Recruiting in China

China's top tier cities may elevate themselves from regional centers to future global metropolises, with advantages in sectors such as smart cities and artificial intelligence.

International investors from global giants like Boeing, Merck and Siemens shared this view at the Annual Investment Conference in south China's Guangzhou on Wednesday.

The conference is a major event aimed at promoting the city to potential investors and listening to their comments on its business environment. Over 1,800 enterprises from around the world attended the conference.

Many investors stated that China is now more than just a large market for them.

This year China is celebrating the 40th anniversary of its reform and opening-up.

Merck, a world leading company in health care, life science and performance materials, has been operating in China for over 80 years. As well as its existing research and development centers and labs in Beijing and Shanghai, the company established a new China Innovation Center in Shanghai in February.

"The opening-up of China has made a great difference to our business and it allowed us to advance business sectors liquid crystal and pigments," said Allan Gabor, managing director of Merck China.

"When Merck looks at China, we see China as much more than a large business market, we see it actually as an enabler of our global strategy," Gabor added.

Similarly, John Bruns, vice president of Boeing International, said China is now "a source of innovation" from the company's perspective.

The American aviation giant will soon open its first finishing and delivering center for 737 planes outside the United States in east China near Shanghai, and recently signed an agreement with China Southern Airlines to initiate a 737 converted freight project in Guangzhou, and to include a local maintenance company in its 787 global care program.

Cities like Beijing, Shanghai, Guangzhou and Shenzhen, and the Greater Bay Area of Guangdong, Hong Kong and Macao, are becoming the key players in investors' global strategies.

These cities have mature urban infrastructure, advanced industries and are renewing their focus on development to be in line with the information revolution and an international lifestyle.

Guangzhou, for example, is focusing on the new generation of information technology, artificial intelligence, bio-pharmaceuticals, as well as new energy and new materials.

The output of its new generation internet technology and panel display industries have both exceeded 100 billion yuan. It is also ambitious in becoming a smart city, by teaming up with global giants like Cisco and Siemens.

New York and London are indisputably global cities now, but what will global cities of the future look like?

"A future global city should be leading in smart mobility and smart energy distribution and future technology like A.I. I think Guangzhou is on a very good way to that," said Jens Hildebrandt, chief representative of Delegation of German Industry and Commerce Guangzhou.

But investors also pointed out that Chinese cities still need to tackle a series of challenges before they become global cities, including IPR protection, environmental protection, further opening-up and continuous innovation, as well as self promotion.

These are also the areas where huge opportunities lie.

Three months ago, SHV Energy, the world's largest distributor of LPG energy solutions, signed an memorandum of understanding with Guangdong Province, to build a LPG terminal in the city's Nansha District.

"With the strong focus of the Chinese government to improve air quality and reduce emissions, you see a higher need for clean energy solutions." said Maarten Bijl, global vice president of the company.

He added that SHV is also innovating its business model and looking for cleaner energy solutions in which it can cooperate with the Chinese cities. "We're in discussion to see how we can work with the city of Guangzhou, and we can get hydrogen mobility solutions here, which is the next step."

Aside from the top tier cities, China as a whole is putting every effort to further open up. Earlier this month, the government pledged to continue to streamline administration and delegate power to improve the business environment and further stimulate market vitality.

Beginning with the second quarter of the year, China will be in the do-or-die battle of its economic transition, according to Hong Kong-based researchers.

The country's transition will undergo its most difficult stage, although it will probably maintain around 6 percent growth in GDP in the second half of the year, according to economists and financial analysts recently surveyed by China Daily.

According to the National Bureau of Statistics, the economy saw year-on-year growth of 6.7 percent in the second quarter, slightly above market expectations. The second quarter's growth rate was the same as in the previous quarter.

The growth was powered by retail sales, industrial output and new loans directed to fixed-asset investment.

But several things are at the center of concern, said Sun Mingchun, senior partner and chief economist of China Broad Capital Co Ltd, including an excess of industrial capacity, a large total social financing and a high leverage ratio, meaning a high level of debt.

Private investment was 15.9 trillion yuan ($2.39 trillion) in the first half of 2016. Its annualized growth rate fell from 3.9 percent in the first five months to 2.8 percent in the first half of the year, which means there was quite a dip in June alone.

Private companies are not seeing encouraging returns from their investments in most industries. And they probably still will not see a good profit in the next two to three years, Sun said.

By contrast, the State sector investment rose an impressive 23.5 percent in the first half of the year, concentrating mostly on infrastructure development in the less-developed areas.

But so much investment is still not as powerful a driver of growth as consumer spending, especially that on services, said Fielding Chen, Asia economist for Bloomberg Intelligence. If investment sees a further decline in the second half of the year, which he expects, the economy's growth engine will remain weak.

According to Cui Li, managing director and director of macroeconomic research at CCB International, the economy will be in its difficult period because it is facing an "unprecedented balancing risk", including "weaker-than-ever global demand, need for a sharper-than-expected capacity cut for the industry, and a round of bond defaults that weigh on investor sentiment."

Ding Shuang, head of China research at Standard Chartered Plc, said that although the hard landing scenario is less likely to happen, the mainland economic situation will remain complex, with questions about how to deal with its mounting debt and avoid the threat of capital outflow.

Ding expects that in the coming months of the year, China's fiscal policy will keep expanding while its monetary policy will be neutral. Cutting the reserve requirement ratio for banks may be the best way to enlarge the credit supply. But before the RRR is cut, the government may use reverse repos and lower interest rates on the medium-term lending facility.

Debt is a particularly ugly spot, the researchers said. As measured by Fitch Ratings Inc's Adjusted Measure of Total Social Financing, credit to companies, local governments and households rose as much as 15 percent in 2015 in the Chinese mainland, more than double its GDP growth.

International investors have a growing appetite for office buildings in China's key cities like Beijing and Shanghai due to bullish demand, a survey from international real estate service provider CBRE showed on Thursday.

About 35 percent of investors surveyed showed their interest in office buildings in the country's first tier cities this year, compared with 20 percent in 2015. A total of 25 percent showed their interest in the residential sector, 25 percent in the logistics sector and 12 percent in the retail sector.

"Though international investors have more competition from domestic ones, China remains one of the most popular investment destinations in the Asia-Pacific region, following Australia and Japan," said Gran Ji, executive director of capital markets for northern China at CBRE Group,

Meanwhile, with public awareness of environmental protection increasing and green building initiatives on a clear government agenda, the green building concept is increasingly gaining the spotlight in China's commercial building market.

In the 10 select cities CBRE observed, rental premiums of LEED-certified Grade A office space in most cities is in the range of 10-30 percent, compared to non LEED-certified samples. LEED-certified office projects enjoyed higher average rental performance and were in a better position in a weak downward market.

A number of companies listed in Shanghai and Shenzhen have been reducing their holdings since the beginning of May, according to disclosures to the bourses concerned.

Market observers said this paring of holdings may dent small investors' confidence and hurt prices of the stocks concerned.

In the first seven trading days this month, large shareholders sold 543 million shares worth 14.02 billion yuan ($2.13 billion) in various companies, according to the China Securities Journal.

This almost matched similar selling through all of May, which saw big shareholders' sales of 435 million shares worth 14.43 billion yuan.

Each large shareholder holds more than five percent in a company's stock.

According to the Journal, 45 companies, through 52 filings, disclosed large shareholders' plans to sell 1.216 billion shares worth 29.14 billion yuan or $4.43 billion.

They will sell these shares gradually in three months to a year as per regulations. A big shareholder is required to disclose any substantial paring of its holding and complete such sales within a given timeframe.

Since the beginning of May, big shareholders in nine companies listed in Shanghai and Shenzhen disclosed that they are going to sell all their holdings. Among them, three firms will see big shareholders selling shares worth more than 1 billion yuan within 12 months.

Many of the companies that are seeing selling by large shareholders are small- to medium-cap enterprises in emerging sectors such as biochemicals and high-tech.

For instance, Shanghai Hile Bio-Pharmaceutical Co Ltd, a drugmaker, has seen heavy selling in their counters.

On May 3, the first trading day of the month, shares in Hile Bio-Pharma closed at 42.97 yuan in Shanghai. But by June 1, they fell to 16.37 yuan. They closed at 15.22 yuan on Friday, marking a 65 percent decline since May 3.

Although the meltdown is attributable to the automatic price shrinkage due to the company's 13-for-10 stock split on May 4, the large shareholders' selling is also believed to be a major factor.

A research note from Ping An Securities said quite a number of companies in emerging sectors listed recently, suggesting that large shareholders may be exiting to secure their gains.

Citing filings, analysts attributed the selloff to big shareholders' desire to stay liquid.

A research note from Chang Xin Asset Management said recent paring of holdings had a limited impact on the A-share market so far, given the small size of sales relative to the whole market. But small investors holding shares in these stocks may feel the pinch due to falls in prices.

Zhang Shaofen, 56, a Shanghai-based small investor, said it is understandable if big shareholders like institutional investors reduce their holdings to boost their liquidity. But, if individuals such as company founders or senior executives, or their family members, are behind such sales, it could mean they are cashing out or eager to get rid of the company's shares for some reason.

"Usually, individual large shareholders have close knowledge of a company's profitability, operations and financial situation. If such individuals sell shares in bulk deals, small investors may interpret the move as a sign of erosion of confidence in the company's future."

But brokerages said block deals do not necessarily mean big shareholders are giving up on the company or that they are cashing out or exiting for good.

A research note from Guangfa Securities said some block deals could well be in anticipation of possible mergers and acquisitions. M&A activity usually stands a better chance of success when the equity structure is clear and simple.

Ping An Insurance Group yesterday reported a nearly 40 percent jump in net profit last year on stellar life insurance sales and investment returns.

Ping An, Asia's second-largest insurance company by market value, said its net profit rose 38 percent to 54.2 billion yuan ($8.3 billion) in 2015, the highest since 2003.

Strong life insurance sales and a surge of investment returns partly from the bullish Chinese stock market in the first half of last year helped drive up the profits.

The company reported that premiums for life insurance rose 20 percent to 299.8 billion yuan, and the gross investment returns jumped 80.1 percent to 114.75 billion yuan last year.

Timothy Chan, the group's chief investment officer, told reporters yesterday that he expected more uncertainties this year and would seek more investment opportunities in blue-chip stocks, preferred stocks and fixed assets, especially logistic infrastructure in first and second-tier cities.

Guotai Junan Securities said in a note that Ping An's investment returns this year is likely to fall but its core insurance business remains in good shape.

The life insurance sector has benefited from greater focus on offering protection type of policies than capital-consuming investment-related ones.

The property and casualty sector has also outperformed industrial average in managing costs, the note said.

Analysts also said the group's more than 10 Internet financing branches spanning wealth management, e-commerce, health care consulting, and home sales will bring more revenue as well as clients.

China vows to further open up domestic markets to foreign investors with fewer restrictions as the country's economic reform goes deeper.

"We have largely slashed restrictions to market access to the Chinese market to further lure foreign investment," said Lian Weiliang, deputy head of the National Development and Reform Commission, at a news briefing on Wednesday.

He added that restrictions over the proportion of foreign equity have also been further eased in the foreign-invested projects, especially in the service and manufacturing sectors.

"It's very important to set up a new system for an open economy and create a business environment that is more legalized and more international", he said. "And the country's efforts have paid off."

China's foreign investment has bucked the trend of the cooling global economy to increase 9.2 percent during January-August, among which investment in the service sector surged 20.1 percent from a year earlier.

In March, the country halved the number of industries that used to be off-limits to foreign investors, another big step toward a more favorable business environment amid reforms.

Lian said the country has been gradually shifting to the "negative list" approach to better regulate market access and encourage foreign investment.

The negative list, which identifies sectors and businesses that are off-limits for investment and allows investment in all other sectors, was first announced in September 2013 in the Shanghai Free Trade Zone and then extended to the other three FTZs in Guangdong, Tianjin and Fujian a year later.

Retail investors check share prices at a brokerage in Qingdao, Shandong province, on Aug 18. The benchmark Shanghai Composite Index plunged by 6.15 percent to close at 3,748.16 points.

Share prices plunged on Tuesday as jittery investors resorted to huge sell-offs on concerns that the government has halted its plan to buy equities to stabilize the market.

The benchmark Shanghai Composite Index sank by 6.15 percent, or 245.5 points, to close at 3,748.16. It was the biggest loss in three weeks since an 8.5 percent dip on July 27.

State-owned enterprises, which are expected to undergo major ownership reforms, led the decline with more than 1,600 stocks on both the Shanghai and Shenzhen bourses tumbling by the 10 percent daily limit.

The market slump came after the country's securities regulator said on Friday that the State-owned margin lender China Securities Finance Corp will not step into the market unless there are abnormal market fluctuations.

The regulator's announcement has been widely interpreted as a signal that the government is ending its direct intervention and letting the market mechanism play a bigger role after the benchmark rebounded by about 15 percent from a bottom on July 8.

But Tuesday's decline underscored that investors' sentiment remained fragile as a slowing economy and the depreciation of the yuan continued to weigh on the market.

Jiang Chao, an analyst with Haitong Securities Co, said that the monetary authorities appear to be in a dilemma over the easing policies and the monetary uncertainty may continue to destabilize the market.

"There is need to inject more liquidity as the depreciation of the yuan is likely to trigger capital outflows. But the market rescue efforts have led to a surge in the broad monetary supply which created a policy dilemma," he said in a research note.

The recovery of the country's home prices has also dimmed investors' expectation for further monetary easing, some analysts said.

Li Daxiao, chief economist at Yingda Securities Co, urged investors not to overreact to Tuesday's decline, but warned about the risk of excess valuations of companies in the military industry.

Share prices of listed military-related companies have ballooned substantially ahead of the country's military parade commemorating the end of World War II and on expectations of major reforms.

The average valuation of the industry has been ranked the top among all industries with the price-to-earnings ratio of most companies exceeding 100 times, according to estimates.

"There is a big risk of the bubble bursting in military-related stocks, which is even worse than the startup board," Li said.

Chinese shares bounced back from early morning losses and closed sharply higher on Tuesday following a nightmarish two weeks.

After a two-week tumble, China stocks surged on Tuesday as a series of government measures bolstered investor confidence.

The CSI 300 Index, which monitors share prices of the largest companies listed in Shanghai and Shenzhen, jumped by 6.7 percent to 4,473.00 points, while the Shanghai Composite Index gained 5.6 percent to 4,277.22 points, the highest daily gain since 2009. The Chinese A-share market has fallen by about 20 percent from its peak in mid-June.

A series of measures to maintain market confidence have been introduced since Friday, including draft rules to allow pension funds to buy stocks, funds and equity-backed pension products.

That could channel more than 1.5 trillion yuan ($242 billion) into equity-backed investments, including about 15 billion yuan directly into the A-share market, Shanghai Securities News reported.

Pension funds may not be allowed to buy stocks before the end of this year, according to the draft rules, but investor confidence has been bolstered by the news, pushing up sentiments in the A-share market, researchers said.

"Although the pension funds may not help the A-share market in the short term, the draft measure, along with the recent cuts in the reserve requirement ratio and interest rates, show intentions to stabilize market incentives," a research report by Haitong Securities said.

The country's fund association said the falling prices presented valuable buying opportunities and it urged hedge fund managers to make rational investment decisions.

"Confidence is more important than gold," the Asset Management Association of China said on Tuesday. "Sunshine always follows rainy days," it added.

Brokerage firm Guotai Junan Securities said it would lower margin requirements for certain blue chips to lever-age investment values.

Leading asset managers echoed the sentiments to convince investors that the bull market was not yet over.

Managers of private equity funds also stated that they believe the market will continue to be bullish.

"From a mid-to long-term perspective, the foundations of the bull market have not been shaken. Instead, they have been consolidated amid corrections, and the market will be bullish in a more stable and lasting manner. We believe it is a rational decision and good timing for value investing," said Wang Yawei, president of Shenzhen Qianhe Capital Management.

Technology companies and brokerage stocks rallied on Tuesday, with an average rise of the sectors reaching about 8 percent.

Mainland stock markets tumbled in late afternoon trading Thursday as investors cashed in on gains from earlier in the day.

The Shanghai Composite Index fell 3.46 percent or 162.37 points to 4,527.78 points Thursday. The Shenzhen Component Index lost 3.80 percent or 619.87 points to close at 15,692.44 points.

The CSI 300 Index of the biggest companies traded in Shanghai and Shenzhen fell 3.56 percent or 173.61 points to 4,706.52 points.

A total of 1.55 trillion yuan ($249.71 billion) changed hands on the two bourses, up from the previous trading day's 1.49 trillion yuan.

News about the central government's decision to scrap the debt-to-loan ratio for banks sent heavily weighted financial stocks soaring during morning trading, pushing the Shanghai benchmark above the 4,700 point mark by midday.

However, in the afternoon session, banking heavyweights took a hit as cautious investors decided to take some profit, dragging down the Shanghai index.

Despite the good news about the debt-to-loan ratio, the banking sector still suffered losses, indicating weak investor sentiment, New Times Securities said in a note Thursday.

The regulatory approval of a new batch of IPOs may have also contributed to the fragile sentiment.

The China Securities Regulatory Commission said late Wednesday that it has approved 28 new IPOs, which media reports said would freeze more than 1.4 trillion yuan.

The coal and nonferrous metal sectors were among the worst performers Thursday. Gansu Jingyuan Coal Industry and Electricity Power Co, Shaanxi Coal Industry Co, Anhui Jingcheng Copper Share Co and Shenghe Resources Holding Co fell 9.46 percent, 9.04 percent, 9.45 percent and 9.20 percent, respectively.

ChiNext, the country's NASDAQ-style board for high-tech and emerging start-ups, slumped 5.23 percent or 177.02 points to close at 3,206.38 points.

Japanese fashion manufacturer and retailer UNIQLO opened its first store in Ma'anshan City in east China's Anhui Province earlier this year, thanks in part to China's campaign to streamline administration.

With the help of a local subdistrict office, Fast Retailing (China) Trading Co., Ltd. managed to obtain a business license, despite lacking an important document.

"We needed the department store's certificate of title for our business license before making orders and employing people. However, the construction work was not done yet and we didn't have much time to wait," said Qiang Lili, a manager with the company.

The company went to the city's government affairs service center for help and learned that Ma'anshan had just launched a new regulation simplifying business location registration.

According to the new rule, which went into effect on December 31, 2014, those who temporarily lack the certificate of title for business license applications can submit proof of location from the local subdistrict office instead.

"We know the streamlining campaign is going on and we experienced the convenience this time. It's encouraging," said Qiang.

In addition to making business registration easier, Ma'anshan has also shortened the vetting period for investment projects. For example, the approval time for industrial projects was slashed from more than 30 to just 17 days.

