -

c ians , w i se as they are , to

prov ide bet te r pub l ic se rv -

ices fo r peop le earn ing

the i r l i ve l i hoods in u rban

China.

They have every r igh t

to d ream about a bet te r

fu tu re , to rea l i ze the i r per -

sona l "Ch ina D ream, " i n

fu l l ha rmony w i th c i t ie s

where they a re t reated

more as res idents than so-

journer s .


Finance

12

'Blue Economy'key to

Qingdao's future


13

CED Monitoring

BEIJING-Qingdao, a coastalcity in Shandong province, willbe at the forefront of the driveto develop a "blue economy" inChina, said a senior local offi-cial.

The blue economy is gener-ally defined to include all ma-rine industries, though it meansmuch more, said Li Qun, Partychief of the city.

The 18th Party Congress,which concluded in Novemberlast year, called for the countryto become a "maritime power".The country has vowed to in-crease input to safeguard itsmaritime rights and interests,develop a marine economyand better protect oceanicecology.

"Qingdao will seize this his-toric opportunity," Li said. "Blueeconomy will lead the city toadjust its development modeand upgrade its industrial struc-ture."

The city is home to 30 per-cent of the country's oceanicresearch institutions and abouthalf of the top experts in ma-rine science and technology.

More than 70 percent ofacademicians in oceanic fieldsfrom the Chinese Academy ofSciences and Chinese Acad-emy of Engineering have re-search teams and facilities inthe city.

"They have brought withthem the leading marine sci-ence and technology researchteams in the country to Qing-dao," Li said.

Their research has laid thefoundation for the city to be-come an international base forthe biotechnology industry,shipping and oceanic engi-neering, he said.

To boost its marine econ-omy, the city government hasmapped out three key zones -Blue Silicon Valley, the WestCoast New Economic Zone andthe Hongdao Economic Zone.

Qingdao has a land areaof more than 11,000 square kilo-meters and a coastline ofabout 700 km.

The vast area providesample development space forthese zones.

Qingdao will make full useof its rich talent pool to build a"Blue Silicon Valley", a world-class research and develop-

'Blue Economy'key to

Qingdao's future


Finance

14

ment center for marine scienceand technology.

In February last year, thedevelopment plan of QingdaoBlue Silicon Valley was un-veiled.

With an area totaling 576sq km, the zone is designed tohost a large batch of high-techresearch centers and compa-nies specializing in marine sci-ence and technology.

An obvious reference tothe technology center in theUnited States, the name BlueSilicon Valley is a sign of thegovernment's ambition for it tobecome the driving force ofcutting-edge marine science

and technology development,Li said.

The West Coast New Eco-nomic Zone features several in-dustrial parks in different fields.

With an area of more than2,000 sq km, the zone is similarto Binhai New Area, Tianjin'slarge economic zone.

The zone includes a State-level economic and techno-logical development zone, abonded port area and an ex-port-processing zone.

It also hosts the Sino-Ger-man Ecological Park and theChina-Japan-ROK InnovationIndustrial Demonstration Park.

Located across the sea

from Japan and the Republicof Korea, Qingdao will benefita lot from the potential devel-opment of a free trade areaamong the three countries.

"We hope to make full useof the advantages of the WestCoast New Economic Zone andbuild it into an economic zonewith the highest level of open-ness, the most preferential poli-cies and the most-convenienttransportation," Li said.

According to the govern-ment's strategy, by 2015, theGDP of the West Coast NewEconomic Zone is expected toreach 500 billion Yuan ($81 bil-lion).


15

And by 2020, the GDP is toexceed 1 trillion Yuan .

"Our task is to make thezone grow bigger andstronger," Li said. "Our goal is todouble the economic aggre-gate of Qingdao in five yearsthrough the development ofthe zone."

The third zone, the Hong-dao Economic Zone, is de-signed to be a center forhigh-tech companies.

Though the city alreadyleads the nation in the devel-opment of the blue economy,more breakthroughs are ex-pected in many fields, Li said.

Innovation is the key to

achieving breakthroughs, hesaid. The major difference be-tween the blue economy andthe marine economy is scienceand innovation.

The Qingdao governmentwill adopt a series of policies toboost the development of themarine economy.

Preferential policies interms of mortgages and bankloans have been implementedto help entrepreneurs to ex-pand their businesses.

The government will alsolead efforts to set up funds to fi-nance promising startups.

Meanwhile, the city hastaken steps to attract high-end

talent. More than 10,000 topprofessionals from overseashave been attracted to thecity so far.

In terms of infrastructure,Qingdao is making rapidprogress in the construction ofthe Port of Dongjiakou and ahigh-speed railway linkingJinan and Qingdao.

The city will also give prior-ity to environmental protection,Li said, adding that the govern-ment will improve local marinelaws and strengthen their en-forcement to protect the seas.

"We will leave the best sus-tainable resources to our off-spring," Li said


Finance

16

CHINA, USAGREE TO

SHARE AUDITDETAILS


17

C E D M o n i t o r i n g

B E I J I N G - C h i n a ' s s e c u r i t i e sw a t c h d o g a n n o u n c e d o nF r i d a y t h a t a m e m o r a n -d u m o f u n d e r s t a n d i n gh a s b e e n s i g n e d w i t h t h eU n i t e d S t a t e s o n t h es h a r i n g o f a u d i t d e t a i l so n C h i n e s e c o m p a n i e sl i s t e d i n t h e U S , i n am o v e a i m e d a t c r a c k i n gd o w n o n i l l e g a l l i s t i n ga n d t r a d i n g a c t i v i t i e s .

C h i n a S e c u r i t i e s R e g -u l a t o r y C o m m i s s i o n s a i dt h e M O U w a s s i g n e d b yt h e c o m m i s s i o n , M i n i s t r yo f F i n a n c e a n d t h e U Sa u d i t r e g u l a t o r , t h e P u b -l i c C o m p a n y A c c o u n t i n gO v e r s i g h t B o a r d .

T h e C h i n e s e w i l l o f f e ra u d i t d e t a i l s o f C h i n e s ec o m p a n i e s l i s t e d o n U Sm a r k e t s t o t h e i r U S c o u n -t e r p a r t s , b a s e d o n C h i -n e s e l a w a n dr e g u l a t i o n s , s a i d a C S R Cs p o k e s m a n .

