F REIGN TRADE the Export-Import Bank of China: Want to Be the Best in a Better World

MAR. 2012 No. 520 Sponsored by CCPIT Since 1956 CHINA’S F REIGN TRADE The Export-Import Bank of China: Want to Be the Best in A Better World

Special report China’s Agricultural Technology Underway

SURVEY China’s Pharmaceutical Market Eyes Rapid Growth

Jaclyn Tsai, Founder of Lee, Tsai & Partners

国内邮发代号：80-799 国际邮发代号：SM1581 国内刊号：CN11-1020/F 国际刊号：ISSN0009-4498

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• Policies China pledges deeper economic reforms earlier, the smallest gain since 2009, according to the General Administration of Customs. New measures will be introduced The Ministry of Commerce has predicted to boost consumption, especially for that a slowdown in the country’s export growth vehicles and electrical appliances, as could continue at least into the first quarter of export demand weakens, China Daily 2012 with a “more severe” outlook. reported. “This year in China will be all about try- With tax rebate policies on ve- ing to ensure a soft landing,” said Jim O’Neil, hicles and appliances having expired chairman of Goldman Sachs Asset Manage- or due to expire, “new measures are ment. in the pipeline” to boost consumption, “Growth, under downward pressure from said Huang Hai, former assistant min- weakening exports and a fall in government- ister of commerce and member of the sponsored investment, will have to be led by economic and trade policy consulting committee affiliated to the Ministry of Com- stronger personal consumption if the economy merce. is to grow by more than 8 percent.” “The Ministry of Commerce has drafted a proposal to continue the stimulus It was agreed at the annual Central Eco- programs in the coming few years, but in different ways, and they are expected to nomic Work Conference in December that Chi- cover vehicles and those related to real estate, say household appliances,” Huang told na will be committed to expanding domestic China Daily in an interview. consumption and improving people’s livelihood The measures may include subsidies for consumers in affordable housing to buy while trying to stabilize exports. appliances and for those planning to change their cars. Since the global financial crisis in 2008, Ministry of Commerce spokesman Shen Danyang also said the ministry is the government has launched a series of pref- mulling over launching new programs on expanding domestic consumption. erential polices encouraging local consumers, Huang also disclosed that under the instructions of Premier Wen Jiabao a na- through subsidies, to renew or purchase house- tional circulation conference, the first of its kind, will be held around April. hold appliances and cars. Government officials will discuss how to introduce concrete measures to boost “No matter whether the nation’s economy consumption at the conference, he added. slows down or not, China will have to change its More than 10 central government departments including the Ministry of Com- economic growth model to consumption-oriented, merce, the National Development and Reform Commission and the Ministry of rather than export-or investment-driven,” said Lu Finance, are expected to make proposals after conducting research before the con- Zhengwei, chief economist with Industrial Bank ference, Huang said. Co Ltd. China has sought to sustain fast economic growth through boosting domestic China’s State Council, or the Cabinet, on consumption, given the fact that export growth has been declining during the past Feb. 15 pledged to push for deeper reforms to few months with demand weakening from the European Union, China’s largest address the country’s economic problems, Xin- trade partner. hua News Agency reported. In November 2011, the nation’s exports increased by 13.8 percent from a year The government will use reform to solve Figures

cating that the economy is transferring 0.3% to a more inner-led growth mode, the China used 9.997 billion U.S. dol- General Administration of Customs 21.9% lars of foreign direct investment (FDI) (GAC) said on Feb. 15. China’s spending in research and in January, down 0.3 percent year-on- development (R&D) last year surged 21.9 year, the Ministry of Commerce (MOC) $73.19b percent year-on-year to 861 billion yuan said on Feb. 16. ($139.7 billion), the country’s statistical The central government has invest- authority said on Feb. 22. ed 461.1 billion yuan ($73.19 billion) 50.1% in forestry over the past six years, the China’s reliance on foreign trade State Forestry Administration said on 22.6% dropped to 50.1 percent in 2011, indi- Feb. 15. China’s tax revenues surged 22.6

2 Quotes

deeply rooted structural problems that “Investment will continue” are hampering the country’s development, according to a statement released “We look for the eu- after a State Council executive meeting rozone and EU to ... offer presided over by Premier Wen Jiabao. investment products that are The government promised policy more attractive and favor- improvements in the non-public sector able for China-EU coopera- to encourage private capital to enter tion,” Zhou said. fields that were previously monopo- He made the comments lized by the state, including railways, while hosting an event for municipal administration, finance, visiting European Coun- energy, telecommunications, educa- cil President Herman Van tion and health care, according to the Rompuy and European statement. Commission President Jose China will expand a pilot pro- Manuel Barroso. gram for value-added tax adjustments He also said that China would increase its participation through the In- and advance resource tax reforms, the ternational Monetary Fund, the European Financial Stability Facility and the statement said. future European Stability Mechanism. To make financial services more “At the G20 meeting, our state leaders promised European leaders that, accessible, the statement said China amid the global financial crisis and the European sovereign debt crisis, China will actively cultivate small-scale fi- will not reduce the proportion of euro exposure in its reserves,” Zhou said. nancial institutes to target small- and micro-sized businesses, adding that “China needs to continue economic reforms for the government will work to properly sustainable growth” guide private financing. Electricity, refined oil and water China has emerged successfully from the global financial crisis, but the pricing mechanisms will also be re- nation must continue to undertake fundamental reforms to sustain its eco- formed, the statement said. nomic growth and help the rest of the world recover, Nicholas Lardy, a senior Reforms in rural areas will in- fellow at the Washington-based Peterson Institute for International Econom- clude regulations on the expropriation ics, said on Feb. 1. of collectively-owned land. Despite the impressive economic performance, China must adopt a “fun- Other reforms discussed during damentally new growth model if it is to sustain anywhere near its recent pace the meeting included policy adjust- of economic growth” and cope with various economic imbalances, Lardy ar- ments in the areas of social service, gued in his new book entitled “Sustaining China’s Economic Growth After administration and foreign invest- the Global Financial Crisis”. ment, according to the statement.

percent year-on-year to 8.97 trillion yuan 0.5 percent year-on-year in January, ($1.42 trillion) in 2011, the Ministry of 5.5b the first decline in two years as a Finance said on Feb. 14. China’s central government will in- week-long holiday distorted trade vest 5.5 billion yuan ($873 million) figures, official data showed on Feb. this year to clean up pollution in 10. on Feb. 9. $14.2t the country’s rural areas, the China’s foreign exchange market Ministry of Finance (MOF) saw its transaction volume hit said on Feb. 13. 3% $14.2 trillion in 2011, up four China’s foreign exchange regulator times from 2006, the coun- said on Feb. 9 that the country’s cur- try’s forex regulator said on 0.5% rent account surplus would account for Feb. 13. China’s exports dropped around 3 percent of the GDP in 2011.

3 Policies their performance assessment system. To better implement the policies, China’s Govt boosts new-type industrialization bases quality watchdog will produce a specific plan annually to guide the work, according to the The Chinese government has set eight major tasks for the future development of blueprint. national new-type industrialization demonstration bases, according to a joint release by the Ministry of Industry and Information Technology, Ministry of Finance and Urbanization to engine China’s Ministry of Land and Resources on Jan. 29, according to China Daily. economy The eight tasks require the demonstration bases to: strengthen self-dependent innovation and technological transformation; encourage low-carbon growth; expand leading enterprises and advance coordination abilities of small and medium-sized firms; promote industry convergence and focus on producer services; build self- owned brands and regional brands; deepen the integration of Informatization and industrialization; develop the public service system, and improve land-use efficiency. The joint release also specified measures in policies, financial support, social resources and talent building. Developing new-type industrialization demonstration bases will contribute to the national industrial transformation and upgrade, boost regional economic development, and help China become a powerful player in the international industrial competition.

China vows to promote quality in development

China has vowed to step up management and supervision over the quality of its products and projects in its development for the years to come, according to a blue- The Chinese government is building new print released on Feb. 10 by the State Council, said Xinhua. cities in the country’s underdeveloped interior, The blueprint, featuring the development of enhanced quality, establishes targets hoping to convert millions of farmers into city for the 2011-2020 period. dwellers and maintain China’s burgeoning By 2015, China pledges to keep the qualification rate of agricultural products economic success in the following decades, re- above 96 percent, while that of the general products in the national checks over 90 ported Xinhua. percent, according to the blueprint. Along the mud-clogged Yellow River, a lo- Regarding project quality, the passing rate for large and medium projects should cal government has widened crooked country be 100 percent, while the rest should reach 98 percent. lanes into highways, turned farmlands into In the service sector, the customer satisfaction index in the producer service housing estates and invited Nike and Adidas to industry is targeted at above 80, while that in the consumer service at above 75, the open stores in a nearby shopping mall. blueprint said. In Changyuan, a county with 840,000 The blueprint also requires local authorities to include quality safety issues to inhabitants in central China’s Henan province,

Figures

from the 9 percent projected in Septem- million hectares) this year, a senior of- 8.5% ber, and it warned that exports would be ficial said on Feb. 3. China’s economy is expected to a significant drag on expansion in the expand by 8.5 percent in the first quar- coming two years. ter of 2012, a government think tank 4.5% said on Feb. 9. C h i n a’s c on s u me r 1.66b price index (CPI), a main China aims to keep gauge of inflation, rose 8.25% its total acreage for 4.5 percent year-on-year The International Monetary Fund planting grain in January, the National (IMF) has cut its forecast for China’s above 1.66 bil- Bureau of Statistics said 2012 economic growth to 8.25 percent lion mu (110.67 on Feb. 9.

4 Quotes ambitious officials, keen business people and restless farmers are working together to urbanize the sleepy rural region. “China’s foreign trade outlook not favorable” From the balcony of his daughter’s new apartment, a cluster of newly fin- The outlook for ished buildings unfurl in front of 65-year- China’s foreign trade is old Wen Xianhua. Those were patches of not favorable in the first wheat when he came last time. quarter of the year amid It’s been six years since Wen last vis- sluggish global growth, ited the county seat, during which time especially among major dozens of villages have been turned into trade partners such as the urban areas. EU, the U.S. and Japan, A report released in January by the Ministry of Commerce National Bureau of Statistics stated that spokesman Shen Dan- 51.27 percent of China’s total population yang said at a press con- was located in urban areas as of the end ference on Feb. 16. of 2011, meaning that over the past three Shen said external decades, more than 500 million people demand waned after have been added to China’s cities, espe- global economic growth cially large ones in prosperous coastal slowed, weighing on the areas. expansion of China’s exports. According to the estimation of busi- China also faces obstacles in expanding imports because of slowing do- ness counselor McKinsey, there will be mestic growth and export restrictions in the EU and U.S., Shen said. one billion people living in China’s cities by 2030. This means more than 300 mil- “Keeping proactive fiscal policy ‘both necessary and lion new urban residents - almost as big possible’” as the current population of the United States. It is both necessary and possible for China to maintain a proactive fiscal However, a blue book on internation- policy this year, Chinese Finance Minister Xie Xuren said on Feb. 1. al urban development warns that the fast In a signed article published in the Qiushi Journal under the Central growing population has overwhelmed Committee of the Communist Party of China, Xie said that implementing a the insufficient infrastructure of China’s proactive fiscal policy was a significant decision as the country deals with a big cities. The blue book done by China’s changing economic environment. top think tank, the Chinese Academy of “There are many favorable conditions for the further growth of China’s Social Sciences, says problems like traf- economy in 2012,” Xie said, citing that China is stepping up the pace of in- fic jam and pollution might become even dustrialization, urbanization and agricultural modernization. worse in the coming years.

their profits increase 25.4 per- Statistics (NBS) said on Feb. 3. 0.7% cent year-on-year to reach China’s Producer Price Index (PPI), 5.45 trillion yuan (863.68 11.5% a main gauge of inflation at the whole- billion U.S. dollars) sale level, rose 0.7 percent in January in 2011, the Na- The export and import year-on-year, the lowest since December tional Bureau of value of China-made elec- 2009, the NationalBureau of Statistics tronics rose 11.5 percent (NBS) said on Feb. 9. year-on-year to 1.13 trillion U.S. dollars in 2011, the Ministry of Industry and 25.4% Information Technology China’s industrial enterprises saw (MIIT) said on Feb. 2.

5 http://cft.ccpit.org www.ccpit-cft.net.cn 2012/03 No.520

Special report

The development of Chinese 08 China’s Agricultural Technology Underway 08 farming industry is in dire need of the 10 Current Agricultural Situation Calls for Science and Technology technology support. 12 China Moves to Encourage Agricultural Technology Innovation 13 How to Boost Agro-technology 14 China Underscores Scientific and Technological Innovation for Sustained Agricultural Growth 15 Why No. 1 Document Targets Agricultural Technology? 17 No. 1 Document Fuels Seed Industry and Agricultural Machinery

ECONOMY 20 The Coming Resolution of the European Crisis I think this diverse era will provide 24 What Is the Economy Really Doing, and Where Is It Going? 41 a perfect stage for the current generation of designers. 27 A Dead Cat Bounces 28 Data Watch on China’s Foreign Trade and Investment in January 2012

Industrial Watch 32 China Frees More Labor with Farm Machinery Subsidies 40 Chinese Demand for Gold Surges 41 The Same Theme Show, While Different Impressions 44 What Can China Do About Health Products Industry? 46 Grand Gathering of Auto Aftermarket Industry

China’s pharmaceuticals market is survey 48 expected to see strong growth. 48 China’s Pharmaceutical Market Eyes Rapid Growth

Case Study 56 RMB Comes Back Home

REGIONAL TRADE AND INVESTMENT 58 China’s Way Out in Iran’s Oil Crisis 60 New Version of Australia-China Economic Relationship 62 EU Seeks Strategic Partnership with China 64 The Idea of Together It is a perfect combination of culture 88 and natural landscape, and can also 66 Brazil: A Leadership Role in Pushing for a Multipolar International be considered as the symbol of the Chinese nation. Monetary System? 68 “Dragon” Brings Business Opportunity for China and South Africa 70 Guangxi Promotes Sino-Vietnamese International Sponsored by (主管) Tourism Zone CCPIT(中国国际贸易促进委员会)

71 “Central China Delta” to be Built Published by (主办) Trade Development and Cooperation Center of CCPIT Cover Story 中国国际贸易促进委员会贸易推广交流中心 72 Jaclyn Tsai: Pursuing a High-Quality Law Practice 社长 President 杨晓东 Yang Xiaodong Contributing to the Development of the Greater China 总编辑 Editor-in-Chief 孟燕星 Meng Yanxing 副社长 Vice President 石净 Shi Jing Region 杨复强 Yang Fuqiang 李英宏 Li Yinghong InfoRMATION 编辑部副主任杨蔚 76 2012 China Market Suppliers List Editorial Deputy Director Yang Wei 编辑部 Editorial Department 郭艳 Guo Yan 78 China Fairs & Expos Tel:86-10-68053271 李振 Li Zhen 竹子俊 Zhu Zijun 82 Investment Projects in Fuding, Fujian Province, China 崔晓玲 Cui Xiaoling 流程总监 Operation Director 张越 Zhang Yue LIFESTYLE 英文校审 English Polisher 莫雷（美）Adam Morley

84 Beyond 经营部总经理石净（兼） Marketing Department Director Shi Jing 副总经理 Deputy Director 白义峰 Bai Yifeng THIS IS China 石林峰 Shi Linfeng 项目经理 Manager 游万龙 You Wanlong 88 For Mountain—Climbing Enthusiasts, Taishan Is a Must Tel:86-10-68027947 李小冬 Li Xiaodong 高嵩 Gao Song eye on china 推广部总经理李英宏（兼） 92 Franchising and Trademark Protection in China Distribution Department Director Li Yinghong 项目经理 Manager 王石 Wang Shi 93 China Consumption to 2015 Tel:86-10-68069328 王岱凌 Wang Dailing

Culture 秘书处副主任刘晓东 Council Secretariat Deputy Director Liu Xiaodong 94 Beautiful Chinese Qipao 联络专员 Assistant 王飞 Wang Fei Tel:86-10-68020773 于洋 Yu Yang 95 Daily Figurative Slangs 戚英杰 Qi Yingjie 石林 Shi Lin

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Underway By Zhu Zijun

he central policy document setting the tone for this year’s agriculture, namely, Opinions of the Central Committee of the Communist Party of China and the State Council on Speeding up Innovation in Agricultural Science and Technology and Building up the Capacity to Guarantee TAgricultural Product Suppliers, was issued on Feb. 1.

8 This is the ninth high-priority policy document themed on agriculture and rural areas issued by the CPC Central Committee and the State Council. The No. 1 document is considered to be of primary importance in setting the agenda for the year. With the theme of “speeding up innovation in agricultural science and technology and building up the capacity to guarantee adequate suppliers of agricultural products”, the document has a Foreword, a Conclusion and 23 articles in six other chapters. Targeting the year’s central task of ensuring effective supplies of agricultural products, the document specially focuses on the progress of agricultural science and technology on the basis of stressing on the simultaneous implementation of various measures and joint efforts from all walks of life. Developing agricultural technology is the core issue to ensure the quality and safety of agricultural products, the document said. China vows to increase financial expenditures on agriculture, farmers and rural areas, and enhance investment to agricultural science and technology. In addition, China is to strengthen service of agricultural technology promotion. The document also pushes for agricultural mechanization by boosting credit support for the purchase of machinery, water-conservation facilities, and key ecological projects in the country as well. How will the document work? What achievements are expected? And what are the difficulties in the course? The Special Report of this issue will present an in-depth study of the document.

9 Current Agricultural Situation Calls for Science and Technology By Richard Zhu

he first document, or known as the No. 1 document, to address China’s agricultural issue by improving agriculture science and technology is in urgent Tneed, considering the present situation facing the agricultural development. The current situation and concerns The CPC committee decided to issue the top document on agriculture and rural areas in an all-round way based on several considerations, said Chen Xiwen, director of the office for the Communist Party of China (CPC) Central Committee’s Leading Group on Rural Work, at a news conference organized by the State Council Infor- utilization of fertilizers and pesticides people’s livelihood in rural areas. Evi- mation Office on Feb. 2. because this can reduce efficiency, ruin dence shows that the top documents on First, China is facing more com- the environment and can not last long. agriculture and rural area work issued by plicated and arduous domestic and Meanwhile, it is necessary to promote the Committee can help highlight key international economic situations. To sustainable and rapid growth of farm- working areas, clarify policy orientation maintain stable and rapid economic de- ers’ incomes by issuing good policies, and major signal of the Committee in velopment, basically stable prices, social increasing prices and encouraging them guiding the work of agriculture, farmers harmony and stability and make stable to work in cities, and these methods and rural areas. progress, China should avoid any ac- should be strengthened in the future. In general, the Committee set cident in agriculture and any problems But the fundamental way is to develop the theme of top document this year as in agricultural product suppliers. This productive forces, constantly increase “speeding up innovation in agricultural year, the 18th National Party Prog- land productivity, resource utilization science and technology and building up ress to be held is of vital importance and work efficiency through sci-tech the capacity to guarantee adequate sup- for creating a sound atmosphere, progress, and increase farmers’ income pliers of agricultural products”, which promoting the general work and win- by increasing production, improving better promotes development, responds ning strategies to do a good job in quality and saving costs. Thus, science to the grassroots demands, considers agriculture, farmer and rural area and technology is vital to consolidate the long-term goals and enriches and development, stabilizing agricultural and develop good agricultural situations develops the policy system of agricul- production and guaranteeing effective in rural areas. ture, farms and rural areas on the basis agricultural product suppliers. Third, in terms of work guidance, of maintaining policy continuity. Second, in terms of development the CPC Central Committee has is- Achievements in agriculture demands, China should stabilize agri- sued eight high priority documents since cultural production and stably ensure 2004. By focusing on a specific theme According to Chen, the year 2011 effective supplies of grain and other every year, the Committee has issued a saw frequent extreme climates, soar- important agricultural products for the series of important policies and measures ing agriculture costs and arduous tasks long term. China does not have enough to strengthen, benefit and enrich farmers of stabilizing market prices. Despite space to achieve this goal by continuing and promote sustainable and stable agri- that, the agricultural and rural work to increase irrigation and land resourc- cultural and rural development, winning maintained strong development im- es; China must increase the per-unit- consecutive good harvests in grain pro- petus, initiating a good beginning for area yield. To increase the yield, China duction, continuous increase of farmers’ the development of the 12th Five-Year should not continue to increase the income and constant improvement of Plan. Great progress has been made in

10 improving production, increasing farmers’ highlights three key areas on the ba- the ideas of industry supplementing incomes, water conservancy project con- sis of fully affirming achievements in agriculture and urban areas helping struction, improving people’s livelihood, agriculture, farmers and rural areas rural areas, and is the precise summary modern agriculture and new countryside this year and deeply analyzing current of strengthening agricultural basis, construction. 2011 was the best year in difficulties and challenges, said Chen. benefiting development in rural areas this century in terms of agricultural and First, China should categorically not and enriching farmers’ lives. rural development as a whole. be sluggish because of the successive Third, in terms of investment to China’s grain output hit 571 mil- increase of grain production, not reduce agriculture, farmers and rural areas, the lion tons in 2011, an annual increase of investment because of the improvement document requires constant increases in 4.5 percent and the eighth consecutive of rural areas or become lax because investment in three aspects: increasing year of growth, according to the Na- of good turns in rural development. financial expenditures on agriculture, tional Bureau of Statistics. Second, the document affirms the farmers and rural areas; increasing the Besides, positive momentum is importance of agricultural science and state fixed asset investment to agricul- leading to rapid growth of farmers’ technology, which is the basic support ture and rural areas; and increasing income in an all-round way. Last year, to ensure national food security, the investment to agricultural science and farmers’ per capita net income reached necessary option of breaking through technology so as to ensure growth in 6,977 yuan, more than 1,000 yuan the limitations of environmental re- increment and proportion. higher than the previous year, setting sources and the decisive force of accel- Fourth, in terms of strengthen- a record high. Actual growth hit 11.4 erating construction of modern agricul- ing service of agricultural technology percent, setting a new record in this ture. Third, the document also clarified promotion, the document puts forward century. The high growth has lasted for the general ideology of strengthening three policies in a collective manner, eight consecutive years. science and technology to ensure de- namely, increasing the salary of reg- Moreover, good development of velopment, strengthening production istered agricultural technicians to the modern agriculture is accelerating the to ensure suppliers and strengthening same level of those working grassroots promotion of new countryside con- people’s livelihood to ensure stability. institutions; promoting the reform of struction in an all-round way. China According to Chen, the main body the grassroots agricultural technology has basically established a region-based of the document reflects the country’s promotion system and the program of agricultural development layout, greatly considerations in five aspects. First, in constructing demonstration counties strengthened construction of farmland terms of the framework, the document to basically cover agricultural counties water conservancy projects, developed stresses on and strengthens support (cities, districts and farms); and making agricultural facilities and continued from three aspects. Around the issue of the qualification construction of agri- to improve the contribution rate of building up the capacity to guarantee cultural technology promotion organi- agricultural sci-tech progress and the agricultural product suppliers, the first zation cover all towns. level of farming mechanism. Further, part stresses on the work of increas- Fifth, in terms of fostering new improvement of people’s livelihood is ing investment and work efforts and type of farmers, the document mainly lifting the public services in rural areas pragmatically working on agricultural adopted “three measures”, namely, in an all-round way. Farmers’ optimism production; after that, the second, third further increasing the fund allocation is leading to the strengthening of grass- and fourth parts put focus on sci-tech standards for students of agricultural roots organized construction and social support for agriculture; the fifth part disciplines; the state compensating the management in rural areas. talks about infrastructure support and tuition fees and paying study loans for Chen pointed out that despite the the sixth part discusses support from the qualified university graduates who huge achievements, there are also con- market circulation. work in rural areas; accelerating the cerns: whether or not the momentum in Second, in terms of the policy pace of free secondary vocational edu- rural and agricultural development can system of agriculture, farmers and cation and implementing subsidy policy be sustained; the rapid increase of the rural areas, the document clarifies for vocational training so that every prices of essential factors of production guidance in three aspects. In the past, backup worker in rural areas can master and frequent market fluctuations pose stress is put on “supporting farmers”, a skill. challenges in improving efficiency of and later “supporting and benefiting In conclusion, the document puts agricultural production and mobilizing farmers”. At the Third Plenary Session forward the general requirement on farmers’ enthusiasm; also, whether the of the 17th CPC Central Commit- strengthening and improving the lead- emerging trend of narrowing down the tee, the idea of “strengthening and ership of the CPC on the work of ag- income gap between urban and rural benefiting farmers” was put forward. riculture, farmers and rural areas, pro- areas and the development gap among In the document, the idea is upgraded moting integrated cultural development different regions is going to continue as to “strengthening, benefiting and en- in urban and rural areas, pragmatically to increase farmers’ benefits. riching farmers.” This idea enriches protecting and improving people’s live- Major contents of the document and develops the strategic ideology lihood in rural areas and strengthening of giving top priority to agricultural and innovating social management in The beginning of the document development, details and materializes rural areas.

11 he priority of the No. 1 Document of the Chi- hina is keen to accelerate technology innovation nese central govern- and scientific research in agriculture, a move to ment has changed from boost the country’s modern agricultural devel- water conservancy investment opment, a central government statement said Tin 2011 to agricultural science on Feb. 1. and technology in 2012. As key China will intensify efforts to encourage develop- resources such as land, water and C labor are becoming more scarce, ment of both frontier agricultural technologies and basic research, so as to maintain sustainable agricultural growth, the increase in productivity from said the document issued jointly by the Central Com- investment in water conservancy mittee of the Communist Party of China and the State and adoption of new technolo- Council, China’s cabinet. gies will be critical to producing The move mainly aims to ensure the country’s food adequate amount of and nutri- By Xinhua News Agency News By Xinhua security and meet the demand of agricultural develop- tious food for a more well-to-do ment, so as to improve land yield, resource efficiency and and urban population in China. labor productivity, said the document. But for China, it is not a choice The government will give support to agricultural between water conservancy and research focusing on bio-safety, farm product safety, ef- technology. It needs both. fective use of farmland, ecological restoration and genetic The government’s priority regulation. to accelerate investment in wa- The government also is eyeing major achievements in ter conservation and irrigation the development of agricultural bio-technology, seed pro- projects in 2011 was widely wel- duction, new materials, precision farming, water-saving comed, for it was long overdue. irrigation, new fertilizers, epidemic control, marine agri- The government must keep this culture, product processing and shipping, and farm equip- momentum and increase investment. ment in irrigation for small farm- Particular emphasis will be given to scientific innova- ers. It is important that these tion in seed production, it said. investments generate higher water supply capacity and help minimize

Innovation China will support the cultivation of new varieties of seeds and promote commercialization of the industry the harms caused by droughts and by encouraging large enterprises to enter the seed market floods. The government should through mergers and acquisitions, as well as equity partici- also set up an effective monitoring pation, said the document. and evaluation system to evaluate The country will work to establish an innovation sys- the progress, results and impact of tem that allows researchers from all agricultural sectors to such investment. join scientific efforts, and an evaluation system that values China’s agricultural technol- practical solutions. ogy is at the forefront of the world Government authorities will introduce favorable poli- in terms of crop yield for major cies, like tax reductions, to encourage agricultural enter- staples such as rice, wheat and prises to focus more on scientific innovation and bring “new corn. Indeed, China’s agricul- research achievements” to the market, said the document. tural sector has seen tremendous

Technology Technology The government also promised to increase financial improvements in productivity in support for agricultural research, while attracting loans the last few decades. According and venture capital to enterprises that innovate agricul- to United Nations Food and Ag- tural technology. riculture Organization estimates, With more labs to be built, more efforts will be made rice and corn yields in China to conduct major scientific projects that are related to agri- were almost two times higher in cultural development and of public benefit, and the culti- 2010 compared to 1980, while vation of new varieties of genetically-modified organisms wheat yield was about three times China Moves to Encourage Agricultural Agricultural Encourage to Moves China will be continued, it said. higher. Now, China produces 50 Local authorities should further promote agricul- percent more rice and wheat than tural technologies and offer farming guidance to grassroot the world average per unit of land. farmers while enhancing meteorological services. Schools But agricultural mecha- and research institutions will also be important forces for nization technologies, which the promotion, said the document. have become more important as labor becomes scarcer still have much room for improvement. A

12 priorities of small farmers, technological innovation must also consider other economic and cultural conditions such as local gender and diversity issues. And education campaigns to increase farmers’ awareness about these new technologies and other public policies, such as technical assistance, finance and regulation, needed to accelerate the adoption of modern technologies must be put in place. An International Food Policy Research Institute study shows that investment in agricultural research and development (R&D) has the largest impact on agricultural growth and second largest impact on poverty reduction. It is next only to rural education investment. But public investment in agricultural R&D in China is still below the desired level. The government has to invest more and at a faster rate, in agricultural R&D, increasing it to at least 1 percent of agricultural gross domestic product How to Boost in 2012, 1.5 percent in 2015 and 2 percent in 2020. Agro-technology Also, the government should improve regulations, policies and incentives for the private sector to increase By Shenggen Fan its investment in agricultural R&D. Chinese enterprises in the agricultural and food sectors have increased expo- shift from land-saving technologies to technologies, there are many others, nentially over the past decade, but their land- and labor-saving technologies is particularly in the central and western investment in R&D is still compara- required. Water- and energy-saving regions, that continue to rely on tra- tively small. The protection of intel- technologies as well as environmental ditional technologies. Research shows lectual property rights, tax concessions protection technologies also need to be that while large numbers of small farm- and secured access to land for experi- improved. China can learn from ad- ers in the northern and eastern regions ment are some of the policies that the vanced countries to push the frontiers have benefited by growing Bt cotton, government should consider continuing of technology development in these for example, adoption rates have been to improve the situation. areas. much lower in the western region. Moreover, China can also Climate change will have a huge Similarly, there is evidence that strengthen collaboration with inter- impact on China’s agricultural sector. agricultural research investment in the national agricultural research systems Agriculture will have to adapt to the central and western regions is much such as the Consultative Group for changes in temperature and precipita- lower compared to that in the eastern International Agricultural Research tion. Besides, extreme weather events region. Therefore, the government has and its supported agricultural research like floods, droughts and storms are to pay more attention to less-developed centers. The system is undergoing re- likely to become more frequent. And regions, where farming has become un- form and has developed large research agriculture can be used to mitigate attractive and less productive. programs on rice, wheat, corn, climate climate change by switching to low- It is particularly important that change, forestry, nutrition and policy. carbon farming practices. For that, new new agricultural technologies are low There is a great potential for Chinese policies, investments and technologies on cost and highly divisible to meet the institutions to learn from and contrib- will be critical. needs of small farmers. Modern tech- ute to these programs. The adoption of agricultural technologies must suit different contexts, nologies varies according to regions too, and be able to coexist with tradi- (Author: Director-general of across China. Although many Chi- tional technologies. International Food Policy Research nese farmers have welcomed modern In addition to the needs and Institute)