"Foreign investors came for business opportunities, but the better government affairs services gave us more confidence," Qiang said.

In the first quarter of this year, Ma'anshan City's utilization of foreign direct investment reached 347 million U.S. dollars, up 12.8 percent year on year.

Similarly, foreign direct investment in other provinces also achieved steady growth in the first quarter of this year.

In Hubei, utilization of foreign investment hit 2.24 billion U.S.dollars, up 10.1 percent year on year. In Jiangxi, utilization of foreign investment reached 2.21 billion U.S. dollars, up 10.3 percent, and in Tianjin, it hit 6.37 billion U.S. dollars, up 10.5 percent.

Since 2013, China's State Council has been streamlining government administration to reduce government control and unleash market vitality.

In two years, more than 700 approval items controlled by central government departments have been canceled or delegated to lower agencies, more than a third of all approval items handled by the State Council prior to streamlining.

Following the steps of the central government, local administrations also explored ways to simplify the approval process and lower the threshold for investment.

On May 12, Chinese Premier Li Keqiang again called for more efforts to streamline administration procedures at a national teleconference attended by senior and mid-level officials.

Li said the government will cancel more approval items, make business registration easier and waive administrative charges it deems unreasonable this year.

"It is a positive trend," said Wang Yukai, a professor from the Chinese Academy of Governance. "But to create a better foreign investment environment in the long run, the government management system should also be improved."

China's first funding program aimed at providing finance exclusively to female entrepreneurs has been launched by a group of heavyweight finance organizations.

International Finance Corporation, Ant Financial Services Group, a subsidiary of Alibaba Group Holding Ltd, and Goldman Sachs Foundation will jointly run the program.

The funds to be offered - through loans from Ant Financial Services' microcredit arm Ant Credit, with the backing of IFC and Goldman Sachs - are expected to benefit around 46,000 female entrepreneurs. The program has 500 million yuan ($80.13 million) available to it.

"The market opportunity for financial products designed specifically for female entrepreneurs is huge", said Ji Min, deputy director of finance research institute of the People's Bank of China, with few, if any, currently on the market.

Karin Finkelston, IFC's vice-president for Asia Pacific, said women starting out tend to invest their business knowhow in different directions from their male counterparts, for instance into family-oriented fields, including children's education and family healthcare, which often represent appealing prospects for financial companies.

On the flipside, however, research shows that women entrepreneurs have traditionally found it hard to get financed, and if they do, the amounts approved can be tiny, even as little as 10 percent of what they are seeking, said Finkelston.

She claims her own organization, however, is female-friendly when it comes to financial support, a philosophy shared with its partner in the new fund, Ant Financial Services, which already has a strong client base of female-led startups, many of which run their businesses on Alibaba's online market platform.

Yu Shengfa, Ant Financial's vice-president, said that just over half of the business owners using Alibaba's online market platforms are female.

IFC provided 1 billion yuan in senior loan funding to Ant Credit in 2014 which it loaned, in turn, to 62,000 micro-, small and medium-sized enterprises across China.

Online-based Ant Credit's role is to evaluate potential borrowers' creditworthiness based on their transactional and behavioral data, without the need for deposits, it says, or using any assets as guarantees.

By the end of March 2014, Ant Credit had loaned 190 billion yuan for more than 700,000 small and micro-business.

Ding Qinyan, 26, an Ant Credit customer, started her online apparel store on taobao.com when she was still in college.

Her first online business loan was granted in 2013, for the deposit needed to join an online sales campaign.

Based on Ding's sales records and credit history, the application was approved within a minute at an interest rate of 0.0005 percent per day.

Foreign banks in the Chinese mainland continue to be optimistic about their future performance going forward, according to a report released by Ernst & Young Greater China here on Tuesday.

"The regulatory landscape continues to challenge foreign players, while alongside are also the opportunities generated from the evolving RMB internationalization and interest rate liberalization," Managing Partner of Financial Services at Ernst & Young Greater China Jack Chan said.

In terms of total assets, based on the China Banking Regulatory Commission's 2013 annual report, foreign banks' market share in China was just 1.73 percent as of Dec. 31, 2013, below the market share of 1.84 percent back as of Dec. 31, 2004.

According to the report, foreign banks in China expect a modest improvement in performance over the next three years. Half of the participants predict a slight improvement, while 45 percent of them hope to see a significant improvement.

Despite the optimism, the report said many of the CEOs that they have surveyed find the market challenging and complicated by issues surrounding financial reform and economic uncertainty.

The most difficult regulatory challenge in 2014 was access to the bond market, followed by the myriad of rules and regulations and capital and liquidity constraints, Chan said.

As China's economy evolves, the foreign banks believe it is critical that the capital markets open up and the foreign banks participate more fully in the bond market, he said.

The report is based on interviews with 41 foreign bank CEOs and senior bank executives based in Shanghai, Beijing and Hong Kong and conducted during August and September 2014.

It examines the challenges facing players as they push to improve their footprint in China. It also looks at the trends and regulatory reform that is shaping the market and offer insights into ways of driving growth now and in the future.

This year's "Invest in Beijing" Fair, which aimed at attracting more investment to the city's high-end industries, opened in Beijing on Dec 9.

As an annual investment promotion event taking place in the city since 2009, this year's Invest in Beijing attached more emphasis on social and private capital's involvement in its cutting-edge sectors, such as the new generation of information technology, biological medicines, as well as energy conservation, and environmental protection.

The organizing committee also set up a service station to offer face-to-face counseling for potential investors and companies in various fields, such as laws and regulations, investment environment and planning of industries.

Representatives from the city's governmental departments, including the commission of science and technology, commission of education and commission of development and reform, came to explain the investment policies at the station, as did the investment promotion organizations from all the districts and counties of Beijing, as well as the city's major industrial clusters —Zhongguancun Science Park, Beijing Economic-Technological Development Area and Beijing Tianzhu Free Trade Zone.

At the Fair, the Beijing Municipal Commission of Development and Reform released a batch of pilot projects which call for social investment in public services and utilities, and the new list of industries that are prohibited or limited by the municipal government.

The China National Gold Group Corporation, the country's biggest gold producer, Nanshan Group, a chemical firm based in east China's Shandong province, and China Energy Conservation and Environmental Protection Group signed contracts worth 31.1 billion yuan ($5 billion), higher than the 27.9 billion yuan at the contract signing ceremony during last year's "Invest in Beijing" Fair.

This year's Fair highlighted the promotion of projects in high-end sectors and strategic emerging industries to help advance the city's economic restructuring and strengthen its role as the country's center of politics, culture, global exchanges and scientific and technological innovation.

More than 500 representatives from state-owned enterprises, large private companies, multinational corporations, leading players from different industries, as well as chambers of commerce from China and abroad attended the fair.

Ma Peihua, vice-chairman of the Central Committee of the China National Democratic Construction Association, Niu Youcheng, a member of the Beijing Municipal Party Committee and the city's vice mayor Cheng Hong were present at the Fair.

Chinese shares continued rising on Monday, with the benchmark Shanghai index jumping over 2 percent to regain the 3,000-point psychological mark, the first time since April 25, 2011.

China's State Council, the Cabinet, has unveiled a series of measures to promote independent innovation and encourage entrepreneurship.

According to a statement released Wednesday after a State Council executive meeting presided over by Premier Li Keqiang, the country must expand pilot programs for independent innovation and seek "multiplication" in social enthusiasm for innovation and entrepreneurship with the "subtraction" of government grip.

Since 2010, China has experimented with policies promoting scientific and technological innovation in the Zhongguancun National Innovation Demonstration Zone in Beijing.

The government will roll out six Zhongguancun policies to the rest of country, including new rules on research funds and equity financing for small enterprises.

There will also be some tax preferences for innovation demonstration zones. For instance, the income tax for equity incentives given to technical and managerial employees can be paid by installment within five years, according to the statement.

The statement added that China will do research in Zhongguancun concerning overseas talent, diversify corporate financing channels and support the construction of bonded warehouses.

China has six national innovation demonstration zones and plans for more.

A total of 547 angel investment deals have been signed in the first 11 months in China totaling $341.4 million, a 69.6 percent increase compared with the whole last year, according to a report of Zero2IPO Group on Wednesday.

Ni Zhengdong, chairman of Zero2IPO Group, said that lots of angel investment institutions and funds were set up in 2014, stimulated by the rising number of start-up deals.

Ni said 55 new angel investment funds have been set up this year and their scale has reached $700 million.

Venture capital companies also have focused on deals at early development stage and about 60 percent of their funds are invested in these deals, said the report.

Vice-Premier Wang Yang (center) holds a golden key to signal the opening of the 18th China International Fair for Investment and Trade on Monday.

Service sector will be steadily opened-up

China will further open its investment and cooperation system and optimize the environment for foreign investment, Vice-Premier Wang Yang said on Monday.

"China's policy of investment and cooperation will be kept in the long run, although the inbound and outbound investment situation is witnessing big changes," said Wang.

Wang made the remarks at an international investment forum during the 18th China International Fair for Investment and Trade, which opened on Monday in Xiamen, Fujian province.

The annual international investment event provided more than 30,000 potential investment projects and attracted companies and government organizations from 54 countries and regions, according to the organizers.

The competitiveness of the domestic companies in the world's second-largest economy has grown remarkably and there are fundamental changes that foreign investment will have to adapt to, said Wang.

Traditional manufacturing businesses are returning to developed countries and developing economies are boosting efforts to introduce foreign investment, which has affected the international capital flows, he explained.

But he said, "We will not ignore the role that foreign investment plays in the Chinese economy and will not reject foreign-invested companies."

However, according to Wang, China will not simply introduce foreign capital in the future, instead it will look to introduce advanced technology, managerial experience and intelligence resources and build various market-oriented systems in accordance with international practices.

"We will relax the restrictions on foreign investments, and steadily open-up the finance, education, culture and healthcare markets," Wang said.

According to Wang, the Chinese government will strengthen efforts to protect foreign investors' interests by tackling the problems of monopolies, commercial bribery and copyright infringements to improve the domestic investment environment.

This year marks the 30th anniversary of China's first group of national-level economic and technology development zones, and Wang said such zones need to be further transformed and upgraded.

"China's economic and technology development zones should be driven by innovation and they should make better use of foreign investment for their future success," Wang said.

Such zones are also being encouraged to enhance communication with their foreign counterparts to promote new growth models, according to Wang, who pointed out that China's 215 national-level economic and technological development zones realized one-fifth of the country's foreign investment and one-eighth of its GDP in 2013.

Commerce Minister Gao Hucheng said the Chinese government will adhere to its policy of mutual benefits and strive to build an open economic system, actively working with international organizations and governments to promote a healthy recovery of the global economy.

"The annual international investment fair has proved to be an efficient platform to create investment and cooperation opportunities. I hope all participants will take full advantage of this event to boost investment and cooperation," Gao said.

Gao urged domestic economic and technological development zones to play an active role in boosting international investment.

"Such development zones have not only promoted the country's development they have also become an important platform for international investment," Gao said.

By attracting foreign direct investment, catalyzing the development of industrial clusters and adopting new technologies and management practices, the economic and technology development zones have played a key role in China's economic success, said Cai Jinyong, chief executive officer of the International Finance Corporation.

"Successful programs, which can contribute to the long-term future of the zones, are the ones that focus on market demand and are integrated into the domestic economy. The development of any zone should be based on an identified market opportunity," he said.

Zhaocai Bao was designed to connect the investment activities of 300 million individual investors in China with the financing needs of 1 million small and medium-sized enterprises. Its annual sales volume is expected to reach 1 trillion yuan in the next two to three years.

China's largest online payment provider Alipay announced the official launch on Monday of Zhaocai Bao, an Internet finance platform that aims to reshape financing for small businesses to the tune of 1 trillion yuan ($162 billion) within three years.

For investors, the Zhaocai Bao (Money-drawing Treasure) platform offers products with average annualized returns of between 5.4 percent and 6.9 percent. In comparison, the annualized return rate for Yu'ebao, China's largest money market fund, has fallen to about 4.1 percent since its launch in June 2013, while China's one-year fixed-term deposit rate is 3 percent.

Zhaocai Bao is different from Yu'ebao as its major product consists of loans to small businesses, while the latter is a money market fund managed by Tianhong Asset Management.

"We aim to connect the investment activities of 300 million individual investors in China with the financing needs of 1 million small and medium-sized enterprises," said Yuan Leiming, CEO of Zhaocai Bao.

In addition to the higher return rate, Zhaocai Bao has set the threshold for investors at a mere 100 yuan. And risk of bad loans is underwritten by insurance companies.

Although products on Zhaocai Bao are bound by a fixed maturity ranging from three months to three years, investors are allowed to "liquidate" the product before its due date by transferring it via the platform to other investors, after paying a 0.2 percent transaction fee, so they can still enjoy the original annualized return rate.

At the borrowers' end, Yuan said the financing cost for SMEs on Zhaocai Bao is about 7 percent, much lower than the average 18 percent financing cost for small and medium-sized companies, and the time it takes to borrow money can be as short as 10 seconds.

"The traditional approach for banks is to collect small pieces of capital, put them into a pool and then go search for borrowers, which pushes up the overall cost," Yuan said.

"Our capability of cloud computing and big data processing enables direct integration of every piece of capital with the borrowers, which significantly reduces the cost," he said, adding that the average Zhaocai Bao deal totals around 200,000 yuan and that Zhaocai Bao takes a 0.1 percent transaction fee on every deal.

Since a test run in April, Zhaocai Bao has already sold 11.4 billion yuan in financial products to a half-million customers, according to its official Web page, which is linked to Taobao.com. Forty financial institutions are currently working with the platform, while another 100 are waiting in the line.

By comparison, Yu'ebao currently has about 100 million users with transactions totaling 600 billion yuan.

"The aim for Zhaocai Bao is to reach 1 trillion yuan annual sales volume over the next two to three years," Yuan said.

According to independent statistics, China is home to 800 online lending websites, with close to 100 billion yuan worth of transactions in 2013.

Chen Jin, CEO of China's first online insurance vendor, Zhong'an Insurance - which is also one of Zhaocai Bao's partners - said the transition from Yu'ebao to Zhaocai Bao reminds him of Taobao.com and Tmall.com, and marks a strategic transformation for China's largest e-commerce conglomerate, Alibaba Group Holding Ltd.

Wu Zhigang, chief information officer for China National Investment and Guaranty Co, said that as most of China's individual investors are vulnerable to risks, a platform like Zhaocao Bao could effectively lower those by offering a high degree of information and comparisons.

"It's a good example of inclusive finance," he said.

Shanghai announced new measures to encourage private investment in small and micro companies, the latest move to boost venture capital in the city.

The local government said in an online statement yesterday that it is striving to build Shanghai into an international venture capital center.

By 2017, the city is expected to accumulate an additional 100 billion yuan (US$16 billion) in capital for investing in innovative companies. The city also forecasts attracting an extra 1,000 venture capital professionals and 100 influential venture capital firms in a bid to help start-up companies receive the guidance they need.

The city's Venture Capital Investment Guidance Fund increased 1 billion yuan annually in the past three years. The fund invests in targeted sectors and also serves as a guide for privately owned funds. District and county-level governments are encouraged to establish similar funds.

Shanghai plans to simplify foreign investment procedures in domestic venture capital firms by piloting a foreign exchange settlement trial.

State-owned enterprises are also being encouraged to form VC firms.

The new measures are part of the government's efforts to support small and micro companies in Shanghai. Apart from direct financing solutions, Shanghai has also encouraged banks to lend money to cash-strapped small companies.

Executive Deputy Mayor Tu Guangshao's said earlier this week that Shanghai will improve fundraising services for small and micro companies.

There were about 370,000 small and micro enterprises in the city as of the end of 2013. They accounted for 97.1 percent of incorporated companies and provided 54 percent of the city's jobs.

Elsewhere, the People's Bank of China's Shanghai Headquarters agreed to loan 1 billion yuan (US$161.1 million) to Shanghai Rural Commercial Bank.

A booth showcasing Guangdong-based businesses at an expo in Guangzhou, the province's capital. Guangdong is currently seeking central government approval of a Guangdong-Hong Kong-Macao free trade zone. Provided to China Daily

Southern province aims to capitalize on links with neighboring regions

The Guangdong provincial government has vowed to realize liberalization of trade in services in the South China province and its neighboring Hong Kong and Macao special administrative regions by this year through CEPA (the Closer Economic Partnership Arrangement).

"It is a task assigned to Guangdong by the State Council," Vice-Governor Xu Shaohua told a Monday news conference. "We are striving for the central government's approval of specific preferential projects and policies.

"At the same time, we will open up more fields for investors from Hong Kong and Macao, including those in the service sector, using a 'negative list'."

Xu also said Guangdong is currently seeking central government approval of a Guangdong-Hong Kong-Macao free trade zone.

"We are talking with ministries about the construction plan and preferential policies," Xu said.

At a joint meeting between Guangdong and Hong Kong in September, Guangdong Governor Zhu Xiaodan said that the new free trade zone will focus on liberalizing trade and building a platform for the cooperation in the high-end service industry, capitalizing on Hong Kong's reputation as a premier international finance center.

A focus on liberalizing trade in services will set this free trade zone apart from the China (Shanghai) Pilot Free Trade Zone, which focuses on financial openness, according to Lin Jiang, dean of the public finance and taxation department of Lingnan College at the Guangzhou-based Sun Yat-sen University.

"The volume of trade in services has surpassed that of trade in goods in international trade," said Lin, who also is vice-director of the university's research center of Pearl River Delta, Hong Kong and Macao.

"The Guangdong-Hong Kong-Macao free trade zone is the pilot zone in China to make breakthroughs in fields such as offering tax refunds for service exports, which are intangible goods," Lin said.

"Liberalizing trade in services also answers the province's need for upgrading and transforming its processing trade. That's why the province doesn't stress liberalizing trade in goods," said Lin, who gave as examples of modern service industries high-end design and management consultancies.

Zhu also noted at the September meeting that the new free trade zone will help adapt the mainland's financial management mechanism to international practices in Hong Kong.

Lin said it will benefit the province to make business laws and regulations according to international practices in Hong Kong, since that will be one of the free trade zone's major incentives for international investors, compared with the Shanghai free trade zone.

Xu listed several items on the Guangdong government's action plan for liberalizing trade in services in the zone. They include: relaxing or canceling restrictions on Hong Kong and Macao investors' qualifications, shareholding ratios and/or scope of business; promoting mutual attestation of professional qualifications; and exploring possible business modes for individual professional services.

"The Hengqin New Area in Zhuhai, the Nansha New Area in Guangzhou and the Qianhai experimental zone in Shenzhen are the three areas opened up for Hong Kong service industry," Xu said. "In addition, Zhongshan, Foshan and Dongguan cities are proposing platforms to attract investors from Hong Kong and Macao."