T h e C h i n a a f f i l i a t e s o ff i v e a c c o u n t i n g f i r m s -D e l o i t t e , K P M G , P r i c e w a -t e r h o u s e - C o o p e r s , a n dE r n s t & Y o u n g - w e r ec h a r g e d b y U S m a r k e tr e g u l a t o r s i n D e c e m b e rw i t h v i o l a t i n g s e c u r i t i e sl a w s f o r r e f u s i n g t o p r o -v i d e a u d i t d a t a r e l a t e d

t o i n v e s t i g a t i o n s i n t os o m e C h i n a - b a s e d , b u tU S - l i s t e d c o m p a n i e s .

B u t s o m e o f t h e f i r m ss a i d t h a t d e s p i t e a s s i s t -i n g w i t h t h e p r o b e s t h e yw e r e c a u g h t i n l e g a l d i f -f e r e n c e s b e t w e e n t h ew o r l d ' s t w o l a r g e s te c o n o m i e s a n d t h a t t u r n -i n g o v e r t h e p a p e r sw o u l d p u t t h e m i n v i o l a -t i o n o f C h i n e s e l a w s .

T h e C S R C s p o k e s m a ns a i d t h e a u d i t c o o p e r a -t i o n w o u l d h e l p C h i n e s ec o m p a n i e s c l a r i f y f a c t s ,a n d r a i s e f u t u r e f u n d s o no v e r s e a s m a r k e t s m o r es m o o t h l y .

T h e C S R C a n d t h eM i n i s t r y o f F i n a n c e s a i dt h e y r e m a i n e d t o b ec o m m i t t e d t o c r a c k i n gd o w n o n i l l e g a l a c t i v i t i e sa n d m a i n t a i n i n g t h e i n -t e g r i t y o f t h e m a r k e t ,w h i l e p o s i t i v e l y s e e k i n gc o o p e r a t i o n w i t h o v e r -s e a s r e g u l a t o r s o n t h eh e a l t h y d e v e l o p m e n t o ft h e g l o b a l c a p i t a l m a r -k e t .

U n d e r t h e a g r e e m e n t ,t h e P C A O B w i l l b e a b l et o s h a r e d o c u m e n t s w i t ht h e U S S e c u r i t i e s a n d E x -c h a n g e C o m m i s s i o n , b u to n l y i f t h e y w e r e o b -t a i n e d t h r o u g h a P C A O Be n f o r c e m e n t a c t i o n .

C h i n a h a s p r e v i o u s l ye x p r e s s e d c o n c e r n o v e re x p o s i n g n a t i o n a l l y s e n s i -t i v e c o r p o r a t e i n f o r m a -t i o n , r a i s i n g f e a r s t h a tC h i n a - b a s e d a u d i t o r sw o u l d b e d e r e g i s t e r e db y t h e P C A O B .

N i e L e i , a p a r t n e r a tP w C C h i n a , t o l d C h i n aD a i l y t h a t o f f e r i n g a u d i td e t a i l s w i l l m a k e U S i n -v e s t o r s r e a l i z e t h a t C h i -n e s e c o m p a n i e s a r ec o n f i d e n t a b o u t g o i n ga b r o a d t o g e t l i s t e d .

" Q u a l i t y c o m p a n i e sa r e n o t a f r a i d o f o f f e r i n gt h e i r c o r e i n f o r m a t i o n ,a n d i t i s a g o o d w a y t os c r e e n c o m p a n i e sa g a i n s t f i n a n c i a l f r a u d , "s a i d N i e .

Z h a n g Y i f a n , a h e d g ef u n d a n a l y s t w h o r e -q u e s t e d h i s c o m p a n yn a m e b e w i t h h e l d ,a d d e d : " T h i s c o o p e r a t i o nb e t w e e n C h i n a a n d t h eU S i s a g o o d t h i n g , a n d ac o m p r o m i s e f o r b o t hs i d e s . "

Z h a n g s a i d m o s t c o m -p a n i e s l i s t i n g i n t h e U St h r o u g h I P O a r e s o l i d ,a n d a n y w i t h p r o b l e m sa r e n o r m a l l y t h o s e w h os e e k a l i s t i n g t h r o u g h t h eb a c k - d o o r , u s i n g s m a l la c c o u n t i n g f i r m s .


18

IT

Samsung breaksrecord ofSmartphone salesin China


19

phones were sold in China dur-ing Q1 2013, Strategy Analyticsestimates. That accounts for32 percent of al l global ship-ments during the period.

Note: The data providedcited by Korea Herald appears(once again) to be from pri-vate, cl ient-facing StrategyAnalytics reports. We’vetouched based with the re-search firm to try to get ourhands on further details.

Samsung’s industry domi-nance i s developing into aglobal norm, and the Koreaelectronics giant i s undoubt-edly the dr iv ing force behindAndroid. The Google-ownedplatform was respons ib le for43 percent of smartphoneprof i t s in 2012, according toStrategy Analyt ics, which de-termined that Samsung ac-counted for a dominant 95percent share of a l l Androidrevenue i tsel f .

Samsung in second place on8.1 mil l ion units sold, havingovertaken Lenovo — whichhas announced its intention tolaunch devices in the US thisyear — which sold 7.9 mil l ionsmartphones.

Chinese phone makersCoolpad (7 mil l ion smart-phones sold) and ZTE (6.4 mil-l ion) rounded out the top five,with Apple coming in sixth withan estimated 6.1 mil l ioniPhones sold during the three-month period.

Nokia was ranked first onChinese smartphone salesback in 2011, but its sl ide con-tinues and it was not evennoted in the Korea Times re-port. LG, another struggler,recorded its worst ever quarterof business in China to date,shift ing just 100,000 smart-phones to give it a meager 0.1percent of the market.

All in all, 67.4 mill ion smart-

CED Monitoring

SHANGHAI-Samsung toppedChina’s smartphone sales forthe first time last year, and theKorean firm has taken that mo-mentum into this year, aftersel l ing a record 12.5 mil l ionsmartphones in China duringQ1 2013, according to Strat-egy Analytics.

The research firm’s latestf igures are reported by theKorea Herald (via Sammy Hub)and are particularly impressivegiven that Samsung sold atotal of 30.06 mil l ion smart-phones last year. That 2012figure was a record annualsales haul for the firm — andtripled its sales from 2011 —but, given its early progressthis year, Samsung looks set tosmash that record once againin 2013.