13 China Underscores Scientific and Technological Innovation for Sustained Agricultural Growth

By Xinhua News Agency

hinese authorities issued growth compared to fiscal revenues. medium machinery so as to push for its first policy document The country will also offer more agricultural modernization. for 2012, underscoring the subsidies for major grain-producing As renewed measures to facilitate importance of scientific and areas and farming cooperatives, with rural market circulation, the government technological innovation for sustained direct subsidies for farmers to be in- will encourage banks to increase lending Cagricultural growth. creased. to rural regions and support commercial To ensure an effective supply of Government investment will boost banks to set up township outlets. At the agricultural products is vital to the development of both frontier agricul- same time, it will work to keep prices of country’s overall and strategic develop- tural technologies and basic researches, agricultural commodities at a reasonable ment amid the complicated global eco- according to the document. level, the document said. nomic situation, deepening influence of Particular emphasis will be given Further, the document pledged to global climate changes and increasing to scientific innovation in seed produc- provide more educational training on shortages of arable land and water at tion, the document said. science and technology in the rural ar- home, said the document, the ninth Meanwhile, the authorities will eas to produce professionals in the sec- of its kind since 2004 to address rural build more water projects, treat rivers tor to facilitate growth. It also pledged problems. and lakes, strengthen reservoirs and to launch key ecological projects in the This was the first time the govern- prevent geological disasters to increase country. ment took “accelerating agricultural the areas that have access to irrigation. Land policy scientific and technological innovation” Efforts will be made to promote as the theme of its No. 1 central docu- new technologies and equipment for The document said the government. water-saving irrigation, expand the pur- ment will accelerate revisions of relevant “It is a milestone in the history of chasing subsidies and offer tax breaks laws to improve its policies regarding China’s agricultural science and tech- for the equipment, the document said. rural land. nology development,” said Chen Meng- The government will offer credit The transfer of land use rights must shan, a spokesman from the Ministry support to the purchase of large and be based on a compensated, voluntary of Agriculture. The country needs more innovation efforts in the agricultural sector as it relies on imports for more than 50 percent of its live pigs, layers, broilers and fine breeds of cattle. Besides, more than 90 percent of the country’s high- end vegetables, flowers and plants come from other countries and regions, said Chen. Support for innovation The document said the government will continue to expand its fiscal budget for agriculture in 2012 and direct more of the country’s fixed-asset investment toward the sector. It said the government should play a leading role in investing in agricultural science and ensure that the investment will create “significantly” faster

14 basis and be conducted in accordance gricultural R&D needs to be closely relat- with the law, it said. ed with production and financial input in Agricultural Technology? Why No. 1 Document Targets Local authorities should step up agricultural science & technology should with registration of rural land owner- be ensured to grow more rapidly than reg- ship and steadily carry out pilot pro- ular financial revenues, so as to make breakthroughs grams to contract rural land. Mean- Ain reforming the agricultural science & technology while, the government will work to system. improve the rules of conciliation and Since China’s agricultural science & technology arbitration of land disputes, said the system reform has been deepened, what problems are document. confronting the reform? And what counter-measures Last year, illegal land grabs and can be taken? These two questions are concerning other regulatory issues caused mass the general public. According to Chen Xiwen, direc- protests in China. A dispute over land tor of the office for the Communist Party of China use, financing and elections in Wukan (CPC) Central Committee’s Leading Group on village in the southern province of Rural Work, system and input consisted of the most Guangdong led to large-scale protests important two aspects for addressing the above-men- by villages against local authorities tioned questions. From the perspective of system, since September. agricultural R&D needed to be closely linked with Premier Wen Jiabao said at the production; if merely angling for academic titles and annual central conference on rural publishing works, researches would play a limited work, which opened late December, role in promoting production, said Chen. that China should strive to promote Surely, system does not only refers to R&D, but agricultural modernization and protect also for promotion of agricultural science and tech- farmers’ rights to boost the develop- nology, as agriculture serves as the foundation of the ment of rural areas. national economy and it strongly supports sustained He said farmers enjoy the legal and stable economic and social development. rights of land contracts, land use and In China, capital input in R&D accounts for a collective income distribution as basic small portion in the GDP and less for agricultural protections, no matter if they move into R&D. Therefore, this year’s No. 1 Document focuses the cities or stay in the countryside. on establishing a long-term mechanism, pointing out “No one is empowered to deprive to ensure that financial input in agricultural science such rights,” Wen said, adding that and technology should grow much more rapidly than any slight failure in agriculture would regular financial revenues and to raise the propor- hamper the country’s economic devel- tion of agricultural R&D in agricultural added value. opment and social stability. However, once input is increased, a string of reform Thousands of residents in Wukan and innovation needs to be launched to form an ef- on Wednesday saw the start of an elec- fective incentive and constraint mechanism so that tion for new leadership after former vil- the increased input can be spent wisely. lage heads were removed. Moreover, since only with farmers’ application, Official data showed China’s grain agricultural technology can yield outcome in the output rose to a record high of 571.21 farmland, it is necessary for farmers to have better million tones in 2011. The figure rep- science & technology quality and to authentically resented a year-on-year increase of 4.5 master modern technologies so that agricultural percent and marked the eighth con- R&D achievements can function well in real produc- EconomicBy Daily secutive year of growth for the country’s tion. grain output. How to overcome the last obstacle for Meanwhile, farmers’ incomes agricultural technology promotion posted relatively fast expansion over eight straight years, which is expected Demo counties for agricultural science & tech- to top RMB 6,900 (US$ 1,092.6) in nology promotion system reform and construction 2011. will cover all the farming counties (cities, districts Despite remarkable achievements and farms) this year. in improving agricultural production The No. 1 Document particularly stressed agri- and the livelihoods of rural residents cultural science & technology promotion, said Tang in 2011, China now faces growing dif- Renjian, deputy director of the office for the CPC ficulties and uncertainties in securing a Central Committee’s Leading Group on Rural Work. stable development of rural areas, said In the past years, the system for agricultural sci- the document. ence & technology promotion had some prominent

15 instruments and equipment as well as transportation means. In the mean time, the document also emphasizes to transform the system so as to infuse vigor. “The personnel recruitment system will be implemented in an all-round manner featuring strict recruitment requirements and clearly- defined job responsibilities. Thus, unlike in the past, it does not mean that those who are hired will have a secured job,” said Tang, “The effects and conditions for promotion will not be determined by competent departments any more, but as- sessed together by three parties—competent departments, township governments and farmers.”

How will the rural policies adapt to the new urbanization trend The key lies in how to address the three prominent problems—who will do the farm work, how will farmers be integrated into the city and how will the villages be governed. Last year, the Chinese towns and cities had a bigger population than the villages for the first time, and the urban population accounted for 51.27% in the total population, which was an epoch-making milestone for China and which shed lights on the policies for addressing the “three rural issues” (agriculture, farmers and rural areas), said Tang Renjian. The key lies in how to address the three prominent problems—who will do the farm work, how will farmers be integrated into the city and how will the villages be governed. For addressing the problem that lots of young rural laborers go to the cities and thus leave behind children, women and the old, attention should be paid to the following three aspects: first, the farming operation entities should be cultivated and innovated based on the household contract management; second, it also needs to train professional farmers in order to let the new generation of farmers who master technologies and well understand management go back to the problems—unsound promotion network, incoherent com- rural areas to engage in the modern operation of agricultural munication and disperse responsible people. After the Third production; third, the social service system for agriculture Plenary Session of the 17th National Congress held in 2008 should be strengthened, and professional, comprehensive and set out new requirements for root-level agricultural technol- cooperative service agencies are encouraged to develop among ogy promotion, epidemics prevention and control as well as companies, governments and non-governmental organiza- for the quality and safety mechanism of agricultural prod- tions, which aims at providing one-stop services throughout ucts, the system for agricultural technology promotion has the process of agricultural production. taken a turn for the better. Through reform and develop- “Regarding the problem how to integrate farmers into ment, the service capability for the agricultural technology cities, farmers, in general, need to genuinely receive equal promotion system at the grassroots level has become consid- treatment with urban residents,” said Tang. “Population flow erably stronger. should be guided reasonably so that on the one hand urban- The No. 1 Central Document highlighted the capability ization will be pushed forward and on the other hand new of the grassroots-level agricultural promotion and it made the countryside will be constructed; eligible farmers should be on-the-job personnel for agricultural technology promotion granted with registered permanent residence in cities; mi- have similar salary with those in the grassroots institutions, grant workers and farmers needs to be guided to be employed Tang introduced. Demo counties for agricultural promotion locally.” system reform and construction will cover all the farming Referring to the problem that how the villages will counties (cities, districts and farms) this year to address the be governed, Tang said that in general a brisk village self- problem that the grass-roots organizations for agricultural governance system which was fully participated by farmers technology promotion lack necessary funding; construction under the leadership of the Party was to be established based projects for agricultural technology promotion organizations on the domestic status quo and the development trend; new will cover all the villages and towns, which will mainly target social organizations and intermediary organizations in differ- at improving working conditions, such as office buildings, ent forms were encouraged to be set up.

16 No. 1 Document Fuels Seed Industry and Agricultural Machinery

By China Securities Journal

he Central Committee’s the technology would be the funda- costs. Therefore it is very important to No. 1 Document for 2012 mental way out. The farming technol- speed up the farming technology con- stresses great focus on farm- ogy constitutes the basis for national structions. ing technology and plans to grain security and is the inevitable Some experts say that the purpose increases financial expenditure on the choice for removing the obstacles that of the farming technology innovation Timprovement of agriculture, rural areas fetter the resource and environment. It is to raise the farmland output capacity, and farmers’ lives. The document also is the driving force that speeds up the resource utilization efficiency and labor aims to improve conditions for farm- building of modern agriculture, being productivity, and put an equal focus on ing technology innovation, facilitate distinguishingly characterized by its raising productivity and efficiency, com- seed technology innovation and agri- public service and social basic func- bine seed enhancement and planting cultural mechanization. Insiders of the tions. method improvement, and agricultural agricultural industry say that the birth The development Chinese farm- machinery and farming process; the di- of this document will greatly enhance ing industry is in dire need of the rection is to promote farming technol- developments of the seed industry and technology support. The recent years ogy integration, mechanization of the agricultural machinery. have witnessed a worsening restraint working process and information-based Agricultural technology becomes on arable lands and water resources, as production and operation, and create a key word of this year well as an increasing demand on grains a technological system that enhances and other major agricultural products, productivity, quality and efficiency, Agricultural technology has be- which posed heavy burdens on the ag- and protect the ecological environment come the key words during recent agricultural development. In the long run, and production security. The break- ricultural developments. Chen Xiwen, China will face a shrinking arable land, through point of technology innovation director of the office for the CPC Cen- transfer of labor force, continuously lies in the close attention to front-line tral Committee’s Leading Group on high labor and agricultural production technology, the satisfaction of industry Rural Work, emphasized on many different occasions that it is very difficult to increase the grain production simply through more material input. The importance is to make use of the available agricultural resources to accelerate institutional reform and self-innovation of the agricultural technology, and raise the contribution ratio of technology ad- vancement on agricultural production. On Dec. 26, 2011, the day before the Central Agricultural Working Meeting was held, the Ministry of Agriculture issued the “12th Five-Year Plan for the Farming Technology De- velopment”, the significance of which is immensely profound. The No. 1 Document states that to ensure the stable and sustainable development of agriculture, and adequate supply of agricultural products,

17 demands, as well as a combination of industry has undergone a rapid growth Bank required all its branches to pro- research and production. The research and its seed market has been expanding vide more funding support for the seed staff shall do their thesis papers during rapidly. The total production value of industry development; while the Agri- field practices and share the achieved the seed industry has increased from 25 cultural Development Bank of China accomplishments with common farm- billion yuan in 2000 to 55 billion yuan will provide benchmark interest rate ers, to close the gap between technol- in 2008. As the seed market becomes service that favors the loans for seed ogy and real production. more mature and the industry further purchases of related companies. Under resource constraint, the develops, the market value is expected The “12th Five-Year Plan for Agri- development of agricultural technology to hit 100 billion yuan in the future. cultural Technology” will have its main will first rely on the increase of produc- The year 2011 marks a new milestone aim as “making breakthroughs in variety tion per unit. It is predicted that the in the development of the seed industry. breeding with great application values seed and farming machinery industries The State Council issued “the Opinion and intellectual property rights, raising will benefit from such a trend. Take on Accelerating the Development of the core competency of the agricultural corn for example, in the U.S. the corn the Modern Seed Industry”, clarifying plants”. The plan will also stress great yield per mu is about 6,000, while in the strategic and important position focus on “new variety nourishment” and China the best yield is about 4,200 and also the future development direc- encourage the expansion of seed compa- and the average is 3,600, 60% of the tion of the modern seed industry. The nies with large scale, strong competitive- U.S. average. Such a large gap could document also raised the development ness and good growth prospect. only be met through seed enhancement thoughts of “basing on corporations Researchers from securities and improvement of the agricultural and integrating seed breeding and pro- trading companies say that the good mechanization. Then the farming ma- motion.” The Chinese seed industry is seed subsidy and the increase of grain chines and the agricultural process, and embracing an unprecedented develop- purchasing price have stimulated the the variety and technology could be ment opportunity. growth of demand. On the one hand, combined. Therefore, it is very urgent Recently a series of policy mea- the government is raising direct sub- to develop the agricultural technology sures have been made to bolster the sidy and good seed variety subsidy for based on seed enhancement and farm- seed industry development. The Min- farmers by a large margin. In 2003, the ing machinery. istry of Finance has agreed to set up a national government allocated 300 mil- Seed technology innovation might development fund for the seed industry; lion yuan as good seed variety subsidy, be the breakthrough point the State Administration of Taxation while the subsidy has increased to 22 has made specific regulations on the billion yuan in the year 2011, which China’s seed industry market is exempt of the income tax of companies lowers the costs for farmers. very large. Since China became a mem- featuring “integration of seed breeding On the other hand, the rise of ber country of WTO, the Chinese seed and promotion”; China Development grain purchasing price, especially those grain varieties specified by purchasing companies (the price will be 10-20% higher than normal price), which en- courages farmers’ initiative of growing good seed varieties. As farmers tend to grow several widely promoted varieties, the seed products of competitive companies will meet a “demand-exceed- supply” situation, which would further lift the seed price. The key to promoting the technology innovation of the seed industry is to making quick breakthrough in seed variety development and breeding a group of flagship companies with great competitiveness in the global market. The innovation of the seed industry technology lies in the support of seed companies featuring “integration of seed breeding and promotion”, and the quick establishment of a new commercial seed breeding system with companies as major subjects. The innovation shall make demands as its guidance, a particular variety as the basic unit, the

18 of mechanization. And more than 60% 52.3%, indicating that the machine- of the fields have been planted by ma- based production method has taken a chines (52% at the end of eleventh five- major role in agricultural production year period). New breakthroughs have and the Chinese agricultural produc- been achieved in rice transplanting and tion method is embracing an era of harvesting of corn, cotton, oilseed and agricultural mechanization. sugarcane. The growth of major agri- What’s more, the No. 1 docu- cultural products has been fully mecha- ment stresses emphasis on enhancing nized and the mechanization of hus- the promotion of agricultural technol- bandry and aquiculture has improved ogy, improving agricultural machinery markedly. promotion service, resolving the “last Statistics show that during the mile” problem and raising agricultural 11th Five-Year Plan period, the rev- technology level. The document also industry chain as its major vehicle, to enue of China’s agricultural machine calls for a further development of new let companies become the major players industry had increased from 112.98 agricultural social service organizations, from R&D investment to result appli- to 265.56 billion yuan, increasing to support agricultural cooperatives, cation. Under such a background, those by 135% and the compound annual supplying and marketing cooperatives, flagship companies with great advan- growth average reaching 18.6%; the farming-related companies and agricul- tages in seed research and development, operation profits had raised from 4.71 tural professional service organizations. cooperation with research and scientific to 18.46 billion yuan, increasing by al- Industry experts say that in the A-share institutions and marketing. most 300% and the compound annual market, companies that promote agri- The No. 1 document places farm- growth average reaching 31.4%. Also cultural machines include Shanghui- ing technology on a corporate footing, at the same time, the mechanization long Share and Jifeng Agricultural Ma- optimizes distribution of seed compa- rate of agricultural planting has for chinery. Companies like these will have nies, raises market access threshold and the first time surpassed 50%, hitting a bright future of growth. issues a series of policy measures that favor flagship companies. Experts in the field say that with the aim of “sup- Links porting the superior and the strong”, domestic listed companies that might China’s 1st Policy Document in Review benefit from such policies include: Longping High-tech, Denghai Seed, Over the past eight years, this government policy document has been key Fengle Seed, Quanyin High-tech, in effecting reform and development of China’s expansive rural sector. Dunhuang Seed, Dabeinong, Wanxi- The No. 1 central document is the first policy document released by Chi- ang Denong and Shennong Dafeng. na’s central government, at the start of every year. But later, it became known An era of mechanization for as a policy guidance on architectural and rural issues. From 2004 to 2011, the farming production document has placed emphasis on three major agricultural issues. In 2004, the focus was increasing farmers’ incomes. The No. 1 document also points In 2005, the spotlight was placed on improving agricultural production out that to speed up the farming mech- capacity, as well as improving rural infrastructure and technology. anization, it is necessary to expand the In 2006 the emphasis was on pushing forward rural areas towards a “new operation area and improve the services countryside scheme”. of agricultural machines. That is to say, In 2007 the focus evolved to the development of modern agriculture, in progress has to be made in the number the technology and business model to improve production efficiency. of agricultural machine application and In 2008 the focus shifted to further consolidating infrastructure, but add- also the level of technology. ing an item to improve the public service standard. The already publicized “12th Five- In 2009 the focus shifted to maintaining stable economic growth in rural Year Plan” for agricultural machines areas; optimising production structure; and adding more investment. The doc- also points out that as of 2015, the total ument also emphasized the sufficient supply of primary agricultural products. output of agricultural machines will The 2010 no.1 central document further consolidated the previous year’s reach 1 billion kilowatt. The number guidance. For the first time the document guaranteed the total amount of in- of major agricultural machinery equip- vestment for agricultural issues, and ensured input proportions will improve ment has been increasing steadily, the steadily. Also, it was the first time the government decided to ensure no rural structure is further improved and re- area would be left without financial services, and that more funds would be gional development more coordinated. made available from agricultural banks for agricultural projects. Major bulk agricultural products, Last year was the first time the document focused on water conservancy including grain, cotton, oilseed and and irrigation projects. sugar, have experienced a higher level

19 CONOMY E The Coming Resolution of the European Crisis

By C. Fred Bergsten and Jacob Funk Kirkegaard

oom and gloom about the euro abounds. An increasing number of commenta- tors and economists, including here at the Peterson Institute, have begunD to question whether the common currency can survive. The economic and financial problems in the euro area are clearly serious and plentiful. The area is in the midst of multiple, frequently overlapping, and mutually reinforcing crises. A fiscal crisis is centered on Greece but visible across the southern euro area and Ire- land. A competitiveness crisis is mani- fest in large and persistent pre-crisis current account deficits in the euro area periphery and even larger intra-euro area current account imbalances. A banking crisis was first evident in Ire- There are only two alternatives. The key to understanding the land but is now spreading throughout Europe can jettison the monetary evolution of the euro is to observe and the area via accelerating concerns over union. Or it can adopt a complemen- analyze what the Europeans do rather sovereign solvencies. tary economic union. This brief argues than what they say. They have resolved The lack of confidence in the euro that, for all the turmoil, Europe is well all of the many crises that have threat- is first and foremost rooted in a crisis on its way to completing the original ened the European integration project, of fundamental institutional design. concept of a comprehensive economic throughout its history of more than half The Economic and Monetary Union and monetary union, and that Europe a century, in ways that strengthened (EMU) adopted in the 1990s com- will emerge from the crisis much stron- the institution and moved the project prised an extensive (though still incom- ger as a result. forward. At each key stage of the cur- plete) monetary union, with the euro From its creation in the 1990s, the rent crisis, they have in fact done what- and the European Central Bank (ECB). common currency has lacked the cru- ever is necessary to avoid collapse. We But it included virtually no economic cial institutions to ensure that financial have complete confidence that, in the union: no fiscal union, no economic stability can be restored during times of crunch, both Germany and the ECB governance institutions, and no mean- acute uncertainty and associated market will pay whatever is necessary to avert ingful coordination of structural eco- volatility. The task before euro area lead- disaster. The politics of each, as de- nomic policies. ers today therefore ranges far beyond scribed below, assure this result. It was assumed by the architects putting together a big enough financial The problem for the markets is that economic union would inexorably bailout to restore market confidence. that these central players cannot say follow monetary union. However, there They must rewrite the euro area rule that this is what they will do. There are was no pressure to create an economic book and complete the half-built euro two reasons. First, a commitment to union during the expansion period house. This means they must combine bailouts without limit would represent prior to the Great Recession. When the creative financial engineering, to resolve the ultimate in moral hazard. It would crisis hit, the contradiction triggered the immediate crisis, with a wave of relieve the debtor countries of the pres- severe market reactions that continue to new institutions to strengthen the real sure necessary to compel them to take this day. economy and restore sustained growth. tough political decisions and maintain

20 effective adjustment policies. Second, of the 20th century. The postwar Eu- timately led to the creation of the euro. each of the four main classes of credi- ropean leadership, driven primarily by It was geopolitics and the completely tors, Germany and the other northern Germany and France, chose the policy unforeseen shock of German reunifica- European governments, the ECB, instrument of economic integration tion in October 1990 that provided the private sector lenders, and the Interna- “to make future wars impossible.”The political impetus for the creation of the tional Monetary Fund (as a conduit for project has experienced repeated severe Maastricht Treaty, which in 1992 laid non-EU governments like China), will crises over its initial half century but the legal foundation and detailed design naturally try to transfer as many of the each was overcome, indeed giving way for today’s euro area. financial losses on Greek government to renewed forward momentum for Eu- With the historical parity in Eu- bonds or European banks as possible rope as a whole. The overriding security rope between (West) Germany and onto the other three, limiting their own imperative drove successive genera- France no longer a political and eco- costs and risks in the process. tions of political leaders to subordinate nomic reality, French president Fran- Every policymaker in Europe their national sovereign interests to the cois Mitterrand and German Chancel- knows that the collapse of the euro greater good of maintaining, and in fact lor Helmut Kohl intensified the EMU would be a political and economic extending, the European project. process as a political project to complete disaster for all and thus totally unac- The concept of a common cur- the integration of the French, German, ceptable. Fortunately, Europe is an rency was always an element in the and other European economies in an affluent region with ample resources to region’s vision of the ultimate goals of economic and monetary union that solve its crisis. Europe’s key political ac- that project. Concrete thinking about would accomplish full and irrevocable tors in Berlin, Frankfurt, Paris, Rome, an economic and monetary union in European unity. Athens, and elsewhere will thus quite Europe goes back to 1970, when the This political imperative for rationally exhaust all alternative options Werner Report laid out a detailed launching the euro by 1999 frequently in searching for the best possible deal three-stage plan for the establishment required that politically necessary before at the last minute coming to an of EMU by 1980. Members of the Eu- compromises, rather than theoretically agreement. It is a messy and indeed ropean Community would gradually unambiguous rules, make up the insti- cacophonous process that is under- increase coordination of economic and tutional framework for the euro. OCA standably unsettling to markets and fiscal policies while reducing exchange- theory, and the earlier Werner and inherently produces enormous instabil- rate fluctuations and finally fixing their Delors reports discussing the design ity. Miscalculation, and thus disaster, is currencies irrevocably. The collapse of of EMU, had been explicit about the always possible under such a scenario. the Bretton Woods system and the first requirement to complement a Euro- But the process relies on financial mar- oil crisis in the early 1970s, however, pean monetary union with a European ket volatility to incentivize solutions caused the Werner Report proposals to economic union complete with binding that will ultimately resolve the crisis. be set aside for a time. constraints on member states’ behavior. Europe’s overriding political imperative By the mid-1980s, following the Political realities in Europe, however, to preserve the integration project will creation of the European Monetary made this goal unattainable within the surely drive its leaders to ultimately se- System in 1979 and the initiation of timeframe dictated by political leaders cure the euro and restore the economic Europe’s internal market, European following German reunification. health of the continent. policymakers again took up the idea of Europeans continue to self- The political origins of the Euro an economic and monetary union. The identify primarily as residents of their Delors Report from 1989 envisioned home country. Hence the realization of The geographic extent of a cur- the achievement of EMU by 1999, European federalism, as it is practiced rency’s use is generally dictated by the moving gradually (in three stages) to- in the United States, is impossible. existing borders of the issuing country. wards closer economic coordination Consequently, European institutions Hence it is often the result of prior among the EU members with binding do not rest on the same degree of direct wars, decolonization or other violent constraints on member states’ national democratic legitimacy as the US federal historical incidents. The scope for the budgets and a single currency managed government. Crucially, this makes the use of the euro as a supranational cur- by an independent European Central collection of direct taxes to fund a large rency union crafted in peacetime, how- Bank (ECB). centralized European budget (similar to ever, has not been dictated by such past Optimal Currency Area (OCA) the US federal budget) politically im- events. Rather, it reflects contemporary theory prescribes the characteristics possible. The relatively high willingness political decisions made by elected Eu- required for a geographic area to ob- of Europeans to pay taxes does not “ex- ropean leaders. tain maximum economic benefits from tend to Brussels.” The designers of the The entire European project was adopting the same currency. It can offer euro area were consequently compelled of course driven by the existential guidance to economically rational lead- to create the common currency area geopolitical goal of halting the intra- ers about whether it makes sense for without a sizable central fiscal authority European carnage that had persisted their country to join a common curren- that would have the ability to counter for at least a millennium and reached cy. But it was not a carefully considered region-specific (asymmetric) economic its murderous zenith in the first half and detailed economic analysis that ul- shocks, or re-instill confidence through

21 CONOMY

E the deployment of large fiscal resources for the coordination of national fiscal and a faulty institutional design that to private market participants in the policies in the euro area. prevented an expeditious solution that midst of a crisis. Building on the euro area conver- would be credible to those same mar- Similarly, the divergence in the gence criteria, the Stability and Growth kets. economic starting points among the Pact (SGP) was intended to safeguard The political fight between the politically prerequisite “founding mem- sound public finances, prevent indi- ECB and governments to save bers” of the euro area made the imposi- vidual euro area members from running the Euro tion of firm fiscal criteria for member- unsustainable fiscal policies, and thus ship in the euro area politically infeasi- guard against moral hazard by enforc- During its first decade, the euro ble. The Maastricht Treaty in principle ing budget discipline. However, faced area institutional framework was that included at least two hard convergence with breaching the 3 percent deficit of a “fair weather currency.” The area criteria for euro area membership—the limit in 2002–04, France and Germany entered the Great Recession woefully 3 percent limit on general government pushed through a watering down of the under-institutionalized as a common annual deficits and the 60 percent limit SGP rules in March 2005 that, as in currency flying on just one engine, the on general government gross debt limit. the Maastricht Treaty, introduced suf- ECB, but without the unified fiscal -en However, in reality, these threshold ficient flexibility into the interpretation tity that traditionally plays a critical role values were anything but fixed as the of SGP that its enforcement became in combating large financial crises. The Maastricht Treaty Article 104c stated wholly political and with only limited euro area leaders have had to build their that countries could exceed the 3 per- reference to objective economic criteria crisis-fighting capacity and bailout insti- cent deficit target if “the ratio has de- and data. tutions (the European Financial Stabil- clined substantially and continuously In sum, the euro area by 2005 was, ity Facility/European Stability Mecha- and reached a level that comes close as a result of numerous shortcuts taken nism (EFSF/ESM)) from scratch, and to the reference value” or “excess over to achieve and sustain a political goal, a in the midst of crisis, to prevent their the reference value is only exceptional common currency area consisting of a immediate financial predicament from and temporary and the ratio remains very dissimilar set of countries without getting out of control while simultane- close to the reference value.” Euro area a central fiscal authority, without any ously reforming the flawed foundational countries could similarly exceed the 60 credible enforcement of budget disci- institutions of the area. Achieving the percent gross debt target provided that pline, and without any real deepening dual policy goals of solving a current “the ratio is sufficiently diminishing of economic convergence. crisis while trying also to prevent the and approaching the reference value at Initially, however, none of these next one, and using the same policy a satisfactory pace.” fundamental design f laws mattered. tools to do both, is rarely easy. In other words, it was a wholly The financing costs in private finan- This marks a crucial difference political decision whether a country cial markets of all euro area members from the United States. Once the Trou- could become a member of the euro quickly fell towards the traditionally bled Asset Relief Program (TARP) was area or not. Membership was not objec- low interest rates of Germany. finally passed, close collaboration be- tively determined by the fundamental It is beyond the scope of this tween the multiple existing institutions economic strengths and reform record policy brief to interpret the causes of in the United States (Treasury, Federal of the country in question. And it was this colossal and sustained mispricing Reserve, Federal Deposit Insurance politically inconceivable to launch the of credit risk in the euro area sovereign Corporation) ultimately restored mar- euro without Italy, the third largest debt markets by private investors in ket confidence and stabilized the situ- economy in continental Europe, or the first years after the introduction of ation in March 2009. In the United Belgium, home of the European capital the euro. But the financial effects were States in 2008–09, the economic crisis Brussels. Hence both countries became obvious: Euro area governments and compelled the Fed to immediately members despite having gross debt private investors were able to finance apply the so-called Powell Doctrine, levels of almost twice the Maastricht themselves at historically low interest overwhelming firepower, to restore Treaty reference value of 60 percent in rates seemingly irrespective of their shaken market confidence and give the 1997-98. economic fundamentals. federal government time to formulate a As a result, Europe’s monetary European policymakers’ initial longer-term response in fits and starts union was launched in 1999 with a set denial and self-congratulations, coupled through the TARP. This is a fairly well of countries that were far more diverse with financial markets’ failure to prop- established crisis response function. The in their economic fundamentals, and far erly assess the risk of different euro area central bank comes out with monetary less economically integrated, than had countries and tendency to ignore the guns blazing and then sits back and been envisioned in the earlier Werner common currency’ s design flaws, thus prays that the politicians do the right and Delors reports or would be dictated conspired to ensure that the euro area, thing. (Congress did pass TARP after by OCA theories. Moreover, shortly when it was finally struck by its first initially rejecting it but has of course after the launch of the euro, European serious financial crisis in 2008-09, was not yet chosen to institute a sustainable political leaders further undermined the hit by a double whammy of huge pre- fiscal response for the United States.) credibility of the rules-based framework crisis public and private debt overhangs The ECB, as the only euro area