The latest announced preliminary plan of the Guangdong-Hong Kong-Macao free trade zone includes the three new areas and experimental zones plus Guangzhou Baiyun International Airport, taking up an area of more than 1,300 square kilometers, which is 47 times of that of the Shanghai free trade zone.

Lin warned that it would be a challenge for the Guangdong government to figure out a way to coordinate so many areas.

Part of the reason for Monday's news conference was to interpret the provincial Party committee's suggestions for Guangdong's implementation of the central government's comprehensive reforms.

The suggestions were approved by the Third Plenum of the 11th General Assembly of the Guangdong Provincial Party Committee, held last weekend in Guangzhou.

"To further open up the province, Guangdong will also strengthen its cooperation with the US and European developed countries by establishing overseas offices of economic trade in these countries," Xu said, adding that an office in Germany already has been set up.

"This is to get in touch directly with big multinational corporations to attract investments and technologies that will assist in upgrading and transforming Guangdong's economy," he said.

Guangdong, the largest Chinese trader for ASEAN countries, also will further promote its foreign trade with these countries and spearhead the central government's strategy of building the Maritime Silk Road of the 21st century.

Yu'ebao (Leftover Treasure). an Alibaba personal finance product, had 43.03 million users with aggregate deposits of 185.3 billion yuan (30.4 billion U.S. dollars) at the end of 2013.

Yu'ebao is an online fund established by Alipay, China's largest third-party payment platform and subsidiary of Alibaba, part of China's biggest online shopping mall, togetheer with the private Tianhong Fund.

"Investments" in the fund have brought 1.79 billion yuan in profits to users since its launch in June 13 this year, according Alipay on Wednesday.

Yu'erbao allows Alipay customers to invest any balance in thier accounts with the Tianhong Fund and has already become the largest fund of its kind in China.

Its users come from all over China: more than 2,000 counties and cities in 31 provincial-level administrative regions with an average deposit of 4,307 yuan per user.

The Shanghai Stock Exchange has started simulated trading in equity options, part of a drive by regulators to expand investors' risk-hedging options.

Simulated trading began on Thursday morning, the SSE confirmed to China Daily, and more than 60 securities firms took part.

The shares of Ping An Insurance Group Co of China Ltd, SAIC Motor Corp Ltd, the China 50 ETF and the Shanghai SSE180 ETF were used in the exercise.

The exchange-traded funds track the top 50 and top 180 yuan-denominated stocks on the SSE.

In early December, SSE Chairman Gui Minjie told a forum that preparations "are almost complete" for launching options on individual stocks.

Single-stock options are essentially equity derivatives, giving buyers the right - but not the obligation - to buy or sell a stock at a fixed price within a certain period or on a set date, said Tony Sun, a strategist with Shanghai Tebon Fund.

The options "will allow investors to hedge their positions more effectively. We have limited financial instruments now, but as reform continues and China's financial markets become more global, innovation is a necessity," said Sun.

China introduced equity index futures in 2008, and those instruments remain the only equity derivatives in use. The regulators expanded a pilot program in August 2012 to boost margin trading.

In February, a new pilot was launched to enable securities lending and short-selling of blue chip stocks.

"Individual stock options can be seen as a form of insurance that reduces trading risks. However, options trading prices can be very volatile. Investors still have to be aware of the risks caused by leveraging and volatility," said Xiong Jinqiu, an independent financial commentator.

The China Securities Journal reported earlier this month that the SSE may officially introduce formal equity options trading in April. Some analysts believe the move is meant to stimulate investment in China's blue chips, which have been trading at depressed valuations.

The average price-earnings ratio for the SSE, where most of China's blue chip companies are listed, stands at only 11 times 2012 earnings. On the Shenzhen exchange, which is dominated by small-cap companies, the average ratio is 28.

Change for WMPs

Another development involving the liberalization of the financial markets took place on Wednesday, this one involving wealth management products.

WMPs will be allowed to invest directly in fixed-income products on domestic securities markets, the China Securities Depository and Clearing Corp announced.

The notice said that WMPs will be allowed to open accounts at the Shanghai or Shenzhen stock exchanges. Investment will be confined to fixed-income products, including exchange bonds, credit-backed securities and preferred shares. The latter are often classified as fixed-income products because of their fixed dividend.

Analysts said that the move on WMPs is intended to provide a bridge "linking" interbank market liquidity with the nation's stock exchanges, even though WMPs can't make direct stock investments at this stage.

The outstanding balance of WMPs stood at 9.92 trillion yuan ($1.63 trillion) as of Sept 30, the China Banking Association said earlier this month.

The figure has more than doubled since the end of 2011, and it's up from 7.1 trillion yuan at the end of 2012.

The Shanghai Gold Exchange plans to launch an international board in the pilot free trade zone to attract offshore yuan capital to invest in the Chinese mainland's gold market, a senior official said yesterday.

"We want to tap the opportunity from Shanghai's pilot free trade zone and launch an international board to attract offshore yuan to invest in the mainland," Xu Luode, chairman of the bourse, said at a precious metals forum in Shanghai yesterday.

The board will ensure that the onshore gold market correlates with the global market, said Xu, without disclosing a timetable for the launch.

Financial reforms in the free trade zone will allow free fund transfers between the zone and offshore markets for the first time, according to a directive issued by the People's Bank of China on Monday.

The Shanghai exchange will establish a system that publishes daily rates at which selected market participants are willing to lend gold in the mainland interbank market, which is similar to the Gold Forward Offered Rates by the London Bullion Market Association, according to Xu.

The world's biggest exchange for physical gold in Shanghai will also offer custody for the metal to retail investors.

The Chinese mainland will continue to levy anti-dumping duties on methyl ethyl ketone (MEK), an industrial solvent, from Japan and Taiwan for another five years, the Ministry of Commerce (MOC) announced on Wednesday.

The decision was made after a one-year review and will come into effect on Thursday.

The Chinese mainland started to levy tariffs ranging from 9.6 percent to 66.4 percent on MEK from Japan, Taiwan and Singapore on Nov. 22, 2007.

When the five-year anti-dumping measures expired last year, Singapore was delisted, while the other two regions came under review.

After the review, the MOC said domestic producers may again suffer losses to MEK from Japan and Taiwan if the anti-dumping duties were lifted.

MEK is a solvent widely used in making paints, dyes and lubricants.

Where’s the money going? The Ministry of Commerce gave a clearer picture with a press conference introducing foreign direct investment into China on Nov. 18.

First of all, China is on track for a big shift. Very soon, Chinese companies will be investing more money overseas than foreign companies bring to the mainland. In the first 10 months of the year, China nabbed $97 billion, up 5.8 percent. Meanwhile, outbound investment reached $69.5 billion, growing at a much more rapid 20 percent. “The trend for Chinese companies going abroad has just started,” said Zhang Yuliang, chairman of Greenland, a real estate developer, in a recent interview with Bloomberg News.

Who’s investing in China? The biggest surge is from the European Union, totaling $6.4 billion January through October, a 22.3 percent increase. U.S. companies, too, upped investment by 12.4 percent to reach $3 billion. And Japanese enterprises put in $6.5 billion, slightly more than the EU sum, a 6.3 percent rise. The largest amount came from Hong Kong due to its historical entrepot role; that totaled $63.5 billion, an increase of 10.5 percent.
STORY: China's Stock Boom Isn't Benefiting Foreign Investors

“We can see that foreign investment from Asian countries, the European Union, and the U.S. all kept relatively fast growth in the first 10 months,” Commerce Ministry spokesman Shen Danyang told reporters in a press briefing.

China’s service industries were the biggest draw for foreign investment, pulling in $50 billion, up about 14 percent in the first 10 months. That’s good news, with Beijing aiming to lift the proportion of its economy made up of the tertiary sector from today’s 45 percent to 47 percent by 2015.

Not surprising, given rapidly rising labor and other costs, investment in manufacturing fell by 5.2 percent, to $38 billion, making up just over two-fifths of the total. Investment in agriculture, animal husbandry, and fishery businesses dropped by 2.6 percent, to $1.4 billion.
STORY: The Trouble With China's Reform Plan

Eastern China continues to bring in the most investment, $81.4 billion in the first 10 months, up 6.0 percent, or about 84 percent of the total. That compares to $8.6 billion in the central part of the country, up 9.9 percent, making up 8.8 percent of total investment.

Meanwhile, western China, home to the restive Muslim region of Xinjiang, didn’t fare well—bad news for Chinese authorities who count on economic development to lessen ethnic tensions. Foreign investment of $7.1 billion was down 1.1 percent and amounted to only 7.3 percent of the total. Nine assailants and two auxiliary police officers were killed in an attack on a police station in Kashgar prefecture, Xinjiang, on Nov. 16, according to Xinhua News Agency.

Coca-Cola says it plans to invest more than $4 billion in China over three years.

David Brooks, president of Coca-Cola’s Greater China and Korea business unit, told Bloomberg earlier this week that the company plans to invest the money between 2015 and 2017 to build factories and add new products to its portfolio. The company is also investing $4 billion in China between 2012 and 2014.

Coca-Cola has been expanding in emerging markets such as Russia and China. It aims to reach $200 billion in revenue by 2020, in part by catering to the rising middle class in emerging markets.

Shares fell a penny to $39.82 in midday trading. The stock has risen 10 percent since the beginning of the year.

Active, growing financial markets and innovations in the sector are making Shanghai more prosperous as a financial hub for the world's second-largest economy, a report released on Monday suggests.

The 2013 H1 Shanghai Financial Prosperity Index, released by Roland Berger Strategy Consultants and the Shanghai Financial Association, shows that the city's financial industry is in good shape to grow.

The analysis covers six dimensions of the industry: markets, institutions, internationalization, innovation, talent and environment.

"Financial markets in Shanghai maintained relatively fast development in the first half of 2013 with a booming fund market, gold market and insurance market.

"The financial innovation index also surged, with more financial products designed and the Free Trade Zone approved by the State Council," said Lian Ping, an executive member of the Experts Committee of the Shanghai Financial Association and chief economist of the Bank of Communications Ltd.

Shanghai's financial industry "has become more stable since 2010, and the growth rate of this sector slightly improved in the first half of 2013", the report said.

The report said that Shanghai achieved more progress than other financial centers, including Hong Kong, Singapore, Mumbai, New York, London and Seoul, in the past six years in terms of the "development index".

The index incorporates indicators of financial markets and the development of the financial environment.

"It is not a comparison of absolute value," said David Ye, partner and vice-president of Roland Berger, lead author of the report.

"It is meant to compare how the financial industry is evolving and progressing in these markets. Shanghai achieved more in the past six years, but Singapore, Hong Kong and Mumbai showed a stronger growth trend in the first half of 2013," he added.

The Shanghai Financial Association and Shanghai United Assets and Equity Exchange also released their Shanghai Merger and Acquisition Index report on Monday.

That report said that during the first half of 2013, there was marked growth of merger and acquisition transactions in primary industry.

Private companies were more active in this market than State-owned ones. Outbound M&A cases surged in May and June, and the quality of the deals improved.

Patrick Becker, chief executive officer of Bexuco Ltd, an M&A project consulting and service company based in Shanghai, said that although Chinese companies have become more willing to pursue outbound cases, they still lack the experience and management skills to handle and execute an overseas investment.

This can lead to strategic mistakes, inappropriate deal structures and overpaying for the target firm, he said.

"But I see a substantial improvement in the past 12 months. Chinese companies are more and more willing to engage foreign M&A advisers acting in their interest," he said.

Investing in Chinese equities is not easy - even the most experienced investors can get their fingers burnt trying to find the right stocks to back in an opaque and volatile market - but one manager has a tip for would-be investors.

Mirabaud Asset Management's Daniel Tubbs has one golden rule to invest successfully in the region - align yourself with whatever the government wants to do.

The group's head of GEM and manager of the $108m Mirabaud Equities Global Emerging Markets fund said he has been choosing his investments according to government policy, backing the property and infrastructure sectors recently after an uptick in state support.

Tubbs (pictured) said the government's spending on infrastructure such as railways is accelerating, while it is becoming more relaxed about the property market after three years spent trying to dampen the bubble.

"Average house prices have increased 6% year on year, in line with wage inflation," said Tubbs. "We bought Yuexiu Property Company in January. It has a business on the eastern seaboard where there is still pent-up demand.

"It is one of the few property companies which has an investment grade rating, leading to a cheaper cost of capital, which is a big advantage for a property company. It has a 5% yield, trades on six times earnings, and has rallied a lot in the last few weeks," he said.

One of the government's long-term aims is to rebalance the Chinese economy towards domestic consumption, and it will do this by boosting income levels, said Tubbs. He owns China State Construction in the fund's top ten holdings as a proxy to this theme.

The manager argued investors are too fixated on economic deceleration in the BRIC countries, especially China, and said a hard landing is not cause for concern as long as the corporate sector remains robust.

Low summer trading volumes have meant swings in sentiment are exaggerated, he added. This has combined with incremental positive data in the developed world to create a home bias, which is why emerging market equities have been at the sharp end of a sell-off in the last few months, said Tubbs.

He is overweight Russia, Turkey, and China because he is still able to find quality companies to own in those markets and, in China especially, he is seeing encouraging signs of stabilisation.

"It is wrong to be pessimistic on China - it was hard for it to continue to grow at 10% a year," he said.

"I am not worried about growth decelerating as long as companies are still doing well. The Chinese companies we hold reported average net profit growth of 38% year on year in Q2, which is not bad considering the consensus forecast for the whole of China was in the teens.

"People have not given the government enough credit that it can manage the recovery."

Over the year to 27 August the Mirabaud fund has lost 2.91% against an average 0.11% gain from the Equity - Emerging Markets sector, according to FE.

China has officially given the green light to setting up a pilot free trade zone in Shanghai, the Ministry of Commerce said yesterday, and an overall plan for the zone will be announced after legal procedures are completed.

“The State Council has proposed to adjust some laws in the free trade zone in an effort to accelerate transition of government functions, explore management of foreign investment through drafting a negative list for foreign investors, and seek innovation in the opening-up model,” according to a ministry statement.

The proposal is pending approval from the Standing Committee of the National People’s Congress, China’s top legislature.

“The free zone will benefit China with new advantages in international competition and provide a new platform for the country to cooperate with other countries and thus help it to explore economic potential and build an upgrading economy,” the statement said.

China plans to suspend some laws on foreign companies and joint ventures in free trade zones, including Shanghai, according to a statement released after a meeting presided over by Premier Li Keqiang on August 16.

The central government approved a draft plan in July, which involves further opening up the country’s service sector, speeding up transformation of trading methods, promoting openness and innovation in the financial sector and building a suitable regulatory system for the zone.

In a free trade zone, goods can be imported, manufactured and re-exported without the intervention of Customs authorities, thus improving convenience and efficiency and facilitating the free flow of commodities and capital.

Shanghai’s current bonded areas allow companies to import goods without paying tax unless they enter the Chinese mainland for sale in the domestic market.

The pilot free trade zone, the first of its kind on the Chinese mainland, will be in the Pudong New Area.

The 28.78 square kilometer area will cover Waigaoqiao Free Trade Zone, Waigaoqiao Bonded Logistic Zone, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone, where a series of preferential policies is already in place.

The Shanghai Financial Services Office said the trial will focus on facilitating trade and investment activities, promotion of cross-border yuan use, and decentralization and improvement of foreign exchange management.

The trial program and implementation will be designed with Shanghai’s own characteristics to pilot China’s new financial reform, opening up and innovation measures, the office said.

Some measures to be implemented in the trial are related to credit asset securitization and foreign direct investment by individuals.

Sun Lijian, head of the Finance Research Center at Fudan University, said: “The approval of the trial free trade zone in Shanghai indicates the government’s resolution to rebalance economic development from a government-led and policy-supported pattern to a deregulated and more market-oriented mode.”

Lu Zhengwei, chief economist with the Industrial Bank, said that building a free trade zone that follows international standards is expected to bring breakthroughs to China’s service industry, which is set to be a new engine for the Chinese economy over the next decade.

China's a big place. The world's most populous country and second-largest economy has become a global star, ranking as the hottest emerging market and an investor target for growth, while previous top economies such as the U.S. and Europe have slowly staggered back from the recession. In China, the present is only part of the story: Growth investors have their eyes trained firmly on this nation's massive opportunity in the future.

But just how big is that opportunity? Let's look at five numbers that sum up China's present and future -- and just how this king of the emerging markets shapes up for investors everywhere.

1. 1.4 billion
China boasts around 1.35 billion people under its flag today, but Thomson Reuters estimates that the country's population will only increase to around 1.4 billion by 2050. This is a country looking at a low-growth environment over the next 35 years as it modernizes and urbanizes -- and it signals a major shift on how investors should look at this emerging market.

For decades, China has translated its massive population's burgeoning potential into double-digit annual economic growth. China's slowdown today is coming as the country faces a pair of demographic challenges that will probably prevent China from achieving its old, eye-popping annualized growth rates again. Indeed, many economists project that India will surpass China as the world's most populous country before then.

Beijing's one-child policy has gutted China's youth, leaving a swelling senior population too heavily reliant on a thin corps of young, productive workers. Thomson Reuters projects that more than 20% of China's population will be above age 65 by 2040, with that percentage growing even higher by 2050. Beijing will be forced to allot more attention and funds away from its current resource-oriented strategy -- one that has given rise to massive state-owned corporations, with many of the largest listed on American markets -- and toward services that can care for its elderly and increase the efficiency of its smaller working class.

Combined with a national birth trend that sees more than 120 boys born for every 100 girls -- one of the highest such ratios among top economies in the world -- China will be hard-pressed to bolster its youth population in the next few decades. But while that will hit the country's long-term growth rates, China does have other statistics firmly in its favor.

2. 651.3 million
China had an estimated rural population of 651.3 million people in 2012, according to figures from the World Bank. That's as many people as the populations of the United States, Russia, Japan, and France combined all living in China's rural fringes that, for the most part, haven't caught up with the country's advances in recent decades.

Urbanization has fueled China's growth, as some of the country's largest cities, from Shanghai to Wuhan, have grown into metropolises large and tall enough to rival America and Europe's biggest cities. As more and more Chinese citizens have flocked to the cities, companies both domestic and foreign have tapped into this source of new, cheap labor as a means to reduce manufacturing costs and boost their balance sheets.

But the face of China's urbanization is changing. The cheap "made-in-China" era is coming to an end as labor costs rise and companies look for cheaper means of production. Increasingly, China's leading companies of the future will need to tap into the nation's growing urban population not as a source of labor, but as a massive consumer market unrivaled on a global stage. This strategy's already paid off in a big way for international leaders in the auto industry that have tapped into China's burgeoning auto market as the revenue base of the future.