Strategy Analytics’s Q12013 data put Huawei behind


20

IT

Lenovo postsrecord results

CED Monitoring

BEIJING-Lenovo Group Ltd reported record sales and earnings results for the past fiscal year

amid a global recession in the personal computer market. Company executives said mobile

devices and corporate business are set to fuel the company's transition in post-PC era.

"We are the fastest growing PC vendor globally. Consumer mobile devices and enterprise

hardware markets will be our new focus," said Yang Yuanqing, chairman and CEO of Lenovo.


21

The world's second-

largest PC maker in terms of

shipment said its full-year

sales climbed to $34 billion, a

year-on-year increase of 15

percent. Its annual net in-

come reached $635 million,

up by 34 percent. Both figures

were the highest in the com-

pany's history. Lenovo's fiscal

year ended on March 31.

In the past quarter, the

company paid increasing at-

tention to its smartphone

business in hopes the unit will

be strong enough to chal-

lenge Apple Inc and Sam-

sung Electronics Co Ltd.

Yang said earlier this year

that Lenovo's major rivals are

consumer mobile device gi-

ants rather than traditional PC

makers such as Hewlett-

Packard Co and Dell Inc.

Fueled by strong smart-

phone sales, Lenovo said its

net income reached $127

million in the fourth quarter, a

jump of 90 percent year-on-

year.

"The biggest advantage

for Lenovo is the company's

brand, channel and produc-

tion capability in China," said

Nicole Peng, research direc-

tor of Canalys China.

Yang said Lenovo is look-

ing for more markets in which

to launch its smartphones.

The company has a presence

in five developing markets

and is ready to enter devel-

oped markets, where it will

face direct challenges from

Apple and Samsung.

But analysts said Chinese

hardware makers may need

more time before taking on

the global electronics giants.

"Apple and Samsung in-

vested heavily in software

and services to build an inte-

grated user experience, and

it is in this area that Lenovo

and most other domestic

companies still have a long

way to go," said Peng.

Out of China — espe-

cially in emerging markets —

Lenovo will have to demon-

strate its ability to bring out

innovative features, and inte-

grate the latest technologies

and industrial design, she

added.

Lenovo had 12 percent of

China's smartphone market in

the first three months of this

year, second only to Sam-

sung, according to industry

consultancy iiMedia Re-

search.

"The crucial part of

Lenovo's business this year

lies in the tablet and smart-

phone businesses," said

Peng. "The smartphone busi-

ness will depend on Lenovo's

performance in the Chinese

market, which drives the ma-

jority of volume."

In addition, Yang said

Lenovo will continue to sup-

port its corporate business

arm in the new fiscal year be-

cause of its high profit mar-

gins.

In late April, reports said

Lenovo was in talks with IBM

to acquire the US company's

x86 server business. The two

companies did not ink the

deal due to price variance.

IBM was seeking $5 billion

to $6 billion for its server busi-

ness, industry website

crn.com reported. IBM was

the world's top server vendor

in terms of revenue by the

end of 2012.

"Servers are the pillar for

Lenovo's corporate business

unit, we will build this arm

through mergers and acquisi-

tions when the price is rea-

sonable," said Wong Wai

Ming, the company's chief fi-

nancial officer.

Last year, Lenovo joined

hands with EMC after the US

company ended a decade-

long reseller relationship with

Dell, the world's third-biggest

PC manufacturer.

Lenovo's idea of entering

the consumer and corporate

markets came after the

global PC market suffered its

biggest recession in history.

US research company

IDC warned earlier this year

that international PC ship-

ments are poised to see a

double-digit slump in the sec-

ond quarter of this year.

Lenovo was the only

major PC maker that saw its

PC sales increase thanks to

the continued demand in

Chinese rural areas.

Stock in Lenovo, listed in

Hong Kong, closed at HK$7.38

(95 US cents) on Thursday, up

2.79 percent from the previ-

ous trading day.


22

Industry

Hong Kong's exports up

by 9%


23

HONG KONG - The value ofHong Kong's total goods ex-ports and imports rose 9 per-cent and 7.7 percent year-on-year in April, respectively, thecity's Census & Statistics De-partment announces.

The department said thevalue of total goods exportsrose 9 percent over a year ear-lier to HK$290.3 billion ($37.39billion). Within this total, re-ex-ports' value grew 9.3 percent toHK$285.8 billion, while the valueof domestic exports fell 4.7 per-cent to HK$4. 5 billion.

Concurrently, the value ofgoods imports increased 7.7percent year-on-year toHK$333 billion. A visible tradedeficit of HK$42.7 billion, equiv-

alent to 12.8 percent of thevalue of goods imports, wasrecorded in the month.

For the first four months asa whole, the value of totalgoods exports rose 5.3 percentover the same period in 2012.Within this total, the value of re-exports increased 5.4 percent,while the value of domestic ex-ports fell 1.9 percent.

In the four months, thevalue of goods imports in-creased 5.6 percent. A visibletrade deficit of HK$152.9 billion,equivalent to 12.2 percent ofthe value of goods imports, wasrecorded.

A government spokesmannoted that the value of mer-chandise exports saw some ap-

preciable year-on-year growthin April, though slightly deceler-ated from that in March. Ex-ports to many Asian economiesgrew further by varying extents,yet those to the major ad-vanced economies in the US,Europe and Japan were still dis-tinctly weak.

The spokesman com-mented further that the sus-tained tepid performance ofthe major advanced economymarkets underlines a still ratherunsteady external environment,which might weigh on regionalexport activities going forward.Hong Kong's export perform-ance will in turn beaffected.(XINHUA)


24

Industry

Chinese investment in

Germany to keepits fast growth


25

CED Monitoring

BEIJING-Growth in Chinese in-vestment in Germany will main-tain momentum in the nearfuture while experts call formore cooperation in the manu-facturing sector.

"Chinese investment in Ger-many began to pick up in re-cent years, but the potentialhas not yet been fully realized,"said Feng Zhongping, VicePresident of the China Institutesof Contemporary InternationalRelations. "The investment canbe expected to expand intosectors of urbanization, ecolog-ical protection, new energyand innovation."

Meng Hong, a researcherat Renmin University of China,agreed that growth in Chineseinvestment in Germany willmaintain a strong momentum.