22 institution capable of affecting finan- ing with euro area governments. It has The ECB must promptly reduce cial markets in real time, is a uniquely also consistently been willing to reverse its policy interest rate by at least an- powerful central bank. Its institutional itself when circumstances demanded. other 50 basis points and buy sufficient independence is enshrined in the EU The initial Greek crisis in May 2010 amounts of periphery bonds through treaty and it is not answerable to any in- led to the first “grand bargain” between the SMP to help push their interest dividual government. This has enabled the ECB (which agreed to set up the rates down to sustainable levels. it to function as a fully independent bond purchasing Securities Market There has been much talk about political actor, interacting with elected Program) and euro area governments. the infeasibility of achieving the needed officials during the crisis in a manner Their agreement produced strong com- “internal devaluations” of the periphery inconceivable among its peers. Quite mitments for structural reforms in countries. Germany has achieved just unlike normal central banks, which Spain and elsewhere. It also produced such an adjustment over the past two always have to worry about losing their €440 billion in resources for the newly decades, however, probably amounting institutional independence, in this crisis created EFSF, which proved to be an to about 20 percent of the (overvalued) the ECB has been able to issue direct effective euro area fiscal agent when exchange rate at which it entered the political demands to euro area leaders, the problem was Greece, Ireland, and ERM/euro, through a combination as with the reform ultimatum conveyed Portugal. Again, one must watch what of budget tightening and structural to Silvio Berlusconi in August, and de- they do rather than solely what they say. changes like the Hartz labor reforms. mand that they take action accordingly. The EFSF is inadequate when the At the other end of the size spectrum, On the other hand, the ECB has EUROPE WILL EMERGE FROM ITS CURRENT Latvia achieved not had the luxury of adopting the an even speedier straightforward crisis tactics of the TURMOIL NOT ONLY WITH THE EURO INTACT and more spec- Federal Reserve and the US govern- BUT WITH FAR STRONGER INSTITUTIONS AND tacular correc- ment within a fixed set of national ECONOMIC PROSPECTS FOR THE FUTURE. tion of its huge institutions. The ECB cannot perform current account a “bridge function” until the proper au- problem becomes Italy and Spain, how- deficit of 25 percent of GDP and, only thorities take over because no euro area ever. The ECB and euro area govern- three years later, is now combining re- fiscal entity exists. Moreover, to commit ments have therefore for some time been newed growth with an external surplus. to a major “bridging monetary stimu- engaged in a new round of strategic Italy has previously achieved dramatic lus,” as some have called for, would bargaining to put together a sufficiently adjustment, notably to qualify for the undermine chances of a permanent large financial rescue package, secure euro in the first place. (Greece never political resolution to the euro area’s structural reform of the two big debt- did so and its ability to remain within underlying under-institutionalization ors (especially Italy) and, perhaps most the zone is clearly more problematic.) problem. Were the ECB to cap govern- importantly, to complete the euro area It took ten years for the first seri- ments’ financing costs at no more than institutional house. The EU Summit on ous economic and political crisis to ar- 5 percent, for instance, euro area politi- December 9, 2011 represented the latest rive after the euro was introduced. The cians would probably never make the round in this game of political poker. most challenging part of today’s crisis is painful but essential decisions. The remaining agenda to use the political opportunity it pres- It is imperative to understand that ents to get the basic economic institu- it is not the primary purpose of the Even the most successful finan- tions right and complete the euro’s half ECB, as a political actor, to end market cial engineering in the euro area will built house for the long term. In this anxieties and thus the euro area crisis ultimately fail, however, if the debtor process the euro will develop in a dif- as soon as possible. It is instead focused countries, and indeed the region as ferent manner from the full economic on achieving its priority goals of getting a whole, are unable to restore at least and monetary union established in the government leaders to fundamentally modest economic growth in the fairly United States. It will require additional reform the euro area institutions and near future. This requires at least three substantial treaty and institutional structurally overhaul many euro area major steps. revisions in the future. But as the US economies. Frankfurt cannot directly The borrowing countries must Constitution’s 27 current amendments compel democratically elected Euro- adopt convincing progrowth structural clearly show, faulty initial designs need pean leaders to comply with its wishes reforms, especially in their labor mar- not preclude long-term success. If the but it can refuse to implement a “crisis kets, as well as budgetary austerity. history of the integration exercise and bazooka” and thereby permit the euro The strong economies in the its crisis responses to date are any guide, area crisis to continue to put pressure on northern core of Europe, especially Europe will emerge from its current them to act. A famous American politi- Germany, must terminate their own turmoil not only with the euro intact cian has said that “no crisis should be fiscal consolidations for a while and but with far stronger institutions and wasted” and the ECB is implementing adopt new expansionary measures, i.e., economic prospects for the future. such a strategy resolutely. they should buy more Italian and Greek So far the ECB has been reason- goods and services rather than debt in- (Authors: from Peterson Insti- ably effective in this strategic bargain- struments. tute for International Economics)

23 CONOMY E What Is the Economy Really Doing, and Where Is It Going? By Stephen Green, Lan Shen

• Q4 GDP growth comes in stronger than expected, at 8.9% y/y; 2011 growth was 9.2% • Growth proxies suggest no serious deterioration in activity, though investment is weakening • The property correction is now happening – and it will be deep

hina’s official GDP sta- investment-led slowdown is in play. Fixed asset investment (FAI) fell sharply in Q4. In tistics say the economy nominal terms, y/y FAI growth dropped to 20.4% in Q4 (from 29.5% in Q3), and in real grew 8.9% in Q4-2011, terms it slid to 12.3% from 20.6% prior (see Chart 3). This is where the slowdown is con- and 9.2% for the year – centrated as both infrastructure and the property sector suffer a continuing credit crunch. pretty quick. Given widely held ex- Industrial production (IP), however, remains robust, growing 12.8% y/y in Decem- pectationsC of a slower Q4 and gen- ber (against 12.4% in November). The National Bureau of Statistics (NBS) even claims eral scepticism on China’s economy, that IP grew by some 1% m/m in each month of Q4, even while the PMI index for some might wonder whether these manufacturing flatlined around 50. It is possible that the unweighted PMI is not captur- numbers are accurate. At times of ing growth at larger firms. stress, we know that China’s GDP Consumption growth remained robust. Retail sales growth accelerated to 18.1% numbers can appear a little weird. y/y in December in nominal terms (from 17.3% in November), and to 13.8% y/y in real In late 2008, we recommended a terms (12.8% prior). The urban household survey found disposable incomes up 9.1% y/y number of growth proxies to watch in real terms in Q4, compared to 7.1% y/y in Q1. Household spending also accelerated to in case the GDP numbers became 7.6% y/y in Q4, from 6.2% in Q3 and 5.5% in Q2 (see Chart 2). If accurate, these num- less reliable, including electric- bers indicate that the negative effects of inflation are fading and that China’s consumers ity production, freight traffic, and are continuing to spend. One multinational client we spoke to recently, who sells clothes production of key industrial goods. across China, also saw no signs of a slowdown. But other domestic retailers, both high- All of these proxies suggested a and low-end, reported an obvious slowdown in sales in Q4-2011, which they feared deeper downturn in late 2008 and would continue into Q1-2012. early 2009 than the official GDP Upward wage pressure looks set to continue in 2012, though not to the same extent numbers showed. In this note, we as in 2011. We expect manufacturing wages to rise another 10% on average this year; check in on those proxies, and they this, along with our forecast of 2% CPI inflation for 2012, will mean households should suggest that the economy is indeed continue to benefit from real income growth. continuing to expand, albeit at a more moderate pace than in 2011. Chart 1: A good Q4, but there are tough times ahead We also take a quick look around the property sector. We GDP growth, y/y and q/q SAAR, % find that the construction slowdown has clearly begun, and will get deeper. There is still considerable pain ahead. The December data Officially, China’s GDP grew by 8.9% y/y in Q4, better than the market consensus of 8.7%. Accord- ing to our estimated q/q seasonally adjusted annualised rate (SAAR), growth accelerated to 9.3% in Q4 from 8.5% in Q3, as we show in Chart 1. We cannot square this with the official q/q growth numbers: 2.0% in Q4, down from 2.3% in Q2 and Q3. Beneath this strong figure, an Sources: CEIC, Standard Chartered Research

24 Growth proxies Electricity growth is soft, as Chart line with FAI 5 shows, suggesting that IP growth will Proxies for infrastructure and Overall, the growth proxies we also weaken in the coming months. property are weaker, ref lecting the track tell the same story as the official Air travel: Below average but slowdown in FAI growth. As Chart 7 GDP data. However, for most of the steady shows, crude steel production growth proxies, we only have data until Novem- Domestic air travel, measured in hit 0% y/y in November, though it ber 2011. person trips, is running at around 10% y/ seems to have bounced back a little in Freight traffic: Pretty solid y and has even strengthened a bit in re- December. Cement production growth The advantage of looking at freight cent months. Chart 6 shows the varying is weakening too, and is running below traffic is that there is little reason to fates of the Chinese, Asian and global the 12% average rate of the last decade. fake the data. The disadvantage is that, economies in the last few years. Inter- And finally, the property sector unlike GDP, it is not a value-added national arrivals tChina cratered during measure. The air freight market has col- the global financial crisis and dipped The correction has begun. Resi- lapsed, but it is a volatile business. Other sharply in earl 2011.Regional arriv- dential housing investment hit a 30- freight sectors suggest much more stable als, from Hong Kong for instance, also month low of 10.8% y/y in December growth through November 2011, as weakened more than local travel during (19.6% y/y in Q4), compared to 35.7% Chart 4 shows. Carriage of goods on the crisis and have been fairly steady in in the first three quarters of 2011. Floor roads is particularly important, and recent months. Local air travel did not space under construction fell 25% y/y in it grew a robust 20% y/y in October- decline as sharply as international or re- December (Chart 8 shows the 3-month November 2011. gional travel in 2008-09, and has glided moving average, which softens the de- Energy production: Softening to a below-average but steady path. cline); this suggests that investment in a bit Cement and steel: Weakening, in this sector has much further to contract. Chart 2: Inflation tax falls Chart 3: Credit controls bite Urban disposable income and consumption expenditure, % y/y FAI growth, nominal and real, % y/y

Sources: CEIC, Standard Chartered Research Sources: CEIC, Standard Chartered Research Chart 4: Freight traffic suggests still strong-growth Chart 5: Electricity production is weaker Rail, highway, air and water freight transport, km- tonnes, % y/y Electricity and industrial production, % y/y

Sources: CEIC, Standard Chartered Research Sources: CEIC, Standard Chartered Research

25 CONOMY

E Sales volumes declined substan- the market. This sector, though, remains pect it to get tighter. Deposits should tially in Q4. Residential floor space sold the biggest risk to China’s economy. come back into the banks after the holi- fell 8.4% y/y in December (following Policy outlook day, which will boost interbank liquidity, average growth of 12.9% in Q3-2011). so we might have to wait a while for the Completed residential floor space is still If anything, today’s data is another next RRR cut. growing, up 9.3% y/y in December. This reason not to expect a quick move to The investment slowdown, though, is resulting in rising apartment invento- further loosening. The economy is slow- will be a drag on IP growth in Q1- ries. Expectations of price rises in Tier ing, but not dramatically – so far. 2012. Exports continue to weaken (they 1-3 cities appear to be reversing, and The failure of the expected required are only growing by 4% y/y in real terms developers have been cutting prices since reserve ratio (RRR) cut to materialise now; and the housing market will cor- October in an attempt to shift inventory. before the Lunar New Year is a disap- rect more. We look for more ‘interesting Prices will likely continue to fall. In pointment (there are four more working times’ ahead – and 6% q/q SAAR GDP Q2-2012, we expect the central govern- days to go before the markets close). The growth. Under these circumstances, ment to begin signalling a policy shift People’s Bank of China (PBoC) instead more monetary loosening will come, but to stabilise the sector. At the March engaged in an open reverse repo transac- only slowly. We still look for Q1 to be National People’s Congress meetings, tion with banks today in order to provide the bottom of growth momentum – but local officials will be lobbying aggres- liquidity before the holiday – and there these numbers, though strong, raise the sively for relief. Once prices have come are reports of at least two other liquidity- possibility that the coming slowdown down, we expect Beijing to start gradu- providing actions between the central will push into Q2 as well. ally easing some of the propertymarket bank and large local banks. Liquidity is restrictions imposed in the past year in tight, but the PBoC has been actively (Authors: Economists from order to encourage first-time buyers into managing liquidity, and we do not ex- Standard Chartered Bank) Chart 6: Slower, but still in the air Chart 7: Less steel and cement growth Air travel, passenger trips, % y/y Production, % y/y

Sources: CEIC, Standard Chartered Research Sources: CEIC, Standard Chartered Research Chart 8: Investment and construction slowing Chart 9: Sales fall, supply increases Residential investment and floor space under construction, % y/y, 3mma Residential floor space sales and completed,% y/y, 3mma

Sources: CEIC, Standard Chartered Research Sources: CEIC, Standard Chartered Research

26 • CPI inflation surprised on the upside, rebounding to 4.5% y/y in January from 4.1% prior • The Lunar New Year was the main cause, but what comes early also goes early • We call CPI inflation at 3.8% for February; our 2012 CPI inflation forecast is unchanged at 2% A Dead Cat Bounces hina’s CPI inflation came in at 4.5% y/y in 9.1% in December). The impact on services prices was January (Chart 1), significantly higher than more muted given that in 2011, as noted above, some market consensus of 4.0%. The A-share of the services-related inflation happened in January. market appears to have focused on the But what comes early also goes early. We be- positives suggested by the number (robust consump- lieve that China’s January’s inflation was a „dead cat tionC and growth resilience), while playing down the bounce’, and that February will see a reversal, with negatives (the number was seen by many as increas- CPI inflation – especially for food – falling. Indeed, ing the chances of further delays in policy easing). looking at m/m food price increases during the Lu- The lack of a cut in the required reserve ratio (RRR) nar New Year month, January 2012 saw the small- this year may have already convinced the market that est gains since 2006. If the historical pattern holds, loosening will be slow. food inflation should fall to 8.8% y/y in February Why did CPI inflation appear to accelerate in from 10.5% y/y in January, and overall CPI inflation January? Based on the m/m, seasonally adjusted an- should slow to 3.8% y/y. nualised rate (SAAR), the pick-up to 8.72% in Janu- The National Development and Reform Com- ary from -1.1% in December was mostly driven by mission (NDRC) published its view of the CPI fig- food and services. Food and services prices tend to ure on its website, arguing (like us) that the uptick surge during the Lunar New Year holiday, and then was mostly driven by increased New Year demand decelerate the following month. Chart 2 shows this for food, combined with some bad weather. “Other holiday-induced ebb and flow in prices for food. The [i.e., non-food] prices are basically stable”, it stated. Lunar New Year holidays fell in January in 2009 and A good grain harvest, a rising pig population since 2012, and in February 2008 and 2010. Things were October, and warm weather mean that CPI inflation a bit more complicated in 2011, when the holiday should fall in February, according to the NDRC. fell on 3 February, just after the turn of the month. This was a pretty dovish statement. Services prices peaked in January 2011, as migrant We maintain our call that CPI inflation will av- workers usually leave early or demand higher pay to erage 2% in 2012, and that there will not be any rate stay as the holiday approaches. Food prices peaked cuts. This is a highly non-consensus call – the market in February 2011 as the food-focused family celebra- inflation forecast is between 3-4%. In November tions kicked in. 2010, we forecast 2011 CPI inflation at 5.5% and pre- WeiBy Li Therefore, the y/y CPI inflation number does dicted four further interest rate hikes. Our inflation not smooth out the effect of the holiday, as it moves forecast was much higher than consensus, but 2011 between January and February each year. January CPI inflation came in at 5.4%, and we did indeed get 2012 saw a surge in y/y food inflation (to 10.5%, from four rate hikes.

Chart 1: A holiday-induced rebound in CPI inflation Chart 2: February to see a reversal of New Year effect CPI inflation, y/y and m/m SAAR 3mma, % Food inflation, m/m SAAR, %

Sources: CEIC, Standard Chartered Research Sources: CEIC, Standard Chartered Research

27 CONOMY E Data Watch on China’s Foreign Trade and Investment in January 2012

China’s foreign trade in January 2012 Guizhou and Jiangxi provinces increased by 1.1 times, 1.1 times, 19.6% According to statistics of the Customs, China’s exports and and 23.5% respectively. Exports of imports in the first month of 2012 reached $272.6 billion, down the ten eastern provinces fell by 2.5%. 7.8% over last year. Specifically, exports stood at $149.94 billion, Exports of Guangdong, Jiangsu and down 0.5% year on year; imports $122.66 billion, down 15.3%. Shandong provinces dropped by 9.2%, The month saw a trade surplus of $27.28 billion. The 2012 Chi- 3.9% and 3.2% respectively. nese Spring Festival, which fell on January, factored into the No f luctuation in exports of data. traditional labor-intensive commodi- Modest growth in exports under the general trade; sig- ties; drop in imports of raw materials. nificant decline in imports under the processing trade. In Jan- In January, exports of plastic products, uary, China’s general trade value dropped by 5.4% year on year toys and apparel increased by 5.4%, 4% to $151.53 billion, compared with the 7.8% drop in the nation’s and 3.5% respectively. Exports of bags, total trade volume. Specifically, exports increased 2.6% year on textiles, footwear and furniture fell by year to $76.77 billion, while imports fell by 12.5% to $74.76 bil- 7%, 6.8%, 1.3% and 2% respectively. lion. The nation’s processing trade value dropped by 9.8% year on The above seven kinds of labor-intensive year to reach $92.76 billion. Specifically, exports fell by 2.6% to goods accounted for 22.4 percent of $62.64 billion, while imports fell by 19.9% to $30.12 billion. China’s total export value in January. Steady increase in trade with some emerging markets; The nation’s imports of iron ore and slow down of increase in exports to the European Union. In concentrates, plastic in primary forms, January, China’s bilateral trade with Russia, Brazil and some natural rubber, unwrought aluminum other emerging markers reported increase over the same period and aluminum products fell by 13.9%, of last year. The nation’s trade with Russia increased by 26.8% to 26.8%, 8.1% and 4.4% respectively, $7.16 billion, and that with Brazil increased by 5.7% to $6.34 bil- with their prices down by 11.0%, 3.8%, lion. China’s trade with the EU fell by 3.2% from last year, with 24.1% and 12.8 % respectively. exports to Germany down by 6.3% and to Italy down by 28.2%. Steady increase in exports of pri- The nation’s exports to the United States and Japan reported vate corporations; lower proportion of marginal increases of 5.4% and 6.1%. imports of foreign-funded enterprises. Significant increase in exports of central and western In January, exports of foreign-funded China; decline in exports of some provinces in eastern Chi- corporations registered $75.33 billion, na. In January, exports of central and western China rose by down 2.8% from the same period of last 17.2% and 19.3% respectively. Exports of Chongqing, Henan, year, and imports $56.56 billion, down 21.0%. Exports of private corporations increased by 3.2% while their imports fell by 16.7%. Exports of State-owned enterprises dropped by 1.0% and imports by 4.4%. Utilization of foreign investment In January 2012, China approved the establishment of 1,402 new foreign- invested enterprises, a decline of 37.49% year on year. The nation utilized $9.997 billion worth of foreign capital, a decline of 0.3% from the same period of last year. Significant increase in the utilization of foreign capital by such sec-

28 tors as agriculture, forestry, animal billion, an increase of 59.9% year on year. By the end of 2011, China’s husbandry, and fisheries. In January, domestic investors had set up 18,000 FDI enterprises in 178 nations and the sectors of agriculture, forestry, ani- regions, with a total of non-financial outbound FDI of $322 billion. mal husbandry, and fisheries made an Overseas-contracted projects In January, China’s overseas- actual use of $197 million in foreign contracted projects reported a turnover of $5.87 billion, an increase of investment, an increase of 40.14% year 38.4% year on year. $9.33 billion worth of new contracts were signed, on year, with its proportion in the na- down by 10.2% year on year. 32 of the new projects were of a contract tion’s total value up by 0.56 percentage value of over $50 million, with a total contract value of $7.07 billion, points from the same period of last year. representing 75.8% of the total value of the newly-signed contracts. 23 Specifically, the agricultural and hus- of the new projects were of a contract value of over $100 million, 12 bandry sectors saw 191.37% and 72.95% more than the same period of last year. increases in utilization of foreign capital Foreign labor service cooperation In January, the number of respectively. The manufacturing indus- all kinds of labor sent abroad was 29,000, an increase of 5,000 year try made an actual use of $4.698 billion on year. At the end of January, there were a total of 811,000 Chinese in foreign investment, a decline of 0.04% working abroad, 3,000 less than the same period of last year. over the same period of last year and ac- Service outsourcing counting for 47% of the national total. The service industry made an actual use In 2011, China witnessed rapid increase in service outsourcing. of $4.471 billion, a decline of 4.62% Chinese enterprises implemented $32.39 billion worth of contract of year on year, and accounting for 44.72% service outsourcing, an increase of 63.6% from the year 2010. Ofall the of the national total. contracts, international offshore service outsourcing contracts register- Steady increase in investment in ted a total value of $23.83 billion, an increase of 65.0% year on year, 22 China from Asia nations. In January, percentage points higher than 2010. China’s share of the international paid-in capital from the ten Asian na- higher market of service outsourcing has been on the rise. In 2011, tions or regions (Hong Kong, Macao, China took 23.2% of the global service outsourcing market, 6.3 per- the Taiwan province, Japan, Philippines, centage points than the year 2010. Thailand, Malaysia, Singapore, Indo- The United States, Europe and Japan are the major sources of nesia, and South Korea) was valued at China’s service outsourcing contracts. In 2011, China implemented $8.586 billion, an increase of 0.77% year $16.43 billion worth of offshore service outsourcing contracts from the on year. Paid-in capital from the United U.S., EU, Japan, Hong Kong and other countries (regions), accounting States amounted to $342 million, up for 68.9% of the nation’s total. by 26.07% from the same period of last Eastern China is where the nation’s service outsourcing indus- year. Paid-in capital from the 27 Euro- try concentrates. In 2011, Jiangsu, Shanghai, Guangdong, Beijing, pean Union nations fell by 42.49% to and Zhejiang implemented $17.78 billion worth of international off- $452 million. shore service outsourcing contracts, accounting for 74.6% of the nation’s Actual use of foreign investment total. Eastern China implemented $20.86 billion worth of offshore in central and western China outgrew contracts, accounting for 87.5% of the nation’s total. Central and west- the eastern regions of the nation. In ern China has seen rapid development in terms of undertaking service January, the eastern regions made an outsourcing contracts and has strong potential. Its increase rate in value actual use of $8.562 billion in foreign of implemented service outsourcing contracts doubled that of eastern investment, a decline of 4.63% year China. on year and accounting for 85.64% of Chinese enterprises undertaking service outsourcing contracts the national total. The central regions are mainly medium-sized ones. Accounting for 2.9% of China’s total made an actual use of $834 million, an number of enterprises, medium-sized service outsourcing enterprises increase of 54.6% and accounting for implemented 51.2% of China’s offshore service outsourcing business. 8.35% of the national total. The western There were 22 big Chinese companies that implemented over $100 regions made an actual use of $601 mil- million worth of service outsourcing contracts, 7 more than the year lion in foreign investment, an increase 2010 and accounting for 0.1% of the total number of enterprises. These of 17.83% year on year and accounting companies completed 16.4% of the total value of the service outsourc- for 6.01% of the national total. ing contracts China received. They are expanding rapidly. Overseas investment and Service outsourcing has become a new job-creating sector. In economic cooperation 2011, 865,000 new jobs were created in the sector of service outsourcing, among which 582,000 were for college students. By the end of China’s outbound FDI In January 2011, there were 16,939 service outsourcing enterprises in China, em- 2012, China’s domestic investors invest- ploying 3.182 million people, 70.1% of whom were college graduates. ed directly in 355 overseas corporations in 87 nations and regions, with a total of (Source: Press conference of the Ministry of Commerce of non-financial outbound FDI of $4.376 China on February 16, 2012)

AGRICULTURE

China frees more labor with farm Industrmachineryial subsidiesWatch ndustr i al Watch I inhua reported on February 17 that the government said it will continue to subsidize farmers’ machinery pur- chasesX this year to free up more rural labor and boost grain production nationwide. The government has slated at least RMB 13 billion (US$2.1 billion) in subsidies for agricultural machinery purchases this year. The new funding for 2012 came after the government output, which hit a record high of 571.21 million tonnes in allocated RMB 52.97 billion to subsidize about 14.89 million 2011. rural households to purchase 16.72 million machinery units Over the years, subsidy program has boosted domestic over the past eight years. demand and driven the agriculture machinery industry with In 2004, the government launched the agricultural ma- an average annual growth of more than 20 percent, according chinery purchase subsidy program to help farmers and boost to the statement. Agricultural machines are now used in 54.5 the country’s grain output. The program has been a success, percent of Chinese farming, or 2.2 percentage points higher contributing to eight consecutive years of growth in grain than that of 2010. No doubt it would be good news for farm machinery industry. In the meantime, more labor will Comment be freed from agricultural production to support China’s manufacturing industry in the context of labor shortage.

China Signs US$4.3b of Soybean Deals Angeles on Feb. 17. The 2011 deals involved 21 purchase With U.S. agreements valued at US$6.7 billion. Iowa farm exports to China in 2010 were 13 times ccording to Bloomberg on February 16, China, the larger than in 2000, data from Iowa Department of Agricul- world’s biggest soybean importer and consumer, signed ture show. Agriculture and related industries contributed 27 Aagreements in Iowa to purchase 8.62 million metric tons of percent to the state economy in 2010 and 17 percent of Iowa the oil seed from U.S. suppliers in a deal valued at US$4.3 workforce is employed in producing food. billion. Soybeans have jumped 5.1 percent this year on the Soybeans will be supplied by companies including Chicago Board of Trade, partly as hot, dry weather damaged Cargill Inc., Archer Daniels Midland Co. (ADM), Bunge crops in Brazil and Argentina, the two biggest exporters af- Ltd. (BG) and CHS Inc., Iowa Soybeans Association Chief ter the U.S. last year. Today, the price reached US$12.765 a Executive Office Kirk Leeds said today in Des Moines, Iowa, bushel, the highest since Sept. 27, on speculation that China during a U.S.-China trade cooperation conference. may increase purchases from the U.S. to rebuild inventories “It would take half of the Iowa soybean crop just to and cushion against any additional adverse global weather feed China’s fish,” said Leeds, who will be traveling to China later this year. in March on a sales-promotion trip for the producer-funded Earlier, the government reported U.S. exporters sold organization. “Soybean profitability depends on international China 116,000 tons of soybeans for delivery before Aug. 31. demand, especially from China.” “The conference will help to improve relationships to Additional sales agreements may be announced in Los achieve mutually beneficial development in the future,” Bill Northey, Iowa’s secretary of agriculture, said in a telephone interview on Feb. 13. “At the end of the day, it’s all about getting business done company to company rather than government to government.” China became the largest buyer of U.S. Comment farm products in 2010, and last year boosted purchases to US$22.17 billion. The nation purchased 20.6 million metric tons of soybeans from the U.S. last year, or 60 percent of the total shipped overseas. China probably will increase purchases from all suppliers by 62 percent in the next decade to 90 million tons from a projected 55.5 million this year.

32 METALS

China eyes overseas metal overseas nonferrous metal supply bases,” the ministry said. bases Last year, the conglomerate CITIC Group signed a strategic cooperation agreement with Bolivia to jointly explore lithium resources in Bolivia’s Coupasa salt flats. hina will de- MIIT said that during the next four years, China will velop overseas reduce pollution and curb capacity in energy-intensive non- nonferrousC metal ferrous metal processing industries. bases and phase out Energy consumption for each unit of industrial output is obsolete smoke- forecast to drop 21 percent from the levels at the end of 2010, stack domestic and water consumption should slide 30 percent. Carbon industries during its emissions for each unit of industrial output should be cut by 12th Five-Year Plan 18 percent. (2011-2015), the Ministry of Indus- Comment China has started to put priority on try and Information Technology (MIIT) said on January 30, overseas nonferrous metal base de- according to China Daily report. velopment compared with domestic facilities. The “In overseas markets, China will encourage capable nation is actively developing bilateral relation- Chinese enterprises to explore copper, aluminum, zinc, nickel ships for resource extraction with other countries. and titanium resources and speed up the process of setting up

China ready for rare earth challenges “They will probably request that China loosen export restrictions on rare earth in the coming months” and even present their case to the WTO, she said. “But we don’t fear hina is preparing to address increasing foreign pressures this because we are fully prepared.” on its export restrictions of rare earth following a failed China is the largest producer of rare earths and controls appealC against a World Trade Organization (WTO) ruling 95 percent of global supplies. Rare earths are a group of 17 on other raw materials, a Ministry of Commerce official said elements used in industries like hybrid cars. The government on January 31. began to control output in recent years, citing resource deple- Endorsing a previous finding, the WTO’s appellate tion and environmental degradation. body declared on January 30 that export limitations by China The US and the EU have repeatedly asked China to on nine raw materials, including zinc, coke and magnesium, loosen the restrictions on rare earth exports. through quotas and tariffs broke WTO rules. The Ministry of Commerce statement reiterated that Although rare earths, crucial ingredients in many China has tightened administration of energy-consuming high-tech products, were not part of the ruling, a number of and polluting resources in recent years. Washington lawmakers urged the US to use the decision to China will evaluate the WTO ruling and continue to launch a case to force Beijing to lift rare earth export restric- enhance scientific administration of resource products based tions. on WTO rules to realize sustainable development, it said. It is “regretful” that the ruling has been upheld, the “The raw material ruling will not come into effect until ministry said in a statement on its website. the end of this month, and China will decide how to imple- But “the result is better than we expected as the WTO ment the ruling then,” Yu said. still supports many of our arguments,” said Yu Fang, deputy director of the department of treaty and law under the Min- istry of Commerce of China. The US, EU and Mexico said in 2009 that China’s export restrictions on raw materials discriminated against foreign manufacturers and gave an unfair advantage to Chinese producers. A dispute settlement panel ruled in July 2011 that export duties and quotas on raw materials contradicted China’s WTO commitments. China later lodged an appeal to the WTO appellate body. Yu expressed her concern that developed nations will now demand that China compromise on rare earth exports.

Comment The WTO should not only uphold free trade but also allow member nations to take necessary steps to protect the environment and natural resources.

33 ENVIRONMENT

the country’s natural gas shortage and even change its entire China to promote shale gas energy supply structure, Wang said. Industrexplorationial Watch China has a rich reserve of shale gas resource, which is estimated at 31 trillion cubic meters, equivalent to the ndustr i al Watch total amount of conventional natural gas, according to I he Ministry of Land and Resources (MLR) said on Feb. Wang. 12 that China will increase efforts to explore shale gas in If developed properly, the country’s shale gas output will 2012,T a move expected to help restructure the country’s en- exceed 100 billion cubic meters in 2020, Wang said. ergy supplies, Xinhua reported. Shale gas, a clean and high-efficiency energy resource, The government will strengthen the survey and ap- is produced from shale through a complicated process called praisal of shale gas this year to speed up the development of hydraulic fracturing, or “fracking”. the shale gas industry, MLR Vice Minister Wang Min said Currently, China has no commercial shale gas produc- at a national geological survey conference. tion, but shale gas has become an increasing important source The move comes after the recent approval of the State of natural gas in the United States and Canada. Council, or the Cabinet, to list shale gas as an independent The MLR said in December that it will formulate a se- mineral resource, making the total number of mineral re- ries of supporting policies to bring in diversified investment sources discovered in China to 172. in shale gas exploration to push forward large-scale extrac- Realizing scale production of shale gas will help ease tion of the resource.

In the context of energy shortage, exploring shale gas can be a solution as it is a high-efficien- Comment cy source of natural gas.