Yum! Brands (NYSE: YUM ) is one company that's already hitched its wagon to China's urban potential, for better or worse: Yum!'s KFC and Pizza Hut brands have thrived in China's market, but a 13% year-over-year same-store sales decline in July hammered the stock recently. Consumer stock investors should expect more hits and misses as companies look to cater to this lucrative market in the years to come.

3. 624 million
Not every industry is still emerging in China, however: The materials industry has come to be dominated by China lately, as exemplified by the 624 million tonnes of steel the nation used in 2011 alone. That was more than six times the amount of steel that the U.S., the second-place nation, used -- and China further beat a second-place America six times over in steel production for 2011.

It's a symbol of how China's investment in its growing nation has fueled its global ambitions -- and also a sign of how those ambitions can be a poison for investors. A caustic mix of oversupply and weak demand in the steel industry has taken down America and Europe's top steelmakers, which have ceded the lead in the industry to China's state-run behemoths, such as Wuhan Iron and Steel.

Wuhan's stock has suffered as a result, but the contagion has plagued former titans of the industry. China's quest to lead materials industries, combined with the general economic slowdown in the wake of the recession, has led to lean times in the materials sector. U.S. Steel (NYSE: X ) in particular has seen its stock fall more than 40% over the past two years, and the company's earnings have turned into the red for the past three fiscal years. Beijing has ramped down production across its state-run companies this year as a result of its slowdown, but China's materials giants are still dominating this hard-hit sector.

Aluminum and other industries have fared just as poorly, as oversupply has forced factory closures and worse. It's just one way that bigger isn't always better for investors in China.

4. 44%
Forty-four percent isn't even a majority, but it's a huge number when dealing with a population like China's. That's the percentage of Chinese citizens on the Internet as of the end of June, according to the Chinese Internet Network Information Center. It's an amount that adds up to 591 million people, more than the populations of the U.S. and Indonesia combined and a gain of 27 million Web-linked Chinese citizens since just the end of last year.

Out of all the industries standing to benefit from China's growth, Internet companies may top the list. China's increasing urbanization will only lead to more citizens on the Web, but Beijing's restrictive Internet regulation has prevented many U.S. or other international companies from establishing a strong base in the country.

That's led to a huge opportunity for Chinese search engine king Baidu (NASDAQ: BIDU ) and other Chinese companies that have quickly filled the Internet vacuum. Baidu's not only captured a majority of the Chinese search-engine market in its young life, but it's also established itself as a dominant force to come by pushing hard into the mobile market. Mobile revenue made up more than 10% of Baidu's total revenue last quarter, a first for the company. China's mobile market stood at 420 million users at the end of last year, according to the China Internet Network Information Center, and Baidu's opportunity here is enormous.

5. 8.7 million
The auto market has exploded in China, and the 8.7 million passenger cars sold in the first six months of 2013 is a staggering amount. Even more eye-popping: That figure represented a 13.8% year-over-year gain, showing that the Chinese auto market's only getting started in the country's growing urban and middle-class segments.

Just how large is that number? America's auto industry has bounced back well this year, and even that success has rewarded automakers with only 7.8 million American auto sales over the year's first half. And that push came from the built-up demand caused by the advanced age of the average car on U.S. roads. China's appetite for cars should only continue to increase its lead on all rivals.

The world's leading automakers have taken notice. China has become Volkswagen's (NASDAQOTH: VLKAY ) largest market, as the German auto king has soared to take the No. 1 spot there. Consequently, Europe's slump hasn't hit VW anywhere nearly as much as it's affected fellow European companies, as VW's stock has roared higher by more than 45% over the past year.

Even Detroit's finest companies have turned to China for their bread and butter, as China recently became General Motors' (NYSE: GM ) top market as well. GM's behind only Volkswagen in China, and strong sales on the other side of the Pacific helped the company's overall sales climb 4% over the first half of the year. For auto investors and China investors alike, the Chinese auto market is one industry you can't afford to take your eyes off.

Making money on China's rise
China's a huge, growing, and valuable market; there's no other way to say it. The country's growth from a minor power in Asia to one of the world's economic powerbrokers has been nothing short of astounding over the past few decades. While some areas in China still need much work to thrive -- the materials sector, the country's weak transportation infrastructure, and the economy's housing struggles are notable examples -- China's in it for the long run.

Investors can't just throw money around in a nation that's still finding its feet, but by sticking to the basics, investing in great, solid companies, and buying for the long term, you might just make the most of China's rise.

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President of the United Nations General Assembly Vuk Jeremic said Friday that the Chinese economy is one of the strongest performers worldwide and offers optimism to the world economy.

Jeremic, president of the 67th session of the UN General Assembly, made the comments in a joint interview with Chinese media in Beijing.

He said one of the most significant reference points to the world economy is China's economic situation. If China is going in the right direction, the rest of the world will be going in a good direction economically. If China is having difficulties, everybody is going to have difficulties.

In the first half of the year, China's economic growth slowed to 7.6 percent.

"The growth, which some people question that whether this is good enough or strong enough... I don't really think that there are too many countries in the world that can have 7.6-percent growth, a very stable one," he said.

"I understand that of the 7.6-percent growth rate, 7.5 percent can be attributed to domestic demand, so we are talking about really 'solid' growth, perhaps not 10 percent like China used to have," he added.

Jeremic praised China for showing the strength and resilience in the face of international challenges.

As to the global political and economic landscape, he believed the UN remained key to resolve the challenges in the 21st century by engaging everyone equally in the General Assembly. Although important organizations like the G20 are emerging, without the UN and UN General Assembly, there is no chance to resolve challenges in a satisfactory manner, he said.

The role of the emerging markets and developing countries will become stronger and the most significant element in this new geopolitical puzzle and the new landscape, as part of the wider global development, he noted.

The Millennium Development Goals will expire in 2015 and they need to be replaced by a new vision for world development for the next 20 to 30 years, he said.

World leaders at the Rio+20 conference in June 2012, agreed for the General Assembly to draft a development agenda for the 21st century. Over the next 24 months, the assembly will need to complete negotiations, achieve a consensus so the world will develop in a sustainable way, not exacerbate social differences and tensions in a country and between countries, and make the gap between the rich and poor smaller.

Jeremic said China plays a critical role in this process and looks forward to working with the country, hoping it will continue to play a constructive role in the UN.

Jeremic will be replaced by John William Ashe, ambassador to the UN for Antigua and Barbuda, for the 68th session in September.

BEIJING: Major global companies are increasingly heading to China in a bid to boost sales among the nation's burgeoning middle class, with growth remaining sluggish in Europe and North America.

Market research company Millward Brown identified the top 20 foreign brands in China for a BBC report, and the UK broadcaster has analysed why they have been success stories.

Millward Brown found that 13 of the top 20 brands are from the US, two each from Germany and France, one from Italy, one was the Anglo-Dutch consumer giant Unilever, while the South Korean electronics firm Samsung was the only Asian brand to make the list.

KFC, the US food group, topped the list, followed by Procter & Gamble's Pampers babywear brand and Colgate Palmolive's Colgate toothpaste, while Apple was the leading technology brand at No6.

Unilever's Omo laundry product and French retailer Carrefour were the only non-US entrants in the top ten, at eight and 10 respectively.

Millward Brown's study found that opportunities for foreign companies are rising rapidly in China, as consumers move away from purchasing by price and trust in Chinese brands rapidly falls away.

For McDonalds, the US drinks giant, the key to Chinese success is to “work with changing social attitudes and continuous aspirational trade-ups,” while Unilever carried out extensive consumer research before entering the market with Omo.

The opportunities for successful companies are immense, with KFC planning to add another 700 outlets to its estate of 4,400 restaurants in 850 cities this year, while McDonald's is opening 10 new restaurants a week and Coca-Cola is to invest $4bn to expand, the BBC reported.

Outside the food and drink market Apple is to double its outlets in China, while Volkswagen, the German carmaker has seven new production plants in preparation to cater for its biggest market, with China representing a third of all its sales.

Understanding micro-markets is also important, and L'Oreal and Samsung told the BBC that they tailor their approach to different regions of China.

All the companies said that the key to their success is to recruit local talent and engage in joint ventures with local parties to better understand the consumer.

General Motors has chosen the world’s second-largest luxury car market — China — to pit itself against automakers from Japan and Germany, despite the industry's lagging fortunes there.

The US-based carmaker said on Wednesday that it would invest $11 billion in the country in hopes of grabbing a larger share of the lucrative sector as it broke ground on new facilities.

“We are also sending a strong message about the important role of Shanghai and China in GM’s global operations,” GM chairman and CEO Dan Akerson said in a news release.

The Detroit manufacturer made the announcement as it broke ground on a new Cadillac plant and a new research facility. The structures represent a total investment of $1.3 billion and will occupy a total area of about 8 million square feet.

More from GlobalPost: Why China will implode

Cadillac has set goals of tripling its annual sales in China to 100,000 units by 2015 and increasing its share of China’s luxury car market to 10 percent by 2020.

To achieve its goals, it will introduce new models every year until 2016. GM now has about 2.5 percent of luxury sales in China.

GM sold about 30,000 Cadillac vehicles in China last year, but that's still a small number compared to brands like BMW and Audi, Agence France-Presse noted.

“There are generous profits in the luxury car market,” industry analyst Cui Dongshu told AFP.

“GM has to make an investment targeted at the segment and build this plant in Shanghai to localize its products, in order to effectively seize a place in the high-end segment.”

China’s market will continue to grow, with AFP reporting it will climb about 2.5 percent annually to 30 million vehicle sales by 2020.

Only Americans buy more luxury cars and SUVs than the Chinese.

GM’s projections come despite slower growth in the luxury segment, the Wall Street Journal reported.

Audi, for example, enjoyed 41 percent growth during the first quarter of last year, but just 14 percent this year.

“The luxury market right now looks like it’s going to grow at about 4 percent this year. At the beginning of the year, I think it was much higher,” GM China president Bob Socia told The Journal.

China’s urban fixed-asset investment fell more-than-expected last month, official data showed on Thursday.

In a report, National Bureau of Statistics of China said that Chinese Fixed Asset Investment fell to a seasonally adjusted 20.4%, from 20.6% in the preceding month.

Analysts had expected Chinese Fixed Asset Investment to fall to 20.5% last month.

China’s retail development and investment opportunities are progressively spreading to large second- and third-tier cities – all with populations above 1 million – which puts added importance on building the right contacts and partnerships in China’s real estate market.

“Understanding a local market – its incomes and consumer preferences – is becoming the single most important challenge for developing and investing in China, and that is really only done with local partners,” said Rong Ren, chief executive officer of Harvest Capital Partners, a Hong Kong-based real estate investment, development and management firm that launched two successful retail investment funds in 2010. “You need to come to China with a longer-term vision and strategy. It’s not for speculators looking for quick deals,” said ULI member, Ren.

China remains one of the hottest economies emerging from the global recession, making it an increasingly favorable environment for property investment. China’s GDP is forecast to grow at a torrid 8%-10% pace during the next few years, and China is expected to surpass the United States in total commercial real estate development during the decade of 2009 to 2019, according to Pramerica Real Estate Investors, part of Prudential Financial Inc.

Retail is already playing a significant part in this growth. Across Asia, retail property deals jumped 38% in the first half of 2010 compared to the same period of 2009, and in China’s largest cities, retail sales surged on a year-over-year basis, rising 19% in Shanghai through May and up 16% in Beijing in the second quarter, CB Richard Ellis reported. Total retail sales in China are predicted to double in coming years, from $2.09 trillion (US$) in 2010 to $4.21 trillion in 2014, according to Business Monitor International’s third quarter China Retail Report.

“In the current climate, China’s retail market has greater potential as an investment vehicle than almost any other retail market in the world,” KPMG and property service firm Knight Frank concluded in an investment trends report earlier this year.

The main drivers of China’s retail potential are the country’s continuing urbanization and rising consumer culture. Although Chinese per-capita spending remains below U.S. levels, annual consumer consumption in China is forecast to grow six-fold during the next three decades, according to Goldman Sachs economists. Meanwhile, the proportion of China’s population living in urban cities has jumped from 19% in 1980 to an estimated 45% today. This is resulting in a dramatic shift in geographic distribution, with 200 cities in China now boasting populations of at least 1 million.

China has four giant first-tier metropolises – Beijing, Shanghai, Guangzhou and Shenzhen, along with Hong Kong off the mainland. The national government also ranks two-dozen other cities as “second-tier,” generally provincial capitals with populations near or above 10 million — places like Chengdu, Hangzhou, Suzhou and Zhengzhou. At an International Council of Shopping Centers conference in Beijing in November, many of those cities were viewed as under-retailed and ripe for development.

“Foreign investors are entering such cities to explore potential investment opportunities, as it’s much easier for them to find suitable investment inventories in those cities, and the continuous improvement in retail sales and consumer spending is also convincing them of the market’s potential upside,” Danny Ma, director of CB Richard Ellis’ China Research, said in an interview.

Developers and investment firms such as Turkey’s Star Mall Group, Singapore’s Keppel Land and Hong Kong investors Hang Lung Properties and Harvest Capital Partners have been actively pursuing projects in China’s so-called smaller cities. Harvest raised $600 million (US$) this year, primarily from North American pension funds and individual investors, to develop and manage family-oriented shopping centers. These centers typically involve 100,000 square meters (1,076,391 sq ft) in a 4- or 5-story building, anchored by a Wal-Mart or Sam’s Club and including electronics outlets, brand-name stores like Nike and Zara, a movie theater and sometimes a skating rink.

The concept is designed to appeal to children, and with China’s one-child-per-family policy, each child typically brings two or more adults. “Our type of shopping mall, the family destination mall, is a popular trend,” Harvest’s Rong Ren said in an interview.

Still, retail development and investment in China come with plenty of challenges. These include: long delays in the regulatory approval process; occasional government regulations to limit foreign investment; onerous requirements such as developing super-blocks instead of single sites; and lots of domestic competition – domestic purchasers accounted for more than three-fourths of Asian real estate deals in the first half of 2010, according to CB Richard Ellis.

In a nutshell, it’s difficult for foreigners to get a foothold in China, which is why Harvest’s Ren and others recommend establishing investment partnerships there to manage the risks. “If you have no contacts in China, it will be difficult for you to get the approvals,” said George von Liphart, managing director of Peninsula Real Estate Capital Advisors in San Francisco and a veteran China deal broker who is chairman of ULI’s Global Exchange Council. “It is still very much a question of who you know and how you cultivate that.”

Overall, retail development and investment in China promise the tradeoff of low initial yields – usually 4.5% to 6.5% – in exchange for greater longer-term asset appreciation. Harvest Capital Partners is trying to buck that trend, with its new retail investment funds targeting 15% and 20% net returns over 5 and 6 years, respectively.

“Overseas investors must have a business presence in China before they can make any actual acquisitions, while the Chinese government is posing stringent control over the approval of investment funds in China,” said CB Richard Ellis’ Ma. “Therefore, the most viable option for foreign investors would be to source an equity deal via an offshore structure, such as looking for an equity investment in Chinese developers that are listed (on the Hong Kong Stock Exchange) and have some investable-grade retail assets.”

Individuals could apply for the right to use uninhabited islands in Zhejiang Province for business development, with the longest possible lease 50 years, according to new local regulations formally implemented on Saturday.

Among the 2,639 uninhabited islands in Zhejiang Province, 31 are listed in the first published batch of 176 usable uninhabited islands nationwide, said Liu Xiangdong, an inspector with the Zhejiang Province Ocean and Fisheries Bureau at a press conference on Thursday.

The islands can be used for purposes from tourism to industry. Individuals could choose one from the 31 islands and submit an application including a concrete development plan to the county-level maritime authorities, Liu said.

After receiving an application, the authorities will publish the applicant's name, the island involved, and the development plans to the public. They should also look for comments and receive approval from county-level governments, provincial maritime authorities and the provincial government, he said.

A bidding process will determine who gets the islands. If these islands have not been developed within three years, their rights could be withdrawn by the provincial government.

"The regulation is worth promoting nationwide," Dong Liming, a vice director-general at the China Land Science Society, told the Global Times Friday. "With individuals working on the inhabited islands, our maritime economy could be developed and national defense could be strengthened."

Geologists have discovered a large tungsten mine in east China's Jiangxi Province, officials said Thursday.

More than 1 million tonnes of tungsten and associated copper have been found at the mine in the Zhuxi mineral area of Fuliang County in the northeast part of the province, said Peng Zezhou, chief of the provincial geology and mineral resources exploration bureau.

The Ministry of Land and Resources confirmed the discovery on Wednesday on its website.

A maximum depth of 449 meters of tungsten and 30 meters of associated copper in the mine has been penetrated, said Peng.
The reserve explored is in the same province as the world's largest tungsten mine, which was found in Wuning County, Jiujiang City, Jiangxi. It holds tungsten reserves totalling 1.06 million tonnes.

Geologists said they expect to find more tungsten at the newly-discovered mine, which could oust the mine in Wuning County as the world's largest.

China may not be home to the low cost factory labor it once was, but corporations are not giving up on it despite rising costs.

As Americas, we always hear how our corporations love exploiting cheap labor. Not as much as the Europeans do, however.

More importantly, China is no longer about cheap labor. The smart money knows it. Rising prices are trumped by rising wealth every time.

Here’s some proof:

Foreign direct investment rose for the third month in a row in April with more money coming from European countries for the first time this year rather than the United States, the Ministry of Commerce said on Thursday. Foreign firms pumped $8.43 billion into China last month, up 0.4% from a year earlier, according to the ministry. While the pace slowed from the gain of 5.65% in March and 6.32% in February, it was much better than January’s fall of 7.3%.

What do investors like? They like wage growth and the rise of the Chinese middle class.

According to a report by consulting firm KPMG, China has become the top destination for sourcing among multinational companies outside their home country with these companies moving more of their research units close to production bases. This year, the U.S. China Business Council conducted a survey of multinationals who have a presence in China and each one said that China was their number one investment choice.

All told, European companies are the most enamored with China.

During the January-April period, investment from European Union companies rose 29.7% to $2.5 billion, while corporate investments from the United States rose 33.2% to $1.4 billion.

From January to March there were 4,822 foreign investment projects approved in China, down from 5,379 in the first quarter of 2012.

Amid a wave of interest rate cuts by major economies around the world, Chinese monetary authorities will face a policy dilemma in the coming weeks.

Financial specialists said authorities will have to decide between cutting the interest rate to curb capital inflows from overseas, and tightening the money supply — usually by keeping a relatively high interest rate — to ward off inflation.

Zong Liang, deputy head of the International Finance Research Institute under the Bank of China, said: "While recent figures show that the domestic liquidity condition is too loose, the global situation is making it difficult for the central bank to initiate an interest rate hike."

The People's Bank of China, the central bank, said on Friday that growth of M2, the broad measure of money supply that covers cash in circulation and all deposits, increased by the end of April by 16.1 percent, 0.4 percentage point higher from March.