"The two governmentshave established favorablepolicies and measures forboosting mutual investment.Germany has been troubled byslow economic growth in re-cent years, which provides agood chance for Chinese com-panies to advance mergersand acquisitions as well as de-velop new investment cooper-ation models," Meng said.

In 2012, China became

the third-largest foreign in-vestor in Germany in terms ofthe number of projects, trailingonly the United States andSwitzerland. Germany at-tracted 854 foreign investmentprojects in 2012 and 98 werefrom China, said GermanyTrade & Invest, the nation's for-eign trade and inward invest-ment agency. Auto parts andmachinery manufacturing ac-counted for 29 percent of Chi-nese investment, and energy,mineral and metals for 22 per-cent, while electronics madeup 8 percent.

A Bertelsmann Stiftung re-port said China's investment inGermany rose by about 22 per-cent year-on-year to $626 mil-lion in 2012, and the figure isexpected to increase to $2 bil-lion in 2020.

"The increasing Chinese in-vestment cooperation in Ger-many is a very good directionas China is advancing industrialupgrades in manufacturingand restructuring the economicgrowth model while Germany isvery developed in manufactur-ing," said Xiong Wei, an associ-ate professor at China ForeignAffairs University.

Meng said: "Energy and en-vironmental protection will bekey issues in the future, as Ger-

many has very advanced tech-nology in these areas.

"Chinese investment in Ger-many, whether it's greenfieldinvestment to start new busi-nesses or M&As, will help do-mestic companies learnadvanced management fromGermany, " Meng said.

Responding to concernsand complaints about China'sincreasing investment in Ger-many, Meng said that "it is un-derstandable in view of China'sfast economic growth in thepast decades and the Westernmedia's overstating of China'sinsufficient intellectual propertyprotection".

"Chinese enterprises mustbe well prepared before invest-ing in Germany, and cross-cul-tural differences could be thegreatest challenge as Germanyhas a very strict and soundlegal system in enterprise man-agement, taxation and em-ployment in addition topowerful labor unions. It's bet-ter to follow the local businessrules and get local services,"Meng said.

Chinese investment in Ger-many, on the whole, is verysmall compared with Germaninvestment in China, which in-creased by 28.5 percent year-on-year to $1.45 billion in 2012.

Chinese investment in Germany, whether it's greenfield

investment to start new busi-nesses or M&As, will help domes-tic companies learn advanced

management from Germany


26

Automobile


27

Valeo'sexpansion inChina shiftsto highergearCED Monitoring

SHANGHAI-Valeo Group, theFrench automobile compo-nents and system supplier, aimsto make China its largest mar-ket in terms of sales in the nexttwo to three years, its presidenthas said.

The company, which al-ready has 22 plants in China,plans to add four new facto-ries in the country and expandthree existing ones in Foshan,Wuhan and Nanjing this year,according to Edouard dePirey, the president of ValeoChina.

In the meantime, Valeo willalso hire 1,500 managers andengineers this year in China,

which will eventually becomethe largest country for the com-pany in terms of the number ofemployees in 2014. The com-pany currently employs 12,000people in China.

"Our long-term strategy isto make our business in Chinaequal our European business,"Pirey said.

China represented 10 per-cent of Valeo's total salesglobally in 2012. In the firstquarter of this year, the com-pany saw 13 percent salesgrowth in the Chinese marketyear-on-year, according toPirey. Doubling the sales inChina by 2015 has been a keyobjective for Valeo.

Pirey said that developing

the customer base and secur-ing future orders for the nexttwo to three years are essentialfor the company to achievethe objective.

The French company in-vests nearly 10 percent of itssales in innovation and its R&Dcenters, according to Pirey. Sofar, the company has set up 10product development centersand three R&D centers inChina.

When asked about risinglabor costs in China, Pirey saidthat it is a fact that all compa-nies have to deal with.

But instead of movingplants out of China, he said,Valeo will continue to add newplants.


28

Automobile

China'sCheryAutomobileinkspartnershipdeal withBWF


29

laboration with BWF who hassignificant influence on theglobal market, it will be anadded push factor for Cherytowards international develop-ment," he said.

Chery's cars and advertise-ments are on display during theongoing Sudirman Cup in Kuala

Lumpur, capital of Malaysia,where the company has a de-cent performance in the pastfew years.

Zhou said Chery may useMalaysia as its base for furtherdevelopment in the SoutheastAsian markets.

Chery cars are so ld in over80 countr ies and regionsaround the wor ld, and salesaccumulated overseas haveamounted to more than800,000 uni ts , according toZhou Bi ren, v ice pres ident ofChery Automobi le.

"I believe that with this col-


30

Automobile

Decline inimportedcar prices'good formarket'

CED Monitoring

SHANGHAI-The prices of im-ported cars in China contin-ued on downtrend in Apriland will further decline thisyear because of fierce mar-ket competition and the gov-ernment's clampdown onluxury consumption.

However, analysts saidthis is a positive signal thatthe country's passenger vehi-

cle segment is developing ina healthy and rational man-ner, in addition to closing itsprice gap with the matureWestern markets.

"The year-on-year aver-age price in April droppedthe most in five months,though the month-on-monthrates have fallen no morethan 0.1 percent recently,"said Cheng Xiaodong, chiefauto analyst of the price

monitoring center at the Na-tional Development and Re-form Commission.

"Average prices will con-tinue to decline for a longerperiod, with my prediction ofa 5 percent year-on-yeardrop in 2013," he added.

Cheng said the boom inimported cars in recent yearsmade automakers overopti-mistic, which meant that theslowed market resulted in an


31

Decline inimportedcar prices'good formarket'

excess of inventory. However,he said he believes the sector'sprice downtrend sends a posi-tive signal to the market.

"The demand is still increas-ing. Private consumption willpick up to fill the gap as China'saffluent middle class is expand-ing rapidly. We expect a 10percent sales increase in theimported cars segment thisyear, so a steady price drop in-dicates the return of a rationalconsumption and a healthymarket," he said.

Zhang Xiuying, an auto an-alyst with I.S.Engine ConsultingLtd, which specializes in autoprice research, agreed.

"The average price of im-ported cars dropped 3.4 per-cent to about 430,000 Yuan($70,100) per unit in April asdealers tried hard to promotesales in the past two months,"said Zhang. "This was an in-evitable result of inventorypressure."