Electric will probably resume production as early as May, Polysilicon production curbed 30% Lian said in an interview. Two phone calls placed to Gong Dan, spokesman for Dongfang Electric, and an e-mail sent to Yin Xiaonan, Baoding Tianwei’s spokesman, weren’t answered. hina’s polysilicon industry, the biggest supplier to solar- The rebound from polysilicon’s 10-year low of $26.31 a panel manufacturers worldwide, has idled almost one- kilogram in mid-December coincideswith increased interest thirdC of production and may keep the plants closed until pric- by China to install photovoltaic devices on its own soil. es recover from a 60 percent plunge, reported China Daily. Chinese producers will double the number of panels The price tumble spurred the smallest producers in- that will be installed this year from the 2.2 gigawatts erected cluding units of Baoding Tianwei Baobian Electric Co and in the country in 2011, according to predictions from manu- Dongfang Electric Corp to halt plants, according to Xie facturers Suntech Power Holdings Co and Trina Solar Ltd. Chen, an analyst from the China Nonferrous Metals Indus- That would absorb some of the industry’s excess inventory, trial Association, a trade group that advises the government. which led to the drop in prices and profits. China has about 45 percent of global production capacity to Demand for solar products is recovering and is expected purify silicon into polysilicon. to shift from Europe to Asian and US markets, Renewable The suspensions may be short-lived because the average Energy Corp ASA, a Sandvika, Norway-based maker of spot price for the most expensive ingredient in making solar polysilicon, said in its earnings presentation on Feb. 8. panels rose by 9 percent since mid-December from a decade The increase in panel demand in China “sucks up some low. A recovery would boost margins for the biggest makers of the excess supply”, Pavel Molchanov, an analyst for Ray- such as GCL-Poly Energy Holdings Ltd, China’s largest, and mond James & Associates Inc in Houston, said by e-mail on Hemlock Semiconductor Corp of the United States, which is Feb9. No 1 in the world by capacity. The expectation that China will increase installations “The freeze in production won’t last too long,” Xie said this year has led some solar companies to keep plants run- in an interview. “Many companies have said they will return ning. GCL-Poly, LDK Solar Co and Asia Silicon (Qinghai) to manufacturing if prices rise to $47 a kilogram” from the Co have continued to operate their plants, according to Xie. current level of about $28.80. His association acts as a conduit between the Chinese gov- Xie forecast prices will jump to $40 to $50 a kilogram ernment and solar companies, advising both ministers and this year. That’s enough to prompt are turn to production in executives. the first half of most of the halted plants, which he estimated were about 30 percent of the total. Xie’s view was shared by Comment The excess supply and price tumble in Lian Rui, a senior analyst in Beijing for New York-based re- the polysilicon industry urges rational search company Solarbuzz. development, though the situation is better off Polysilicon will average about $30 this year, and compa- due to expected increasing demand. nies including the units of Baoding Tianwei and Dongfang

34 FINANCE

country faces pressure in supporting growth and containing Monetary policy to remain prudent inflation. The remarks, made by an official with the People’s Bank of China (PBOC), was quoted in a PBOC press release a day ccording to Xinhua on February 19, China’s central bank after the central bank announced a reserve requirement ratio said it will maintain a prudent monetary policy as the (RRR) cut to ease a liquidity shortage and secure growth A amid weak external demand. The PBOC announced a cut in the amount of cash that lenders must set aside as reserves, the second of its kind in three months. The RRR will drop by 50 basis points to 20.5 percent for large commercial banks and 17 percent for mid- and small-sized banks, effective on Feb. 24, the PBOC said. The central bank lowered the RRR in December by 50 basis points after hiking the RRR six times last year to cool inflation. It was the first cut since December 2008. China’s economy expanded by 9.2 percent year-on-year in 2011, while its GDP growth rate dropping to a 10-quarter low of 8.9 percent in the fourth quarter.

The current international economic situation remains complicated and grim, while China’s eco- Comment nomic development is still not balanced, coordinated or sustainable enough, which makes it necessary to introduce some policy responses.

China Reduces Holdings of U.S. my,” Zhou said in August. Treasuries to Lowest Level Foreign investors held 47.6 percent of outstanding public Treasury debt as of December, the smallest proportion since October 2006, Treasury data show. loomberg reported on Febru- Net buying of long-term equities, notes ary 16 that China, the larg- and bonds totaled US$17.9 billion dur- Best foreign lender to the U.S., ing the month compared with net pur- reduced its holdings of Treasuries chases of US$61.3 billion the previous in December to the least since June month, the Treasury Department said. 2010 amid efforts to assist Europe Including short-term securities such in addressing its debt crisis. as stock swaps, foreigners bought a net The world’s second-largest US$87.1 billion in December compared economy decreased its U.S. debt securi- with net buying of US$42.9 billion the previ- ties by US$31.9 billion from November, or 2.8 percent, ous month. to US$1.11 trillion, according to Treasury Department data China increased its position in shorter-term released. Its position in longer-term notes and bonds also fell bills by US$600 million to US$2.9 billion. The U.S. updated US$32.5 billion, or 2.8 percent, to US$1.1 trillion, the least data on Feb. 28, 2011 to show China’s Treasury investments since June 2010. Japan, the second biggest buyer, increased its in October 2010 were a record US$1.18 trillion, 30 percent holding by US$3.5 billion to US$1.04 trillion. more than the initial estimate of US$906.8 billion. “We continue to see Chinese Treasury holdings trend- “Overall flows were weak for the U.S. and the Chinese ing lower as they are acting on their desire for diversification tactical selling reflected that as Treasuries were giving back and as they may get more involved in the situation in Eu- very little,” said Aaron Kohli, an interest-rate strategist BNP rope,” said Ian Lyngen, a government bond strategist at CRT Paribas SA in New York, one of 21 primary dealers that trade Capital Group LLC in Stamford, Connecticut. directly with the Federal Reserve. “As yields rise, look for “China will always adhere to the principle of holding as- China to buy Treasuries again.” sets of EU sovereign debt,” Zhou said in Beijing. “We would Treasuries have lost 0.1 percent this year after returning participate in resolving the euro debt crisis,” he said. 9.8 percent last year, according to a Bank of America Merrill Chinese Officials, including central bank adviser Li Lynch index. Daokui, have urged diversification of the nation’s foreign exchange reserves. The Asian nation will “seek diversification Comment This is absolutely an important step for in the management of reserve assets, strengthen risk manage- China to diversify the nation’s foreign ment, and minimize the negative impacts of the fluctuations exchange reserves away from U.S. assets. in the international financial market on the Chinese econo-

35 ELECTRONICS

“Proview refuses to honor their agreement with Apple, Dangdang, Gome may form e-commerce and a Hong Kong court has sided with Apple in this matter,” Industrallianceial Watch according to the statement, which also said the case is still pending on the Chinese mainland. ndustr i al Watch Gome, a major electronic appliance store in China, is I ccording to China Daily on February 14, e-commerce the latest to suspend sales of the iPad online, though it said its China Dangdang Inc, a major Chinese online retailer, stock is abundant. Amay join hands with Gome Electrical Appliances Holding “We will not stop selling iPad in brick-and-mortar stores Ltd, the country’s second-biggest electronics retailer, to fend until the final verdict on Apple’s case is out,” said a public re- off rising competition from rival 360buy.com. lations worker with Gome. Over the past few weeks, Apple has been uncommuni- cative, while the Shenzhen company has reached out to the media about its repeated complaints to market regulators and sent pleas to customs officials to impose an embargo on the iPad 3, which is expected later this spring. Apple’s statement did not specify from which company underneath the Proview umbrella it had acquired the iPad trademark. Xie Xianghui, a lawyer representing Proview Technol- ogy Shenzhen, said Apple’s “partial” reply is meant to confuse the public. He added that the verdict in Hong Kong will not have any influence on other trials on the mainland, where the two The two companies may cooperate in sales of electronic companies also sued each other for the copyright, because of devices and home appliances, and a deal may be reached if the different legal frameworks. talk between them goes well, according to a source close to Xie countered Apple’s claim that the Hong Kong court the matter, the newspaper said. sided with it in the dispute. Industry experts said the rapid growth of Beijing Jing- “Apple is worried the iPad trademark will be resold be- dong Century Trading Co, the operator of 360buy.com, has fore the hearing is finished, so it asked the Hong Kong court put great pressure on other e-commerce websites. to forbid Proview Shenzhen from doing that,” he said, adding 360buy.com had about 17 percent of RMB 240 billion that the court’s decision to prevent the trademark from being of China’s e-commerce market in which businesses sell to transferred cannot be seen as showing that it has ruled in fa- consumers last year, while Gome’s online shop and Dang- vor of Apple. dang together only had some 3 percent, according to Chinese It is uncertain at this time when exactly the trial will IT research company Analysys International. begin in Hong Kong, and the lawyer said the evidence exchange has begun and will last until March. Comment Dangdang has a strong advantage in Yu Guofu, a Beijing-based lawyer specializing in intel- selling books, while Gome is good at lectual property rights, said the verdict of the Hong Kong selling electronic products, so it would be a win- trial or that of the mainland will not have any influence on win model for them. one another or vice versa.

Apple claims firm broke trademark agreement

hina Daily reported on February 16 that after a number of online stores suspended sales of Apple’s iPad, the US techC giant accused Proview Technology of not honoring its agreement to transfer the rights to use the trademark for the product in China. Many Chinese online stores, including Amazon China and Gome, pulled the iPad after local administrations of in- The root cause of the dispute is Apple’ dustry and commerce seized loads of the popular tablet com- Comment underestimation of the legal complica- puters from a second-tier city. tions in China, and the case also serves as a warn- “We bought Proview’s worldwide rights to the ing to companies in China to think twice about iPad trademark in 10 different countries several years risks before going abroad. ago,”according to a statement Apple sent to China Daily.

36 ICT

multinational companies, providing leased-line services, In- China examining Google’s bid for ternet services, Internet data centers, managed services and Motorola Mobility voice wholesale service. Relying on its resources in China, its major clients are Chinese enterprises in the US such as Bank of China and hina’s Ministry of Commerce (MOC) said on February Sinopec, and US corporations with investment in China, in- 16 that its antitrust bureau is still examining Google’s cluding Microsoft and Bank of America. bidC to purchase phonemaker Motorola Mobility. In addition, CT Americas will further expand its busi- “The investigations and reviews are still under way. Any ness in Central and South America, forging strategic part- news will be disclosed in a timely manner,” MOC spokesman nerships with local operators and providing service to public Shen Danyang said at a press conference. users. The remarks came just days after the case won govern- Witnessing the booming tourism and ment approval from the United States and the European Comment Union, bringing Google a step closer to completing the deal. business exchanges between China Search engine giant Google Inc. announced last year and the United States, China Telecom Americas that it would buy Motorola Mobility Holdings, Inc. for ap- has began to tap into this huge market potential in proximately $12.5 billion. mobile and data communication service. Under China’s anti-monopoly laws, multinational companies have to seek government approval before consolidating if their combined global revenues exceeded 10 billion yuan China’s Huawei wins UFB contract in ($1.59 billion) and if two or more parties involved in the deal New Zealand reported more than 400 million yuan in sales revenues respectively during the previous fiscal year. An anti-monopoly review is also necessary if the firms’ hinese telecommunications maker Huawei has scored a revenues in China exceeded 2 billion yuan during the previ- second major contract in the New Zealand government’s ous fiscal year and if two or more parties involved in the deal schemeC to bring ultrafast broadband (UFB) to most of the reported more than 400 million yuan in sales revenues re- country, according to Xinhua. spectively. Enable Networks, owned by the council in New Zea- land’s second city of Christchurch, announced on February 8 Google’s purchase of Motorola Mobility that Huawei New Zealand would supply the fiber equipment Comment is clearly driven by Google’s perceived for the city’s UFB network, and for services to manage opera- need to establish a strong portfolio of patent rights tions and maintenance. in an attempt to ward-off patent attacks by competi- The “multi-million-dollar contract” covered the provi- tors in the fiercely competitive and growing smart- sion of all network equipment, including fiber ducting, fiber phone market. optic cables and open access layer two, or “bitstream,” network solutions. Huawei would also provide the service expertise for the Telecom giant accelerates to explore 3,500- km UFB network across Christchurch and neighbor- America ing Waimakariri and Selwyn districts, said a statement from the two companies. Huawei won a similar contract late last year to build the T Americas, the largest international subsidiary of UFB network in the Hamilton-Central North Island region. China Telecom, decided to explore the US retail market The Enable Networks’ deployment will connect a total inC 2012 after more than 10 years of development in the US, population of more than 380,000, including about 7,000 according to China Daily report. businesses, 1,000 medical centres and 170 schools, according During the Chinese Spring Festival in January, CT to the government. Americas launched its branded mobile service in Chicago. The roll out, which began in November last year, will be Later, the service will be promoted in Los Angeles and completed over an eight-year period. New York - major destinations for Chinese visitors and where Overall the government’s UFB initiative will see 75 per- the majority of Chinese-Americans live. cent of New Zealanders able to access speeds of 100Mbps or The cell phones with this service will carry one SIM more before 2020 at a projected cost of 1.5 billion NZ dollars card with two numbers: one Chinese and one US cell num- (1.25 billion U. S. dollars). ber. Huawei won the contract thanks to its The new service is targeting frequent business travelers, Comment track record in delivering fiber infrastruc- long-term visitors and students. The international calling rate ture, reputation for quality products, commitment will be lower than US local operators, but slightly higher than to New Zealand, professionalism and delivery time- a calling card, Tan said. frames. Set up in 2002, CT Americas has focused on serving

37 AUTO

Electronic Products (CCCME AUTO) said on February 8, China's auto exports hit record high according to Xinhua report. Industrin 2011 ial Watch Statistics from CCCME AUTO showed that China exported 849,900 vehicles, full sets of car spare parts and ndustr i al Watch

I car chassis in 2011, up 49.96 percent from a year earlier hina’s auto exports hit 849,000 units last year, the and the largest figure seen since 2009. The exports were highest level seen since the onset of the global finan- valued at $10.95 billion, up 56.72 percent from 2010. Ccial crisis, the automobile branch of the China Chamber China exported automobiles to 190 countries and of Commerce for the Import & Export of Machinery & regions last year, with Russia, Brazil and Iran accounting for most of China’s automobile export value, CCCME AUTO said. Following years of hard work, Chery, Great Wall, JAC and other manufacturers have managed to make significant strides in overseas markets, reported Gasgoo.com. For example, Chery managed to export 160,200 vehicles alone in 2011, increasing 73 percent from the previous year, manufacturer Spokesman Jin Yibo said. Mean- while, Great Wall managed to export 83,117 vehicles last year, Shang Yugui, head of Great Wall's media relations, said, while JAC saw its exports over double in the same period of time. It is encouraging to witness Chinese auto export is growing impressively. China-made autos are Comment finding their overseas market prosperous in emerging markets, such as South America. China's Foreign Trade magazine has been organizing the China Auto International Exhibition Tour for 9 sessions in the recent decade. After-sales service will be the future focus.

Chinese automobile sales grow less than 3% in 2011 exceeding one million units. CAAM statistics show that the industry is continuing to grow, with the overall value index increasing 16.8 rowth in the Chinese automobile market finally slowed percent from 2010. SAIC led the list of top ten manufac- down in 2011, with a year-on-year increase in sales of turers in 2011, followed by Dongfeng, FAW, Changan, Gonly 2.45 percent, the lowest figure the country has seen in 13 BAIC, GAC, Chery, Brilliance, Great Wall and JAC. years. Ministry of Commerce statistics, as quoted by china. These ten manufacturers were responsible for 16.09 mil- com.cn, reveal that 18.51 million vehicles were sold last year. lion sales last year. Gasgoo.com, an industrial website, commented that the cooling down in the market in 2011 is attributed to a variety Comment It is like to win a lottery to get a quali- of factors, including new national macroeconomic planning, fication to buy a new car in Beijing. phasing out of policies stimulating consumer spending and When you have a new car, you can't drive it one day the introduction of other policies aimed at curbing automo- in a week in Beijing, since its restriction launched bile growth in Beijing and other cities. to driving. The traffic is getting worse in big cities Growth in the market for passenger vehicles was above in China too. Sometimes during the rush hour, it is the industry average, with nearly 14.47 million passenger even faster to walk on foot than driving a car. Also vehicles sold last year, increasing 5.2 percent from 2010. The to find a proper place to park may take longer time minivan and SUV segments performed strongly, growing than the real drive, and the parking price is crimi- 11.7 percent and 20.2 percent, respectively. nal. The petrol price is always hiking... Who wants Meanwhile, statistics from the General Administration to drive in China? Bicycle will be a better choice. of Customs show that automobile imports grew 27.3 percent,

38 39 CONSUMER

ChineseIndustrial WatchDemand for Gold

ndustr i al Watch Surges I By Zhu Zijun

hinese demand for gold is surging and the annual demand in 2011 hit 761.05 tonnes (t). This amount is up 33.2 percent over the previous year according to recent data released by the China Gold Associa- tion. CFrom gold jewelry to gold bars, Chinese demand for gold saw a boom in various fields in 2011. Among them, the consumption of gold jewelry amounted to 456.66t, a 27.9 percent increase over 2010. The consumption of gold bars increased to 213.85t, up 50.7 percent year on year and the consumption of gold coins hit 20.80t, up 25.2 year on year. The consumption of gold used in industry reached 53.22t, a 12.3 percent increase year on year. The growth is a result of increases in both jewelry and nomic conditions, volatility and currency weakness against investment. The largest rise was in investment, where demand the US dollar, the council added. leaped by 69% to 258.9t with a value of RMB 84.5 billion, Gold, as the only financial asset with its own intrinsic according to the World Gold Council. China jewelry de- value, is an essential part of world financial reserves. Due mand increased every quarter of last year and was the largest to its scarcity in the global strategic resources, it plays an single jewelry market worldwide for the second half of 2011. irreplaceable role in safeguarding national economic and fi- Growth in demand for gold is also a global trend. Glob- nancial security. In particular, in the context of the stagnant al demand for gold in 2011 rose to 4,067.1t, worth an esti- world economy and the European sovereign debt, gold’s mated US$205.5 billion. This marks the first time that global function to combat financial risk and safeguard asset security demand has exceeded US$200 billion and is the highest ton- becomes more obvious. Therefore, various countries are striv- nage level since 1997, according to the World Gold Council’s ing to increase gold reserves. Gold Demand Trends. Presently China and India remain the Meanwhile, gold is an important tool for consumers to cultural heartlands of gold, generating 55% of global jewelry develop a rational portfolio of corporate accounts, fight infla- demand and 49% of global demand. tion and diversify investment risks, hence their interest in “Asian growth and optimism and the western desire to possessing physical gold is constantly increasing, the China protect assets against uncertainty are the two main factors Gold Association remarked. driving the 2011 figures. Looking particularly at Asia, there According to the association, with growth in people’s was a major boost to the overall figures from the increase in living standards and changes of consumption structure, the Chinese demand, which is a trend that we see continuing gold creativity, processing and retailing have developed to a over the next year,” said Marcus Grubb, Managing Director new level. The processing base for domestic sales in Luohu, at the World Gold Council. Shenzhen and the processing base for export sales in Panyu, “It is likely that China will emerge as the largest gold Guangzhou have become two main gold processing bases. market in the world for the first time in 2012. What is certain In addition, the gold investment and trading market is is that the long-term fundamentals for gold remain strong, developing quickly as gold is becoming a new hotspot for in- with a diverse and growing demand base, coupled with con- vestment and enriches people’s investment portfolio. strained supply side activity,” he added. Apart from its financial attribute, gold has a special nat- Globally speaking, gold used in electronics was up 1.1% ural quality. Along with the speeding up of the development to 330.4t worth a record US$16.7 billion, which is unex- of strategic new industries, gold is maintaining the momen- pected considering the increase in cost. Annual demand for tum of rapid growth in the fields of electronics, aeronautics technology as a whole was steady at 463.5t due to growth pri- and astronautics, environmental protection, new energy, en- marily in the Chinese market, said the World Gold Council. ergy conservation, new materials, biological medicine, etc. The value of global jewelry demand in 2011 reached More data from the China Gold Association showed a new annual record of US$99.2 billion. India and China that in 2011 Chinese gold production amounted to a record continue to believe in both the intrinsic and emotional value high of 360.957t, up 5.89 percent year on year. For 5 consecu- of gold jewelry which explains why overall global jewelry tive years, China has been the biggest producer of gold in the demand was resilient despite high gold prices, difficult eco- world.

40 CREATIVITY

The Same Theme Show, While Different Impressions By Guo Yan

n the fall of 2011, the world’s two fashion cities—New York and Beijing presented a fashion show themed with Sketch·New York Impression within one month, which attracted lots of spotlight. The same theme impressed audience differently at different times and different places. And the show owner is the renowned Chinese designer Richard Wu. “Just like the name of the brand launch—Sketch, I want to present a sketch, a creative space. With a definite orientation, I create parts of the content and consumers the rest part. People from diverse cultures and having various prefer- Iences may bring their individualism into full play by matching and accessories”, said Richard Wu when he was interpret- ing the theme of the show. At the creative VLOV 2012 Spring & Summer collection show, the exquisite and low-pitched design aesthetics was unanimously praised by professional media and buyers during the New York Fashion Week. What’s worth mentioning, apart from the 36 outfits exhibited in New York, the designer created an extra 8 outfits based on the actual New York impressions in a move to present a feast for the eyes of the Chinese audience during the China Fashion Week. Back from a successful show in New York, Richard Wu now appears again on the China Fashion Week stage. Wu’s unique and reserved smile delivers more confidence and calmness. In an exclusive interview with China’s Foreign Trade, Richard Wu talked freely about his design philosophy, his New York trip and his thoughts about the domestic and the overseas fashion designers as well as the entire fashion industry. The New York Trip well-designed shop logos and well-dressed people can be seen everywhere. This fashionable metropolis has brought me lots of creation inspiration. Have you ever been to New I think it’s every Chinese designer’s honor to launch a show in New York. Q:York before? How do you think For me and VLOV, this brilliant New York fashion trip is an inevitable outcome of of New York? What does the New long-term brand planning and also an optimum choice at a perfect time. York Fashion Week mean to you? In February, 2011, I got the op- When did you decide to bring your own brand to the New York Fashion A:portunity to watch the New York Q: Week? And what kind of preparation have you made? Fashion Week along with the delega- I began to make preparation about one year ago. The positive feedback of the tion of the Organizing Committee of A:VLOV brand showed in the China Fashion Week inspires me to bring VLOV the China Fashion Week. After con- to the international stage. After conducting detailed market research about the ducting market research in New York, world’s influential fashion week—Paris, Milan and New York, I found that the I thought the VLOV brand suits the New York Fashion Week better suites the brand positioning of VLOV in the mar- US market in terms of design style and ket. This February, along with the Organizing Committee of the China Fashion brand positioning. Personally, I appre- Week, I researched the New York Fashion Week, which I found was closely related ciate the US business model and I plan with the market. At the same time, I appreciate the New York Fashion Week’s to nudge the VLOV brand into the US operating model—art-plus-business, which is close to my menswear brand VLOV. market to make it more international. Moreover, I think the New York market promises tremendous potential. Therefore, As the biggest city in the US, New I eventually chose the New York Fashion Week to launch the VLOV brand. York is a city full of cultural atmosphere I have made lots of preparation for the New York brand launch, such as and fashion is embodied throughout obtaining inspiration and collecting materials as well as custom-tailoring spe- its sectors. In the streets of New York, cial fabrics.

41 CREATIVITY

How do you think attending the also leave much creative freedom to Q: NewIndustr York Fashionial Watch Week will the wearer. Besides, Richard Wu’s impact the brand? And what does structure design highly praised dur- it mean to the Chinese menswear ndustr i al Watch ing the New York Fashion Week also I design domain? embodies many creative ideas: three- As we know, the New York Fash- dimensional modeling and no-side- A: ion Week is the world’s top fash- seam design make the outfit well- ion stage, therefore, I regard it as not fitting and more stylish; creative no- only a fashion show, but an in-depth armhole design makes the outfit more communication with the world’s fash- attractive in details; the ingenious dart ion. The New York Fashion Week shifting makes the traditional dart as a provides an opportunity for VLOV to decoration, which becomes a highlight enter the international market and as in the outfit design. a strategic objective for VLOV in the Mixed and matched among the next move, the US market is a signifi- purely natural fabrics featuring flax cant initiative in the planning blue- and high-density cotton fabrics, the print for brand internationalization. abundant nylon fabrics utilized in this As a result, attending the New York season’s fashion show broadcasted Fashion Week is of great significance youthful and sportive feelings but did to the Chinese fashion brand which not damage the elegant style. More- strives to have a presence in the inter- over, colors in the fashion show are national high-end market. bright: from the elegant and classical Shifting to integrating Chinese gray series, to the cool black series, and culture into DNA from emphasiz- to the fresh and sunny white and blue ing Chinese symbols, the domestic series, the designer definitely delivers designers’ performance has attracted the new round of fashion trends for the more and more attention in the inter- VLOV menswear. national stage. Gradually going global to participate in the international inte- Who is your target customer gration, Chinese menswear designers Q:when you are designing? aim at bringing the domestic mens- Robert Pattinson, the hero in the wear design into the international A: Twilight. His melancholy prince- stage and enabling the world to get like but not flighty temperament as to know both China and the Chinese well as his sharp eyes make me cannot designers. Likewise, only by keep- help connecting VLOV with him. ing learning and contacting with the world can the Chinese designers make As design often carries the objective comments about their own Q:personality and preference of works. the designer, what kind of person- The design philosophy— ality does VLOV show? Sketch My works target at white collars’ A:elegant menswear, which advo- Where did you get the inspira- cates simplicity, elegance and taste. Q: tion for this season’s brand The menswear I have designed stand launch? for men’s dressing code in the new In a sketched space, you may have era. Fresh, elegant and exquisite are A: your own thoughts, your own cre- the main features of my design, which ation and your own performance. In may somewhat reflect my life style— a sketched space, you may fill in your pursing perfection and elegance. own things. Outline is the highlight for de- Which brand is your favorite signers to stress the “sketch” theme: Q: and which designer is your there were tailored coats and also loose idol? casual wear. The two dark-blue loose Diane Von Furstenberg, President outfits are the designer’s favorite— A: of the Council of Fashion De- collarless and loose-cuff outfits fully signers of the America and Kris Van demonstrate comfortableness and Assche, Chief Designer of DIOR.

42 Only Integration with Business designers, I think, lack innovation. We have spent much time following suit and can Bring the Brand to there is still a long way for us to go in terms of innovation, which I think we have to Somewhere learn from our overseas counterparts. Have you ever thought that you What do you think can the Chinese designers learn from the overseas Q: may fail this time just as the do- Q: designers? mestic designers who attended the Originality, innovation and mentality, where I think we can do better and international fashion week before? A: which are absent from many domestic designers. However, I believe we Chi- Why do you think the home-grown nese designers will create better works as long as we make full use of our rich brands have no way to enter the in- cultural heritage and fast-de- ternational market and just turn out veloped information as China to be a flash in the pan? keeps developing speedily and It depends on the attendees’ men- becomes more international. A:tality and purpose as well as the integration with the business model af- What do you think is the terwards. For the VLOV brand launch Q: relation between the de- in the New York Fashion Week, I just sign and the sales profit for want to showcase the brand at the in- the China-designed brands ternational stage. In the mean time, I to attend the international think highly of the New York market as fashion week? it better suites my brand style. Besides, What you are talking I want to learn about the New York cul- A: about is actually the rela- ture, by which I may breathe fresh ideas tion between the product and to my brand. I thought I would not the market. Personally, I think come back without any gains. “What designers have to know how to matters is not that you stand there, integrate the product into the but the direction you face towards”—I market, as on the one hand highly appreciate this motto, which also design serves business pur- reflects the mentality for me to attend poses and cannot exist inde- the New York Fashion Week. I’m not pendently of the market; and sure about the purpose of other brand on the other hand, blindly ca- launches at the international stage, but tering to the market will make I know well about my objective. In my the product lose individualism. opinion, no matter where you choose to Therefore, the product and the launch your brand, only by effectively market have to depend on each integrating the brand with business can other. you bring your brand to somewhere. Comparing with the overseas Q: designers, what do you think are the strength and weakness of the domestic designers? I feel it’s a great honor for us Chi- A: nese designers to live in this era, when we have absorbed the cultural heritage from China’s brilliant 5,000- year history and we may obtain lots of design inspiration. I think this diverse era will provide a perfect stage for the current generation of designers. Under the current Chinese circumstances, only with good works can you be recognized by the market and can you have abundant opportunities. This can be regarded to be the strength of a Chinese designer. The works created by the domestic

43 HEALTH

IndustrWhatial Watch Can China Do About ndustr i al Watch I Health Products Industry? By Alice Yang

e now watch advertisement companies in China, but most of them are in small size and do the low on health products, beauty level repeating job. “For the manufacturing enterprises in health products, and body care products ev- their characters can be concluded as too many, too small, too dispersed, eryday everywhere, which too chaotic, and too low-level,” said Tong. actually shows how big the industry is and will China now is a very important nation as ingredients exporter. How- be,”“W Yu Xiucheng, former deputy director of Sci- ever, while more and more Chinese companies started to do business in ence& Technology and Education Department foreign markets, the export value didn’t grow at the same speed as what of Ministry of Health (MOH) said. “The health the company number did. According to China Chamber of Commerce product sales in China had exceeded RMB 100 for Import and Export of Medicines & Health Products (CCCMHPIE), billion in 2010. And it is estimated that the in 1996, only 123 Chinese companies were doing export on ingredients, potential market size can reach over RMB 350 and got US$246,000 in average export value for each company. How- billion. The health industry is on a fast track,” he ever in 2010, 1,279 companies joined the export team, which was over added. Yes, the market is growing, the potential 10 times of that in 1996, but with only US$637,000 in average export is huge, the future is promising, but how about value, less than 3 times growth over 1996. (See the table below) The cake the situation now? didn’t grow that big, but more and more companies came to grab a piece OMG, so many problems! of share. The fact that there are too many small companies in the industry makes it difficult to even name a few brands that the customers are famil- The health product industry started to de- iar with and trust. (Yes, difficult to trust.) velop in the early 1990s. After over 20 years of Table Chinese companies started to do export from 1996 to 2010 development, the industry is still weak and in Unit: thousand USD chaos though. Many industry experts and officials feel a lot of problems ahead. Year Export company number Average export value Trust lost 1996 123 246.3 “I’m aware that Chinese consumers have a 2000 284 245.2 保健食 bad impression when hearing the word, 2005 985 331.3 品 (bǎo jiàn shí pǐn, health products) due to the 2010 1279 637.3 variety of fake, unsafe or useless products that Source: CCCMHPIE have plagued China’s dietary supplement industry in the past,” Jeff Crowther, Executive Director of Few R&D investment US-China Health Products Association said. Since the enterprises are in small and medium size, the investment It is true that the industry in China was in R&D is far from enough that the products produced are in low level somehow ruined by too many fake products and and lack core competitiveness. Some companies are even dishonest and untruthful marketing. It’s not news to hear illegal use illegal measures (eg, adding drugs into the products) to cheat consum- manufacturing and operation in the industry; ers. (And that brings back to the TRUST problem again.) drugs are added into health products illegally, Lag-behind regulation exaggerated advertisement for the products. The “Our regulations and rules lag behind the requirement of industry trust crisis is already the bottleneck of the indus- development, and an over-all standard hasn’t built up. The standards of try development. “That would not only mislead raw material safety, detecting measures, producing technology, function and deceive consumers, but also do harm to their claim assessment are missing or are poorly designed. As a result, the su- health. Especially those health products claiming pervision work from SFDA is difficult to conduct,” Tong said from State to have the function of losing weight and reduc- Food and Drug Administration side. ing blood sugar are often detected to contain il- Tong’s opinion was echoed by Crowther. “The current regulatory legal drugs,” said Tong Min, Director of Health system is holding the industry back from reaching its true potential. Real Product and Cosmetics Department of SFDA. growth will only be realized with regulatory reform of the entire system.” Chaotic manufacturing Crowther said. There are over 6,000 bio-pharmaceutical Health products are in an embarrassing position in China’s regulation

44 system. The registration for the health products, “blue hats” Weak industry strength and lack of innovation; #4. Difficult takes years and a lot of money to obtain with very strict process to compete with foreign competitiors; #5. Defective rules and and procedures. While many health products are sold as food, regulation. If China can’t solve the five problems properly, the a yogurt from Mengniu, a local and big dairy company is sold development of health products industry will surely suffer,” as health product with a proud blue hat. While vitamins are Yu said. typical health products, they are much more popular sold in Well, what to do? China as OCT, a kind of drug. Let alone various TCM products causing more confusion. “The overlapping of the market With so many headaches inside the industry, China still leads overlapping of the administration. Health products are has to move on. actually in a grey zone,” said Crowther. According to Tong, what SFDA is busy doing now is More education in need building up a regulation system. They are going to launch or The concept of keeping health has to change in China, revise several regulations in the near future, including “Health as “the health problem of the Chinese people is changing”, Products Supervision and Management Regulations”, “Reg- said Yu. “The chronic non-infectious diseases, such as hyper- istration and Management Rules of Health Products”, “Trial glycemia, hypertension and tumor, has replaced the tradi- Production and On-site Assessment Regulations”, “Technical tional infectious diseases as the main causes of death. Future Standards to Health Products Inspection and Assessment”, focus of the industry will be transferred from treatment to and “Standards to GMP of Health Products”. prevention, from infectious diseases prevention to chronic Also, the Food Safety Committee Office of the State diseases prevention. Yet Chinese’s main conception is still Council issued a special Notice at the end of last year, titling going to find the best doctor after getting ill. Little attention “On Further Strengthen the Supervision Work on the Qual- is paid to daily care of the physical condition. If people’s con- ity and Safety of Health Products”, and made concrete ar- ception has adjusted, doctors, including the best doctors, can rangements for the administration of the quality and safety of have the energy and time to educate public more in how to health products, including more frequent supervision checks, prevent diseases,” Yu added. building up a Blacklist system, more strict supervision on ad- According to a recent survey conducted by the Chinese vertisement and labels, more followed regulations. Consumers’ Association, 5.1 percent of the senior respon- The Blue Paper of China’s Health Product Industry dents think the health products “can” cure diseases; 47.1 Development released on January 5, by China Health Care percent think the products “can help” to cure diseases; 27.9 Association and the Research Center for Development & percent of seniors trust advertising rather than a doctor’s ad- Regulation of Food and Drug Industry of Chinese Academy vice and 29.2 percent of seniors attended health lectures or of Social Sciences predicted the development trend of the in- products experience events held by commercial organizations dustry in the future, describing a promising and encouraging resulting in 64.3 percent of those attending to buy the prod- future. ucts immediately or after the event. Education on Chinese’s 1) The demand for health products will increase rapidly health concept and knowledge still has a long way to go. in China that its industrial size will grow in large scale as And more... well; Yu has more to say, “I can conclude as five big problems 2) The category of the health products will be more di- the industry is facing. #1. Low level of consumer compli- versified, and the general price of the products will go down; ance or repeat business; #2. Over reliance on advertising; #3. 3) “Green, Natural, Organic, Environmental friendly” will be the keywords to a new growth of the industry; 4) The market share taken by those products based on Chinese traditional health culture will grow impressively; 5) The growth pattern of the industry will shift from marketing-oriented to science& technology-and-capital-oriented; 6) The supervision on health products safety will be more severe, and the supervision on their function and claims will be strengthened; 7) The influence from industrial as- sociations will be more powerful. “Another piece of good news is the task of fully promoting the health products industry’s development has been listed in the Twelfth Five-Year Plan of MOH.” Yu said. “We will see an improvement in the future.”