That was higher than the yearly growth limit of 13 percent for the indicator, which the PBOC had set earlier.

In addition, total social financing, an index that covers all loans, bond issuance and stock sales, stood at 1.75 trillion yuan ($284.6 billion) in April, higher than the market forecast of 1.5 trillion yuan.

"As the reserve requirement ratio for banks is already high, it seems that the PBOC can only turn to open market operations to tighten the money supply," Zong said.

On Thursday, the Bank of Korea lowered its benchmark interest rate by 25 basis points to 2.5 percent, the first cut in seven months. The move came after central banks in Europe, India and Australia all took actions to lower their borrowing costs.

Having cut Europe's interest rate to a record low, policymakers are ready to make further cuts when needed, said Mario Draghi, president of the European Central Bank, early last week.

Monetary easing in those economies all followed the United States policymakers' overwhelming endorsement of the Federal Reserve's plan to keep buying bonds to spur growth and employment, and the Bank of Japan's effort to double its monetary base over the next two years.

The PBOC is vigilant on the policy-based monetary easing in other countries and implications for China, according to its quarterly report on monetary policy released on Thursday.

The central bank report described the issue as one of a potential "major risk" for the Chinese economy, and called for "strengthening effective monitoring of cross-border capital flows".

Lu Zhengwei, chief economist with the Industrial Bank Co Ltd, said he does not believe the PBOC wants a Chinese monetary easing because the monetary policymakers are still using the rhetoric they used during the economy's overheating cycle.

For example, he said, the PBOC still declares it will "keep the overall liquidity in check" to maintain stability of the domestic monetary environment when the country is faced by increasing capital inflows resulted from all the monetary easing programs overseas.

Although the economy witnessed a slowdown in the first quarter, it has seen four straight months of net foreign exchange purchases by the central bank and commercial lenders, which suggest a continuous capital inflow.

The central bank data showed that banks brought in nearly 1.2 trillion yuan worth of foreign exchange in the first quarter on a net basis, a record high in recent years.

A large part of the capital inflow came from dollar-denominated bonds issued by Chinese companies, especially property developers, in the overseas markets, said Ding Zhijie, dean of the School of Banking and Finance of University of International Business and Economics in Beijing.

The rising purchase of foreign exchange by domestic banks will directly multiply the money in circulation, create excessive liquidity, and exert an inflationary pressure, said E Yongjian, an analyst at Bank of Communications Co Ltd.

"Throughout the year we expect such purchases to continue to grow, but the pace of increase may slow down somewhat from the first quarter," he said.

The threat from the inflow may become moderate in the coming few months because of China's slowdown in economic growth and interference from its monetary regulators.

And a possible exit of US quantitative easing would also help soothe the capital flood, said Zhu Haibin, chief China economist at the JPMorgan Chase & Co.

The Wall Street Journal reported on Monday that the US Federal Reserve is getting ready to wind down its $85-billion-a-month bond-buying program in careful steps, but the timing is still uncertain.

Zhu said that it's most likely that Fed will slow down purchasing the bonds and start to exit before the end of this year. "The transform probably will take six to nine months."

For the time being, the PBOC remains on high alert against inflation, as it states in its first quarterly report that it cannot afford to be "blindly optimistic" about the price situation in the next phase. It must fend off the inflationary risks proactively, and stabilize the market's inflationary expectation "in a forward-looking way."

China's consumer price index rebounded to 2.4 percent year-on-year in April from 2.1 percent in March, stronger than expected.

"We expect it to rise further in the coming several months," said Zhang Zhiwei, chief China economist at Nomura Holdings Inc, adding that he expects the authorities to continue to tighten monetary policy in the second quarter, and a slowdown in credit growth as a result.

He added as inflation is edging close to the one-year benchmark deposit rate of 3 percent, it reduces the possibility of an interest rate cut. "A rate cut would also contribute to more speculative pressure in the property market."

The impact of major economies' quantitative easing on China would be less than some people fear, and the nation should continue to deepen its ongoing reforms, especially currency reform, to better cope with the overall global uncertainties, said Fred Hu, chairman of Primavera Capital Group and a former economist at the International Monetary Fund.

By improving the yuan's convertibility for the capital account and increasing the flexibility of its exchange rate, China will free itself from the necessity of injecting money into the market passively whenever the yuan exchange rates

Beijing is set to open the floodgates for fresh capital from Hong Kong to the mainland's equity and bond markets in a bid to shore up liquidity.

The China Securities Regulatory Commission and the State Administration of Foreign Exchange have begun vetting applications for new renminbi qualified foreign institutional investor (RQFII) products following a three-month hiatus.

They are likely to grant fresh quotas as early as the end of this month, according to regulatory officials and fund managers.

Beijing launched the RQFII scheme in 2011, allowing Hong Kong subsidiaries of mainland fund houses and brokerages to raise offshore yuan to invest in the mainland stock and bond markets.

The RQFII quota was raised to 270 billion yuan (HK$339 billion) late last year from 70 billion yuan, which was used up in January.

A CSRC official said the regulators had accepted new applications and were reviewing them.

The move to reopen the RQFII market followed a major liberalisation last month, when non-mainland institutions registered in Hong Kong and Hong Kong-based units of mainland banks and insurers were also allowed to participate in the scheme.

"Hong Kong subsidiaries of mainland institutions will continue to be the primary target in the new round of RQFII quota issuance," said Z-Ben Advisors' chief researcher Howhow Zhang. "Some quotas will also be assigned to foreign companies."

A clutch of mainland institutions, encouraged by the government to expand abroad, have been preparing to issue new RQFII funds in Hong Kong to diversify their revenue sources.

Last week, Industrial Securities said it would launch its RQFII product, taking an initial step towards its go-global strategy.

The medium-sized Fujian-based brokerage said it was also considering overseas acquisitions and a listing on the Hong Kong stock market.

RQFII funds are subject to a 20 per cent cap on equity investments while the remaining 80 per cent of their assets are restricted to fixed-income products. Mainland authorities might increase the equity investment ceiling in the near future, sources said.

The move to introduce more RQFII funds to the mainland follows a lacklustre stock market performance this year.

The Shanghai Composite Index is up 0.36 per cent so far this year, despite the CSRC's efforts to restore investor confidence by suspending initial public offerings.

It is believed that newly appointed CSRC chairman Xiao Gang is under pressure to bolster confidence since he took office late last month.

The former Bank of China chairman, who took over from Guo Shuqing, remains tight-lipped on his policy directions. Yet, the timing of restarting issuing RQFII quota is seen as the latest effort by the regulator to boost the market.

The CSRC stopped approving initial share sales in October last year to stem fresh equity influx while underpinning the weak share market.

More than 700 applicants are still awaiting clearance to list on the Shanghai and Shenzhen stock exchanges.

Although there has been speculation that Xiao would lift the ban on initial public offerings soon, the CSRC has not announced a timetable for new share sales.

Growth in China's services sector slowed sharply in April to its lowest point since August 2011, a private sector survey showed on Monday - fresh evidence of rising risks to a revival in the world's No.2 economy.

The HSBC services Purchasing Managers' Index (PMI) fell to 51.1 in April from 54.3 in March, with new order expansion the slowest in 20 months and staffing levels in the service sector decreasing for the first time since January 2009.

Two separate PMIs last week had already shown that China's manufacturing sector growth slowed, With the weakness spreading to services, which make up almost half of gross domestic product, the risk to the recovery may be increasing.

"The weak HSBC service PMI figure provides further evidence of a slowdown not only in the factory sector but also in the service sector," said Zhang Zhiwei, chief China economist at Nomura Securities in Hong Kong.

"This confirms our worries about insufficient growth momentum in the economy, which we expect to slow to 7.5 percent in the second quarter."

The HSBC services PMI follows a similar survey by China's National Bureau of Statistics, which found non-manufacturing activity eased to 54.5 from 55.6. The official PMI is more weighted towards large state-owned firms.

Readings above 50 indicate activity in the sector is growing, while those below 50 indicate it is contracting.

The HSBC survey showed that the sub-index measuring new business orders dropped sharply to a 20-month low of 51.5 in April, with only 15 percent of survey respondents reporting an increased volume of new orders that month, HSBC said.

"This started to bite employment growth. All these are likely to add some risk to China's growth in 2Q, as there's still a bumpy road towards sustaining growth recovery," said HSBC's China chief economist Qu Hongbin.

The employment sub-index decreased to 49.6 in April, the first net reduction in staff numbers since January 2009, although HSBC said job losses were marginal, partially caused by firms down-sizing and employee resignations.

Employment is a decisive factor shaping government thinking because it is crucial for social stability. The services sector accounted for 46 percent of China's gross domestic product in 2012, as big as the country's better-known manufacturing industry.

China's economic growth unexpectedly stumbled in the first quarter, slipping to 7.7 percent versus 7.9 percent in the previous three month period, as factory output and investment slowed.

The government has set a 2013 growth target of 7.5 percent, a level Beijing deems sufficient for job creation while providing some room to reform to the economy.

Any more weak data could spark a policy response.

"The risk of slower growth is rising, the Chinese government will probably take actions after April data come out," said Jianguang Shen, chief China economist of Mizuho Securities Asia in Hong Kong.

"I see an increasing possibility for China to cut interest rates, but not likely any time in the near future, as housing inflation is a constraint."

However a Reuters poll last month found that China's central bank is expected to keep the benchmark one-year bank lending rate at 6 percent and the one-year bank deposit rate at 3 percent through 2013, as well as holding banks' reserve requirement ratios (RRR) steady.

Nestle SA, the world's largest food company by revenue, said on Monday that it will boost its investments in China’s health food sector.

"Nestle will bring more products which target Chinese kids, the senior, pregnant women and (products) for critical care," said Luis Cantarell, president and CEO of Nestle Health Science SA.

The Chinese health food market was worth 105 billion yuan ($16.87 billion) in 2011, with an annual increase of 11.4 percent since 2006, said the State Food and Drug Administration.

According to the Beijing-based S&P Consulting, China's per capita spending on health food is $31 per year, which accounted for 0.07 percent of consumers’ total annual consumption. By contrast, the figure in the United States and in the European Union is about 2 percent.

The number of foundations set up in China reached 2,961 in the third quarter of 2012, about three times that of 2005, the Ministry of Civil Affairs announced Tuesday.

The number of foundations in China has continued to increase steadily in recent years, with the number of private foundations overtaking public ones for the first time in 2011, according to a report released by the ministry's non-governmental organization administration.

The total assets of foundations across the country reached 78.5 billion yuan ($12.58 billion) in 2011, up 29.91 percent year on year, figures from the report show.

Foundations received donations worth 40.1 billion yuan and spent 28.9 billion yuan on public welfare projects in 2011, according to the report.

The administration also found an "obvious imbalance" in the layout of foundations in different regions throughout the country.

In 2011, the number of foundations in provincial-level regions, including Jiangsu, Guangdong, Zhejiang, Beijing and Hunan, accounted for about half of the nationwide total, according to the report.

Surging numbers of private foundations

In recent years, private foundations have expanded more quickly than their public counterparts, surpassing public ones in number for the first time in 2011, according to the report.

By 2011, the country had 1,296 private foundations, accounting for 53.75 percent of the total, figures from the report show.

Of the 351 foundations registered in 2011, 264, or 75.21 percent, are private.

In China, foundations are divided into two types: public foundations, which can raise funds from the public; and private foundations, which may not take public donations but rely entirely on funding from individuals or organizations.

The administration said in the report that as the number and scale of private charity foundations increase, they are gradually evolving into an important force for solving social problems, resolving social conflicts and promoting social development.

Private foundations are not only growing in terms of numbers, but they are also maturing in terms of project management, according to the report.

China should divert foreign capital to core technologies and manufacturing activities with high added value
Globalization has made it impossible for any individual country to produce completely independent innovations or dominate innovations by monopolizing all resources and technologies for such activities.

Therefore, China should try to take advantage of the dividends brought about by globalization to facilitate its struggling transformation into an innovation-driven economy.

The ever-rising prices of China's factors of production in recent years, its tightened land supply and looming labor shortages, together with the weakened cost advantages enjoyed by traditional production activities, have put ever-growing pressure on China-based foreign-funded enterprises, especially export-oriented and labor-intensive ones. However, this has not crippled China's general advantages in attracting overseas capital.

The country's comparatively steady economic development, a series of policies it has adopted to spur domestic demand, as well as a steady increase in the quality of its labor and a relatively complete industrial auxiliary infrastructure, are sharpening China's edge in absorbing high-quality foreign investment. The adoption of an innovation-driven development strategy and measures aimed at encouraging the development of new industries of strategic significance have also offered policy props for China to improve the quality of inward foreign capital.

At the same time, different economic development stages among its regions and a multi-layer labor force supply model have made China attractive to different types of foreign investment. Its ever-improving investment environment, increased investment convenience, as well as a sound legal system and strengthened efforts for intellectual property rights protection also make China a tempting long-term investment destination for foreign investors.

China's low ratio of technological conversions is now undergoing some positive changes and this has benefited from expanded technological cooperation with the outside world and its absorption of foreign technological transfers. Data indicate that some foreign countries, especially developed ones, are spending more and more funds on scientific research in China and the number of technological transfers has been growing. These have offered China more chances for cooperation on joint research and development. In particular, developed countries' renewed efforts to promote re-industrialization, boost high-end manufacturing and expand their exports of services, moves aimed at realizing their economic rebalancing, have increased the opportunities for their technological cooperation with China.

The history of industrial technological innovations shows that high-tech products need enormous inputs of funds, but they usually only enjoy a short life cycle. This decides that developed countries, in the context of global market integration, have to share technological development costs with other countries and embark on an export-oriented road. Increasing exports and expanding their share of overseas markets are effective ways to help them gain a profit proportionate to their research inputs.

China now faces multi-directional and multi-layer international competition in terms of absorbing foreign investment. But the upward global transnational direct investment momentum, rising internationalization of transnational companies and their increased cash-holding volumes mean there are possibilities for a new round of cross-border investment in the future. This, if true, will bring more opportunities for the flow of increased foreign investment to China.

At the same time, China has also become a major market of global high-tech exports. Statistics from the Ministry of Commerce indicate that the value of China's high-tech imports rose to $463 billion in 2011 from $56 billion in 2001, with an average annual growth rate of 23.5 percent. It is estimated that the country's high-tech imports will grow 20 to 40 percent year-on-year in the coming decade, a pace that is expected to help China develop into a base for global industrial transfers and technological research and development. This, undoubtedly, will offer China an opportunity to make great leaps in innovation.

China also enjoys a wide space for more economic openness. According to the United Nations Conference on Trade and Development, the per capita foreign direct investment absorbed by China has long been below the world's average. In 2011, China's per capita foreign direct investment reached a record high, but it was still only 18 percent of the world's average. The low per capita FDI, however, also means the country still has space for it to expand in the years ahead. While trying to increase its FDI volumes, the country should also work hard to improve the quality of inward foreign investment. For example, it should try to divert foreign investment to manufacturing activities with high added value and expand the openness of domestic services to foreign investors.

Foreign capital should also be used to help facilitate the ongoing industrial transformation in China's booming eastern regions, its bid to promote industrial transfers to less developed central and western regions, help optimize its foreign capital structure and advance its innovation capability.

China should further lower domestic market barriers to foreign investors in a bid to narrow the gap with developed countries in financial openness. Its rising international economic status, deepened economic and trade links with surrounding countries mean China can push for regionalization and internationalization of the yuan. Besides, the country should also further lower the import tariffs on finished industrial products to attract high-tech imports and facilitate participation in the utilization of global resources and the research and development of some core technologies.

The author is an economics researcher with the State Information Center.

The net profits of domestic companies listed on China's bourses remained slightly above that of 2011 last year, as the country's economic growth slowed to a 13-year low, according to new data released Friday.

As of Thursday, 1,435 companies had filed their 2012 annual reports to the Shanghai and Shenzhen stock exchanges.

Their total profits stood at 1.69 trillion yuan (about 270 million U.S. dollars), up just 0.46 percent year on year, China Finance Information, a website providing stock market information, reported.

The profits of 648 companies, or 45.17 percent of the total, dropped year on year, the report said.

This came as the country's economic slowdown last year thwarted demand both at home and abroad and cut into the profitability of Chinese companies.

Data from the National Bureau of Statistics show that China's gross domestic product grew 7.8 percent last year, the slowest pace since 1999.

By the end of last year, 2,494 Chinese companies were listed in Shanghai and Shenzhen. They are required to release annual reports before the end of this month.

Burton Malkiel, author of the classic investment book A Random Walk Down Wall Street (W.W. Norton), long has been a proponent of investing in China.

“The transformation of China is the economic miracle of the twenty-first century,” Malkiel says in his 2008 book, From Wall Street to the Great Wall (W.W. Norton).

“The pace of growth is so rapid that it takes less than a year for China to build a new city equivalent to the size of Houston. China is now central to the world commerce; and even if its growth rate slows, it will be the largest economy in the world by the 2020s, as measured in terms of purchasing power.”

That’s a mighty strong statement from the Princeton University professor. There may be good reason for his love of China. Malkiel is chief investment officer for AlphaShares LLC, a Walnut Creek, Calif., investment firm dedicated to providing investors with strategies and products to participate in China’s fast-growing economy.

Nevertheless, don’t bet the ranch on Chinese stocks and bonds. The region is riddled with political foreign currency and market risks because Chinese stocks are thinly traded. In addition, there are concerns about accurate accounting statements from both private and government-run Chinese companies. An investment in China requires patience over the long term.

Lately, China’s growth has been weakening. Chinese stocks were down around 1 percent this year, but they lost 50 percent in 2008, according to Morningstar Inc., Chicago. If you had bought and held Chinese stocks over the past 15 years, your investment would have grown at a 7.3 percent annual rate.

“Chinese (stocks) had a rough two years,” says Morningstar analyst Pat Oey. “China is facing a new normal: weak external demand for exports and slowing infrastructure spending.”

Good time to buy?

“We find the growth of domestic consumption to be very compelling,” says Greg Walker, J.P. Morgan Private Bank global investment specialist in Palm Beach. “It’s very hard to buy Chinese (stocks) and not get exposure to the mature government-owned industries, like banks, energy companies and insurance companies.”

Plus, Walker says, “there are a number of markets and economies in the Asian Pacific rim that benefit from China’s growth.” Singapore, Taiwan, Korea and Malaysia, he says, provide opportunities. Walker expects better earnings growth of around 10 percent in China this year.

Malkiel, in his book, suggests how much to invest in Chinese investments.

He advises conservative investors to keep about 5 percent to 10 percent for their total holdings in Chinese investments. The more venturesome should have between 10 percent and 20 percent.