Moreover, he said, the gov-ernment's campaign on reiningin luxury consumption rein-forced the impact on the seg-ment, which has suffered froma severe market competitionamong foreign automakers.

Cheng said that the gov-ernment's policy will continueto have an effect in the shortterm, and "from a long-termperspective, the price declineis normal. It should go down toclose to the level in maturemarkets in Western countries".

He told China Daily thatthe profit margin of importedcars in China is much biggerthan in mature markets such asUS and Europe.

According to a recentWall Street Journal report,l isted prices of luxury sedansin China are on average 64percent more expensive thansimilar vehicles sold in the US,based on a comparison ofthree models: the Mercedes-Benz C-Class, Audi A4 and theBMW 3-Series.

The gap is even biggerwhen it comes to importedmodels, the report said. Evenafter stripping out consumptiontaxes and value-added taxes,those three vehicles are still anaverage of 37 percent pricier inChina.

"As such the price declinetrend will not damage the au-tomakers' profitability," Chengsaid.

"By contrast, the shrinkingprofit margin amid fierce com-petition and more individualpurchases of luxury cars willmake the automakers paymore attention to the Chinesemarket and improve their serv-ices."

Analysts agreed the drop inprice will benefit not only con-sumers, but also the industry inthe long run.

In the first quarter, salesgrowth for luxury vehicles inChina slowed to 4 percent, farbehind the 13 percent annualgrowth in the overall passengercar market, according to theChina Association of Automo-bile Manufacturers.

The 4 percent figure waseven more eye-catching com-pared with the average growthof 36 percent in the sector overthe past 10 years, statistics fromconsulting firm McKinsey & Coshow.

However, Yale Zhang, di-rector of automobile consultingfirm AutoForesight (Shanghai)Co Ltd, said the single-digit rateis normal and reasonable on abig base of 1.2 million units ofsales in 2012.


Construction

32

Chinese companies to build hydro-power

plants for Nigeria


33

LAGOS -- Two Chinese firms onTuesday officially commencedthe construction of 700megawatts (MW) Zungeru Hy-droelectric Power Plant in Nige-ria.

The plant, located in cen-tral north Niger State, is ex-pected to be completed in2017 and is being constructedby China-based consortium ofSinohydro Corporation Ltd andChinese National Electric Engi-neering Co (CNEEC).

Both Chinese firms signedthe Engineering procurementconstruction (EPC) contractwith the federal ministry of

power to complete the projectby the end of 2017.

President GoodluckJonathan said at the ceremonythat the hydro dam projectwhen constructed would gen-erate 700 megawatts of elec-tricity for the country.

The Zungeru Hydro Electric-ity Power Project was con-ceived in 1982, but due toconstraints of funds the con-struction work could not com-mence.

The president said the1.293-billion-U.S.-dollar powerplant would be the largestpower plant to be built by this

administration.The project when completed

would open new frontiers to drivethe socioeconomic transformationof the entire country to anotherlevel.

The government has beenpursuing a strategy to develophydro- power projects to meetthe desperate demand forelectricity.

The Nigerian governmentapproved the project in 2012 inorder to obtain more electric-ity, help maintain appropriatepower price and promote eco-nomic growth and develop-ment of the country. (XINHUA)


34

Real Estate

China’s Railindustry to seemore orders


35

BEIJ ING -- Booming demandfor urban rai l t ransit f rom anincreas ing number of Chi -nese ci t ies would re igni tethe rai lway equipment indus-t ry , the China Secur i t iesJournal reports.

The Nat ional Develop-ment and Reform Commis-s ion (NDRC) on Thursdayrevealed an urban t rans i tplan for Kunming, capital ofsouthwest China's YunnanProvince that features atotal investment of 63.49 bi l -l ion Yuan (10.34 bi l l ion U.S .dol lars) .

The NDRC, China's topeconomic planner, has ap-proved urban t rans i t con-st ruct ion plans for severalc i t ies , including Guiyangand Chongqing, for 2013.

Off ic ia l s tat i s t ics indi -cate that total urban transitinvestment has reached 1.23t r i l l ion Yuan thus far , ofwhich 189.6 bi l l ion Yuan wasused to bui ld 337 km of sub-way l ines in 2012. Another220 bi l l ion Yuan wi l l be usedto bui ld 290 km of subwayl ines in 2013.

The increased input hasaccelerated the expansion ofthe rail equipment industry.

China CSR and ChinaCNR, China's two biggestt ra in manufacturers , haveboosted thei r bus iness withthe help of the increased in-vestment. China CSR is f i l l ingorders for urban transit vehi-c les in the ci t ies of Shen-zhen, Shanghai andChengdu, whi le China CNRhas s igned agreements con-cerning t rain manufactur ingor cooperat ion in publ ictransit with several cit ies.

The increas ing develop-ment of intercity rai lways wi l la l so benef i t the ra i l equip-ment indust ry . The Pear lR iver Delta, one of China'smost developed areas, wi l lspend 118 bi l l ion yuan on in-

tercity rai lways f rom 2012 to2020. China CSR and ChinaCNR have produced newtrains that specif ical ly caterto intercity rai lway networks.

The intercity rai lway mar-ket i s hoped to boost thes lumping prof i t s of the twocompanies, which have seentheir income drop due to thecountry ' s suspens ion of b id-ding for bul let t rains in 2010.

China CSR saw i t s year-on-year net prof i ts fal l in thef i rs t quarter of 2013, with in-come from bul let t ra in saless lumping 50 percent f rom ayear ear l ier to 3 bi l l ion yuan,according to a report f romUBS Secur i t ies.

China CNR's quarter ly re-port a lso showed weak per-formance, as i t s total sa lesamounted to 18.15 bi l l ionYuan, down 1.35 percentyear on year.

However, the gloomytrend is l ikely to be reversed in2013 due to the looming re-sumption of bullet train bid-ding, the journal reported.

The China Rai lway Cor-porat ion (CRC), newlyformed in March 2013 afterthe breakup of the Min is t ryof Rai lways, has f in i shedprepar ing for restart ing thebidding, which i s expectedto begin in May or June.

Meanwhi le, construct ionwork on the new West Rai l -way Stat ion in the ci ty ofFuzhou, Fuj ian province, hasjust f in i shed and an inspec-t ion is underway.