45 EXPO

Industrial Watch ndustr i al Watch I

Grand Gathering of Auto Aftermarket Industry By Lesley Cui were closed at the show. The expo is divided into six product sections: auto electronics, auto interior & exterior accessories, car care products, auto tuning, and other auto related products. National pavilions from Taiwan, Korea and Japan among others were also present. In addition, the CIAACE provided exhibitors and attendees with a number of relevant events such as the Forum on China Auto Consumption, the Release of New Products, and the networking events. As one of the most influential international auto aftermarket expos, CIAACE attracts the attention from the businesses of auto aftermarket worldwide and get the support from the Chinese government. The expo since 2010, has received subsidies from the country’s Ministry of Commerce to be used for the benefits of exhibitors. To date it is the only expo that has received such a subsidy. CIAACE plays an important role for Chinese government in applying industry regulations and policies. Highlights Profile of the show The show attracted almost all of the big brands in the industry, who unveiled 18,000-plus kinds of new, innovative products in areas such as automotive enter- Held in China International tainment systems, car alarms, rims, car cleaning products, tires, windshield wip- Exhibition Center (New Venue) from ers, etc. Like the past exhibitions, around 85% of new auto products were unveiled February 14 to 17, the 14th China International Expo for Auto Acces- sories, Electronics, Tuning & Car Care Products (CIAACE2012) is one of the most famous platforms of China’s auto aftermarket industry. It is the biggest expo for auto electronics, accessories, tuning and car care products in China. The show drew 6,103 exhibitors and 221,864 visitors from home and abroad, who were very excited about what they saw. 20,316 billion yuan worth of deals

46 at the show in each spring. More and more target the domestic market now that the foreign demand has been shrink- manufacturers would like to choose CIAACE ing. They were optimistic about the potential of China’s market for auto as their first choice of platform to present their accessories. new products. Refit vehicles Companies used many ways to attract the attention of buyers and visitors. Refit vehicles attracted a lot of attention at the show. The following are some of the refit cars on display.

Development trend of the industry During the show, a report on the development trend of Chinese auto accessories industry was released. According to the report, 430 billion yuan worth of auto accessories were sold in the Chinese market in 2011, and the figure is expected to exceed 550 billion yuan in 2012. Specifically, the sales of auto maintenance and beauty products are see- ing rapid growth and are expected to reach 148 billion yuan in 2012; as they are not consumables, the increase of auto electronics sales will slow down after explosive growth, with their sales forecast to be about 180 billion yuan; market need for the solar film is also slowing down and its sales are expected to be only 39 billion yuan; auto interior products will Exporting Chinese companies turn to account for 30% of the total sales to reach 165 billion yuan; the sales of the domestic market auto exterior products are expected to reach 6.05 billion; the modified products, due to its high requirement of technology, are mainly sold in Two auto interior accessories exhibitors the first-tier cities. Their sales are forecasted to be about 21.45 billion Omeok and Sumek were very popular at the yuan. show. They told the reporter that their products The report also shows that the consumption of auto accessories took used to be exported. However, they started to on distinctive regional characteristics. In the first-tier cities, car owners’ primary concerns are comfort, price and quality. They have developed a liking for individualistic products that represent their good taste. In the second- and third-tier cities, new cars sales continue to rise. Consumers are not sensitive to car accessory brands. Products essential to new cars sell well. The show was held by YASN International Exhibition Co., Ltd. Witnessing the success of this exhibition, the organizers are very optimistic about the 15th CIAACE to be held in Chongqing from May 26 to 28, 2012. The next show will be held in the same place in Beijing from March 1 to 4, 2013.

47 ase S tudy cies as used in other common acquisi- c RMB Comes Back Home tion deals. — From the perspective of AGCO’s acquisition Breakthroughs of Dafeng by paying in RMB In China’s over thirty years history of attracting foreign investment, the By Liang Tao Dafeng-AGCO deal is one of the first batch of transactions in which RMB is used by foreign investors to purchase shares in Chinese domestic companies. These first movers benefit from a series ore and more RMB funds an investment vehicle. Shandong Dafeng of circulars and regulations issued by are flowing out of China Machinery Co., Ltd. (“Dafeng”) is a competent regulatory authorities. through various channels, Chinese domestic agricultural machin- On October 12, 2011, the Ministry including RMB interna- ery company located in Yanzhou City of Commerce (“MOFCOM”) issued tional trade settlement, foreign-invested of Shandong Province. In April 2011, a the Notice on Relevant Issues on Cross- Menterprises’ profits, proceeds generated share transfer agreement was made and Border RMB Direct Investment (“MOF- from their China business units, dim executed by and between AGCO HK, COM Notice”), clarifying the regulatory sum bonds and the contemplated RMB Dafeng, and individual shareholders regime over foreign direct investment in denominated stocks offering in Hong holding 80% equity interest in Dafeng RMB. The second day, the People’s Bank Kong. How to attract the RMB funds (“Transferring Shareholders”). Under the of China (“PBC”) issued the Administra- to come home will be an important is- share transfer agreement, AGCO HK tive Measures on RMB Settlement in Re- sue for China’s central government, es- acquired 80% equity interest held by the lation to Foreign Direct Investment (“PBC pecially under China’s strategy of RMB Transferring Shareholders in Dafeng Measures”), setting forth the detailed internationalization. which consequently turned into a Sino- procedures from the perspective of RMB With a view to “internationalizing” foreign joint venture named AGCO settlement. Promulgation of the MOF- the RMB, among other efforts, China Dafeng (Yanzhou) Agricultural Machin- COM Notice and the PBC Measures has embarked on its pilot RMB trade ery Co., Ltd. (“AGCO Dafeng”). As full represents that foreign direct investment settlement scheme since 2009, and fur- consideration to the 80% equity interest settled in RMB has been successfully ther expanded the RMB trade settle- in Dafeng, AGCO HK paid the Trans- accepted by China’s central government ment scheme to cover the entire main- ferring Shareholders in RMB. This deal after around two years pilot program run land China in 2011. By the end of June could be simply illustrated as below: in certain provinces and regions. It marks 2011, RMB deposits in Hong Kong a spectacular break- had amounted to around RMB 553 bil- Deal Structure of Acquisition by AGCO of through regarding lion. In order to utilize the increasingly 80% Equity Interest in Dafeng the regulatory re- accumulated offshore RMB funds, Sources:Publicly Available Information gime of the foreign China’s competent authorities issued direct investment, After Acquisition a series of circulars in 2010 and 2011 Before Acquisition since RMB has been to let RMB funds flow back to China. AGCO AGCO formally included These circulars lifted various restrictions 100% 100% in the feasible cur- AGCO HK AGCO HK imposed on foreign investors, and paved Offshare Offshare rencies which can the way for the repatriation of offshore be used by foreign Transferring Onshore Onshore RMB funds into China through direct Remaining Remaining investors to pay the Shareholders Shareholders 80% Shareholders investment channels. In particular, 80% 20% 20% consideration of pur- foreign investors have been permitted chased shares. to purchase shares in Chinese domestic Dafeng AGCO Dafeng According to （Domestic （sino-foreign companies by paying in RMB. To take Company） Joint Venture） t h e M O F C O M first-mover advantage, certain foreign Notice, the foreign investors have already tested the water. investors shall use AGCO Corporation (“AGCO”) is one This deal is reportedly one of the the “legally obtained” offshore RMB of them. pioneering cases under which offshore funds when conducting direct invest- Deal stories RMB funds are used by foreign inves- ment into China. The “legally obtained” tors to pay for the purchased shares in RMB funds refer to RMB funds raised AGCO is a worldwide farm ma- Chinese domestic companies. Actually, from: (i) international trade; (ii) divi- chinery company listed on NYSE. this acquisition would never be a high dend distributions and funds derived AGCO Holdings (Hong Kong) Ltd. profile deal, unless the foreign investor from share transfer, capital reduction (“AGCO HK”) is AGCO’s subsidiary opted to pay for the purchased shares by and liquidation of foreign invested incorporated in Hong Kong, serving as using RMB instead of foreign curren- enterprises registered in China; and

56 (iii) proceeds from offshore issuance of investment conducted in foreign RMB denominated bonds or shares. currencies, the administration for The MOFCOM and local counterparts foreign exchange will be in charge will ask foreign investors to provide of relevant approval and verifica- relevant documents supporting and tion. For the investment in RMB, certifying the legitimate sources of the in addition to the administration offshore RMB funds whilst reviewing for foreign exchange, the PBC or and approving the foreign acquisition. its local counterparts will be also Although, the MOFCOM Notice responsible for the verification and the PBC Measures aggressively relating to the wire transfer of the remove various limitations imposed on acquisition price. foreign investors who propose to in- foreign exchange registration with the In addition, compared with the vest their RMB funds into China, the administration for foreign exchange and foreign investment conducted by foreign MOFCOM and PBC still leave some get the IC card of foreign exchange; currencies, onshore receiving banks critical barriers. The MOFCOM No- (iv) upon verification by administration with which transferring sharehold- tice sets forth that the existing rules, for foreign exchange, the transferring ers open receiving bank accounts are regulations and policies applicable to shareholder opens a receiving bank granted with more responsibilities on foreign investments into China using account for the purpose of receiving monitoring the wire transfer of price other foreign currencies apply equally the consideration paid by the foreign of purchased shares under the circum- to RMB denominated investments. investor; (v) upon another verification stances of RMB denominated foreign Therefore, some restrictions currently by administration for foreign exchange, investment. However, it has not been applicable to foreign investments will the foreign investor remits the price of tested as to how vigorously will the re- continue to remain for RMB denomi- purchased shares into the transferring ceiving banks review and monitor the nated foreign investment, for example, shareholder’ receiving bank account and wire transfer process. industries limitations on foreign in- obtain a certificate from the administra- It is worth noting that verifica- vestment, the national security review tion for foreign exchange proving that tion from the administration for foreign regime and the merger review system. the foreign investor has completed its exchange is also necessary when RMB Fortunately, AGCO was not bothered payment of the purchased shares and is used to pay the purchased shares by by these problems. As agricultural finished this acquisition. foreign investors. However, it is still not machinery sector is deemed as an “en- For AGCO HK, the foregoing clear in which method the PBC or the couraged” industry for foreign invest- procedure was slightly changed. Upon administration for foreign exchange ment under China’s foreign investment obtaining the approval from the MOF- will exercise their regulatory power in industries catalogue, AGCO HK goes COM or its local counterparts and practice, or whether the PBC or the ad- through the procedures smoothly. successfully registering with the admin- ministration for foreign exchange may What’s the difference? istration for industry and commerce, the further issue any implementing rules in AGCO HK, as a foreign investor, was the future on this. Before the MOFCOM Notice also required to conduct a registration Outlook and PBC Measures have been issued, with the local counterpart of PBC. It is except in certain RMB investment crucial for a foreign investor, since the This is definitely good news for settlement pilot regions, a foreign inves- PBC registration is a requisite condi- foreign investors with offshore RMB tor like AGCO HK is not permitted to tion to the consequent account opening funds. However, it will take a long time use RMB to pay the price of purchased activities and wire transfer of price of for the new policies to be fully imple- shares of Chinese domestic companies. purchased shares. Under the PBC Mea- mented in practice. According to our In common cases in which foreign cur- sures, injection of offshore RMB funds consultation with certain commercial rencies are used to pay purchased shares, into Chinese domestic companies is not banks and officials from administra- foreign investors shall go through the required to obtain the PBC’s case-by- tions for foreign exchange or local PBC, following procedures: (i) the foreign case verification and approval; instead, it appears that most of them still have investor shall submit application docu- a general and quite straightforward reg- no idea about how to handle the RMB ments to and apply for the approval istration regime will be adopted by the denominated foreign investment. In with the MOFCOM or its local coun- PBC regarding the RMB denominated addition, how to divide the jurisdictions terparts; (ii) within 30 days of receipt of foreign investments. of PBC and administration for foreign the approval from the approval author- The major difference between exchange will become another practi- ity, the foreign investor shall register foreign currencies denominated foreign cal issue. We also need to keep a close with the administration for industry and investment and RMB denominated eye on whether the foreign investors commerce and obtain the business of foreign investment is the regulatory have to duplicate the application and license for the newly established Sino- authorities governing the formation of registration formalities with both the foreign joint venture; (iii) the established the receiving bank account and wire PBC and the administration for foreign Sino-foreign joint venture shall conduct transfer of price of purchase shares. For exchange.

57 ASIA-PACIFIC

s the second largest crude oil producer in the Organiza- tion of Petroleum Exporting Countries (OPEC), Iran exports 2.6 million barrels of crude oil Aon a daily base, around 20% of which are for the EU countries, mainly Italy, Spain and Greece. Since the Interna- tional Atomic Energy Agency (IAEA) announced last November that Iran’s nuclear programs were for military use,

egional T r ade & I nves t men the international community led by

R the US and Europe has been stepping up sanctions against Iran. The EU approved in January the ban to import petroleum from Iran, but it postponed the date for full implementation to July 1 of 2012, so that Greece, Span and Italy China’s Way Out may have enough time to find alternative supplies. This initiative has sparked off violent reaction in Iran and many in Iran’s Oil Crisis senators and governmental officials have even claimed that petroleum will By Hu Wenxiu not be exported to some EU countries. On February 19, the Iranian Oil with the Iranian situation, but the fu- Energy Agency (IEA) partly attributes Ministry announced on its website ture trend was subject to changes, said the rising oil price to worries about geo- that it had stopped selling petroleum Dong Xiucheng, Vice President of the politics due to the Iranian issue, claim- to the UK and France. On the next College of Business Administration of ing that worries from various parties day, the Iranian official said that if the China University of Petroleum. If the over the upcoming supply problem have EU countries continued to take hostile war starts, the oil price will soar instead undoubtedly lent a temporary support actions, Iran would be likely to stop of rising slightly. This will impact more to the rising oil price. exporting petroleum to Portugal, Span, heavily on the European economy than Due to production hikes in pe- Greece, Italy, Germany and the Neth- on the US economy, but nobody has troleum and hydrofracturing natural erlands. With its own oil clients, Iran a way to step outside. At present, the gas, the US had cut its oil imports from faced no problems in terms of selling Hormuz Strait is the sole maritime 57% in 2008 to 45%, said Daniel Ye- oil and besides Iran would sell oil to channel for the Gulf area to export pe- rgin, President of the IHS CERA. He some new clients, said Alireza Nikzad, troleum to such destinations as Western held that Saudi Arabia would be able Spokesman of the Iranian Oil Ministry. Europe, the US as well as Japan and to feed the globe by increasing its oil But Alireza Nikzad refused to reveal Iran is exactly located at the north coast production. Daniel Yergin believed that more details. Both the UK and France of the Hormuz Strait. To some degree, the Iranian issue would impact the oil have almost stopped importing oil from Iran’s situation will directly determine price by no more than USD 10 per bar- Iran, indicating that Iran’s move merely the trend of the international price oil. rel and he also observed another factor has symbolic significance in the real A few days ago, China’s National that threatened the oil price. “The oil sense. Development and Reform Commis- price will be driven up by increasing Nevertheless, this is the first real sion (NDRC) announced that from the fundamental demand from Europe and action Iran took after it issued threats midnight of February 8, gasoline and China, but not the disrupted supply in several weeks ago. Therefore, this may diesel prices will be raised by RMB 300 the Middle East,” said Daniel Yergin. still cause psychological impact, which per ton, which means that the retail The European refiners had de- will push up the oil price as the market prices of the #90 gasoline and the #0 creased oil imports from Iran and so fears that Iran may stop oil exports to diesel will increase by RMB 0.22 and will some Asian buyers, IEA—an oil other countries. RMB 0.26 per liter respectively on av- supervisory agency in the western coun- The national oil price trend shows erage at a national level. As the current tries — expressed earlier this month. that after the Iranian oil embargo was international political and economic However, statistics show that approved at the EU Foreign Ministers’ situation was quite complicated, it was China imports 40% crude oil from the Conference held on January 23, the possible that the Iranian nuclear crisis Gulf area, about 11% of which are from international oil price began to pick may prompt turbulence in the inter- Iran. As Iran’s biggest crude oil buyer, up. The rising international oil price in national oil market and oil price surge, China usually imports 556,000 barrels the past days did have something to do said the NDRC. The International per day, accounting for about 1/5 of

58 ASIA-PACIFIC

Iran’s oil exports. As China was cutting and on the other hand Saudi Arabia sult, both the domestic market and the oil imports from Iran, Asia’s oil imports may sell its oil more cheaply than Iran, external environment demonstrate that from West Africa hit a record high in which may be in China’s favor. it is an urgent task for China to advance this quarter, said the IEA. In the mean National Iranian Oil Company the establishment of an oil reserve sys- time, the international sanction mea- and China International United Petro- tem. More efforts need to be spared sures have made China more power- leum & Chemical Co., Ltd. (herein- in looking for overseas oil supplies ful in bargaining with the Iranian Oil after referred to as UNIPEC) signed so as to ensure the domestic energy Company. The new agreement stricken a contract to increase Iran’s crude oil supply. China needed to strengthen between Iran and China signaled that exports to China to 500,000 barrels its awareness of energy security, said Iran’s cuts in oil exports to China ear- per day, the Tehran Times reported on Han Xiaoping, CIO of China’s En- lier this year was out of nothing but February 18, which has caused great ergy Network. That the US has made business reasons rather than political attention from the western media. today’s achievements is because it has ones, the US Dow Jones News Agency This contract also sends a signal that depended slightly on the Middle East’s analyzed. China declines to implement the US’s oil, only about 80 million barrels. In the For such a big energy-consuming sanction measures against Iran imme- past three years, through the shale gas nation as China, development will halt diately. Just on the day before the news revolution, the US increased 100 bil- without energy. And the Iranian oil about the Sino-Iranian new contract lion cubic meters of natural gas, which crisis just provides an opportunity for was reported, the US once again urged equals to 84 million tons of oil. Thus, China to ponder on a series of issues in- China and Iran’s other oil trading the US earned energy independence by cluding energy security, energy reserve partners to stop importing oil from innovating shale gas as an oil alterna- and energy alternatives. Iran. Moreover, Zhuhai Zhenrong has tive. Since China is also rich in natural Strengthening communication maintained the same crude oil imports gas resources, it may increase natural with the Middle East is one approach from Iran as last year, when the for- gas supplies and thus depends less on among others to address the oil crisis. mer imported about 240,000 barrels external oil by replacing diesel with Aiming at strengthening communi- per day from Iran. As a key state-run LNG and gasoline with compressed cation in the domain of energy with company in China, Zhuhai Zhen- natural gas (CNG). Only in this way major oil exporting countries which are grong specializes in military products- can China achieve energy indepen- also the US’s trading partners, Premier oil trading and it has built up long- dence. “As a matter of fact, China needs Wen Jiabao of China’s State Council term ties with the Iranian government. a fundamental reform, which requires a paid a visit to the Middle East this But the US imposed sanctions against consensus among the general public. If January, when the US pressured the Zhuhai Zhengrong in January on the a consensus is reached, I believe that we Chinese government into cutting crude pretext of the latter’s business relations may be impacted but this will provide oil imports from Iran. Saudi Arabia is with the Bank Markazi. an opportunity for us to reform. This the world’s largest crude oil exporter, It is of great urgency to advance opportunity will also remind us of tak- and Qatar the largest producer of lique- the oil reserve system for China. As ing the initiative to master our energy fied natural gas (LNG). China’s crude China depends increasingly heavily security,” said Han. oil imports from Saudi Arabia are on a on foreign countries’ energy, economic In the recent World’s Future En- steady rise in recent years. According to risk derived from energy is still the big- ergy Forum, Premier Wen particularly the statistics from China’s General Ad- gest risk for China’s economic security, stressed that China had begun to look ministration of Customs, Saudi Arabia experts have pointed out. At the pres- for various oil alternatives, such as wind exported 45.5 million tons of crude oil ent stage, the domestic crude oil sup- power, solar power and nuclear power, to China during the first 11 months of ply capacity had reached a bottleneck, which surely refers to a safe one. Premier 2011, or about 1 million barrels per day, while crude oil imports were increasing Wen also emphasized that in future ener- registering a year-on-year rise of 13%. by leaps and bounds, introduced Lin gy technologies would call for innovation Besides, Qatar is China’s second larg- Boqiang from the Energy Economic and partnership would be supposed to est LNG supplier, only next to Aus- Research Center of Xiamen University. be established for energy security, which tralia. Statistics from China’s General The IEA has predicted that China is meant that the energy exporting countries Administration of Customs show that likely to import 80% crude oil. As a re- across the world would understand that during last January to November, Qa- as energy providers they were supposed tar exported approximately 1.8 million to have the awareness and mechanisms tons of LNG to China, up 76% over for safeguarding energy security. This last year. During his visit, Premier Wen does not mean that today you can provide signed a cooperation contract with Sau- several ten thousand tons of energy, but di Arabia to set up oil refineries locally. tomorrow you’ll be exhausted all of a sud- This contract will benefit both sides as den, which will give rise to energy supply on the one hand Iran’s oil crisis provides shortage for developing countries, in par- an opportunity for Saudi Arabia to ticular for China where development is in increase oil production and oil exports, full swing.

59 PACIFIC

And we see Australian businesses increasingly traveling and developing re- New Version of lationships with those cities. The reason we want to do that is of course it will support China’s central and western Australia-China provinces to make their goals unto the five-year plan, and it would also provide Australian companies with accesses to new and under-serviced markets. We Economic Relationship will continue to work with China on similar initiatives in both directions to —An exclusive interview with H.E. Mrs. Frances ensure that this extremely prosperous egional T r ade & I nves t men complimentary economic relationship R J.Adamson, Australia Ambassador to China continues to flourish. Negotiations on FTA between By Fu Ligang China and Australia

: In 2005 China and Australia Q started negotiation on Free Trade Agreement (FTA). Up till now we have held 16 rounds of negotiation. What will be the direction of the following negotiation and what is the role of the Australian embassy in this process? : We will continue to negotiate and cover a wide range of sectors that includeA goods, services, and investment and legal frameworks. And that’s quite complex. Both sides have very large number of officials working on the details of this FTA. What we have now started to do is to prepare for the 17th round in Beijing. While our bilateral trade is very strong (it’s over $100 billion last year), we think an FTA will ensure against Qture protectionism, and the readers will be well aware of Australia-China 2.0 its own language for these sorts of the risks of rising protectionism around things, but what we call it is “Australia- the world at the moment. That is one of : China has become the largest China 2.0”, because we think that there the reasons why we are committed to Q trade partner and also the largest is a new version of China’s economic breaking down trade barriers and en- export market of Australia. So in your growth model and a new version of the suring that our economies can continue view, how to further develop bilateral Australia-China economic relationship. to grow together. economic and trade relationship on a That description was first used by our As with any part of the bilateral stable and beneficial basis? Foreign Minister and former Prime relationship, the embassy plays an Minister Kelvin Rudd in a speech that important role, not much in negotia- : China and Australia have al- he made in Guangzhou last May. tions, but in providing on the grounds ready established a very strong What we mean by that is not insights and advice during the negotia- andA mutual beneficial trade and invest- just a shift from export-orientation to tions and between decisions. What we ment relationship. We look forward to consumption and through that to the specifically do is we’ve got the role to working with and supporting China’s services sector, but we are very keen to build up the bilateral relationship be- urbanization and rising prosperity ensure that our Qture trade coopera- tween the Australian officials and the through trade in areas including envi- tion doesn’t just focus on the eastern sea counterparts in China because we can’t ronmental sustainability, architecture border of China, particularly Shanghai, reach a successQl negotiations unless and design, telecommunications and Guangzhou and Beijing, but goes also both sides Qlly understand each other’s financial services. Every country has into China’s second and third tier cities. situation and what is possible to negoti- 60 PACIFIC

Ambassador presents credentials Beijing in August of 2011 ate. And I think what I am trying to do serving here as Australia’s ambassador students exchanges... last year we’ve got as a new ambassador is to understand at such an interesting time in China’s 106,000 Chinese students in Australia. the domestic context here in China history and China’s engagement with We had almost half a million Chinese in which those negotiations are tak- the world. The things that impress visitors to Australia last year, and those ing place. And I am very confident the me the most are simple things like numbers are increasing substantially. Chinese embassy in Australia will also the friendliness of people, and what The message I get from the highest level be seeking to do the same thing. I call — their industriousness, their of your government is how much Chi- Width and Depth of Australia- hard work. Chinese people are famous nese people appreciate the relationship China Relationship around the world for being very good at with Australia and I reciprocate that business, grasping opportunities, work- very enthusiastically. So the most im- ing very hard and achieving very great pressive thing to me is that I would have : What is your impression about success. So of course that is striking to 3~4 years as an ambassador, the poten- Q China ? And what’s your ex- me. I continue to be surprised every day tial for us to deepen our engagement pectation about the future of the two by the changes I observe… there are and strengthen our relationship. We will countries? some wonder Q 1 things happening. be celebrating the 40th anniversary of : I’ve been deeply impressed, obvi- At a professional level, what really diplomatic relations this year. I am very ously. I suppose there is something impresses me is the width and depth keen and hope that we should look to thatA impresses me at a personal level. of Australia-China relationship, in the take our relationship to a new level dur- Of course it is a great privilege to be fields of art, music, sports, business, ing this period.