The best way to invest in China, Malkiel says, is through exchange-traded funds. Exchange-traded funds generally are low cost, although you’ll often pay a brokerage commission to trade them. You also can hedge your bets with short sales.

Malkiel, whose company licenses exchange-traded-fund indexes, has suggested that half of your Chinese stock holdings be invested in China company shares traded in Hong Kong or New York. The other half should be in China’s major trading partners, excluding the United States. About 10 percent of this half of your investments should be in commodities and gold — the favorite savings vehicle in China.

BEIJING—China set a growth target of around 7.5% for this year as it kicked off a meeting to finalize its leadership transition, reflecting how Beijing is turning away from breakneck growth based on exports in favor of a broader economy driven by spending at home.

China's ambitions for more moderate growth come after decades of double-digit increases and are a centerpiece of new leaders' plans to be detailed during the annual National People's Congress, which began Tuesday.

"We should unswervingly take expanding domestic demand as our long-term strategy for domestic development," said Premier Wen Jiabao, delivering his final report to the congress after 10 years at the helm. The key to that change, he said, is to "enhance people's ability to consume."

Beijing's broader goal is to shift the economy away from reliance on investment and exports, with a stronger role for domestic consumption, as it kick starts painful reforms to rebalance the country's economic model.

Underpinning that is an ambitious plan to raise household income and ensure more equal distribution of national wealth.

A stronger social safety net, which frees up money for households to spend, is an important part of the plan. The central government promised a substantial 27% increase in its health-care spending to $41.8 billion, and spending on employment and social welfare is also rising fast.

Mr. Wen also reiterated commitments to bring China's 200 million-plus migrant workers into the urban social welfare system and provide stronger protections for farmers' land rights, both seen as crucial to support higher household income and greater social equity.

On other economic matters, leaders reduced the inflation target to 3.5% from 4% in 2012, reflecting a goal of keeping expected price rises from accelerating too much. The fiscal deficit target was set at around 2% of GDP, up from 1.5% in 2012, as Beijing puts its relatively healthy balance sheet to work in support of growth.

In the days leading up to the legislative meeting, China's government aggressively struck at once-again-surging housing prices, showing leaders' determination not to let a property bubble push the economy off track or breed dissatisfaction with the government just as a new guard is taking over.

The growth target maintains the goal for stable growth set out last year and isn't a forecast—China routinely exceeds its targets. Last year's growth was 7.8%.

During the National People's Congress, eyes are on the new leadership under Xi Jinping, the Communist Party chief to be named president during the meeting, to see whether it will go beyond rhetoric to make the difficult changes required to raise household income and boost consumption spending.

Details on the timeline and implementation of reforms remain vague. And crucial questions remain unanswered on how cash-strapped local governments will pay for changes. Some analysts expect a major Communist Party meeting in October to fill in the blanks.

A bubbly property sector has been a key feature of China's unbalanced growth. Rising house prices drove overinvestment in real estate, and also crimped consumption by forcing households to scrimp and save to get their foot on the housing ladder. Leaders have worried about social frictions caused by housing that is out of reach for average earners.

The renewed controls to tame the property sector, a major contributor to growth, suggest the government is prepared to safeguard the gains from three years of attempts to make buying a home more affordable for the middle class—even if it dents the growth outlook.

The realization that leaders are retightening screws surprised markets, which like many property buyers had concluded that leaders were satisfied with the results of repeated tightening and willing to tolerate a gradual return to rising prices and sales.

Shares of Chinese developers plummeted on Monday, the first day of trading after policy makers said on Friday that they would strictly enforce a capital-gains tax of 20% on profits from home sales. China's State Council, or cabinet, also said it would reinforce controls on who is allowed to buy a home and push banks to raise down-payment and mortgage rates for second-home buyers in some cities.

The repeated tightening had resulted in prices leveling out. But in the past few months, house prices in China's top-tier cities have again started to rise at alarming rates. Average prices for property in Shanghai were up 41% from a year earlier in the first two months of the year, and Beijing prices are also rising fast, according to data from real-estate agency Soufun.

"The government has not been able to break the cycle of expectations pushing prices higher and driving higher expectations. Someone has to get hurt, to convince people China's property is not a surefire bet," said Mark Williams, China economist at Capital Economics.

Shenzhen-listed China Vanke Co., 000002.SZ +0.46% China's largest developer by volume was one of several property stocks to plunge the daily 10% trading limit Monday. The property hit helped drag China's benchmark Shanghai Composite Index down 3.7% for the day. Mainland developers in Hong Kong also fell sharply.

The market appeared to regain its footing in early trading Tuesday, with the Shanghai and Hong Kong markets opening fractionally up.

The recent uptick in property prices had raised questions about whether policy makers can deliver a more permanent solution to the problems of the housing market. Reaction to the latest moves in Shanghai was that they were likely to have a strong effect.

"Home prices will definitely take a hit once the new regulations are in place," said Chen Jun, a real-estate agent at Haiyu Dichan, a property agency in Shanghai.

Developers also took the move as a sign of the central government's determination to tighten the market. It "strengthens our view on the long-term nature of the property curbs," said a spokesman for China Vanke.

The measures to quell housing costs since April 2010 have left China's central government in a game of whack-a-mole with real-estate developers, local governments and speculators—all of whom have an interest in continued rapid increases in prices.

Leaders' efforts started to bring house prices back into line with income but did little to address the fundamental causes of China's property bubble, analysts say. Limited alternative investment options for households, local government reliance on land sales as a source of finance and the persistent belief that China's house prices can only go up meant the pressure for unsustainable rises in prices remains.

The latest moves appear aimed at preventing sharp increases in home prices spreading from China's first-tier cities to provincial capitals and smaller cities, where prices remain subdued. "The evidence is that prices in second-tier cities follow the top tier with a lag of a few months," said Jinsong Du, China real estate analyst at Credit Suisse. "The government wants to get ahead of that."

Property developers face the prospect of slower sales. Yuzhou Properties Co., 1628.HK -1.01% a developer in the southeastern city of Xiamen, said the new rules would delay the launch of their high-end homes. "We have to wait for an opportune time to launch the villas," said Leo Yang, investor-relations manager. "You can't possibly launch it when the country is going through a tightening phase."

The State Council has promised to expand China's nascent property tax, currently being tried in Shanghai and Chongqing. A nationwide tax would dent the enthusiasm of speculators by increasing the cost of holding property. But finding adequate new sources of revenue for local governments, and alternative investment options for households, remain intractable problems.

Many analysts expected rising property sales and investment—the biggest single source of China's domestic demand—to provide a tailwind to growth into 2013. But a weaker property market will hit demand for everything from steel to furniture to a car to park in the garage. Commodity exporters like Australia and Brazil, which feed China's steel mills, could also suffer.

Real-estate developers come into the downturn with their balance sheets relatively robust. "The listed developers had strong sales in 2012 and also raised debt in the bond market," said Mr. Du, the Credit Suisse analyst. "They are saying that local governments will go bankrupt before they do."

Mobile payment technology displayed at an international telecommunications exhibition in Shenzhen, Guangdong province. Innovation Works is focusing on the IT, software and mobile segments. Its founder Kai-Fu Lee said most mistakes are made in first 12 to 18 months in business.

If asked for three words to describe himself, Kai-Fu Lee, a high-profile information technology professional and former head of Google China, says they would be: "Make a difference".

He certainly lives up to the motto. The 51-year-old has made a difference in terms of not only his career development but also his devotion to, and influence on, young people in China.

Born in Taiwan in 1961, Lee was the youngest child in his family and was sent to the United States to be educated at the age of 12. After getting a PhD degree in computer science at Carnegie Mellon University in 1988, his career progressed smoothly through a series of globally leading IT companies.

New career

Lee worked at Apple Inc from 1990 to 1996, where he started as a research and development executive.

The talented individual then moved to Silicon Graphics Inc, a global high-performance computing solutions provider, and spent a year as a senior executive.

At Microsoft Corp, he founded the company's research facility in China, and helped Bill Gates deal with problems the company experienced in China. He also set up the Chinese business side for Google Inc, introducing the search engine to the nation.

However, after decades of success in leading multinational companies, Lee decided to start up his own business - Innovation Works - in 2009. It's a company that acts as an incubator for entrepreneurial young Chinese people with innovative business ideas to initiate startups.

According to Lee, when he was heading Google China, he saw a lot of people who worked for him leave and start their own companies with passion and determination. Some succeeded, some failed. Lee then decided he would like to use his experience and social network to give people - not just former Google employees - the backing to start new companies.

"I think I can. I believe the elements that made Google, Facebook and Apple become great companies can be - and will be - duplicated in China," said Lee.

What Innovation Works does is to find promising entrepreneurs early and provide them with all-round support, including recruiting people, product manufacturing, management, and financial and legal consultancy.

Lee's company usually helps young entrepreneurs in their first 12 to 18 months in business. "That's when most mistakes are made. That's when people have the chance to succeed. If you make one mistake, everything can fall apart," he said.

With initial funding of $500 million, Innovation Works focuses on the IT, software and mobile segments. It has made 50 investments over the past three years. The majority have so far survived and 18 of them have received a second round of funding averaging around $30 million. "But these companies still have a long way to go before they can go public," said Lee.

He added that of the hundreds of companies Innovation Works has invested in, so long as one becomes an Internet giant in 10 years, the investment return will be considerable.

Two years ago, Jiang Fan, a 25-year-old engineer, decided to leave Google and set up his own company - Umeng Co Ltd - to provide services for mobile Internet application developers. Jiang described his business plan to Lee and immediately received support.

"He had never done anything other than engineering. He is a great engineer but has no business experience, so we first had to mentor him to be a good manager," said Lee, adding that he felt Jiang has good business sense.

Just 28 months later, Jiang's company has grown from only one person - himself - to almost 100 people and become the leader in the niche market. The company received another round of funds of $10 million from venture capital firm Matrix Partners in 2011. Lee estimated that Umeng will be profitable by the end of this year.

"Without help from Lee, companies like us at the early stage may not survive and develop the business so well," Jiang said. "More importantly, Lee has made 'angel' investments more widely recognized in China. As a result more rich people and successful businessmen are joining in the trend."

Angel investors are wealthy people who help entrepreneurs they believe in to start businesses by funding them.

Xu Xiaoping, founder of the venture capital fund Zhen Fund and Lee's friend, said: "Lee feels a strong social responsibility to help both young Chinese people and companies to list in the US market."

Promising sectors

According to Lee, over the next five years, mobile Internet companies will come to prominence. "Today, you think of Baidu, Alibaba and Tencent as three giants. I predict that in five years there will be two or three other mobile Internet companies at the same level of power and value as these companies," said Lee.

He specifically cited entertainment such as music, video, gaming, social networking and e-reading as aspects of the market young people are mostly interested in and that are most promising.

The value of the Chinese mobile Internet market totaled 14.8 billion yuan ($2.38 billion) in the third quarter of 2012, up 102.1 percent year-on-year, data from iResearch Consulting Group shows.

Lee also said he is personally keeping a close eye on digital television, enterprises selling software to corporate clients and big data businesses.

Against short sellers

Chinese software company Qihoo 360 Technology Co Ltd in August initiated legal action against Citron Research and its main contributor Andrew Left for the short seller's "untruthful publications or statements regarding Qihoo 360", the New York-listed company said in a statement.

Citron is blamed for affecting the share prices of 21 New York-listed Chinese companies since 2006, with 16 companies seeing their prices drop more than 80 percent, and seven being forced to delist. Qihoo was among those that suffered a fall in the value of their shares. Lee said he has also filed a lawsuit against Citron for alleged defamation, which will be held in Beijing.

The spat came after Lee rounded up more than 60 top Chinese technology executives to defend US-listed Chinese companies from being hit by short sellers in a joint letter in September.

In one of the alleged mistakes in the piece of analysis that Lee pointed out, a Chinese search engine is described as using a new search method that is simply illogical and that does not exist.

Lee said the "intentional" behavior of Citron has had several dangerous outcomes, including misleading US investors, damaging their confidence in Chinese companies and causing Chinese companies' stock prices to fall when they are "completely innocent".

Furthermore, the Chinese companies that were listed in the US market may choose to turn private and relist in Hong Kong or elsewhere while those waiting to list may defer that move.

"So all these could end up with the result that US stock exchanges, which could be perfect stock exchanges, may no longer have Chinese stocks," Lee said, adding that he wanted to help US investors understand Citron and Muddy Waters, another short seller of stocks in Chinese companies, "are not to be trusted", that warning signals need to be sent to short sellers so they can "no longer fool people".

Lee said his action also gives the signal to Chinese companies that if a company is unfairly treated it should react immediately, especially by using the legal system to protect itself. Spending money for this purpose is worthwhile.

The most crucial thing is to have truthful and authentic financial data, said Lee. Chinese companies should have strong public relations with the media and attach importance to investor relations.

Citron has admitted some mistakes. "It's just a step and they might be more careful in the future because they know they are being watched by Chinese companies," said Lee. "Hopefully it could help Chinese companies regain the confidence to defend themselves."

China is facing pressures concerning its foreign direct investment inflows as other Asian countries reposition themselves to take advantage of its increasing labor costs. China’s minimum wages are rising at an average 22 percent per year, while employers have to part with as much as 40 percent of that salary again through social welfare payments that are directly linked to wages. China’s corporate income tax rate is currently 25 percent, yet foreign investors are also subject to a further 10 percent tax on profits (dividends tax) should these be repatriated out of the country. Concerns are growing among many multinationals over the ongoing and increasing costs of doing business in the country.

Many, however, assert that the creation of wealth in China is a positive issue, pointing out that the current middle class in China estimated at roughly 250 million is expected to rise to 600 million by 2020. The view is that foreign investors will be able to share in a mass consumer boom for products on a gigantic scale as increasing numbers of Chinese enjoy higher levels of disposable income. The key to this potential bonanza, though, relates to where these products will actually be made – and part of this conundrum relates to the continuing rise of Chinese labor.

Other Asian neighbors are eying China’s middle class consumer boom versus increasing labor costs predicament with their own strategic views. The Vietnamese Ministry of Planning and Investment has indicated that in 2013 it will employ a far more aggressive approach to attracting foreign investment. German, Japanese, Taiwanese and South Korean investors have all been lobbying for reductions in taxes, and the government appears to have been taking their cases seriously.

Vietnam’s corporate income tax rate is currently 25 percent, the same as China’s, yet moves expected to be ratified by Vietnam’s National assembly next year could see these reduced to 23 percent – a significant discount. In addition to this, the Vietnamese government has reduced corporate income tax rates to 10 percent for foreign investors increasing their existing investments in Vietnam. On a trial basis, Samsung has been given a 10 percent CIT level for profits arising from a new factory investment of US$830 million following an increase of this amount in their Vietnamese registered capital. Again, this policy is expected to be adopted as an FDI incentive by Vietnam at the National Assembly in the spring next year. Unlike China, Vietnam does not levy any dividends tax.

Taiwanese companies too are eying the potential. Foxconn, for example, has thousands of employees in China, and has invested heavily in strategic hubs of component manufacturers all based in one themed industrial park. Yet with those labor costs increasing, and a de facto (repatriated) profits tax rate of 35 percent, Vietnam’s lower labor costs, CIT rates and lack of dividends tax are starting to appear very alluring.

It is not just Vietnam that is aggressively looking at exploiting China’s labor, tax and consumer boom squeeze. Thailand and Indonesia are beginning to provide lower tax bases to attract FDI. India too, with its rather high corporate income tax rate of 40 percent is examining this situation. India’s politicians realize their CIT rate is too high, and significant tax reforms are expected to come in due course with a top rate of 30 percent CIT anticipated.

On top of facing competition from other Asian countries offering significantly lower income tax rates and incentives, the ASEAN free trade zone will unify in 2015. Existing and anticipated free trade agreements between ASEAN and China, such as the Regional Comprehensive Economic Partnership, will wipe out tariffs across the region on thousands on products come January 1, 2015. By that time, the costs of manufacturing in China may well have begun to look highly uncompetitive. Foreign manufacturers wishing to reach out to the Chinese consumer will have options regarding where to position that manufacturing capacity. It is to countries such as Vietnam and other ASEAN locations that the bean counters at corporate head offices will start to reach out to, as competition for foreign direct investment in the global manufacturing arena places China’s dominance thus far in some question.

Insiders in China Merchants Securities (CMS) confirmed that the securities firm is carrying out a 5 percent elimination to the last, according to the Financial Weekly. Some investment bank employees have been transferred to other departments. And some investment bank staff who didn’t accept job transfers chose simply to leave. The timing of transfers and layoffs relates to many sponsor representatives and quasi-sponsor representatives.

This is the first time CMS has had to lay off personnel. A person working in the investment bank department of the securities firm said that mainly new staff have been fired, so there’s not so much obstruction towards the redundancy.

Different from other securities firms, the redundancy of CMS only focuses on the investment banking department. Currently, there are 300 people working in that department in CMS. With a 5 percent layoff ratio, it is estimated that around 15 people will be leaving.

Disclosed by the official website of the China Securities Regulatory Commission (CSRC), CMS has 82 sponsor representatives. But it has only seven IPOs, with three additional programs were completed this. If each sponsor representative signs one contract, which represents the lowest efficiency of the human resource use, a maximum of merely 20 sponsor representatives have been engaged in projects. The rest of the 62 sponsor representatives had no output, which may make it difficult to recoup their 100 million yuan annual salaries.

The Shanghai Stock Exchange rose nearly 10% in the last sessions while signs of improvement started to be seen as the economy is accelerating under the monetary control of Beijing. And this could be the beginning of a strong catch-up which could take place in 2013. The Chinese stock market is still at a three year low, and it is one of the few remaining stock markets to be negative this year. In fact, more good news reassured investors and suggested that the second largest economy hit a bottom and could see a new economic upturn next year.

The Chinese economy has shown more and more reassuring signs of upturn since the end of September. The Chinese manufacturing activity in December grew at its fastest pace in 14 months, thanks to an increase in new orders and the resilience of employment according to the first result of a survey of purchasing managers. The HSBC PMI "flash" was released at 50.9, its highest since October 2011. This indicator had increased for the fifth consecutive month, a development that strengthens the hypothesis of a stronger recovery than expected in China.

The improvement reflects the government investment projects announced in the second quarter and which begin to produce their effects on the economy. This important upturn in the activity can be explained by good numbers in construction and distribution industries. The strength of China's services sector shows that the Chinese economy quickly came out of its slump...Investors could take interest in the Chinese stock market again.

Technically, the dynamics of the index is now bullish in weekly data above 2100 points which also refers to the 20-week moving average. One month ago we had reported that it was the time to take long positions. We reiterate our advice to target 2450 points in the first half of 2013. Any pullback on 2100/2130 points will be the opportunity to obtain long exposure to the Chinese market. We can play this bullish trend thanks to a tracker on CSI 300 (IE00B5VG7J94).