The new stat ion, locatedat the intersect ion of Wu-longj iang St reet andGuangxian Road, near Min-hou New Univers i ty Town,covers an area of 85,333square meters , three t imeslarger than the old one.

I t wi l l main ly serve l inesbetween western Fuj ian andcit ies and counties surround-ing Fuzhou.

The six-story main buildingincludes a basement withparking lots the first and sec-ond floors contain a tickethall and waiting hall, and allthe other f loors contain staffoffices and apartments.

The wait ing area has acapacity for a maximum of2,500 passengers , and ashopping area near thewait ing hal l wi l l includerestaurants and shops and isexpected to open soon. Thestat ion i s expected to serve25,000 people a day, and upto 40,000 dur ing peak sea-sons.

On the other side, 2 rai l-way lines that Anhui provincehas been working on, to im-prove connections in thenorthern part of the province,are close to completion, ac-cording to a Shanghai Rail-way Bureau report.

One of the l ines con-nects the ci ty of Fuyang inthe north with Lu 'an, a pre-fecture- level c i ty in thewestern part of the province.This 166-ki lometer- long l ine isexpected to be completedby late August , at an est i -mated cost of 4 .3 b i l l ionYuan ($702 mi l l ion) . I t has atop speed of 160 k i lometersper hour, and wi l l take someof the burden off the busyBei j ing-Kowloon l ine, whi leass ist ing with coal del iver iesin northern Anhui , theShanghai Rai lway Bureau ex-plained.

The other ra i lway l ine,cost ing around 4.9 b i l l ionYuan ($800 mi l l ion) , con-nects the ci ty of Suzhou innorthernmost Anhui with thecity of Huai 'an in J iangsuprovince and i s 210 k i lome-ters long. i t i s most ly for mov-ing cargo, especial ly coal .Const ruct ion work on i tbegan in Ju ly , 2009 and i sexpected to be completedthis November.(Agencies)


36

Real Estate


37

What next forpropertymarket?CED Monitoring

BEIJING-He Yuanxiang is a Bei-jing-based real estate agentworking at Homelink, one of thebiggest house brokerages inthe country. She expected alesser workload after an ex-tremely busy March, but that'snot what she got.

In March, the central gov-ernment rolled out measuresdesigned to cool China's red-hot property market by reiningin speculative investment. Oneof the measures, a 20-percenttax on capital gains from prop-erty sales, a pilot project insome cities, triggered wide-spread panic among potentialbuyers and sellers. Fearinghigher home costs after the im-plementation of governmentcontrol measures, potentialbuyers rushed to buy beforethe changes went into effect,creating a secondhand prop-erty-purchasing spree in Marchin many cities.

"After the March purchasespree, the market only cooledoff for a short period and thenstarted to heat up again," Hetold Beijing Review, noting thatthe Homelink branch she worksfor sealed six deals during the

second weekend of May."If the apartment is exempt

from paying the 20-percent tax,the price shoots up by hun-dreds of thousands of Yuan bysellers. If not, secondhand-home buyers will have to paythe exorbitant tax," she said."Anyway, home costs arehigher than before. It turns outthat the earlier you buy a homein Beijing, the better."

He's words were echoed bya Real Estate Blue Book pub-lished by the Institute for Urbanand Environmental Studies atthe Chinese Academy of SocialSciences (CASS) on April 25.The blue book projects thathousing and land prices inChina will see a continuous in-crease in 2013. In big cities likeBeijing, Shanghai andGuangzhou, a sharp pricesurge is likely to occur in 2013,due to a growing imbalancebetween supply and demand.The Chinese Government willface greater pressure in termsof housing price controls andmay consider expanding thecapital gains tax to more re-gions.

Latest figure showed thatnew home prices rose in almostall Chinese cities in March. Of a


Real Estate

38

statistical pool of 70 major Chi-nese cities, 68 saw home priceincreases in March from amonth earlier, up from 66 inFebruary, according to the Na-tional Bureau of Statistics. On ayear-on-year basis, 67 citiesregistered higher prices inMarch. The number in Februarywas 62. First-tier cities recordedthe largest monthly increase innew home prices, with Shang-hai's 3.2-percent growth top-ping the list, followed by 2.8percent in Shenzhen and 2.7percent in Beijing. The averageprice of newly built apartmentsin 100 Chinese cities hit 10,098Yuan ($1,640) per square meterin April, rising 1 percent fromthe previous month. Priceshave risen for 11 consecutivemonths since June, accordingto a report from the ChinaIndex Academy.

"Demand outstripping sup-ply is the key reason for theprice hike," said Li Enping, a re-search fellow with the CASSand also one of the authors ofthe blue book. "If the 20-per-cent profit-gain tax is strictly im-plemented, housing prices willrise faster because the tax sup-presses supply. On the onehand, the new tax will add aburden to homebuyers. On theother, people who can nolonger afford a secondhand-home will turn to newly builthomes, pushing up prices ofthe latter," said Li.

China's young have rushedto the market to buy homes, asmany consider owning anapartment a prerequisite forgetting married. The average

age of first-time homebuyers is27 in Beijing, while it's 37 inBritain and 42 in Germany andJapan, according to the CASSblue book. Also, insufficient af-fordable housing projects andfast-rising rentals make Chinesepeople constantly insecure,pushing up the demand forbuying a home.

Bo Wenxi, vice president ofZhuoda Group, a domesticproperty developer, said thereare three reasons for the ongo-ing surge in housing prices."First, local governmentsstrongly rely on land sales andthe real estate market as signif-icant parts of their fiscal rev-enue and GDP growth.Second, demand will outstripsupply for a long time in China.As more rural people flock tocities, the demand is gettingstronger. With further urbaniza-tion underway, this trend will beintensified," said Bo.

"Finally, housing prices areaffected by currency issuance.Under the influence of quanti-tative easing in many Westerncountries, China has to imple-ment quantitative easing poli-cies as well, for fear oflarge-scale capital flight. Withso much money in the market,it's quite unlikely that propertyprices will fall."

He said, "Two months afterthe new tightening policies, themarket has rebounded. Pricesare continuously rising after ashort period of hesitation andobservation from buyers."

For the Central Govern-ment, housing price controlshave become vital in improv-

ing people's livelihoods amidgrowing public complaints overrunaway real estate prices.While purchase limits proved tobe ineffective, a property taxwas touted as a much-neededsolution to skyrocketing prices.In China's real estate market, aproperty tax—while well-estab-lished and taken for granted inWestern countries—is a rela-tively new phenomenon inChina, and is viewed as ameasure to restrict the buyingof homes for investment pur-poses.