Perth year of the dragon coins launched

61 EUROPE

The European Central Bank is taking decisive action through making available to banks liquidity, which is contributing to ease banks funding problems. EU Seeks Strategic According to Van Rompuy, some governments in EU countries under pressure had to take drastic measures with China including budget cuts and economic re- Partnership forms. Three countries (Greece, Ireland and Portugal) have to ask for a provi- By Zhu zijun sional European-organized shelter from egional T r ade & I nves t men the market rates, in order to be able to

R finance their deficits and debts. Other countries has to be convinced to help their partners. The EU has built the tools to face the situation. The central surveillance and enforcement mechanisms are also strengthened for the public debts and he European Union is seeking France and the United Kingdom that deficits to prevent future trouble. closer cooperation with China their top ratings could be at risk, citing Political leaders are showing in the context of stagnant the weakening prospects for an overhaul real courage in all member states to world economy and its sover- in Europe. The downgrade was the lat- convince their parliaments and pub- eign debt crisis. est such move by a major global ratings lic opinions of what is at stake. Some T “The economies of the EU and agency. Standard & Poor’sand Fitch Rat- governments are forced to resign for China have become ever more closely ings each cut ratings for the eurozone last taking unpopular decision, but all the linked. This has confirmed the need for month, China Daily reported. new ones are committed to adopt and common analysis and joint actions by Though trapped in the eurozone implement reforms. the EU and China, not only in the short debt crisis, the EU “has been acting de- “In the current crisis, beyond term, but also in dealing with the fun- cisively”, said Barroso. The EU has taken the money involved, it is a common damental challenges we both face in the important decisions to tackle the ques- European destiny which is at stake. medium term,” said Jose Manuel Bar- tion of sovereign debt and strengthen That is why we European leaders, roso, European Commission President, economic governance in the eurozone, together with European Council Presi- to improve financial supervision and dent Herman Van Rompuy and China’s stabilise public finances, to implement central bank governor Zhou Xiaochuan, the necessary structural reforms and to at an opening ceremony for the “Currency enhance its competitiveness. for Europe” exhibition, which was held According to Barroso, the EU at the Beijing-based University of Inter- has constituted significant firewalls, national Business and Economics. to the combined tune of €500 billion “We need to work ever more closely (EFSM+ESFSF) which are being used together on a wide range of issues to to give financial assistance to some make change happen for the better and Member States. From July on, the perfor the well-being of our citizens and fu- manent crisis resolution mechanism, ture generations,” he added. the European Stability Mechanism European Union is now China’s (ESM) will be in force. Besides, the largest trading partner, with business EU has strongly reinforced the rules for worth more than €1 billion taking place fiscal discipline, the so called Stability each day. Statistics shows that the bilat- and Growth Pact. More recently, on eral trade volume has reached 560 billion January 30, there was agreement on euros. a fiscal compact in the form of a new The continuing eurozone debt Treaty which further fosters fiscal recti- crisis tude. Still, member States are imple- On Feb. 13 Moody’s Investor’s Ser- menting hard but necessary budgetary vice cut its ratings on six European na- adjustment and structural reform. The tions including Italy, Spain and Portugal. process of recapitalization of European Zhou Xiaochuan (left), Herman Van Rompuy (middle) It also warned another three - Austria, banks is going according to schedule. and Jose Manuel Barroso (right)

62 EUROPE when in difficulty, will do everything Stability Mechanism and the European this critical juncture to not only resist what is required to maintain the Euro Financial Stability Facility. responding to pressures to protect mar- and the financial stability of the Euro China will continue to invest in eu- kets, but to instead resolve to mutually zone,” said Van Rompuy. rozone sovereign debt, Zhou Xiaochuan open markets. Doing so will assist a China’s ready for resolution said. “China will not reduce the propor- more speedy resolution of the current tion of euro exposure in its reserves.” global economic difficulties and will China is lending a hand to EU for “We have appreciated the construc- also lead both sides to increase efficien- addressing the debt issue. China is seen tive Chinese reaction to the challenge we cies and innovation, ultimately at the as having the potential to bail out some face. Both in the bilateral relations and benefit of the consumer in both the EU troubled European governments, with in the G20, we highly value your confi- and China. US$3.2 trillion in foreign exchange re- dence,” said Van Rompuy, by adding that “As China aims to rebalance its serves. “We will consult each other and we will economy through increasing domestic “China’s willingness to support the cooperate in a concrete way to ensure the consumption, relying less on exports EU in dealing with its debt problems is financial stability of the Eurozone, which and opening its economy, this process sincere and resolute,” said Premier Wen is an important outcome of the EU- will bring the economies of the EU and Jiabao at the 14th China-EU summit in China Summit.” China closer. This will bring synergies, Beijing, which was also attended by Van “Europe and China share a wish but will also put China and the EU into Rompuy and Barroso. to live in a multi-polar world. A world greater competition together in some China supports the EU in strength- which is “united in diversity”, where we areas”, said Davide Cucino, President of ening fiscal discipline, and hopes the work together to find global solutions to the European Chamber. European side will create a positive common problems. The key word for the It is of requisite importance that and favourable environment to deepen EU-China relationship is cooperation short-term trade irritants are addressed China-EU financial cooperation, Wen not rivalry,” Van Rompuy said. and solved in a spirit of mutual trust and was quoted as saying by Xinhua News Closer relationship needed cooperation so as not to jeopardize the Agency. He said joint efforts made by strong potential of the future EU-China the international community in dealing The crisis in Europe has demon- economic relationship. with the European debt issue are very strated not only the mutual importance, “By maintaining an eye to the long important for the stability and recovery but also the interdependency inherent term and the potential and significant of the global economy and international in the EU-China economic relation- mutual benefits which it could entail, finance. China will consider getting ship. With massive business and in- it should be possible for both parties to more involved in solving Europe’s debt vestment opportunities still accessible, amicably solve and make progress on woes, especially through the European both parties need to work together at the current issues which affect the EU- China relationship in the knowledge that this will bring huge benefits in the future,” Davide added. Although the economies of the EU and China are different in many ways, there are also an increasing number of similarities. At the core of both the EU’s 2020 Strategy and China’s 12th Five- Year Plan is the drive for green and sustainable growth based on an innovative economy. Eight years after China released its first policy paper on relations with the EU, much has changed in the bilateral ties. “China is now a global force and so it is especially welcome,” said Barosso, strongly welcoming the Chinese leadership’s ambition to rebalance China’s growth model in the medium term, and in line with the G20 framework for growth. “Increased Chinese consumption, like increased economic discipline and convergence in Europe, will be important for delivering sustainable global growth, and I welcome the recognition of this in China’s 12th Five-Year Plan,” he said.

63 NORTH AMERICA

new, what’s the promising prospect and The Idea of where we can go with it together. The Together idea is together. -An exclusive interview with Edward Nixon : Are you bringing any project or and Devon Nixon Qforefront technologies to China for this trip? Edward Nixon: By Lesley Cui There are a lot of ideas that I want to introduce on this trip. I come with a formula for hydro metallurgical treatment of base metal egional T r ade & I nves t men ores. It cleans up bad extraction pro-

R cess. We use the technology in Chile. We will see if we can get the Chinese to help and invest in our effort in the United States. We can also cooperate here in China. Besides, I am bringing green nano steel technology which comes from Hungary. It produces extraordinarily strong nano steel. It requires much less iron content to get the same result. The technology needs not only to be spread in China, but worldwide. We also try to bring new solar energy technologies to Baoding. It’s four times efficient extracting energy from the Sun by using concentrating light through lens onto a cell that’s made of exotic materials. We have some projects under way. For example, a visa program in Mas- rom 21 to 28, 1972, U.S. presi- fields. What is your purpose of this sachusetts inviting Chinese to invest in dent Richard Nixon visited the visit to China? the United States, provide ten jobs and People’s Republic of China, Edward Nixon: First and foremost, get a life visa. It’s a golden opportunity. ending 25 years of separation this trip is to recognize the anniversary We will come back another time and between the two countries and mark- of the opening that changed the world. see what we can do. ing an important step in formally nor- F The visit 40 years ago shows how much Devon Nixon: Uncle Edward helped malizing the relations between the two change would take place if you get both make the first suggestions that led sides. President Nixon called the visit sides together and solve the problem. President Richard Nixon to create the “the week that changed the world.” I haven’t realized until recently how Environmental Protection Agency. On the 40th anniversary of the much strategy my brother uses in con- Since then, a lot of the world’s top event, the late president’s youngest fronting problems by getting the two inventors, people who are interested brother Edward Nixon came to China extremes together. We need more of in green technology and energy, have with a delegation of 8. On the first stop that internationally. The leaders of Chi- come to our family to bring these busi- of his China visit, he met with Zhang na and the leaders of the United States nesses global. Wei, Vice President of China Coun- need to be less accusatory and more re- Our family is involved in an ag- cil for the Promotion of International ceptive by listening. It’s very important riculture company called SoilTap, to Trade (CCPIT) in Beijing on February to listen before you open your mouth. improve soil condition and sustainably 20. After the meeting, Mr. Edward That philosophy is within our family. improve agriculture in a natural way. Nixon and Devon Nixon, the great Beyond that, every time I come We have been testing and proving the nephew of Richard Nixon, had an ex- to China, whether it’s for an official technology in the U.S. for over ten clusive interview with China’s Foreign thing, like a diplomatic effort, there is years. It’s very successful. Tests show it Trade reporter. always an interest in the commercial increases the yield up to 200% and at : Starting 1984, you have been side, the prospect for improving the the same time increases the nutrients Qin China for over 30 times, exchange in both directions. We need value on average by 50%. It is proven strengthening US-China relationship to have more exchange of entrepreneurs technology already in use in the U.S., and striking business deals in various from both countries, finding out what’s Panama and other countries. This is a 64 NORTH AMERICA product I have seen with my own eyes often have when doing busi- and know is real. ness in China? Do you have In the future, we have another car- any suggestions for them? bon negative business that turns trash, Edward Nixon: Red tape and anything with a carbon base, into is always a problem. U.S. electricity and fuels. We have a lot of companies doing business in very new technologies that can improve China need to find the right the livelihood in China. I know China’s person to take charge and di- next Five-Year Plan is very focused on rect them. agriculture and green technology. We Devon Nixon: China has always : With huge foreign exchange are able to help. been the manufacturer of the world. Qreserves in China and high un- : On this trip, what places are you And now with the rise of the middle employment rate in the States, both Qgoing to visit and who are you go- class, it will be the purchaser. China's Beijing and Washington are encour- ing to meet with? consumer market has a very bright aging Chinese companies to invest in future. the States. However, many Chinese Edward Nixon: After Beijing, we From all my friends here in China investing attempts were thwarted by will go to Hangzhou, Shanghai, Kuan- and from my experience in the past the U.S. on the ground of threatening shan, Wuxi, and Shenzhen. Aside three and a half years, people look at its national security. How do you see from the anniversary event, the major the obstacles to Chinese enterprises U.S. companies as having high-quality cooperation we want to develop is the trying to invest in the States? products. U.S. brand names bring a green nano steel. We will be meeting certain image of good quality. That is Edward Nixon: If there is a suspicion steel companies that can import the a benefit to U.S. companies bringing on the part of the United States, so new nano steel formula as I mentioned their products here. much to make an obstacle out of it, that before. As to the difficulties, it is common is very discouraging. We are getting Devon Nixon: For the agricultural for businessmen in China to take time around that. We have more and more side of the business, I am going to start with things and deal in roundabout reasons to open that door and find out my company in China very soon. Be- ways. While in the U.S., businessmen what it’s all about. I am optimistic that cause the technology and the products like to be direct and get things done things will get better. More exchange are so new, the way to test it is also fast. So if U.S. companies try to do will improve our relations and peace of new. I am looking forward to meeting business in China with a U.S. mindset, the world. with the right people so that we can there will be a conflict. You can’t come Chinese enterprises trying to in- market and sell the products in China, to China and ask things to be done vest in the States need to have someone to improve not only farmers’ lives but right now. You need to have a vision of who is in good standing with the U.S. also Chinese people’s lives. One of the a long term. You must be patient and government as their lead, as someone things I always look for in my ventures work hand in hand. I don’t expect my who can put things into operation, at are those that have a positive impact on business to happen overnight. I plan least someone with the enthusiasm to the people they touch. to be here for the foreseeable future. see something through to the end. But : What advantages and difficul- I think this is a difficulty that can be at the same time, they should keep the Qties do you see U.S. companies overcome. door open. If things do not work, shut it aside and go for another one. : How was your meeting with Vice QPresident Zhang of CCPIT? In what way can you work with CCPIT? Edward Nixon: I met with Vice President Zhang here this morning. There is a lot we can do in solar energy, mining, agriculture, cashmere, etc. I think it’s a golden opportunity here. If I have the means, I will be here again to visit your facilities and consider your options. President Zhang added that Mr. Edward Nixon and Devon Nixon will be welcome to CCPIT’s trade and investment promotion activities such as the Edward Nixon meets with Zhang Wei, Vice President of CCPIT Guizhou Investment and Trade Fair and Inner Mongolia Mining Conference.

65 LATIN AMERICA

Brazil: A Leadership Role in Pushing for a Multipolar International Monetary System? -Exploring the Possible Prescriptions to the complaint from the cases of Brazil

By Edwin Way, Li Xiaoxue egional T r ade & I nves t men R

quested. At present, the Doha Round faces a serious im- passe and one can question how the WTO can solve the exchange rate issue. The only reference to the question in the trading system is found in Article XV of the GATT that establishes that countries shall not frustrate the objectives of the trade agreement through exchange-rate measures, or the objectives of the exchange agreement through trade. This article, however, has never been tested by GATT or WTO panels. The same may be said of Brazil’s proposals for new WTO rules. There razil is set to propose an “exchange rate anti-dump- have occasionally been suggestions about addressing mis- ing” measure to the World Trade Organization that aligned exchange rates in the WTO but its existing laws are would allow countries to retaliate against trading vague on the subject and the likelihood of negotiating new partners that undertake competitive devaluations rules is close to nil. of their currencies. Brazil’s Geneva office is working on the Brazil’s contradictory complaint Bplan, which would mark an escalation of what Latin Amer- ica’s largest economy has dubbed the “currency war” – the One strange feature of Brazil’s complaint is that Brazil battle against what it sees as the use of loose monetary poli- does not need to wait for WTO approval to remedy the prob- cies by reserve-currency issuers such as the US to boost their lem of an overvalued currency. If Brazilian authorities are sin- exports. cerely concerned about their currency being overvalued, this Brazil has presented two submissions to the Working is a problem that can be resolved easily without turning to the Group on Trade, Debt and Finance of the WTO, in April WTO. The Japanese Central Bank, US Federal Reserve and and September 2011. In the first, a work program was pro- European Central Bank each allow foreign governments and posed including academic research on the relationship be- foreign companies to purchase yen, dollar, and euro denomi- tween exchange rates and international trade. In the second, nated government debt. If the Brazilians wanted to reduce further analysis of trade instruments available in the multi- the value of the real against any of these currencies they are lateral trading system allowing members to redress eventual free to intervene in currency markets. This is precisely what distortions caused by exchange-rate misalignments was re- smaller countries such as Switzerland and Israel have been

66 LATIN AMERICA doing since the onset of the 2008 crisis. US dollar. Mantega has suggested that the Brazilian real Even states that forbid foreign countries from buying should be promoted as one of the world’s five internationally their debt would be vulnerable to Brazilian currency inter- traded currencies. As Mantega pointed out on the eve of the vention. Brazil could always simply announce that it accepts G20 Ministerial in Paris in 2011, “We would like to transi- the foreign currency of other nations at a value substantially tion from a system based on fluctuating exchange rates to a higher than the official exchange rate (say, 25%). This would multipolar currency system, where international transactions automatically create international arbitrage opportunities, and in other currencies would be recognized.” the ensuing deluge of foreign bills and coins flooding into As Mantega himself has noted, it doesn’t make any Brazilian coffers would bring down the value of Brazil’s cur- sense for the US dollar to continue playing a hegemonic role rency. There are of course downside risks to the strategic ac- given that the US is merely a secondary power in global ex- quisition of foreign currency and assets (particularly the gov- porting. As long ago as 2003, Germany surpassed the United ernment bonds of states with shaky public finances like the States to become the world’s number one exporter. In 2010, United States). However, as economists have long observed, China surpassed Germany, so now the US trails far behind as there are no “free” lunches. Sometimes assets lose value. This a distant number three. It is very strange that the US should is a risk that is unavoidable for private investors and sovereign play such a dominant role in the global monetary system governments alike. given its weakness as an international trader. Brazil is in an If the Brazilian government is indeed unhappy with the excellent position to help accelerate the transition to a multi- consequences of an overvalued currency, it would be easy for polar monetary system by building up its reserves of foreign Brazil to correct this problem. If currency intervention is an exchange, particularly of the Chinese renminbi, the Euro as acceptable policy option for Switzerland, Israel, Singapore, well as other significant currencies such as the Japanese yen, South Korea and others, it must be the case that Brazil as a and Korean won. Chinese, European, Japanese and Korean sovereign state also enjoys the right to determine the value of currencies would probably be preferable given the underly- its own currency. Moreover, Brazil is a much larger and much ing economic strength of these powerful export-oriented poorer country than Switzerland or Israel and would certainly economies. It would be wise for Brazil to avoid Brtish and occupy the moral high ground if it chose to follow the Swiss American government debt given the deep structural weak- or Israeli strategy. nesses of the US and UK economies. In 2011, Dagong credit It may be the case that the Brazilians are hesitating rating agency downgraded both British and American debt to follow the lead of Switzerland and others because they and they maintain a negative outlook moving forward. As- are afraid that if they did so, they would upset their major sets denominated in yen, won and renminbi and a German- trading partners. Brazilian officials may be concerned that backed euro are very attractive investment options and a shift Brazil would risk undermining its recent diplomatic gains away from dollar reserves on the part of a large trader such and reduce its international stature. On as Brazil would help bring the global the other hand, many if not most of monetary and trading systems into the governments of the world regularly proper balance. participate in international currency In recent years, Brazil has dem- markets. Brazil’s unwillingness to take onstrated leadership in promoting an part in this globally accepted practice open, multipolar and mutually ben- makes its complaints about having an eficial international economic order. overvalued currency ring hollow. At any Brazil’s strong commitment to open- rate, the Brazilians have not been afraid ness is reflected in its encouragement to lodge complaints against the US and to foreign investment. While some Europe for their agricultural subsidies or countries have restricted strategic raise antidumping duties on a range of sectors from foreign investors, includ- Chinese exports. It is not obvious that imposing antidumping Chinese companies, Brazil has been very welcoming ing duties leads to fewer international frictions than simply to foreign investment. In September 2011, for example, purchasing foreign currency and government debt. In addi- Taoyuan Iron and Steel and Baosteel together with Citic tion, expanding Brazil’s foreign exchange reserves through purchased a 15% stake in Companhia Brasileira de Meta- strategic purchases carries the upside of advancing another lurgia e Mineração (CBMM) which is a major producer important Brazilian goal, as the next section will discuss. of Niobium. Brazil in fact accounts for 98% of the global Brazil: A Leadership role in pushing for a production of Niobium. Its openness to foreign participa- Multipolar International Monetary System? tion in the mining of Niobium (which is used in nuclear and high tech industries) is a significant demonstration of Brazil should consider participating more actively in in- Brazil’s commitment to an open international system. ternational currency markets in part because this would help move the world towards a more internationalized monetary (Author: Edwin Way, doctoral student in political system. Brazil’s finance minister, Guido Mantega, has in fact science at Indiana University; Li Xiaoxue, doctoral stu- been a leader in pushing for a more balanced and multipolar dent in China Institute for WTO Studies, University of international monetary system that is less dominated by the International Business and Economics)

67 AFRICA

“Dragon” Brings Business Opportunity for China and South Africa egional T r ade & I nves t men

R By Guo Yan

On January 31, the first direct flight was opened between China and South Africa. China’s Foreign Trade magazine had an exclusive interview with Mr. Miller Matola, CEO of Brand South Africa. During the interview, he expressed the importance and significance of the direct flight from Beijing to Johannesburg. Matola also denied they misunderstood the intention that China assisted Africa. He also looked into the promising future between China and South Africa under the frame of BRICS (Brazil, Russia, India, China, and South Africa) in terms of the economy and trade.

The direct flight was opened frastructure construction, transportation, real estate, health care and education. Jo- At 12:20 pm by South Africa time hannesburg is South Africa’s largest city on Tuesday January 31, 2012, a “dragon” and its economic engine with many large- jumped into the twilight sky of Johannes- scale companies and banks headquartered burg and fled to the east. After 15 hours, there. As Beijing is the capital of China, at 8:50 pm by China time on February 1, the direct f light between Beijing and 2012, the flight SA288 landed at Beijing Johannesburg could better promote the Capital Airport with all sectors of gov- commercial exchange between China and ernment, businesspeople and internationd South Africa, create more jobs and also media. When interviewing Mr. Miller could attract more investment. Matola, he vividly described how mean- According to Miller, before the ingful the flight is to South Africa and direct f lights, the businessmen from China. He also compared the different the two countries had to transfer from concepts of dragons as they are evil in the the third cities such as Hong Kong and Mr. Miller Matola, CEO of Brand west but in China the dragon is the sym- Dubai and would arrive at the destina- South Africa bol of wealth, prosperity, luck and power. tion after at least 20 hours in transit. The dragon also represents success, per- After the opening of the direct flight, it fection, bright and an indomitable spirit. only takes about 15 hours. South Africa He expressed that this special time of Airways chose the Airbus A340-600 the start of the Year of the Dragon was plane for this route. When arriving at Jo- selected by South Africa Airways after hannesburg, Chinese businessmen could elaborate consideration. fly to more than 10 cities in southern Miller said that after August 2011, Africa through South Africa Airways, when China and South Africa established even could transfer there and arrive at a comprehensive and strategic partner- two major cities in South America- ship, bilateral ties reached a series of Buenos Aires of Argentina and Sao cooperative agreements in the areas of in- Paulo of Brazil. 68 AFRICA

China helps Africa based on cooperation and not to rob the natural resources. Western media always doubt why China assists African nations. Is China a robber of African resources or just really committed to help Africa out of poverty? When asked this question, Mr. Miller shook his head and expressed his view. In the long term, there were many reports from Western media that China robbed the natural resources of Africa and many Chinese workers poured into Africa and took the jobs from African workers. But these reports are irrespon- sible and they don’t know the truth. In the past, the original colonial countries, mainly from Europe, robbed the wealth and separated the African continent in order to develop it for themselves, and wool, granite, gold, copper, aluminum destination. Till the end of 2010, the Africa was poorer. China is different and automotive spare parts. While the GDP of South Africa increased by 2.8% from them. Over several hundreds of main commodities that to reach $363 billion, years, China has developed business China exports to South Af- and in 2012, it will rise ties with Africa. From the foundation rica include: textiles, kidney South Africa is the by 3.4 %. of the People’s Republic of China, the beans, peanuts, cottonseed, The increasingly relationship between China and Africa electronic products, fixtures, gateway to other strong relationship with has strengthened gradually. China’s aid solid paraffin and TVs. African countries, China accelerates the to Africa is based on cooperation not Many Chinese enterprises in for Chinese growth of South Africa exploitation. South Africa have achieved in world trade and the Nowadays, China has become the great success, such as ICBC, businessmen. development of South first trade partner with South Africa China Steel, FAW, Huawei, The direct flight Africa in Africa. Miller beyond U.S, Japan, Germany and the Hisense and other Chinese- will bring Chinese also introduced that UK. South Africa is also China’s largest funded enterprises. Till businessmen more besides the direct flight trade partner in Africa. According to November of 2011, the total between Beijing and recent data released by China Customs investment that Chinese opportunities in Johannesburg, South in December of 2011, the bilateral trade state-owned enterprises and Johannesburg, Africa Airways is the amount was $45 billion, an increase of large-scale companies have South Africa line between Beijing 77% compared with the same period of invested in South Africa is and the African and other African main 2010. Till the end of 2011, China im- $7 billion. markets such as Angola, ports of South African good increased New Era of BRICS continent at large. Zambia, and Zimba- by 116% with the amount of $32.07 bwe. Taking advantage billion. Growth of Chinese export to Last year, South Africa became a of geography, the route between Beijing South Africa was up by 23.7% with the member of BRICS. Globally speaking, and South Africa is one of the strategies amount of $13.36 billion. The main BRICS accounts for 42% of the popu- that South Africa employ as it is keen commodities of South Africa that are lation and 18% of the GDP. Miller to enter the Asian and South American exported to China include: iron ore, thought that while many countries are market. In addition to Russia, South steel, manganese, chromium, tobacco, in economic crisis, Brazil, Russia, India Africa has achieved the direct flight and China have achieved the miracle of with the other BRIC countries. South economic development. Furthermore, Africa is the gateway to other African they laid a solid foundation for the countries for Chinese businessmen. The future in the long term with stable de- direct flight will bring Chinese busi- velopment. With the entrance of South nessmen more opportunities in Johan- Africa, BRICS play a more and more nesburg, South Africa and the African important role in the world, and make continent at large. At the end of the the world recognize the BRICS. Miller interview, Miller said he was optimistic said that many countries have invested about the future of the business oppor- in Africa as an emerging investment tunities of China.

69 LOCAL

outh China’s Guangxi Autonomous clearance convenience, border market rectifica- Region is making positive progress in tion and emergency handling. promoting the construction of the Si- With the completion of the China - no-Vietnamese International Tourism ASEAN Free Trade Area, Guangxi has been Zone, with consensus reached after rounds of playing a role as a bridgehead in China-ASE- negotiationsS with Vietnam concerning rela- AN cooperation by beefing up its tourism and tive agreements, according to an official from transportation ties with ASEAN, especially Guangxi. Vietnam. Presently, Guangxi’s provincial Chen Jianjun, director of the tourism capital Nanning and the tourism city of Gui- administration in Guangxi, said in order to lin have opened airline routes to main cities of enhance the tourism cooperation between ASEAN. Railway has also been strengthened egional T r ade & I nves t men China and Vietnam, the Sino-Vietnamese with the international railway from Nanning

R International Tourism Zone is to be built at to Hanoi in operation, according to China the borders of the two countries, based on News Agency. the Daxin cross-border waterfall and Frien- Additionally, highway routes for tourism ship Pass (Youyiguan), a famous scenic spot from Nanning to several cities like Hanoi, in Guangxi. In years to come, the zone will Halong and Haiphong in Vietnam have been become a tourist resort known for its cross- opened. Sea transportation has also been border waterfall, experience of Chinese and boosted with a tourism route from Beihai, Vietnamese folk custom cultures and land- Guangxi to Halong now opened and the scape with good environment and perfect sealane between Fangchenggang and Halong amenities. The zone is also expected to lead has resumed operations. China’s border tourism for further opening In recent years, tourists visiting Guangxi up as a demonstrative zone for international from ASEAN members like Singapore, Ma- tourism cooperation, where travelers can en- laysia, Vietnam, the Philippines have been joy visa-free tourism. increasing at an annual growth rate of over Since 2009, the border tourism coopera- 15 percent. In 2011, Guangxi received about tion between the two sides has been strength- 3.03 million inbound tourists, among whom, ened, with frequent official high-level talks, ASEAN members totaled to 840,900, up self-driving tour along the border and the 31.6 percent year on year and accounting for construction of the tourism zone, said Chen. 49.5 percent of the total foreign tourists. At present, Guangxi and Vietnam have estab- Guangxi will strengthen its position as lished the mechanism of regularly scheduled the leading tourist destination in ASEAN, sessions, and enhanced cooperation in customs Chen said. Sino-Vietnamese By Zhu Zijun By Zhu International Zone Tourism Guangxi Promotes Friendship Pass（Youyiguan）

70 LOCAL

centered on the three provincial capital cities Wuhan, Changsha and Nanchang is combined with a number of cities along the Yangtze River and around Dongting “Central China Delta” Lake and Poyang Lake. This region will become a city cluster with economic integration. Through integrated planning, to be Built it will be a new growth pole in China’s economy in the future. The three capital cities form a By Zhu Zijun natural triangle where more than 90 million people live, which is nearly 8 percent of China’s population. The zone had a total economic output of RMB 2.5 trillion (US$397 billion) and maintained 7.3 percent of the country’s gross domestic product in 2010, according to China Daily. More than 129 of the top 500 global companies have either investments or offices in the region. The coordinated development of the city group along the middle reaches of the Yangtze River is beneficial for expanding further domestic consumption, leading the rise of the central region of China, said Zhou Ji, president of the Chinese Academy of Engineer- ing, by adding that “With the favorable geographical and human conditions, the city group is ready to take off.” Only by integrating the three provinces’ advantages can the status of the central region be improved, said Qin Zunwen, vice president of Hubei Academy of Social Sciences. The rise of the city group along the middle reaches of the Yangtze River will drive the economic development of the Yangtze River and China at large. hina’s central provinces enhance cooperation in labor division, Leaders at the conference suggest Jiangxi, Hunan and Hubei agriculture, water conservancy, environ- in 10 to 20 years, efforts should been are making joint efforts mental protection, tourism, business, made in the integration of infrastruc- to build a new urban hub culture, education, technology, etc. ture, industrial layout, regional market, in Central China along the middle In recent years, the Wuhan City cultural tourism and ecological conser- reachesC of the Yangtze River. Circle in Hubei, Changsha-Zhuzhou- vation in the new hub. The strategic cooperation frame- Xiangtan City Circle in Hunan and The hub is expected to become a work agreement to build the cities of Poyang Lake Economic Zone in Ji- fourth significant urban hub in China, the middle reaches of the Yangtze angxi have all become important core after the Bohai-Rim Economic Circle River was released at the conference engines in the rise of Central China. (Beijing-Tianjin-Tangshan); Yang- held by the three provinces on Feb. 10 This is fundamental to the economic tze River Delta (Shanghai-Nanjing- in Wuhan, signifying the official start development of the three provinces. Hangzhou), and Pearl River Delta of establishing the new urban hub in With China’s regional economy (Guangzhou-Shenzhen-Zhuhai). Central China, China News Agency competing with each other and with the The capital cities are focal points reported. growing influence of the city circles, of- in the context of the rise of Central According to the agreement, the ficials from the three provinces have real- China, and the “Central China Delta” three provinces are to strengthen the ized that it is necessary to plan for the re- centered on the three cities is ready to interaction between regional develop- gional development of the middle reaches appear, said Li Hongzhong, provincial ment strategy, plan and policies, and of the Yangtze River. The new hub, Party secretary of Hubei.