INTERNET job hunting giant Seek has expanded further into southeast Asia, taking a $206 million stake in a Hong Kong-based online recruitment website.

Seek yesterday announced it had purchased the majority holding in employment website Jobs DB Inc, giving it a 60 per cent slice of the Chinese company through the creation of a new company, Seek Asia.

Seek Asia is a partnership between Seek, James Packer's Consolidated Media Holdings, Macquarie Capital and Tiger Global.

Seek's co-chief executive Andrew Bassat said the move into Asia "built upon the company's existing international footprint" and exposed the company to "attractive regions".

"We believe this transaction represents a compelling opportunity for Seek to play an increasingly meaningful role and to expand its exposure in the region."

Seek's latest acquisition adds to several other major international investments including Chinese online jobs board Zhaopin; Southeast Asian recruitment website JobStreet and employment sites in Brazil and Mexico.

Evans and Partners analyst Paul Ryan said the Jobs DB acquisition would be part of Seek's long term strategy to become a leader in the Pan-Asian online employment market.

"When you add Jobs DB in, the combined businesses have a larger, more diversified and better presence in southern China," Mr Ryan said. "It's a bigger, more diversified and more profitable business."

Mr Ryan said he expected Macquarie and Tiger Global to exit Seek Asia through an IPO at a later date.

However, another analyst said Seek may have been spreading itself too thin with its latest Asian investment following co-founder and chief executive Paul Bassat's plans to leave the company in mid-2011.

"This is another company that they have to integrate and manage and try to grow," said the analyst, who declined to be named.

Seek Australia has a 69 per cent holding in Seek Asia and the other 31 per cent, $64 million, will be divided between the three other co-investors.

Mr Packer's $25 million Seek Asia investment was his first since selling out of Seek Australia last year for $440 million.

The media and casino mogul has also invested in Seek's Brazilian acquisition, Brasil Online Holding, and made an unsuccessful attempt to get Paul Bassat on the Ten Network board.

Seek shares rose 1c to $6.57.

Sept. 16 (Bloomberg) -- Dell Inc. plans to spend more than $100 billion over 10 years to broaden operations in China and capture more sales in the world’s second-largest economy.

The company will open a second China operations center next year in Chengdu, adding production, sales and support in the western part of the country. It will also add an office and as many as 500 workers at its existing Xiamen site, the Round Rock, Texas-based company said in a statement.

Last year’s sales increased in the Asia-Pacific region for Dell at a faster pace than other parts of the world. Still, the company got only 12 percent in its business revenue last year from Asia-Pacific, according to data compiled by Bloomberg.

The manufacturing and customer support center in Chengdu will begin operations in 2011 and may eventually employ 3,000 people, the company said. It didn’t elaborate on how it intends to spend the $100 billion.

Dell fell 3 cents to $12.27 at 12:08 p.m. in Nasdaq Stock Market trading. The shares had fallen 14 percent this year before today.

Dell said it’s the No. 2 supplier of PCs in China and that it posted a 52 percent revenue increase in its most recent fiscal quarter.

The Great Recession rolls on, but it’s not too early to single out the major powers that have come through the wreckage in the best shape. They are the ones the other major nations implore for help — to bail out weaker economies, to diminish their dominance of the world’s production and start consuming more themselves. There are just two such nations: China and Germany.

Global unemployment might remain stratospheric, but in China, long-suppressed wages are finally increasing for millions of industrial workers. China’s stimulus — effectively the world’s largest — has funded bullet trains, airports and wind turbines. In Germany, unemployment has been running a point or two below ours, and exports remain high. Thanks to its favorable trade balance, Germany’s finances are the strongest in Europe, which is why German monetary guarantees have been key to the future of both Greece and the euro.

Germany and China don’t have a lot in common. Germany has a mature economy and is a stultifyingly stable democracy. China has a rising economy and remains disturbingly authoritarian. What sets them apart from the world’s other major powers, purely and simply, is manufacturing. Their predominantly industrial economies meet their own needs and those of other nations, and have made them flourish while others flounder.

This used to be true of United States, too. In 1960, manufacturing accounted for a quarter of our gross domestic product and employed 26 percent of the labor force. Today, manufacturing has shriveled to 11 percent of GDP and employs a kindred percentage of the workforce.

For the past three decades, with few exceptions, America’s CEOs, financiers, establishment economists and editorialists assured us that the transition from a manufacturing to a post-industrial economy was both inevitable and positive: American workers would move to more productive jobs, and the nation’s financial security would only grow.

But after rising steadily during the quarter-century following World War II, wages have stagnated since the manufacturing sector began to contract.

Increasingly, it’s our most productive jobs that are being offshored. Until 2001, the United States exported more advanced technology than it imported, but since then, as Clyde Prestowitz reports in “The Betrayal of American Prosperity,” his persuasive new book on the need for an American industrial policy, we’ve been running annual high-tech deficits that reached $61 billion in 2008. Worse yet, as we lose manufacturing, which employed 63 percent of our scientists and engineers in 2007, we lose many of our most valuable professionals. Last year, reported Business Week, the number of employed scientists and engineers fell 6.3 percent while overall employment fell 4.1 percent.

Most Americans, I suspect, believe we’re losing manufacturing because we can’t compete against cheap Chinese labor. But Germany has remained a manufacturing giant notwithstanding the rise of East Asia, making high-end products with a workforce that is more unionized and better paid than ours. German exports came to $1.1 trillion in 2009 — roughly $125 billion more than we exported, though there are just 82 million Germans to our 310 million Americans. Germany’s yearly trade balance went from a deficit of $6 billion in 1998 to a surplus of $267 billion in 2008 — the same year the United States ran a trade deficit of $569 billion. Over those same 10 years, Germany’s annual growth rate per capita exceeded ours.

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Why Germany and China are winning
MICHAEL OSBUN / Tribune Media Services

By HAROLD MEYERSON

Published: Monday, July 5, 2010 at 3:00 a.m.
Last Modified: Friday, July 2, 2010 at 6:05 p.m.

( page 3 of 3 )

The Great Recession rolls on, but it’s not too early to single out the major powers that have come through the wreckage in the best shape. They are the ones the other major nations implore for help — to bail out weaker economies, to diminish their dominance of the world’s production and start consuming more themselves. There are just two such nations: China and Germany.

Global unemployment might remain stratospheric, but in China, long-suppressed wages are finally increasing for millions of industrial workers. China’s stimulus — effectively the world’s largest — has funded bullet trains, airports and wind turbines. In Germany, unemployment has been running a point or two below ours, and exports remain high. Thanks to its favorable trade balance, Germany’s finances are the strongest in Europe, which is why German monetary guarantees have been key to the future of both Greece and the euro.

Germany and China don’t have a lot in common. Germany has a mature economy and is a stultifyingly stable democracy. China has a rising economy and remains disturbingly authoritarian. What sets them apart from the world’s other major powers, purely and simply, is manufacturing. Their predominantly industrial economies meet their own needs and those of other nations, and have made them flourish while others flounder.

This used to be true of United States, too. In 1960, manufacturing accounted for a quarter of our gross domestic product and employed 26 percent of the labor force. Today, manufacturing has shriveled to 11 percent of GDP and employs a kindred percentage of the workforce.

For the past three decades, with few exceptions, America’s CEOs, financiers, establishment economists and editorialists assured us that the transition from a manufacturing to a post-industrial economy was both inevitable and positive: American workers would move to more productive jobs, and the nation’s financial security would only grow.

But after rising steadily during the quarter-century following World War II, wages have stagnated since the manufacturing sector began to contract.

Increasingly, it’s our most productive jobs that are being offshored. Until 2001, the United States exported more advanced technology than it imported, but since then, as Clyde Prestowitz reports in “The Betrayal of American Prosperity,” his persuasive new book on the need for an American industrial policy, we’ve been running annual high-tech deficits that reached $61 billion in 2008. Worse yet, as we lose manufacturing, which employed 63 percent of our scientists and engineers in 2007, we lose many of our most valuable professionals. Last year, reported Business Week, the number of employed scientists and engineers fell 6.3 percent while overall employment fell 4.1 percent.

Most Americans, I suspect, believe we’re losing manufacturing because we can’t compete against cheap Chinese labor. But Germany has remained a manufacturing giant notwithstanding the rise of East Asia, making high-end products with a workforce that is more unionized and better paid than ours. German exports came to $1.1 trillion in 2009 — roughly $125 billion more than we exported, though there are just 82 million Germans to our 310 million Americans. Germany’s yearly trade balance went from a deficit of $6 billion in 1998 to a surplus of $267 billion in 2008 — the same year the United States ran a trade deficit of $569 billion. Over those same 10 years, Germany’s annual growth rate per capita exceeded ours.

Germany has increased its edge in world-class manufacturing even as we have squandered ours because its model of capitalism is superior to our own. For one thing, its financial sector serves the larger economy, not just itself. The typical German company has a long-term relationship with a single bank — and for the smaller manufacturers that are the backbone of the German economy, those relationships are likely with one of Germany’s 431 savings banks, each of them a local institution with a municipally appointed board, that shun capital markets and invest their depositors’ savings in upgrading local enterprises. By American banking standards, the savings banks are incredibly dull. But they didn’t lose money in the financial panic of 2008 and have financed an industrial sector that makes ours look anemic by comparison.

So even as Germany and China have been busily building, and selling us, high-speed trains, photovoltaic cells and lithium-ion batteries, we’ve spent the past decade, at the direction of our CEOs and bankers, shuttering 50,000 factories and springing credit-default swaps on an unsuspecting world. That’s not to say our CEOs and bankers are conscious agents of foreign powers. But given what they’ve done to America, they might as well have been.

By HAROLD MEYERSON

China's central authorities have set down a more open policy to attract top-notch foreign talents to help promote the economic and social development and global competitiveness of the nation.

According to the newly unveiled National Medium and Long-term Talent Development Plan (2010-2020), the government will work out favorable policies in terms of taxation, insurance, housing, children and spouse settlement, career development, research projects, and government awards for high-calibre overseas talents who are willing to work in China.

Furthermore, the government will also improve the system for giving permanent residence rights to foreigners, explore the potential of a skilled migration program, and work out measures to ensure a talent supply, discovery and appraisal system.

The national plan, a blueprint for creating a highly skilled national work force over the next decade, aims to transform the country from being "labor-rich to talent-intensive."

Wang Huiyao, vice chairman of Beijing-based China Western Returned Scholars Association, said, "The measures outlined are very attractive. They've touched upon various concerns of talents from overseas including personal and career needs."

"The plan is practical and concrete compared with previous documents," said Wang, who help draft the plan.

A program to hire 1,000 overseas top-notch specialists initiated in late 2008 was also incorporated into the new plan as one of the 12 key projects to be completed over the next ten years.

By May this year, 662 people have been recruited under the program, which gives priority to leading scientists who are able to make breakthroughs in key technologies, develop high-tech industries and lead new research areas.

Xiao Mingzheng, director of the Human Resource Development and Management Research Center at Peking University said, "It's preferable to import talents rather than capital or technology."

"As China strives to adjust its economic growth pattern, it has become more important for it to tap others' 'brains'," he said.

"The new policies reflect China's open attitude to personnel recruitment - that is, the country not only exports talents to serve the world but also enables foreign talents to serve China's development," he said.

China's efforts to attract overseas talents have gone beyond the central government level.

The country recruited about 480,000 talents from foreign countries, Hong Kong, Macao and Taiwan last year, according to the State Administration of Foreign Experts Affairs.

And about 50,000 Chinese officials and professionals went overseas for various training programs last year.

Li Yuanchao, head of the Organization Department of the Central Committee of the Communist Party of China, said earlier this year, "Top-notch talents are crucial for improving the core competitiveness of a country, a region, and a company."

"Not only should the central government earnestly carry out its talent recruitment program. Local governments should also develop their own programs to create conditions to allow talents to achieve," he said.

After news last week that Facebook, the world's largest social networking service (SNS), aims to enter the Chinese market, a domestic head-hunting company disclosed that Facebook has hired it to recruit the person to manage its business in China. This signals Facebook's timetable to enter the Chinese market is drawing nearer.

According to the recruiter, Facebook wants to hire a general manager overseeing its Chinese operations and this person would be based in Beijing.

But according to the detailed description of the post, the company also wants this person to lead the SNS game lab team to make products for the western market, and the position may match the requirements for a person leading a research institute in the Chinese market.

Also, the head-hunting firm said that Facebook was hoping the person would be from its headquarters, but the firm does not want to exclude those who are interested in the post to apply.

According to last week's information, Facebook may enter Chinese market as soon as in three months, and this latest recruitment announcement adds fuel to the possibility.

But according to local media reports, in order to enter the Chinese market now, Facebook may only just establish the research institute first. According to the requirements of the position, the products designed by the lab are mainly aimed for the western market, which means that Facebook will not launch products for the Chinese market for a while.

Nevertheless, an insider from the recruiting company said that if Facebook wants to enter the China market, it first needs to set up a management team and begin its relations with the Chinese government, which is only still in its preliminary stages.

EMS-giant Foxconn is said to hire for its PC manufacturing factory in the Chongqing Xiyong Microelectronic Industrial Park in China.

EMS Foxconn is reportedly set to hire a further 6'000 staff over the next half year for the facility, with plans to reach a total work force of about 10'000 next year, reports CENS.

The EMS-provider currently employs around 1'000 staff at the Chongqing facility, which manufactures PC for various customers. The company aims for an annual production output of 10 million notebook.

Published: 29-Jan-2010

Sanofi-aventis has signed agreements with Minsheng Pharmaceutical to form a new consumer healthcare joint venture (JV). Sanofi-aventis will obtain a majority equity stake in the new entity. The agreements were signed in the presence of senior leaders of the Hangzhou municipal government.

The proposed Sanofi-aventis-Minsheng joint venture will primarily focus on vitamins and mineral supplements (VMS).

Recently, Sanofi-aventis had announced its planned acquisition of Chattem, a manufacturer and marketer of branded consumer healthcare products, toiletries and dietary supplements in the US.

Hanspeter Spek, president of global operations at Sanofi-aventis, said: “We are pleased to take a significant step toward establishing the new consumer healthcare joint venture with Minsheng, our long-standing partner. Combined with our leadership position in vaccines, we will continue to contribute to preventative healthcare in China. Entering the world’s second largest consumer healthcare market is also a strategic move for Sanofi-aventis to consolidate its position in consumer healthcare.”

Zhu Fujiang, chairman of Minsheng Pharmaceutical, said: “We are equally excited about the prospect of forming the new consumer healthcare joint venture with Sanofi-aventis, after more than ten years of successful partnership.Sanofi-aventis is an energetic and dynamic company. His success with pharmaceuticals and vaccines has demonstrated his strong marketing capability.

"We hope that once materialized, the new venture will revitalize our consumer healthcare business and expand the reach of our products to benefit more consumers. We also hope that the new venture will serve as a platform for us to develop more health products in order to contribute to the local economy and meet consumer needs.”

CHANGCHUN, Jan 03, 2010 (Xinhua via COMTEX) -- The global economic meltdown impacted many of the clients of BT Frontline, which provides outsourcing services for the IT systems of docks and logistics companies. But its General Manager, Lawrence Low, is still satisfied with the company's performance amid the financial crisis and confident about its future.

China's service outsourcing industry, mostly about software outsourcing, bounced back in the second half of the year from a hard time of three months caused by shrinking demand from the global market, according to Yu Hengzhuang, vice president of Dalian Software Park.

"We have gained access to high-end market and recently entered the Middle East market, which more than offset the impact of the global downturn," Low said.

"Our business not only survived, it grew and thrived," Low said with a smile, keeping the exact figures as business secret.

RAPIDLY DEVELOPING INDUSTRY The software outsourcing park in Dalian, the industrial hub in China, attracted 63 new clients in 2009, bringing the overall number of businesses in the park to more than 400, and the park's total sales are expected to top 20 billion yuan, up 32.9 percent year on year.

The sales of Dalian's software outsourcing business grew from 200 million yuan (29.3 million U.S. dollars) to more than 30 billion yuan in the past 10 years. A total of 700 companies are in the industry, including 300 joint ventures and more than 40 Fortune 500 companies.

In the first ten months, the industry's sales in Dalian grew by 33 percent to 33.7 billion yuan and its export grew by 34 percent to 1.1 billion U.S. dollars.

While Dalian has become a world famous hub of software outsourcing after Thomas Fridman compared it with Bangalore in India, another less known industrial hub with equally fast pace in east China's Jiangsu Province, is taking shape.

The contract value of Jiangsu's software outsourcing industry reached 3.28 billion U.S. dollars in the first 10 months of the year, a growth of 174 percent. The province has 2,470 companies in the industry, with 290,000 employees, according to statistics from the provincial department of commerce.

The provincial capital Nanjing's software outsourcing industry had a contract value of 2.1 billion U.S. dollars in the first 11 months of the year, growing by 239 percent.

"The income of China's software industry, which software outsourcing takes a major part, has been growing by 38 percent annually and its revenue is expected to top 1 trillion yuan in 2010," said Hu Kunshan, vice chairman of China Software Industry Association.

China's software industry earned 757.3 billion yuan in 2008, and the figure is expected to reach 900 billion yuan in 2009.

BOOSTING EMPLOYMENT The rapid development of outsourcing industry bears great significance in sustaining economic growth, restructuring economy, stabilizing export and boosting employment, said Chinese Vice Premier Wang Qishan during a visit to Dalian in November.

More than 60,000 people are working in the software outsourcing industry in Dalian.

China's outsourcing industry recruited 690,000 new employees, 460,000 of whom were college graduates, in the first 11 months of 2009, according to statistics released on a national conference on commerce.

China's Ministry of Human Resources and Social Security expects the outsourcing industry to create 1.2 million new jobs in five years, including 1 million jobs for college graduates.

At the end of Sept. 2009, 1.42 million people were working in 8,060 outsourcing companies in China, said Qian Fangli, deputy head of the foreign investment department of the Ministry of Commerce.

The software outsourcing companies in China have enough programmers but lack mature project managers and decision makers, who are on the top of the talent pyramid, said Yu Hengzhuang, vice president of Dalian Software Park.

The gap in talent pool limited the size of such companies to less than 300 people, which is a human resource threshold to carry out core projects with high added value. "That's why Chinese companies are now the lowest ring of the world software outsourcing chain," Yu added.

BEIJING, Oct 15, 2009 (SinoCast Daily Business Beat via COMTEX) -- The Chinese call center industry is predicted to have a revenue of CNY 10 billion in all during 2010, Wang Jun, chief engineer of the government and enterprise customer division of China Telecom Corporation Ltd. (NYSE: CHA, SEHK: 0728), one of the nation's Big Three telecommunications carriers, said at the China Call Center Industry Summit in Beijing on October 15.