Recent rises in China'shousing prices have fueledcalls for an expansion of thetax, which has been limited toonly Shanghai and Chongqing.Property taxes in the two citieswere introduced on a trial basison January 28, 2011, in a bid tohelp cool the real estate mar-ket. Nearly 20,000 units of resi-dential homes were hit with aproperty tax in Shanghai in2011 and the number jumpedto 37,000 in 2012, bringing in2.46 billion yuan ($395.1 million)in tax revenues last year, ac-cording to the city's financeand taxation authorities. TheShanghai property tax modelcovers only buyers of secondhomes, while the Chongqingprogram levies it on both newand existing high-end houses.

"In China, most taxes werelevied on property transactionsinstead of on property owner-ship. This is really unreason-able," said Li of the CASS. Lisuggested the government ex-pand trial property tax pro-grams to more regions to avert


39

a possible price rebound in2013.

Jia Kang, Director of theResearch Institute of FiscalScience, aff i l iated with theMinistry of Finance, said theproperty tax would expand tomore cities this year. The CASSblue book also mentionedthat maintaining a steadyland supply and acceleratingthe construction of affordable

housing projects are effectiveways to tame the overheatedmarket.

"Local governments shouldguarantee fairness in the allo-cation of affordable housing,by setting up a transparent sys-tem. Also, the system shouldcover migrant workers in citiesor townships," said Li.

"Land supply should bescientifically planned accord-

ing to regional conditions. Infirst-t ier cit ies and cit ies withfaster-than-expected surginghousing prices, more landshould be put into use for theconstruction of residentialhousing. In third- or fourth-tiercit ies with too much inven-tory, land supply should be re-duced to avoid rampantconstruction."(Courtesy Bei-j ing Review)


40

Real Estate

DEVELOPERSCONTINUE TO

RAISE FUNDS FORLAND PURCHASE

CED Monitoring

SHANGHAI-China's 10 largestproperty developers haveraised nearly 38 billion Yuan($6.2 billion) in funding athome and abroad since thestart of 2013, nearly equal tolast year's total, and analystssay the borrowing binge islikely to continue.

The demand for capitalhas mainly come from landpurchases as domestic devel-opers continue to bid for high-premium plots, said ZhangDawei, Centaline's researchdirector.

The 10 developers raised41.3 billion Yuan in capital dur-ing the whole of last year, ac-cording to figures fromCentaline Property ResearchCenter.

Public information showedthat in eight days from May 3this year, three land parcelswere auctioned off separatelyfor record prices in Shanghai,Guangzhou, in Guangdongprovince, and Changsha, thecapital city of Hunanprovince, showing that theland market - which fellsharply after the execution ofthe central government's lat-est property tightening policies

- had picked up significantly. "Domestic developers are

raising funds overseas be-cause the borrowing costs aremuch lower than in the do-mestic finance market," saidZhang.

"The funds raised arebeing used to repay maturingloans and stockpile primeland."

About 50 Chinese devel-opers raised an estimated $23billion overseas through issuingbonds and through trusts, ac-cording to the Centaline re-search.

Another notable change isthat borrowing costs for someleading developers are drop-ping sharply, helping themstockpile land at lower cost,added Zhang.

He said that he thoughtthe central government's lat-est tightening policy had hada limited effect in bringingproperty prices down, andthat institutional investors stillregard China as a premiumdestination for property invest-ment.

Other recent industry fig-ures from Hong Kong-basedMidland Realty showed thatthe amount of land auctionedoff in Shanghai during the first

four months of the year soared113 percent year-on-year, inShenzhen the volume surged227 percent, and in Hangzhou,273 percent.

Hui Jianqiang, director ofreal estate informationprovider Beijing Zhong-fangyanxie Technology Serv-ice Ltd, said: "We are seeingapparent growth in domesticfinancing, but developers arealso taking the opportunity ofraising capital outside China."

According to James Mac-donald, head of Savills re-search China, a large numberof offshore corporate bondshave been issued by HK-listedmainland developers.

In January, 16 companiesraised about $6.85 billion,more than half the total USdollar-denominated debt is-sued by mainland developersin 2012, he said.

Among Hong Kong-listeddevelopers, Guangzhou-based Agile Property Hold-ings Ltd has raised 12.88bil l ion Yuan in senior notesand bank loans so far thisyear, China Resources LandLtd has raised around 9.35bill ion Yuan, and China Over-seas Property Ltd has raised17.38 bil l ion Yuan.


41


Agriculture

42

SLOWER GROWTHMAY HINDER RURAL

DEVELOPMENT


43

China's decelerated economicgrowth, which is expected to be-come the new norm, might ham-per its countryside'sadvancement, a top agriculturalofficial said on Saturday.

"Annual economic growthrates of around 7 percent willbring some uncertainties in cre-ating enough job opportunitiesfor China's rural population," saidTang Renjian, deputy director ofthe Office of the Leading Groupon Rural Work, Communist Partyof China's primary rural manage-ment organ.The central govern-ment's enhanced support fordomestic enterprises and theservice industry will provide somecushioning against job losses.

"But we don't know how longthat can be sustained," Tangsaid.

The buoyant inflation rates ofrecent years have enticed thegovernment to contain agricul-tural products' price growths,creating obstacles for farmers' in-come increases, he said.

Production will also facechallenges from diminishing nat-

ural resources and agriculturalreforms, Tang said.

"The government needs todevise a mechanism to protectfarmers and encourage agricul-tural production," Tang said.

He made the remarks at ahigh-end forum organized by theResearch Center for Rural Econ-omy at the Ministry of Agriculturein Beijing.

The government has longstressed agriculture's importanceand takes pride in the past nineyears of increased grain outputs.The country produced 589 millionmetric tons of grain, official datashowed in 2012.

Growing grain yields, how-ever, did not rein in surging agri-cultural imports. In 2012, China'stotal grain imports hit a historicalhigh of more than 70 million tons,renewing food security concerns,experts said.

"Increasing grain outputcannot catch up to increasingconsumption," said Yin Chengjie,head of the Chinese Associationof Agricultural Economics, a gov-ernment think tank.