Jaclyn Tsai: Pursuing a High-Quality Law Practice Contributing to the Development of the Greater

China Region By Richard Zhu

72 ot long ago, the Taiwan-based law where she joined in the strategy making for IBM firm Lee, Tsai & Partners became the in the Greater China covering the departments of winner of the 2011 Global Award of marketing, finance and corporate legal. Her years the “Law Firm of the Year in Taiwan” in IBM helped her understand how a transna- (http://leetsai.drtech.tw/fyi/ezcatfiles/leetsai/img/ tional corporation operated in businesses. With the Nimg/752/737693732.pdf). In 2010, the firm was transformation of IBM to a software and services selected as the best law firm in Taiwan of the year supplier, Jaclyn learned and experienced much a lot by Chambers and Partners, and was awarded the during the process. The knowledge she acquired in “Chambers Asia Award for Excellence 2010”. In the the period was beneficial for her later work in the same year, the firm was chosen as the winner of the law firm. 2010 Taiwanese-Labor & Employment Law Firm Later Jaclyn became the General Counsel of of the Year by the Global Law Experts Award. IBM Greater China and shouldered more respon- These awards and honors can not be achieved sibilities. However, the seven busy years in IBM without one person—one of the founders of the sometimes made her feel a little sorry for her family. firm: Jaclyn Tsai. It is she that has led the firm to Work took much of her time and she found it dif- become the leader in Taiwan. ficult to balance work and life. Once the General Counsel of IBM Greater Then how to achieve work-life balance? A China, Jaclyn Tsai now is pursuing her legal cause thought came through her mind: to open a law firm with reason and compassion. of herself may work. The thought was encouraged The origin of the firm by his husband, who later decided to leave his law firm and start business with his wife. In 1977, Jaclyn Tsai received her LLB from The foundation of the firm National Taiwan University Law School. Her first work was a judge in Yilan District Court, while in Dr. Chung-Teh Lee and Jaclyn Tsai, after the meantime his university classmate Dr. Chung- working as judges and practicing for extensive pe- Teh Lee worked in another district court who later riods, both had a vision of creating a law firm that became her life companion. Taking the job as a is not only grounded on professionalism but also judge at 26 years old left a deep imprint on Jaclyn’s compassion. As such, the first office of the Lee career life. Tsai Group was founded in Taipei in 1998 with the Jaclyn always kept a straight face as she be- professional motto “reason” and “compassion” and a lieved it was the last defensive line of public interest mission statement “to provide the highest quality of for a judge to uphold justice by praising virtue and professional service to clients through comprehen- punishing vice. The line looks different for differ- sive knowledge of their industries while dedicating ent judges. But for Jaclyn, she always had her heart itself not only to the clients but also to the commu- in her mouth for she was afraid of doing anything nity.” against her conscience after she was sworn in as a At first, Dr. Chung-Teh Lee judge. and Jaclyn Tsai had a new posi- “I should take every case very seriously. Some tion of the law firm Lee, Tsai & parties may go to court for once in their life time, Partners by making it engaged and they should be given fairness and justice,” Jaclyn exclusively in technology law said when recalling her first work. since there was no similar She once judged a case related to a senior of- firm in Taiwan then. Thus, ficial. Some colleagues warned her against the of- the firm became the first ficial’s power and influence, but she was not at all one of its kind in Tai- afraid. She had nothing to be afraid of except law. wan. They hoped to On one side, Jaclyn insisted on reason; on the create value for cli- other side, she was kind-hearted. Gracious and mer- ents through the ciful as she, she always lent hand to those in juvenile delinquency. To the year of 1991, she had been a Professional motto: judge in several cities like Taipei, Shilin, Taoyuan, “Reason” and Zhanghua. “Compassion” In 1991, she became acquainted with IBM which was recruiting an experienced legal professional at that time. No surprisingly, the job fell on Jaclyn in the end thanks to her nine years’ experience as a judge. At first, she entered the strategy team of IBM combination of ever-changing technology and the legal lag. Jaclyn Tsai liked to express her work as an integration of reason and compassion. Reason means to adhere to professionalism and provide all-round legal service to clients in different industries via expertise, while compassion refers to being actively engaged in community service and repay the society. The law firm now offers full legal services ranging from merger & acquisition, transnational investment, technology transfer, capital market and business consulting to infrastructure Global Women Development leaders visit Lee, Tsai & Partners projects, green energy, intellectual property, culture and entertainment was the first to introduce ERP systems Another deep impression on Ja- law, employment, competition and en- in Taiwan. clyn is the change of juridical area in the vironmental protection law. In the first With uncompromising persistence mainland. In the past years, the justice year of its business, the firm employed to the professional motto, within two level in the mainland has been raised about 20 lawyers and made a profit. years of foundation, the Taipei office significantly so that Jaclyn often refers In terms of professional field, Ja- swiftly soared from a firm with slightly to the judicatory cases in the mainland clyn Tsai and Dr. Chung-Teh Lee had more than 10 employees to one of the when giving a speech related to intel- their respective emphasis. Jaclyn had an top 10 firms in Taiwan. The Lee Tsai lectual property protection. In addition, acumen in technology and intellectual Group, including the law firm and the the present law in the mainland is in property rights. The past time in IBM intellectual property and investment line with international practice with its laid a solid foundation for Jaclyn in consulting companies, continued to rather complete articles of law, though technology law. As such, she became a grow in the years after. the shortage is that the laws concerning well-known lawyer in the technology Concerns of the Greater China investment changes so fast that increases law field in terms of technology licens- region the risk of investment. ing, high-tech patent, litigation, M&A. Due to her years of acting as a While, Dr. Chung-Teh Lee was a fa- Through her extensive involve- judge, she has developed a keen insight mous lawyer in the field of public works ment in structuring international trans- and ability to foresee the legislative and infrastructure in Taiwan. actions in the Greater China region, Ja- trends in the laws of the mainland and The foundation of Lee, Tsai & clyn Tsai closely monitors the economic Taiwan. Partners brought freshness to the law and commercial developments in the “Our perspective is to quickly industry. It broke some common prac- Greater China region. understand the changes in the laws and tice in the industry with its system After years of reform and opening provide professional consultation to the completely different from the tradi- up, the economy, science and technol- clients,” said Jaclyn. tional ones. It is known to all that the ogy has been developing fast in the With the economy development management of lawyers remains a per- mainland and China became a huge and completion of laws and regulations sistent problem with loose partnerships and dynamic economic entity. As Lee, in the mainland, Lee, Tsai & Partners between the lawyers and the firms they Tsai & Partners mainly served for those gradually set its goal as “ a Greater were employed in. clients from the Greater China area, Ja- China local firm”. Devoting itself to the However, Lee, Tsai & Partners clyn believes that the firm enjoys grow- study of the mainland laws and adopt- broke the rule and rationalized the ing potential. ing localized measures is the embodi- management approach. Every lawyer, Jaclyn once worked in Beijing ment of the firm’s competitiveness. as an employee in the firm, should ac- for two years during her time at IBM. As early as 2000, Jaclyn decided to cept the work appointed by the firm. There, she had a direct understanding set up a point in the mainland. In July Besides, the firm invested heavily into of the economic development in the 2001, the firm opened its second of- the work environment and adhered to mainland. fice in Shanghai to assist multinational scientific management. Moreover, the “In 1996, there had been restric- companies and Taiwanese companies in firm attached much importance to the tions for foreign direct investment in their inbound investments into China. informationization construction from the mainland, while great changed Continuing its steadfast commit- the very beginning. Within three years, have happened in recent years, with the ment to its clients and in response to the firm became the one with the most biggest change in policy liberalization, their pressing need for legal expertise advanced facilities in Taiwan. Thanks and foreign investment covers extensive on the increasingly close economic to Jaclyn’s experience in IBM, the firm fields,” said Jaclyn. relationship between the mainland

74 and Taiwan, the group established the sole proprietorship. However, after the cross-straits matters and in advising Beijing office in July 2010. The Beijing signing of the ECFA, the mainland multinational corporations in their en- office is aiming at the goal of assisting investment can enter into Taiwan and, tries into the Greater China market. It multinational companies in developing hence, there will be economic interac- has the ability to handle complex cases their business in the more integrated tions between the two sides. But Jaclyn and provide the clients with innovative economy of the Greater China region warns of the potential risk. She said, the solutions in the Greater China area that and assisting local PRC companies in cross-strait industries, rather than com- not only addresses their legal concerns their outbound investments with a spe- petitors, should be cooperators as the but also their business demands. cific focus on investments into Taiwan. two sides enjoy broad-based cooperation It provides inbound and outbound The Lee Tsai Group’s seamless opera- for a win-win situation and a great era. transactions legal advice, including joint tion between offices allows the clients Given her unique perspective, Ja- venture, strategic alliance, distribution, full access to its entire professional team, clyn’s advice has become coveted among licensing, real estate, employment, and regardless of location. clients. The teams of professionals in M&A matters in the region. It also In the past decade, the Shanghai Shanghai, Beijing and Taiwan she leads advises clients on how to structure dis- office has supported numerous enter- are continuing to expand their business pute resolution clauses in cross-border prises in establishing and advancing with dedication and diligence. Lee, Tsai transactions and on enforcing arbitral their businesses in Mainland awards. China. With the addition of The practice of Lee, Tsai Beijing office, the firm is able to & Partner is rooted in “compas- provide a total solution for com- sion.” The true meaning of laws panies investing in the Greater lies within implementing the China region in terms of full maintenance of social order and legal services. The free exchange the sustainability of social sys- of experience, local industry tem. Since Lee, Tsai & Partners knowledge and resources among was founded, it has understood the three offices help not only that the robust legal system and to provide its clients always the its proper operation are the criti- quality and efficient services but cal key to the social stability. also to provide such services in It has been enthusiastically terms of geographical width. participating, in public interest After more than 10 activities, including assisting, as years, the team contin- Dr. Chung-Teh Lee and Jaclyn Tsai well as funding, the establish- ues to strive to meet Lee, Tsai & Partner ment and expansion of public its mission statement has always been & Partner has always been interest foundations, voluntarily act- in every aspect of known for its legal ex- known for its legal expertise ing as legal counsels in public interest pertise and providing work. It has its efforts excellent legal services and providing excellent legal groups, participating in legal-aid cases, recognized from time to its clients. services to its clients. The firm’s and encouraging its associates to take to time by the interna- outstanding performance is parts in various types of charity events tional business and legal widely acknowledged within the and educational and professional activi- communities, including the legal profession. ties. It has endeavored to support mi- titles aforementioned in the be- Reason and compassion: key to nority groups, to contribute to society, ginning of the article. success to realize its social responsibility and to The signing of the ECFA (Eco- fulfill its commitment of actively serv- nomic Cooperation Framework Agree- The professionalism of Lee, Tsai & ing and contributing to the society. ment) is a milestone in the cross-strait Partner stems from “reason.” Its quali- In June 2010, Jaclyn Tsai was trade between mainland China and fied lawyers and technicians possess invited by the Council for Cultural Af- Taiwan. Under the ECFA, each side both legal savvy and technical know- fairs, Executive Yuan, to be the honor- committed to providing the other with how to keep up with the rapid pace able consultant of cultural innovation economic incentives exceeding those and legal developments of the world industry project for the year of 2010. offered to other countries and thereby today. The firm has positioned itself as a She is also appointed by the Premier bringing the economic relations be- Greater China Local Law Firm and has of Taiwan as one of the members of tween the two straits closer than ever. equipped itself with the ability to adapt the Committee for the Policy-Making What is the meaning of the to the rapid changes in the Greater Chi- for the Small & Medium Enterprises. ECFA? Jaclyn pointed out that the na area that have resulted from China’s Since 2010, she has been the pro bono agreement changed the one-way in- economic liberalization by leveraging legal counsel of the CSA (Community vestment in the past. Previously, it was its alliances and networks in Shanghai, Supported Agriculture) Taiwan and the always the case that Taiwan investment Beijing and Taipei. Association of Taiwan Organic Agri- entered the mainland in the form of It has accumulated experience in culture Promotion.

75 China Suppliers List 2012 INFORMATION City, Zhejiang Pro, China, 322000 Pro, China, City, Zhejiang Add: vivid and products! for your images bright create will and etc, stationeries, products, daily-use food, cosmetics, medicine, hardware, ucts, prod electronic in used widely are ucts defects. no visual with ,and impact-resistant static-resistant, Scratch-resistant, more boxes pack aging clear its makes GANGHUA Germany, from machine printing set off UV of XL-75-6 line Heidelberg China, production box advanced folding most clear the with Equipped future! brilliant and bright Ganghua’s of confident are We train. by Ningbo and Hangzhou, hours Shanghai, three from away or two taxi, by minutes 15 just with City, Trade International China. in products packaging for clear enterprise most competitive the and be to is powerful goal Our customer loyalty. precious us bring delivery fast and service, good products, quality High- US. the and European in food and of toys tests pass can products Our WAL-MART.of audit the passed has Ganghua management, advanced and technique With Japan. and America, Europe, North to exported are mainly products PP Our and gifts. promotional stationeries PP PP Placemats, packaging, clear PP/PVC/PET in specializes factory Products Plastic Profile:Company factory Products Plastic Ganghua Yiwu Name: Company 76 Ganghua clear packaging prod packaging clear Ganghua Yiwu near very is factory Our 1559th, XiCheng Road, YiWu Road, XiCheng 1559th,

Market Yiwu Ganghua Ganghua Yiwu - - - - cooperation and bright progress to progress bright and cooperation mutual-benefit for discussion have business to factory and office our visit to welcomed friends warmly All are customers and delivery. punctual service and excellent prices, also but competitive products quality good only not for customers our from reputation good and satisfaction a enjoyed have also we and ef customer, our high to ficiency with manners our offer We professional market. international the towards directly window important opening most the is Ltd Co., trial Asia. Indus Newest Shenzhen Southeast Meanwhile, and East Middle America, South Europe, from coutries factories. porcelain all Guangxi of list the of front very the on out come already have Now we pieces. lion mil hundred one than more of output annual with manufacturer and porter ex large-scale a become develop has it and ment, operation active 15 years After 1996. in China Guangxi in Ltd Co., by Industrial Newest found Shenzhen was which export, of supporting right self with enterprise tory manufac joint-stock large a is Factory Porcelain Baian Guangxi porcelain. daily exporting and manufacturing in specializing is Ltd Co., Industrial est Profile: Company Ltd. Co., Industrial Newest Shenzhen Name: Company Fax: Tel: ticated supply chain solutions relate relate solutions chain supply ticated sophis provides Company The sories. acces & products IT and appliances household of supplier one-stop-shop global professional the as recognized company, Shenzhen-headquartered Profile: Company Ltd. Co., Technology teco Super Shenzhen Name: Company Fax: Tel: China Shenzhen, Futian, District Add: gether. Our products are selling well in in well selling are products Our 86-579-85239131 86-755-25693999 86-579-85239251 86-755-25693000 Rm.90, Block A, 9th Rd, Tairan, Tairan, Rd, 9th A, Block Rm.90, Superteco is the the is Superteco Shenzhen New Shenzhen ------4002 Shennan Road East, Luohu, Luohu, East, Road Shennan 4002 Add: customers. our for done always we’d what perfor mance permanent the and are efficiency Security systems. management risk and policies corporate into our ded embed are considerations tainability performance, Sus sustainability.its andgovernance for accolades ous numer won has Superteco years, the Over practices. governance corporate good and integrity with business our conducts it needs, specific customers’ meet to standards operational highest customers. to our present to always like we’d what are product wonderful service, perfect price, Best distribution. and sourcing development, design, to Fax: Tel: China Guangdong, Yangchun, Road, Nanxin No.2, ing, Add: for future. us abrighter with business discuss and company our visit to come wel are clients Asia new and Old Markets. Southeastern and East Middle the America, Europe, South States, United to the sale good are etc. goods Our Scissors, sets, Manicure cutlery, & Flatware tools, Gardening enware, Kitch Tools, Barbecue Firecrackers, and Fireworks handle We rights. port ex and import commodity current a with provided be to China of Republic the by People’s the of Commerce entitled of Ministry been has that prise convenient. very is traffic the Guangzhou, from directly city our reaches speedway Airport, coastal the from far International Guangzhou kilometers 240 are Province, there Guangdong of City ang Yangji Center, Knife China and city tour coastal beautiful the in located is Guangdong of Ltd Co., Trading Star Profile: Company Trading Ltd. Co., Star Silver Yangchun Name: Company Fax: Tel: Shenzhen Superteco is committed to the the to committed is Superteco Our company is a private enter private a is company Our 86-662-7721321 86-755-82388525 86-662-7729366 86-755-82388070 Room 901-906, Dengbao Build Dengbao 901-906, Room Honglong Century Plaza, No. No. Plaza, Century Honglong Yangchun Silver Silver Yangchun ------SUPPLIERS

ability and consign in time. By now, constantly effort, active creativity, ab- Company Name: Xiamen Dohope we have occupied some part of domes- sorbing all cycles of technicans and ap- Co.,Ltd. tic and foreign markets. Because of our plying for high-techs, which develops good quality and service, more than us to a certain extent, grade, attained Company Profile: Xiamen Dohope twenty famous finery firms have used better economical benefit. Co.,Ltd., is an experienced manufac- our product for a long time. We have Add: Chaozhou Avenue North, Chao- turer and exporter in Xiamen. Our fa- built good reputation in the clothes zhou, Guangdong, China cotry located in Dehua, the sales branch rack industry. Tel: 86-768-2805768 in xiamen. Our products are focus on Capturing the fashion of inter- Fax: 86-768-2800880 garden and houseware gifts like ceramic national market and basing on the flower pot, ceramic decoration, Ceramic advanced equipment, we try to exploit daily use both hand paint and decal new product and perfect our service. Company Name: Blue Ocean Plas- method, polyresin seasonal gifts and Our firm always insists that we should tics Industry Co., Ltd. souvenir items, Organza and PVC box efficiently produce and strictly control & basket etc., We manage to offer high the qualify management. All clients Company Profile: Founded in 2003, quality and attractive products at rea- are warmly welcome to our company. Blue Ocean Plastics Industry supplies sonable prices for every client. We have Your requirement will be the direc- all kinds of packaging material needs, abundant experience on crafts for many tion and biggest impetus for our firm’s including double-sided tape, masking years. We can meet your every taste and development. We hope to have a bight tape, aluminum foil tape, PVC tape, requirements. At Dohope, you will get cooperation perspective with you. filament tape, fiberglass mesh tape, through ceramic world and gifts tiara Add: XiaMao Industrial District, Xia- BOPP tape, cloth tape, kraft paper here, Do Hope to have chance to work Mao Town,SiHui Shi, GuangDong tape. Plastic bag, plastic cover sheet together with clients all over the world. 526200 and stretch film etc. Whether you need Add: 22B, ZhongXin HuiYang Build- Tel: 86-758-3516888 are laminating, printing, carpeting or ing, No. 55 HuBin North Road, Xia- Fax: 86-758-3516666 packaging, we can offer what you need. men China Located in Jiangmen city, one Tel: 86-592-2116550 of the biggest plastics industry bases Fax: 86-592-5213910 Company Name: Chaozhou Daxin of China, we are 95 and 53 nautical Arts & Crafts Co.,Ltd. miles away from Hong Kong and Ma- cao, respectively. It only takes about Company Name: SiHui Shi FengHe Company Profile: Chaozhou Daxin two hours from Baiyun Air Port of Hanger Co., Ltd. Arts & Crafts Co., Ltd is with 20 Guangzhou to Jiangmen city. years experience in specializing in We have an output of more than Company Profile: Sihui FengHe Ceramics Production, the company 750,000 pcs per month, also there Clothes Rack Limited Company scale is from small to big, Enlarge- are 20,000 square meters developable has advanced machine, consum- ment and Development from the factory site near our 9,000 square mate working procedure and highly continually business competition, cur- meters modern factory and hundreds qualified staff. We are specializing rently our company is a manufacturer of experienced staffs, this enables us in designing and producing different with certain scale and better-quality. to enlarge the product line shortly levels of wooden clothes hangers. Our Our products are ceramics for daily- to meet the demand during busy product can be used for various kinds use and decorations attractive foreign seasons and diversified market. Thus of clothes, including business suit, t- customers, All daily-used ceramics are timely delivery is guaranteed. Our shirt, jacket, trousers, and so on. exported to U.S.A & European Coun- R&D department with four staff All of product is made of diver- tries. is dedicated to develop innovative, siform wood including black walnut, Presently we have around 500 stylish and practical products so as to Indonesia wood, oak, basswood, etc, workers, all kinds of professional tech- keep pace with the changing market which is all selected by our expert. nicans up to 100 persons, not only the trends. In addition, our QC team These expert can ensure that our prod- shapes but the quality of our products supervises mass production in order uct with stable humidity is easily nei- can demand the different countries to discover and solve possible quality ther distorted nor eaten by worm. With and folk Buyers. Now we own 2500 issues at the very beginning so as to many years’ experience and our own SQM plant houses, also we invested lessen cost of time and material ef- relative advantage, we design many the advanced Rolling Kilns, Tunnel ficiently. styles of clothes hangers, basing on the Kilns, and some traditional shuttle Add: Building 3, Tiansha 5rd, BeiJiao marketing fashion. Additionally, we kilns to meet our productive capacity, Industrial Park, Jiangmen City, China are always glad to produce as what the thus, our production is very capable. Tel: 86-750-3221481 clients require. Client’s satisfaction will At Present our company is a main Fax: 86-750-3232418 be the best reward to our firm. production plant of Chaozhou Daily- Our firm has high production use ceramics export, Thanks to our (Source: Canton Fair Online)

77 InfoRMATION Center (New Hall) (New Center Venue: Date: Exhibition Equipment and Technology Petrochemical & leum Petro International China 12th The Contact: Email: Fax: Tel: etc. systems, pipelines distribution and transmission gas equipment, gas ment, Exhibits: Center Exhibition and vention Venue: Date: Exhibition ogy Technol Biogas Guangxi 5th 2012The Contact: Email: Tel: 300110 Tianjin, District, Add: etc. machines, drilling lathes, cell, machine, grinding machines, milling manufacturing lexible f and robots industrial centers, chining Exhibits: Frequency: Meijiang Center tion Venue: Date: bition Exhi Metalworking Tool and Machine International Tianjin China 11th The Power Electric Welding, Metallurgy, Industry, Mining resources, and Energy

78 China Fairs & 86-771-2368926 86-771-2368926 86-22-27366505 No. 57 Xianyang Road, Nankai Nankai Road, Xianyang 57 No. March 16, 2012-March 18, 2012 16, 2012-March March March 19, 21,March 2012 2012-March March 8, 2012-March 10, 2012 2012-March 8, March China International Exhibition Exhibition International China Tianjin International Exhibi Nanning International Con International Nanning [email protected] [email protected] Expos Wang Yanjun Qiurong Zhang Biogas production equip production Biogas CNC machine tools, ma Yearly ------Frequency: Center hibition Venue: Date: Technology Expo Energy Renewable and Efficiency Energy Building Hebei 2012 Contact: Email: 116025 Province, ing Add: etc. bioagriculture, bioenergy, sciences, life Exhibits: Venue: Date: ference Con Biotechnology Industrial 5th The Fax: Tel: etc. services, other and products exotic new Exhibits: Center Venue: Frequency: 2012 Date: Exhibition Energy New and Show Solar National Ninth Northeast 2012 equipment, production and velopment Exhibits: Exhibits: 86-471-3380054 86-471-3380065 po.com High-tech Zone, Dalian, Liaon Dalian, Zone, High-tech April, 2012 April, April 2012 April geophysical prospecting, well prospecting,geophysical logging, drilling technology technology drilling logging, Dalian World Center Expo Dalian Shijiazhuang International Ex International Shijiazhuang March 28, 2012-March 30, 30, 2012-March 28, March and equipment-onshore,and etc [email protected] Science Palace Convention Convention Palace Science Web: Web: Add: Add: Block E, 8 Triumph. Chaoy Triumph. 8 E, Block Geng Yun Geng Solar hot water engineering, engineering, water hot Solar Oil and gas exploration, de External wall insulation sys ang District, Beijing, 100101 Beijing, District, ang Cutting-edge technologies, Cutting-edge Tel: Tel: Fax: Email: Email: Yearly Yearly www.cippe.com.cn 86-10-58236588 86-10-58236567 Beiyuan Road 170, 170, Road Beiyuan cippe@zhenweiex ------Fax: Tel: etc. solar, efficiency, energy building transportation, energy-efficient, saving Exhibits: Frequency: Center Exhibition and Convention Venue: Date: tion Exhibi New Technology Energy and Energy (Chengdu) China 3rd The 2012 Contact: Fax: Tel: 050091 huang, Add: etc. materials, from system insulation exterior tems, Contact: Email: Tel: 10028 Beijing, District, oyang Cha Center, Exhibition International Add: Web: villa. steel light house, wooden houses, garden high-residential, buildings, plex du penthouse villas, overlay-style villa, Exhibits: Frequency: Center tion Venue: City: Host Date: Exhibition tive Facilities Decora and Villa Beijing China 2012 Decorations planning, City Construction, Email: Fax: Tel: safety etc. equipment, mine rescue and equipment, drilling and boring tunnel equipment, and vehicles equipment, surveying and equipment exploration mineral instruments, Exhibits: Frequency: Date: Exhibition Equipment Mining International Shanghai 2012 Email: 86-28-68168911 86-311-83835767 86-21-61294171 86-28-68276746 86-311-83835001 86-20-58629127 86-21-33586934 http://villa-expo.com/ No.368 North Road, Shijiaz Road, North No.368 No.16 North 3d Ring, China China Ring, 3d North No.16 April 2, 2012-April 4, 2012 4, 2012-April 2, April March 3, 2012-March 5, 2012 2012-March 3, March 7, 9,April 2012-April 2012 ainl giutrl Exhibi Agricultural National Chengdu New International International New Chengdu [email protected] [email protected] [email protected] Du Shixia Du ZhouYi Industrial energy saving, life life saving, energy Industrial Villas, townhouses, larry larry townhouses, Villas, Mining equipment and Beijing Beijing Yearly Yearly Yearly ------FAIR & EXPOS

Expo Center Auto tools and Fittings Frequency: Yearly Exhibits: Large household appliances, 2012 The 9th Hebei International Man- kitchen and small appliances, con- ufacturing Automation & Instrument sumer electronics, home audio-visual Exhibition products, home appliances spare parts Date: March, 2012 and support services, etc. Frequency: Yearly Tel: 86-21-61459694 Venue: Shijiazhuang International Ex- Fax: 86-21-61158437 hibition Center Email: [email protected] Exhibits: Industrial automation and Contact: Liu Jing control systems and equipment, etc. Add: North Street, No.3, Jinyuan, Shi- jiazhuang, 050000 Machinery, Machine tools Tel: 86-311-87871868 Fax: 86-311-87871868 2012 The 3rd Hainan International Email: [email protected] 2012 The 18th Northeast Shenyang In- Refrigeration, Air Conditioning, Heat- ternational Building &Decoration Fair ing Ventilation and Food Processing Date: March 22, 2012-March 24, Exhibition 2012 Date: March 25, 2012-March 27, 2012 Frequency: Yearly Frequency: Yearly Venue: Liaoning Industrial Exhibition Venue: Haikou International Exhibi- Hall tion Center Exhibits: Decorative materials, build- Exhibits: Refrigeration equipment, ing energy-saving wall materials, win- refrigeration system or unit, cooling dows and doors, curtain wall, glass, system equipment and accessories, spe- heating and air conditioning technol- cial-purpose air-conditioning equip- ogy and products, etc. ment, air handing, building intelligent Web: www.bfexpo.com.cn control, etc. Add: Jinyuan Building, 5F, No.93, Tel: 86-898-66252360 Sanhao, Shenyang, 110004 Fax: 86-898-36386318 Tel: 86-24-23914926 Email: [email protected] The 16th Tianjin International Indus- Fax: 86-24-23922432 Contact: Mr. Wang trial Automation and Instrument Exhi- Email: [email protected] bition 2012 The 13th China (Shenzhen) Inter- Date: March 8, 2012-March 10, 2012 2012 China (Shanghai) International national Tool Manufacturing Technol- Venue: Tianjin International Exhibi- Garden Design Exhibition ogy and Product Exhibition tion Center Meijiang Date: March 27, 2012-March 29, 2012 Date: March 28, 2012-March 31, 2012 Exhibits: Regulator, sensitive compo- Frequency: Yearly Venue: Shenzhen Convention and Ex- nents and measuring devices, transmit- Exhibits: Landscape planning and hibition Center ters, sensors, testers, measurement in- design, landscape engineering, wood Frequency: Yearly strument, indicator, weighing devices, preservation, wood, green roofs, etc. Tel: 86-755-83458748 etc. Tel: 86-21-61956088 Email: [email protected] Add: No. 57 Xianyang Road, Nankai Fax: 86-21-61956099 District, Tianjin, 300110 2012 The 4th China International Con- Email: Cindy.zhang@vnuexhibitions. Tel: 86-22-27366505 crete Technology and Equipment Expo com.cn Email: [email protected] Contact: Zhang Liang Date: March 28, 2012-March 30, Contact: Zhang Qiurong 2012 Venue: Beijing Exhibition Center Furniture, Household Decora- Exhibits: Concrete materials, concrete Transportation, Logistics, Stor- tions, Woodwork Floor Decora- products, precast concrete products age tions main and auxiliary equipment, goods and production technologies and 2012 China Tianjin International Pub- 2012 China (Shanghai) Household Ap- equipment, etc. lic Transportation and Bus Exhibition pliances Expo Tel: 86-10-88365655 Date: March 14, 2012-March 16, 2012 Date: March 20, 2012-March 23, Fax: 86-10-88365655 City: Tianjin 2012 Email: [email protected] Venue: Tianjin International Exhibi- Venue: Shanghai New International Contact: Li Lingling tion Center Meijiang

79 InfoRMATION Exhibits: Frequency: Center Exhibition and vention Venue: 2012 Date: Exhibition Lighting Landscape Urban and LED International Chongqing 7th The 2012 Lighting instruments, Musical Sound, Contact: Email: Fax: Tel: plumbing etc. technology, bathroom, sports acces and sories, hardware showers, tubs, Exhibits: Hall) (New Center tion Venue: Date: Exhibition Equipment Construction Urban Technological and Ware itary San Conditioning, Ventilation Air and 2012HeatingInternationalChina Air-conditioning Heating, Apparatus, Electrical Fax: Tel: sys etc. tem, monitoring campus safety equipment, human system, the prevent to Exhibits: Center Exhibition and vention Venue: Frequency: 2012 Date: and Exhibition Technological Equipment Security Public Chongqing 2012 Control Fire and Security Public Contact: Email: Fax: Tel: etc. parts, Exhibits: Web: 80 86-23-86830137 86-10-68414610 86-10-84600669 86-23-86830069 86-10-68416664 86-10-84600666 www.cuauto.com.cn April 2, 2012- April 4, 2012 4, April 2012- 2, April Chongqing International Con International Chongqing Chongqing International Con International Chongqing March 23, 2012-March 25, 25, 2012-March 23, March March16, 2012-March 18, China International Exhibi International China [email protected] [email protected] Li Jin Li Gao Qian Gao Bathroombathfurniture, LED display technology technology display LED Surveillance monitoring monitoring Surveillance Passenger car and zero Yearly Yearly ------2012 The 16th China International Exhibi Equipment &Photo WeddingInternational China 16th The 2012 Wedding Photography Dress, Email: Fax: Tel: 100028 Beijing, District, ang Add: Web: etc. equipment, projection and production film digital sound, and lighting video equipment, production Exhibits: Frequency: Center tion Venue: 2012 Date: 2012CCBN Contact: Email: Fax: Tel: etc. equipment, application and Email: Email: Fax: Tel: Guo Jian 100004 Beijing, Street, Menwai Hall, Exhibition World Add: photography,children’s etc. supplies,wedding,training,studio wedding jewelry, makeup, tography, pho photography, theme ing, children photofinish printing background, post-production, albums, photo frames, Exhibits: Venue: 2012 Date: tion 86-10-65053260 86-10-86094090 86-23-62986138 86-10-65052161 86-10-86092648 86-23-62986278 North Third Ring Road, Chaoy Road, Ring Third North www.ccbn.cn Floor 2, No.1, Beijing China China Beijing No.1, 2, Floor March 21, 2012-March 23, 23, 2012-March 21, March China World China Trade Center March 18, 2012-March 21, 21, 2012-March 18, March China International Exhibi International China [email protected] [email protected] [email protected] Yan Gong Video knitting equipment, equipment, knitting Video Wedding dress,photo Yearly - - - - - Email: Email: Contact: Fax: Tel: Web: etc. backlight, IC, LED and control system chip, LED light, solid LED Exhibits: 2012 Date: Equipment Exhibition Sewing Dongguan 2012 Email: Fax: Tel: 100742 China, Beijing, Street, Add: Web: etc. designers, fashion resources, apparel shoes, and bags fur, leather, products, children’sclothing,infantchildand and infant women’s, clothing, outdoor Exhibits: Hall) (New Center tion Venue: Date: Fair & Accessories Clothing International China 26th The Contact: Email: Fax: Tel: Web: etc. accessories, fashion Exhibits: Frequency: Pavilion Venue: 2012 Date: Fair Fashion International Shanghai 2012 Textile Clothing and Frequency: Center Exhibition and tion Venue: City: 2012 Date: Exhibition ment Large Equip and Technology Display Screen LED (Shanghai) China 2012 86-21-34140987 86-10-85229018 86-21-60950192 86-21-54485616 86-10-8522936 86-21-62775353-608 Room 449, No.12 East Chang’an 449,Chang’an No.12 Room East Shanghai www.www1111.com www.chiconline.com.cn www.modeshanghai.net March 26-March 29, 2012 26-March March March 28, 2012-March 31, 31, 2012-March 28, March Shanghai Everbright Conven Everbright Shanghai Shanghai World Expo Theme Theme Expo World Shanghai March16, 2012-March 18, March 27, 2012-March 29, 29, 2012-March 27, March China International Exhibi International China [email protected] [email protected] [email protected] Li Li Li Miss Xue Miss LED display, touch screen, screen, touch display, LED Men, casual wear, women, women, wear, casual Men, Men, sports equipment, equipment, sports Men, Yearly Yearly - - - FAIR & EXPOS

Venue: Dongguan Modern Interna- Tel: 86-351-4166813 Exhibits: Pathological diagnostic tional Exhibition Center Fax: 86-351-4079700 equipment, function test equipment, Frequency: Yearly rehabilitation, etc. Exhibits: Accessories, aids, after sew- 2012 Beijing International Jewelry Ex- Add: Heping District, No.28 North ing, sewing, logistics, laser equipment, hibition Street, Shenyang, 110002 etc. Date: April 6, 2012-April 9, 2012 Tel: 86-24-22853303 Email: [email protected] Venue: China International Exhibi- Fax: 86-24-22853500 Tel: 86-21-63045419 tion Center Email: [email protected] Exhibits: Diamonds and precious 2012 China International Apparel stones, jewelry, pearls and coral, Fabrics and Accessories Trade Fair equipment and apparatus, fashion ac- Packaging, Paper, Printing and Date: March 28, 2012-March 30, cessories, etc. publication 2012 Tel: 86-532-85010059 Venue: China International Exhibi- Fax: 86-532-85012624 2012 The 6th Ningxia Printing Adver- tion Center Email: [email protected] tisement Exhibition Exhibits: Fabric, garment accessories, Date: April 8, 2012-April 10, 2012 computer CAD, etc. City: Yinchuan Add: Room 550, No.12, East Chang’an Food and Additives, Beverage, Venue: Yinchuang International Con- Avenue, Beijing, China, 100742 Drinks, Seasonings, Dairy Prod- vention and Exhibition Center Tel: 86-10-85229463 ucts Exhibits: Advertising equipment, Fax: 86-10-85229296 printing, photo printers, etc. Contact: Shen Zhen The 16th China International Food Tel: 86-951-5017735 Additives and IngreMoldnts Exhibition Fax: 86-951-5017735 Date: March 28, 2012-March 30, Email: [email protected] Toys, Gifts and Craftwork 2012 Frequency: Yearly 2012 The 25th China Beijing Interna- Exhibits: Food additives and ingre- Entertainment, Leisure tional Gifts, Premium & House-ware Moldnts, testing equipment, food pro- Fair cessing, packaging machinery, etc. China Golf 2012 Date: March 14, 2012-March 17, Tel: 86-10-68396330 Date: March 16, 2012-March 18, 2012 Fax: 86-10-68396422 2012 Host City: Beijing Email: [email protected] Venue: Beijing National Convention Venue: China International Exhibi- Center tion Center Exhibits: Clubs, golf equipment and Exhibits: Arts and crafts, ceramics, Medical Care, Health Care accessories, clubs, shaft, grip, ball, ball crystal class, glass, metal crafts, gifts, tee, golf bag, club sets, etc. promotional items, promotional items, 2012 The 26th Shenyang Internation- Web: www.chinagolfshow.com benefits, collectibles and commemora- al Medical Equipment Exhibition Email: [email protected] tive coins, stamps, etc. Date: March 21, 2012-March 23, 2012 Web: www.99inf.com Venue: Science Palace Convention Center 2012 The 17th Beijing International Add: No.58, Lane 1108, Lianhua City: Shenyang Swimming Pool SPA Bath Show South Road, Shanghai Date: April 7, 2012-April 9, 2012 Tel: 86-21-54995547 Venue: China International Exhibi- Fax: 86-21-5499541 tion Center (Old Hall) Email: [email protected] Exhibits: Class spa pool, SPA water therapy classes, sauna bath category, class hotels, thermal heat pump type, Jewelry, Watches and Clocks, water type, health-care and other ser- Glasses vices, etc. Host: Beijing Bathing Industry As- 2012 The 4th Shanxi Jewelry Exhibi- sociation, China Professional Leisure tion and Health Care Association, Nation- Date: April 2012 al Standardized Technical Leisure and Venue: Shanxi Exhibition Center Health Committee, 100028 (New Hall) Tel: 86-10-85864985 Exhibits: Diamonds and precious Fax: 86-10-85862040 stones, jewelry gold ornaments, peals Email: [email protected] and coral, etc. Contact: Heng Wenjuan

81 Investment Projects in Fuding, Fujian Prov nfoRMANTION ince, China I Fax: 86-15859323366 Person-in-charge: Town Location: Project Organizer: Project Tea City White Cultural Diantou Name: Project finished. been have also requisition for land approval the Work: Preliminary of Progress benefits. economic and Analysis: Results Economic Total Investment: Scale: Construction leather yet. ready synthetic been have market specialized of construction in for conditions frastructure the Therefore, Superfine leather. and synthetic leather fibre synthetic PU of base the formed production gradually leather has which rear ), 4 and enterprises etc. processing cloth, base leather additives, ins, res as such providing firms synthetic upstream 22 4 and wherein firms ( leather projects leather synthetic zone 31 project has the Yuan, billion 1.89 of Investment total a 41 and exploited With imported. been been have scale considerable has with projects zone project the in land mu 3500 over present, At mu. 22,300 is zone project dustrial Overview: Project Fax: 86-13599189996 Person: Contact 86-l5259328866 Person-in-charge: Location: Project Zone Development Long’an Organizer: Project Leather Market Synthetic Long’an of Construction Name: Project 82 86-593-7675675 86-593-7995733 Zhang Dehe 86-593-7285828 Dehe Zhang Long’an Development Zone Development Long’an RMB 20 million million 20 RMB The total planned area of Long’anin of area planned total The Diantou Township Diantou Government Shundian, Yishan Village, Diantou Diantou Village, Yishan Shundian, Zhan Zhaoyu 86-593-7675175 Zhaoyu Zhan 86-593-7283366Chen Shixiao the market occupies a land of 60 mu. mu. of 60 aland occupies market the Administrative Committee of of Committee Administrative The project has good social social good has project The The project planning and planning project The

- - - - museum, standardized production workshop will be built built be will workshop production standardized museum, tea fine street, cultural Teatea center,mu. white trade 300 Scale: Construction cultural awhole. as tea transmission and service information pro marketing, transaction, duction, tea combines which in Village, built be to Shundian planed is city cultural tea white a industry, satisfied longer tea and no transaction tea of development the have for demand the market and existing scale the the of As tea. capacity dry tons 8,000 and leaves tea tons 30,000 of volume transaction annual an with City Fuding in market trade tea specialized biggest the become has ket mar the meters, square 8,000 of area an border.Covering Fujian-Zhejiang the on market trade tea specialized a and industries tea various 150 than more has town The there. tea from annually, comes income household tea famers’ the of green 80% and tons 21,000 over producing tea garden, of mu 30,000 over are there towns, tea-producing est Overview: Project room industry further. industry room mush of development the promoting Qianqi, in industry mushroom the invest to project the join to talent the invite sincerely we Now, 2010. in trademark registered national “Duoduobai” the declared Jiangshu), successfully mushroom Shanghai, Qianqi Zhejiang, as (such cities and inces prov ten over to sold Yuan.As million 40 to up add value output the tons to and 7,200 amounts ofoutput mushroom total the feet, square million 8 to amounts area sown room mush for area entire for the present, At grown years. 30 been than more have mushrooms where center mushroom, distributing for a also is Town Qianqi Fuding, in eas ar producing mushroom major the of counties one As circumjacent towns. and the in feet square more is million 50 area the than while mushroom with cultivated is feet square million 17 with Province, Fujian of county ducing Overview: Project Fax: 86-l3860367586 Person: Contact 86-15959335577 Person-in-charge: Location: Project Organizer: Project Finishing Fine its and Bisporus Agaricus White of Cultivation Standardized for Base Demonstration Production Name: Project underway. are approval for land dures proce the Meanwhile finished. been have Board also requisition Planning Town the pre- land the and project ofthe by planning general the while organized appraisal the Work: Preliminary of Progress Mode: Cooperation Total Investment: future. the in 86-593-7572880 Wang Chuanhe 86-593-7562669Wang Chuanhe Qianqi TownQianqi RMB 150 million million 150 RMB Qianqi Township Qianqi Government Fuding is the main mushroom pro mushroom main the is Fuding Zhuang Chaohe 86-593-7572303Zhuang Build Transfer (BT) model Transfer (BT) Build In Diantou, one of Fujian’s larg Fujian’s of one Diantou, In The project will cover an area of of area an cover will project The The project has passed passed has project The ------INVESTMENT

Construction Scale: A specialized production base of (a provincial-level highway) passing through the town mushroom and the mushroom processing plant which to get the both ends of the seawall. The seawall is 2.53 cover an area of 50 million square feet will be built to kilometers long with a reclamation area of 13,700 mu. supply various products such as canned mushroom, salted The shape of the project is designed as type of bell mouth mushroom, dehydrated mushroom, preserved mushroom, while the small island in front of the seawall can act as quick-frozen mushroom, instant mushroom and so on. shield, forming fine terrain conditions. Total Investment: RMB 50 million Construction Scale: The sea wall is 2.53 kilometers long Cooperation Mode: sole investment or joint venture with a reclamation area of 13,700 mu. Two flood drainage Progress of Preliminary Work: The planning of the gates with 13 holes measure 65 meters across totally, and two project has been finished. tide gate with 5 holes measure 15 meters across totally. Total Investment: RMB 350 million Cooperation Mode: joint venture or cooperation Economic Results Analysis: Project Name: Shacheng Central Fishing Port The payback period will last 5 to 6 years Project Organizer: Shacheng Township Government Progress of Preliminary Work: The pre-qualification of Project Location: Hougang Village, Shacheng Town the utilization of national sea areas has been finished. Person-in-charge: Chen Xiaolong 86-593-7581436 86-l3950561719 Contact Person: Chen Aqing 86-593-7581436 Project Name: Warehousing and Wharf Construction 86-l3830366868 in Hougang Operation Zone in Shacheng Town Fax: 86-593-7581154 Project Overview: As a deep-water port with a wide Project Organizer: Shacheng Township Government opening, Shacheng Port has convenient transportation Project Location: Hougang Village, Shacheng Town and abundant fishery resources, is indeed an ideal location Person-in-charge: Chen Xiaolong 86-593-7581436 for a fishing port. Shacheng central fishing port is divided 86-l3950561719 into operation area and typhoon anchorage area. After Contact Person: Chen Aqing 86-593-7581436 the establishment of the project, Shacheng Port will has 86-l3830366868 2 a 48,800m terrestrial area, a 707-m water front, a 625- Fax: 86-593-7581154 m harbor and two typhoon anchorages, which will afford Project Overview: Shacheng port lies on the north- the function of fish distribution and typhoon avoidance for ernmost coast of Fujian Province, which borders Fujian vessels. Moreover, this project will accelerate the develop- and Zhejiang. The port boasts advantageous geographical ment of Shacheng Port and make marked social and eco- condition and convenient transportation, which also con- nomic benefit. nects with coastal highway, Wenzhou- Fuzhou Railway, Construction Scale: The harbor of the fishing port cov- and national highway network. Hougang operation zone, ering an area of 1500 mu and its supporting facilities are one of the six harbor operation zones in the overall plan for planned to be built. Shacheng port, is located on the south bank of Shacheng Total Investment: RMB 80 million Port, 10 kilometers away from the estuary. The wharf apron Cooperation Mode: joint venture or Build Transfer (BT) is very superior in its excellent water depth conditions while model the rear land areas those are surrounded on three sides by Progress of Preliminary Work: Shacheng Primary mountains boast their vast open flat spaces. The land area is Fishing Port has been built and the project of National about 1000 meters long and covers an area of 1500 mu. Central Fishing Port is under the application for approval. Construction Scale: The wharf apron closes to the waters which are 20 -30 meters in depth while the frontage of the planned dock line is 1000 meters long, where is feasible to Project Name: Yujing Reclamation Project build 3 berths of fourth-generation Ocean-going container terminal (or 2 berths of the fifth-or-sixth generation contain- Project Organizer: Fuding Municipal Bureau of Water er terminal). Its handling capacity is about 1 million TEU. Resources Total Investment: RMB 1 billion Project Location: Qinchuan Bay, Xiamen Town Economic Results Analysis: The annual output value Person-in-charge: Lin Changsheng 86-593-7879100 may reach RMB 2.5 billion. The taxation may be RMB 200 86-13809574936 million. This project will create over 3000 job vacancies. Fax: 86-593-7579506 Cooperation Mode: sole investment Project Overview: Yujing Reclamation Project lies in Progress of Preliminary Work: The project has been Xiamen Town in the southest of Fuding and Qinchuan listed in the plan. Bay in Taimushan Town, belonging to the harbor-styled reclamation project. Being 40 kilometers away from the (Source: The Department of Foreign Trade and downtown, the project is easily accessible, with Shalv Line Economic Cooperation of Fuding Municipal Government )

ART & GALLERY Lifestyle Beyond By Marie-Pascale Rauzier

ordinary is elevated into the timeless. Transcendence is achieved by his unwavering focus on physical details: Gold is created out of a rusty nail, a sandy desert emerges from a scarred wall, and shark skin is conjured from a stretch of mottled, cracked pavement. Jean-François Rauzier « Hyperpho- Jean-François Rauzier has been scouring the streets of Paris since 1986, baring tos ». its unhealed scars, and then venturing further to its abandoned industrial sprawls. At Galerie Paris-Beijing / Beijing During his nocturnal wanderings, he stalks his prey: Tiny, ghostly forms hacked From Saturday 3rd of March to into a crumbling wall; intimations of fossils embedded in asphalt are sought-after treasures. By night’s suggestive light, the photographer would metamorphose a slab 18th April 2012 of concrete into an ocean and spin a drenched sidewalk into a swirl of stars. His Opening the 3rd of March , 5 PM. show, “The Flesh of a City” was exhibited to great acclaim in Paris, Neuilly and Solo exhibition of photography Clermont-Ferrand. Since 1992, Jean-Francois Rauzier has been even more deeply immersed in the “soul” of substance. He transfigures the object by the light of a lamppost, a flashlight or a filter, abolishing all relief and perspective. Every image becomes a microcosmos. In time, this personal introspection has matured and softened. He veers towards more ephemeral horizons – finding serenity between earth and sky, and accompanying his photos with his personal poetry. Today, Jean-Francois Rauzier works on a different scale, spilling into a new imaginative dimension. Broadening his quest, he is intoxicated by fields and infinite horizons. A native of Normandy, he has retained a love for grey, tormented skies, and skimming, preter- natural light. He now Jean-Francois Rauzier lives a dou- conjures a more expan- ble life. By day he is a renowned com- sive world whose sweep- mercial photographer reputed for his ing poetry still conceals work in advertising, and widely praised a plethora of minute for his still-lifes, as well as his sculp- details, detectable to ture, painting and poetry. By night, he only the most attentive haunts less civilized preserves, scaveng- viewer. ing urban and abandoned industrial His technique is to zones for traces of their past. He has the capture hundreds of de- meticulous craftsman’s unsparing eye tails in his lens and then for details while his vision is informed juxtapose and sculpt by the alchemists’ insight into the hid- them into a monumental den power of raw materials. His pho- and panoramic photo- tographs transform stone, metal, wood graphic image. His bare and paper into visual poems where the bucolic landscapes are

ON STAGE

SUM41 World Tour Beijing Concert 2012 Time: 2012/4/4 Venue: MasterCard Center (Formerly the Wukesong Arena) Price: 180/380/480/580/1080/1280 Tickets are available at 64177845

Sum 41 is a Canadian rock band from Ajax, Ontario, active since 1996. The current members are Deryck Whibley (lead vocals, rhythm guitar), Tom Thacker (lead guitar, backing vocals), Jason McCaslin (bass guitar, backing vocals) and inert and oblivious to time. Only the perspective Steve Jocz (drums). given by a road or a pathway marks the frontier be- In 1999, the band signed tween the untouched and the human. an international record deal This surrealist universe is mysteriously void with Island Records. The band and sometimes eerie. Here, armchairs drift on the released their debut album, All waters only to be submerged, hundreds of frames Killer, No Filler in 2001. The hang in a forest, celluloid swimmers lie scattered on band achieved mainstream a path, balloons drift from a rusty fence in the middle success with their first single of an open field. Departure, flight, disappearance, from the album, “Fat Lip”, which reached number-one on the escape, abandonment, absence, tracks, traces and Billboard Modern Rock Tracks chart and remains the band's memories are the recurring themes. Yet, despite the most successful single to date. All Killer No Filler’ was certi- intimations of emptiness, life is fully present: Look fied platinum in the United States, Canada and in the UK. closely and you will find it in the form of a spider The band has since released four more studio albums: Does weaving in the underbrush, in the scratching of an This Look Infected? (2002), Chuck (2004) Underclass Hero inquisitive little rat, in the padding of a far off cat or (2007) and Screaming Bloody Murder (2011). The three al- the imaginary flutter of a caged bird. Here, the in- bums before Screaming Bloody Murder have been certified finitely small encounters the cosmic, details partake platinum in Canada. Their fifth studio album, Screaming of eternity, envisioned by the ceaseless roaming of Bloody Murder, was released on March 29, 2011. an artist-as-seeker’s soul.

Lorin Maazel and Philharmonia Orchestra Concert Time: 20124/5 Venue: NCPA-Concert Hall Price: -- Tickets are available at 64177845

85 ON STAGE Lifestyle

Daniel Harding and Symphonieorchester des Roxette 2012 Live In Beijing Bayerischen Rundfunks Concert Time: 2012/3/12 Time: 2012/3/9 Venue: MasterCard Center (Formerly the Wukesong Arena) Venue: NCPA-Concert Hall Price: RMB 280/480/680/880 Price: RMB 200/400/600/780/880/980 Tickets are available at 86-10-64177845 Tickets are available at 86-10-64177845 Which Swedish band was more successful in America than ABBA? Yes, the Swedish band that had more number ones and Top 10 hits than ABBA in the US (and once fea- tured on their very own postage stamp) are coming back to China in 2012. Gehua-LiveNation is thrilled to announce that legendary pop duo Roxette are coming to China to play two very special live shows at the MasterCard Center (fomerly the Wukesong Arena)in Beijing on Monday March 12, 2012 and at Shanghai Grand Stage on Wednesday March 14, 2012 with tickets going on sale soon. Roxette have numerous massive hits in China including It Must Have Been Love, Joyride, The Look, Listen To Your Hear t and Fading Like A Flower. Their hits Pendulum DJ SET & Verse Asia Tour Concert were also Time: 2012/3/10 covered by Venue: The One Club Hong Kong Price: RMB 200/250/300 superstars Tickets are available at 86-10-64177845 s u c h a s Alan Tam (The Look, Formed during Danger- 2002 by three musi- ous), Leon cians from Western Lai (Joy- Australia with similar r i d e) a n d visions and musi- Shirley cal backgrounds, Kwan (Lis- Pendulum’s mission ten To Your has always been to Heart) pull together their Rox- production resources, ette’s brand ideas and influences new album from various styles C h a r m of music, to create a School was new sound that they released by felt was missing from EMI earlier last year. Charm School went straight to number dance music. The in- one on the German, Czech and Swiss album charts the week dividual members be- of its release and is heading for platinum status in Sweden. hind Pendulum have With a catalogue of mega hits including It Must Have been active in Perth’s Been Love, Joyride, Listen To Your Heart, How Do You live music scene for Do, Dressed For Success and The Look, this is set to be several years: producer / vocalist / keyboardist Rob Swire and one of THE live events of the 2012 calendar. So grab all producer / bassist Gareth McGrillen played together in the your friends, listen to your heart and get yourself dressed acclaimed Perth band Xygen, while Paul ‘El Hornet’ Harding for success and get ready to join the joyride with Roxette had been a veteran of the Perth DJ scene. in 2012!

86 ON STAGE

Paul Kalkbrenner @ Berlin Caling Asia Tour José Carreras 2012 Live In Beijing Concert Time: 2012/3/17 Time: 2012/4/1 Venue: The One Club Venue: Great Hall of the People Price: RMB 200/250/300 Price: -- Tickets are available Tickets are available at 86-10-64177845 at 86-10-64177845 José Carreras is a Spanish Catalan tenor particularly Cool DJ Agency is proud to known for his performances in the operas of Verdi and Puc- announce that Paul Kalkbrenner cini. Born in Barcelona, he made his debut on the opera stage has been the most innovative Eu- at the age of 11 as Trujamán in Manuel de Falla's El retablo de ropean Electronic Music artist for Maese Pedro and went on to a career that encompassed over the past five years. Even his previ- 60 roles on the stages of the world's leading opera houses and ous releases on B Pitch Control are in the recording studio. outstanding in terms of structure, He gained fame with a wider audience as one of The constraint and melody. Three Tenors along with Plácido Domingo and Luciano Pa- Besides being a musician varotti in a series of mass concerts that began in 1990 and Paul Kalkbrenner is also know continued until 2003. Carreras is also known for his humani- for playing the main role “DJ IKarus” in the movie “Berlin tarian work as the president of the José Carreras International Caling”. The movie projects how the live could be as a Berlin Leukaemia Foundation (La Fundació Internacional Josep based Techno Producer. The viewer follows Ikarus on his Carreras per a la Lluita contra la Leucèmia), which he estab- jouney through certain highs and lows a Producer/DJ could lished following his own recovery from the disease in 1988. go through and gets an insight view of a different live style in a music metropole such as Berlin. Through out the movie Tracks from Paul’s Album “Berlin Calling” are played. Even though reality shows have been trying to prove otherwise, a successful career as a musician, even as a pop star, cannot be forced with a pre-packaged crash course. As of 2010, Paul Kalkbrenner has tallied up more than 15 years of experience as a producer and live act, all the while learning what it means to go purposefully from one step to the next. When the Berlin Wall fell, he was 12. The soundtrack of his youth, and of the majority of his generation, was still in its infancy, awaiting its breakthrough: techno music. Together with Paul Kalkbrenner, BPitch Control gained a strong momentum. Paul’s third album Self (2004) would mark the beginning of a new era. His melodic sound, with its affinity for grand emotional gestures, obeyed the logic of the dancefloor, but Self introduced a narrative aesthetic, serving as a soundtrack to a film that did not exist (at least, not yet). “Ge- brünnGebrünn”, released one year later, became a crossover hit. Carreras has received numerous awards and distinctions for both his artistic and humanitarian work. These include: TNT Theatre Britain Presents: David Copperfield Commander of the Ordre des Arts et des Lettres and Cheva- lier of the Légion d'honneur (France); Gran Croce di Cava- Time: 2012/3/30-2012/3/31 liere and Grande Ufficiale della Repubblica Italiana; Grand Venue: Chaoyang 9 Theatres-Che Decoration for Services to the Republic of Austria; the Cruz Price: RMB 60/120/180/280/VIP de Oro del Orden Civil de la Solidaridad Social from Queen Tickets are available at 86-10-64177845 Sofia of Spain, The Prince of Asturias Prize, and the Bundes- verdienstkreuz from the Federal Republic of Germany. On 23 February 2004, the Austrian Post Office issued a 1€ stamp to commemorate the 30th anniversary of his debut at the Vienna Staatsoper. In Spain the central plaza in Sant Joan d'Alacant bears his name, as do two theatres – the Auditori Josep Carreras in Vila-seca (near Tarragona) and The Teatro Josep Carreras in Fuenlabrada.

87 THIS IS CHINA

For Mountain—Climbing Enthusiasts, Is a Must

By Lily Wang

or many mountain-climbing enthusiasts, Songshan of Henan province and Mountain Mount Taishan (泰山 tài shān) is a must. Hengshan of Shanxi province), though it is only Previously called “Daishan Moun- the third highest. It is considered as the leader tain”, Mount Taishan is also known as of the Five Sacred Mountains, partly because it “the Great Peak”, “the Great Mountain” and “the is close to the sea and rivers, and rises abruptly FEastern Mountain”. It is a perfect combination from the relatively low rolling hills and Qilu of culture and natural landscape, and can also be plains. Its relative height is quite impressive, with considered as the symbol of the Chinese nation. an altitude difference of 1395 meters within the Leader of Five Sacred Mountains nine kilometers. Moreover, in Chinese culture, east is regarded as a sacred direction since it is Mount Taishan is ranked as the No. 1 of where the sun and the moon rise. Therefore, the Five Sacred Mountains (the other four are Mount Taishan is associated with sunrise, birth, Mountain Hengshan of Hunan province, Moun- and renewal, and is often regarded the foremost tain Huashan of Shaanxi province, Mountain of the five mountains. As a site of historical interest, Mount Tai has been a perfected place for centuries. Dating back to the Yin and Shang periods (1766-1122 B.C), Chinese forefathers established five directions of north, south, east, west and centre. The east, where the sun rises, represents life’s fertility with the end of winter and coming of spring. Mount Taishan, located in a coastal province in eastern China, has been regarded as a propitious place.

88 stone inscriptions, which were either inscribed by ancient emperors or celebrities. Most of the inscriptions were done with elegant font style, beautiful words and delicate design. In total, there are 1696 stone inscriptions in Mount Tai area, mainly of two kinds: inscriptions on precipices and inscriptions on steles. All of these stone inscriptions are precious records of the history of Taishan. Picturesque scenery Mount Tai is well known for its grand- ness and the southern part is especially steep and spectacular. The typical character of natural scenery of Mount Tai is imposing, steep, surpris- ing, serene, secluded, profound, and spacious. For thousands of years, Mount Tai is the There is a flight of 7,200 total steps (in- sacred mountain where Emperors hold ceremony cluding inner temple steps), with 6,293 Official of offering sacrifices to heaven and earth to pray Mountain Walkway Steps, leading up to the and say thanks for peace and prosperity. More East Peak. Along its course, there are 11 gates, than seventy emperors are said to have per- 14 archways, 14 kiosks, and 4 pavilions. formed mountain worship ceremonies on Mount It has been a rich source of inspiration for Taishan. Among them, Emperor Wu of the Han countless maxims, poetic allusions, and literary Dynasty had visited Mount Tai for eight times. works. The path ascending the mountain is lit- It is the first and foremost thing for emperors tered with poems and tributes carved in stone, to do when they ascend to the throne, because proclaiming the importance and beauty of the Mount Taishan is regarded as the symbol of the spot. Confucius and poet Dufu both penned county’s peace and prosperity. poems illustrating their respect, and legend has Mount Tai held a sacred position in state it that those who climbed the mountain will live politics, and also enjoyed a high status in the until they are one hundred years old. The peak of world of Taoism and Buddhism. Throngs of the Jade Emperor, rises some 1545 meters above Buddhist and Taoist practitioners, scholars and sea level. The trek from base to summit is about 8 celebrities all came here, leaving the place lots of km long and takes approximately five hours. The historical sites and humanistic landscapes. The climb is relatively easy until the half way point at main cultural sites spread from Sheshou Moun- Zhongdian Gate, from where the steps become tain’s memorial site to Haoli Mountain and all considerably steeper. the way to Jade Emperor Peak, creating the three A staircase leads you to the Heavenly dimensions of “Hell”, “World” and “Heaven”. Southern Gate, where you look around in the Mount Taishan is also famous for its diversified distance, enjoying with involuntary admiration

89 THIS IS CHINA

the overpowering views of mountains beyond Han Dynasty (206 BC – 220 AD), its design has mountain and scenery beyond scenery. You will be been a replica of the imperial palace, which makes awed by the numerous grotesque rock formation, it one out of three extant structures in China with clear waterfalls, giant pine trees, temples, pavil- the features of an imperial palace (the other two ions, bridges, pagodas, as well as stone inscriptions are the Forbidden City and the Confucius Temple by poets, scholars and calligraphers of various dy- in Qufu). nasties. The temple connects Tong- Each season here has its own beauty: bright tian Street in the front and flowers in full bloom covering the green slopes the winding path at the back, in spring; spectacular summer thunderstorms bringing the mountain and which are rarely seen elsewhere; blue rivers run- the city together. Ascending ning across the mountains overlaid with red maple the mountain from this spot is a leaves in autumn; snow-capped mountains and good choice, because it symbolizes frosted pine in winter that stage a quiet spectacle going from “this world” of grandeur of particular interest. On a clear day to the “divine heaven”. one can see peaks rising one after another. When There are totally the sky is overcast, the horizon disappears into a 151 steles and stone sea of clouds. inscriptions from the The sunrise and sunset is one of the marvel- past dynasties in the Dai ous natural phenomenons on top of the mountain Temple, which wins Dai and also an important symbol of the mountain. Temple a title of Stele For- Standing on the mountain in the misty early est. Among them the morning and evening, you can see a colorful ring prescript inscription of with blue inside and red outside, called “Holy the second emperor Light”. of Qin Dynasty was Dai Miao engraved during The Temple of the God of Mount Taishan, known as the Dai Temple（岱庙 dài miào）, is the largest and most complete ancient building complex in the area. It is located at the foot of Mount Taishan in the city of Tai’an and covers an area of 96,000 square meters. The temple was first built during Qin Dynasty. Since the time of the

90 209 BC by Li Si, the renowned official and cal- ligrapher of Qin Dynasty. It is one of the oldest inscriptions preserved in China. Besides, the famous steles include Hengfang Stele (168AD) and Zhangqian Stele (186 AD) of East Han Dy- nasty and Madam Shun Stele (272AD) of West Jin Dynasty. Jade Emperor Peak In Chinese mythology, Jade Emperor is the most powerful god in the heaven. Jade Emperor Peak (玉皇顶 yǜ huáng dǐng), towering 1545 meters above sea level, is the summit of Mount Tai. The city of Tai’an, at the foot of Mount Taishan, is 153 meters above sea level, while the Jade Emperor is 1545 meters above sea level. Its altitude difference of 1392 meters offers tourists a breathtaking bird’s eye view of the entire area. It is also called Taiping Peak (Peace Peak) and Celestial Pillar Peak, which is long known as the First Peak under Heaven. It was built in the honor of Jade Emperor of Taoism. There is a big stone in the middle of the yard in front of the temple, engraved with “The Summit of Mount Tai 1545 meters”. It could not be checked when it was firstly built. Rebuilt during the Ming Dynasty, it consists of Jade Emperor Hall where houses the bronze figure of Jade Em- peror, the Sun-viewing Pavilion where tourists can enjoy the sunrise, and the River-enjoy Pavil- ion, a perfect place for tourists to appreciate sunset clouds and the golden belt of Yellow River. Azure Clouds Temple The Azure Clouds Temple ( 碧霞祠 bì x iá cí) , near the top of the mountain is another grand building complex, a special combination of metal components, wood, and bricks and stone structures. From the Dai Miao to the Azure Clouds Temple there are numerous stone tablets and inscriptions and ancient buildings. Visitors derive much pleasure from climbing Mount Taishan. From the red gate at the foot of the mountain to the South Heaven Gate at the top are some 7,000 stone steps, which wind their way up the mountain slopes, each step offering a different view. For visitors, the penetration and influence of thousands of years’ spiritual culture and humanistic landscapes have catapulted Taishan Moun- tain to the top of the Five Famous Mountains of China. The mountain is not just a snapshot of the spiritual culture of the Chinese nation, but more of a precious world heritage.