"Now, we face a tight supplyand some structural problems inthe domestic food market."

Depletions of natural re-sources as agricultural inputs willalso take a toll.

Sunny Verghese, CEO of Sin-gapore-based grain trader OlamInternational Ltd, pointed to a re-cent Bloomberg report forecast-ing China will become a majorimporter of corn, wheat and riceby 2015 because of shrinkingland and water resources.

The government shoulddeepen rural reforms and ex-pand support for farmers, forumparticipants said.

Han Jun, deputy chief of theState Council's Development Re-search Center, a top governmentthink tank, said farmland shouldbe a key reform issue.

"The government should letfarmers have more property andeconomic rights over their land,"Han said.

"We have an opportunitywindow over the next seven toeight years, and we must makefull use of it."


Agriculture

44

U.S. BREEDINGExPERT VISITS BRIGHTSEED UNDER BRIGHTRICE INDUSTRY LTD.

On May 10, Cui Zhiren, Chairman of the Board of Supervisors and Vice President Zhang Hanqiang of BrightFood (Group) Co., Ltd. met with Dr. Ronnie Coffman, Director of International Project Department of CornellUniversity who is also a plant breeding expert from the U.S. They expressed their welcome and thanks to Dr.Coffman for his special visit to Bright Food Group for professional guidance on cultivation of high-yield riceand wheat and quality rice screening and breeding.

During the meeting, Cui briefed the development of modern agriculture Bright Food Group has made inrecent years, and also talked about the development and business model of the group in creating modernurban sight-seeing agriculture and building a safe industry chain “from field to table”.

According to Cui, modern agriculture sector is an important part of industrial pattern of Bright Food Group.


45

The group has madesome achievements inthe development of mod-ern, large-scale, inten-sive, scientific andecological agriculture. Itis actively promoting andexploring the further inte-gration of agricultural re-sources, construction ofmodern agro-ecologicalcivilization and optimiza-tion of the modern seed-growing agriculturedevelopment to enhancethe competitiveness ofmodern agriculture. Hehoped that Dr. Coffmanwould provide technicalsupport and assistance ingrain cultivation andscreening and breedingnew varieties of rice andwheat, and offer guid-ance on improving therice yield, enhancing therice resistance and im-proving the rice qualityand taste, to help BrightFood Group solve thetechnical bottleneck

problems encountered intransition and develop-ment.

Dr. Coffman, accom-panied by Vice PresidentZhang Hanqiang, visitedthe breeding labs of BrightSeed under Bright Rice In-dustry Limited LiabilityCompany, the corebreeding bases of qualityrice and wheat seed and10000 mu of high-yieldgrain production demon-stration area. He dis-cussed and interactedwith the technical person-nel and answered theirquestions. Dr. Coffmanspoke highly of thegroup’s achievements inthe development of mod-ern agriculture, gave in-ternational forefrontsuggestions about theseed development of thegroup and expressed hisdesire for further ex-changes and coopera-tion in rice breeding.


46

Agriculture

MOUNTAINS WITH

HEART

Tea plantations flourish on the fertile soil of Guizhou's moun-

tains. Photos by Feng Yongbin / China Daily


47

Wicker baskets become canvases for these fair maidens.

A worker sifts through tea

leaves in Meitan county, one of

the major tea-producing areas

in Guizhou province.

A Bouyei woman serves local

food to visitors in Wanggang

village in Guiyang.


Agriculture

48

Guizhou offers tourists offthe beaten track a sense ofhospitality, tranquility - and asplendid cuppa, Tom Cliffordreports.

Guilt is a terrible thing tobring to a table. For hours oursmall bus had been buffetedby nature's wrath, exposed onGuizhou's mountain passes,and only the dexterity and skillof our driver kept us this side ofparadise.

Rain slashed our windowsin a Hitchcockian shower-scene frenzy. Our schedulehad been literally washedaway. Up through gorges,down into valleys, tight bends,narrow roads and white knuck-les. Then relief as we de-scended to the flatlands.

We were on Bouyei ethnicgroup land and stumbled uponthe village of Yinzhai, still farfrom our eventual destination,but craving rest and nourish-ment.

"Can you feed us," shoutedthe driver to a woman in thevillage kitchen.

"How many?""Eleven.""Twenty minutes. Have a

walk, see the village, relax,"came the assured response.

Like us, the countrysidewas breathing a sigh of relief.Mountains looming over us ap-

peared picturesque. The skystreaked with red hues, nolonger in torment, seemed tobe blushing with embarrass-ment at its previous behavior.

Wits gathered after a shortwalk, we headed for the mealbut first acknowledged an olddiscolored poster in the mainvillage home displaying thecore principles of the Bouyeiethnic group.

"Heaven, Earth, Emperor,Ancestors, Teachers," it read.History was tapping us on theshoulder, a privilege before wesat down to eat.

Fried fish, pork, vegetablesof blazing color were offeredwith joyous abandon to shoutsof appreciative approval. Andthen came the guilt.

Had they enough food forthe village, or were we eatingthem out of house and home?We were assured that the vil-lage stored its food for monthsin advance and had morethan adequate supplies.

On hearing this, not a wordwas spoken for six minutes asstomachs were replenished.

Our thanks were acceptedgraciously as the plates werecleared. We had been recipi-ents of a kindness to strangers.Outside, darkness had finallyovercome its inhibitions and

descended, ushering in a timefor reflection.

For days we had beentraveling through the highs andlows of Guizhou province. Itsfertile soil struggles to produceon mountainous terrain, butwhen given a chance on thehorizontal it can provide a ver-tical harvest for the imagina-tion. Nothing, it seems, isbeyond its capability. The usualsuspects, broccoli and corn,are joined by delicate leavesfor tea, tobacco and chilies tojump-start the synapses.

This is Guizhou tea country.If in doubt, look to the heavenswhere a laser beam cuts acrossthe clouds from a giant teapotthat dominates the skyline ofMeitan town in Zunyi.

Tea, especially green tea,is growing in popularity; youcould say it's a top pick.

China exported about300,000 tons of tea last year, 30percent of it green.

The art of picking tea is al-most as sublime as its taste,and requires a surgeon's deli-cacy and optical prowess.

"You can never use yournail or sharp edge like a knife,"one picker said. "If you do, youcauterize the cut and it turnsblack. Each leaf has to be torn,delicately, from the plant."


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