The industry is expected to reach a 20% growth next year, the chief engineer estimated. The size of the call center outsourcing service market will rise to USD 20 billion in the Asia Pacific region in 2011.

However, China is weak in the competition for call center outsourcing services from Europe and the United States. The establishment of a call center is based on a similar culture environment, so Japan and South Korea choose China as their offshore outsourcing base.

In addition, the summit is held in Beijing on October 15 to 16.

Need staffing your call center in China? go to DaCare Staffing - the only specialized call center staffing agency in China

By Patrick O. Courtois

The Beijing Olympics have had a great impact on the city of Beijing, where a large infrastructure refurbishment initiative, fresh developments and a massive English language training campaign have been some of the elements of a drastic change and an amazing source of business opportunities for both local and foreign companies. Shanghai, with its upcoming Universal Exposition in 2010 is going through the same face-list, with the replenishment of the famous bund area, the accelerated infrastructure changes much needed to ease the megalopolis congestion problem and much more. Commercial opportunities are as well rising fast toward the May opening of the Exposition; opportunities that are being seized by both for local and foreign companies.

I have anticipated a rise in solicitaton from pavilion ran countries. Tendering processes are going on in most country having a pavilion presence, and many overseas third parties have, and still are, gotten in touch with me for solutions in search and selection of the pavilion staff, but most importantly staffing, enabling each pavilion to legally employ staff, local Chinese or foreign nationals, without having to establish a legal corporate entity in China. My firm being fully licensed and resourced for both activities it is of course a solution that we are capable of handling.

However what was not anticipated is the rise in solicitation from overseas SMEs.

Some the challenges faced by SMEs, while trying to seize their share of the tremendous financial and marketing opportunity the Exposition yields, can be briefly summarized as such:

• No local contact / connection in China
• No interest in forking out the additional cost, not to mention the lengthy process, of setting up a corporate legal entity for the limited duration of the Exposition (6 months)
• how to source bilingual and qualified employees locally
• how to legally employ local and eventually foreign national staffs during the Exposition period
• …

The opportunities are there, the challenges as well, but most importantly, solutions exist. Solutions that are legal, hassle free and well… affordable.

When you are operating an overseas SME, with a limited margin for error or financial flexibility, the process of establishing a commercial or operational presence in China can be seen as a daunting task. Entrusting a local business partner becomes therefore a viable solution, as you can stress-free focus on what you do best, that is sell and promote your products/services, while the local partner handles the “Chinese” side of things, like recruitment, employment, payroll, labor law compliance and so on, on your behalf.

Before signing up with a staffing company a few essential points are to be kept in mind:

• Do your research and make sure the firm you are engaging yourself with is LEGALLY LICENSED… that make sense, in the west at least, but I can guarantee you that a casual “sure, I can help” answer, here, is not what you should expect.
• Make sure they do have experience and references available for their staffing activities…
• Compare prices, as tariffs for staffing solutions can go from a few thousand US Dollars to a few hundred Chinese RMB from a firm to another, per month, for pretty much the same service level…
• Make sure that the firm has the INTERNAL resources to provide you with a pro-active and professional service. Too many firms around will be happy to take your money but will outsource payroll, contracts, … In China, quality is not always here while dealing with third parties suppliers…
• Foreign staffing firm versus Chinese firm? This is entirely your choice… but bear in mind that a foreign firm does not necessarily have the flexibility a local firm can have in terms of terms of quick fixes and might not be able to provide additional services like last minute lodging, visa and such… In addition, a foreign firm might have larger overheads and as such that might impact the quote you received.
• Finally, trust your guts. If the few emails you exchanged gave you a somewhat dodgy feeling or your primary contact gives of the sense of being “lost in Translation” at every phone conversation … walk away…

…or better, call me!…

Patrick O. Courtois is the Director of Operations at DaCare Executive Search, a leading executive search and HR services consultancy, based in the heart of Shanghai, China. (http://www.dacare.com/). Patrick has extensive management consulting experience in Asia, as well as European markets. With a current focus in executive talent sourcing in Greater China, Patrick engages with multinational clients in professional services, hi-tech communications and industrial manufacturing. Visit Patrick’s HR blog at http://hrshanghai.blogspot.com/.

EMPLOYMENT on China's mainland for the third quarter will cool to a five-quarter low due to the impact of the global economic downturn, according to a quarterly survey released by Manpower Inc yesterday.

But expectations are falling more slowly than the previous quarter, thanks to the government's fiscal stimulus package, said the report, based on interviews with 4,026 employers on the mainland.

Companies in the steel, automobile, finance and transport industries were likely to hire more employees in the coming months, in response to industry adjustments and revitalization plans issued by the State Council, the report said.

"There were some optimistic signs. But whether confidence in the whole labor market can be lifted depends on how the economy changes in the second half of this year," said Wu Ruoxuan, Manpower Greater China's managing director.

Eleven percent of HR respondents surveyed in 13 cities said they will expand head counts, while 9 percent said they would cut staff.

The report claimed 66 percent of employers said they would maintain current staffing plans - 10 percent higher than the previous quarter.

"The fact that more companies expect to keep current staff levels rather than cut them shows market confidence is becoming more stable," said Zhu Yijuan, from Manpower.

Hiring in the service industry was the most robust. Finance and insurance, mining and construction and the transport industries also showed stronger hiring prospects compared to the previous quarter, but all had declined from the same period last year, the report said.

China Mobile Communications Corporation (China Mobile), the country's biggest mobile operator, plans to invest 31 billion yuan ($4.54 billion) in Shanghai in the coming three years according to an agreement signed between the two on Monday.

The plan was revealed in a frame agreement signed by China Mobile and the Shanghai government, which aims for further cooperation in the information industry in Shanghai between 2009 and 2011.

China Mobile will help Shanghai become an international financial center by opening 100,000 wireless POS/ATM machines, offering fixed-mobile information service for 800 financial institutions and mobilizing 8 million subscribers of its customized mobile banking services in the three years.

The company plans to allocate 3 billion yuan for constructing Shanghai's TD network with a signal that will cover urban area and major rural areas this year. It plans to spend 1 billion yuan for the information service for the Shanghai 2010 World Expo.

It also pledges 600 internships and 3,000 jobs for Shanghai university graduates and residents.

China Mobile registered a 29.6-percent increase in net profit to 112.79 billion yuan last year.

As a business innovator, China has a wealth of advantages. These include a huge, adaptable population with an affinity for improvisation and reverse engineering; low-cost labor, operations and overhead; and mature industrial clusters ready to supply a variety of parts, components and subassemblies. These elements are creating a strong culture of innovation, one that companies from developed economies soon will either profit from, or compete against, as China moves beyond labor-intensive, low-value-added consumer goods.

Already, many large multinational corporations (MNCs) have set up R&D centers in China, and the government is encouraging the development of design capabilities among its workforce. But China is not an easy place for outsiders to be innovators. Companies from developed economies looking for R&D partners in China must learn to operate within an industrial structure quite different from their own, and take great care in selecting whom to work with and how, experts caution.

MNCs are likely to find that the best opportunities for harnessing Chinese-style innovation lie in two areas: discrete, targeted pieces of larger products and products for home-market consumption.

In this article, part of a special report on Chinese manufacturing, experts from The Boston Consulting Group (BCG) and Wharton look at how companies can profit from Chinese innovation, what drives this innovation, and what challenges they face in sourcing R&D in China.

Global Recession's Role

Jim Andrew, a senior partner and managing director in BCG's Chicago office and head of its global innovation practice, says that in the current recession, companies need to ensure that they are getting full benefit from every dollar they spend -- including their investments in innovation. Andrew sees growing innovation in low-cost countries such as China and India as one way for companies to increase the cost-effectiveness of their innovation spending. "The crisis in the developed markets has accelerated the move to developing markets because they are lower-cost and now have a track record," he says, noting that the changes afoot are redefining the innovation landscape. "We will look back on this time and say it was an inflection point with regard to the speed at which certain innovation activities were scaled up in China and India in particular. There is really a step-function change in the rate at which some of these activities are growing."

Innovation in China before its economy opened up was limited to design institutes that were part of government departments, says David Michael, a senior partner and director of BCG's Beijing office. Some of institutes have since been repurposed for new commercial goals. Such is the case with the state-owned oil company PetroChina, which has a large network of design institutes within it, according to Michael.

MNCs now realize that China has tremendous development capabilities, including the ability to size up opportunities and rapidly bring products to shelves at low cost. The availability of well-educated talent is particularly attractive, Andrew says. "You can access that talent to do a lot more of the 'R' (research) that is increasingly relevant not just to China's domestic markets but to developed markets." For MNCs that set up R&D centers in China, "It is more about accessing talent rather than some unique source of innovation," Michael notes. That makes innovation in China substantially different from that in other global hubs such as the Silicon Valley. "There is low-cost engineering talent in China, but that's different from saying that there is a whole fountain of innovation we can tap into," he adds.

This raw engineering talent is a valuable resource for companies from developed economies. The best way for MNCs to tap into Chinese design skills is by sourcing select pieces of their product, Michael says. As is true for contract manufacturing, much of the advantage of Chinese R&D is in low-cost labor -- but for brains, not brawn. "When Western or world-class business practices line up with low Chinese costs, new types of companies develop to take advantage of this opportunity," he notes.

In health sciences, for instance, some Chinese companies are already responding to Western research needs with low-cost services. Michael offers WuXi PharmaTech in Shanghai's Waigaoqiao Free Trade Zone as an example. WuXi, a leading provider of contract research work for the global pharmaceutical industry, has become adept at setting its engineers to work on Western pharma projects. "It's run by people who understand the needs of Western pharmaceutical companies and know how to leverage local engineering talent to do the work."

This kind of division of labor is common in such East-West partnerships. Western companies typically tap into Chinese design for parts or modules, Michael says. One global energy company gets "a lot of its design for oil exploration and drilling facilities in China at the local oil companies' design institutes," he notes. Microsoft and other Western and Korean gaming and software development companies have a network of local software developers. Michael also points to Perfect World, a Chinese gaming software writer that "is booming in the 3-D world." It may not be a household name in the United States or Europe yet, but Perfect World is a leader in the country's online game market, according to Morgan Stanley Research.

Development Attitude and Disruption

Such industry specialization is common. Corporate R&D in China tends to focus on specific industries and on product development rather than basic research, says Marshall Meyer, a Wharton management professor whose research focuses on China. "You see successes in China in machine tools and lasers, but it has been a combination of development and marketing more than basic research."

Chinese companies have been good at the "D" (development) part, Andrew says. "You could grow very large very quickly by playing in existing markets if you developed new products that were just a little better than everybody else's. But with increased competition everywhere, it takes products and services that are more innovative and targeted to needs that are not already being met." One recent example is a soybean blender that produces a popular soy milk drink. Joyoung Co. in Jinan, China's Shandong province, manufactures the blender, which has become "a big hit product." The blender has no fancy technology -- just a plastic body with an electric motor, but its "fundamental concept is what local consumers want," he says.

More dramatically, according to Michael, Taiwanese computer manufacturer Asus used its development capabilities to "single-handedly invent the netbook segment of the PC market." Producing computers stripped down in functionality and priced at $300 each, Asus "has completely disrupted the global PC market."

As existing markets become saturated, however, China must invest more in the "R" part of R&D to compete differently or to expand into fundamentally new markets, Andrew says. And while piracy has eroded profit opportunities in China's traditional gaming software industry, Michael points out that it has not similarly affected online games. "People are paying for the experience of playing games with each other, and that turns out to be profitable despite some piracy."

Longer-term, the capacity to innovate seems likely to grow. "The culture is very, very good at devising quick and often effective solutions to problems," Meyer explains. "I see a lot of improvisation." An increasing demand for a Chinese language card in computers, for example, prompted Lenovo years ago to create one for its products. Chinese white-goods manufacturer Haier found that potato farmers in China were using their washing machines to clean produce, so it designed a heavy-duty, special-purpose machine that can be used outdoors and will "wash your clothes or your potatoes," Meyer notes. Electronic and electrical manufacturers often design products that work with "very heavy-duty power supplies because of the poor quality of electricity" in the country.

Nor are Chinese innovators focused entirely on their domestic market. According to David Jin, managing director and head of BCG's Shanghai office, some Chinese companies have already tried to out-innovate large MNCs -- and succeeded. In one highly publicized case in 2006, Chinese electrical products maker Chint won a lawsuit over its patent for a circuit breaker against the Chinese unit of the French company Schneider Electric. "Usually, it is the other way around," Jin says, alluding to Western companies accusing those in developing countries of patent infringements. Many high-tech operations are succeeding abroad as well. China Medical Technologies, a supplier of in-vitro diagnosis and treatment systems, competes with MNCs and commands a market share of more than 90% in at least one product segment and 70% in another, according to a July 2008 report from Citigroup Global Markets.

Choosing a Business Model

For companies in developed economies that want to harness Chinese innovation, Wharton and BCG experts say it's important to select the right business model. These models range from plain-vanilla purchasing through a series of one-off orders, to joint technological collaborations through supplier development programs, to taking an equity position in Chinese suppliers, says David Lee, partner and managing director in BCG's Beijing office and a supply chain and procurement specialist.

No one-size-fits-all formula exists for such partnerships, Lee adds. He has seen several MNCs invest in their suppliers, but "a lot of them don't like the idea," in part because of potential management disagreements. Some Chinese companies "are reluctant to change the way they have worked historically," he says, adding that the handling of human resources and material waste, in particular, could be points of friction. However, many of them have begun reining in waste of materials in manufacturing processes and increasing wage levels have got them to focus on lean manufacturing and productivity enhancement, he adds.

Many MNCs have rolled out supplier development programs, transferring pieces of technology and attempting to transfer their best practices to Chinese partners. But this, too, is unfamiliar territory for some. Companies from developed economies typically haven't had to worry much about quality control in their home markets "because suppliers themselves take the initiative to invest in quality-control processes," Lee says.

Markets are so competitive and dynamic in China that innovation is likely to continue relentlessly. Companies are being pressured for ever more gains in productivity. And where Chinese manufacturing wages were relatively flat for many decades -- allowing wage productivity to grow -- labor markets have tightened and wages have started rising, Michael points out.

The challenge going forward will be to accelerate productivity growth ahead of any inflationary pressure on wages, he says. The available labor supply in the medium term will not be as large as it was in the past -- although the global economic slowdown has idled millions of workers for the moment. But the release of large blocks of talent through the restructuring of state-owned enterprises is almost complete. At the same time, rising farm incomes -- at least until very recently -- had constrained the supply of migrant rural labor to the industrial centers, Michael explains. That gave labor more leverage. Ultimately, as labor increasingly absorbs more manufacturing resources in the long run, companies will have to push even further for innovative solutions with "a focus on driving more productivity increases in Chinese operations." The global economic downturn will likely slow the pace of these trends -- and even reverse some -- in the short term. But over the mid-term and beyond, expect China to build upon its already substantial innovative capabilities in manufacturing and services.

Innovation and Intellectual Property

Does porous intellectual property protection have a negative impact on r innovation? Not necessarily, says Harold Sirkin, senior partner at BCG in Chicago and global leader of the firm's operations practice. When you innovate, "you're creating a brand, and that's a different kind of intellectual property (IP) than a patent." IP protection is growing less important to innovation, even in the West, Sirkin notes. "The world has gotten so small that even if you invent the next iTunes, you can't rely on patent protection," he notes. "It's readily copied now, everywhere. A lot of the [market appeal with] iTunes and the iPod is about [their] installed base."

However, innovation and protection of IP have long been connected, and China has duly noted that linkage in its attempts to transform itself from a low value-added manufacturing center to recognized innovation leader, particularly as lower-cost countries compete for China's core business. Mike Chao, a Principal at BCG in Beijing, notes that, "The IP laws have always been there, but what's changed in the last 20 years is how they have been interpreted and enforced. There's a big difference between policy and enforcement." One notable example is the software industry, where Chao battled piracy with Microsoft China for over five years before joining BCG. After strong lobbying by Microsoft in partnership with the US government, China declared in 2003 that the government would only use legal software. That announcement was followed by two additional decrees requiring that PC manufacturers only preinstall genuine software and Chinese enterprises only use legal software. "While that's absolutely a step in the right direction, there's still work to do in terms of bringing up the levels of enforcement and awareness to comply with the policies," Chao says.

On another front, however, he notes the Chinese government's tendency to provide research grants to projects that have the same time frame as the tenure of bureaucrats, thus sacrificing long-term horizons for short-term gains. "Innovation requires a long-term approach, and companies need to know their hard work won't just be stolen right away." Therein lies the difference between betting the company on the "R" or the "D": "Research is never a sure thing, but development can consistently result in realizable output," Chao explains. "With the recently announced government stimulus programs, there is hope that more funding will go to the companies that can actually productize that research and bring it to market." Academic institutions that have traditionally received such grants have "not had a great track record in commercialization," Chao points out.

Evolving IP policies, however, will not necessarily be the savior to spurring a wave of innovation in China. "At the end of the day, the market will force you to innovate and differentiate, and if your company isn't doing that, someone else will." Chao points to the PC industry as an example. Prices of notebook computers dropped 13% on average in China last year, in large part due to pressure from netbooks, other low-cost offerings, and a general lack of differentiation. "Asus saw an opportunity to disrupt the industry with the netbook, and now PC companies are dropping prices and scrambling to catch up." Innovation is and has always been the key to competition. China's ability to do so effectively will undoubtedly determine its future in the global economy.

Source: Knowledge@Wharton

PowerRating -- Sanofi-Aventis SA (NYSE:SNY), one of the top pharmaceuticals producer in Europe, will additionally pour USD 90 million into China, and an insulin glargine pre-filled injection production line is scheduled to break earth in the Beijing Economic-technological Development Area.

Presently, the company still has great confidence in China's development prospect, so it decides to invest more in such a market with growth potential. Sanofi-Aventis intends to spend a lot of money building or expanding its factories and seeking more partners locally, in accordance with the country's increasing public health demand.

The Sanofi-Aventis CEO Chris Viehbacher also revealed that the European pharmaceutical giant and the Society of Diabetes of Chinese Medical Association would cooperate in a sizable type-2 diabetes gene research, in which about 46,000 diabetes patients and non-diabetes individuals are invited to participate.

So far, Sanofi-Aventis has invested more than USD 300 million in China, hiring over 3,300 employees, and its production bases are dotted in Beijing, Hangzhou, and Shenzhen.

The world's third largest pharmaceutical company Novartis Group will invest heavily in Chinese market through its innovated drugs arm despite the global recession.

The Swiss drug giant will put money into overall strength enhancement in China, including sectors of research and development (R&D), marketing, and sales. And to meet the demand of expanded facilities, larger recruitment scheme is expected this year, according to Joseph Jimenez, CEO of the Novartis Pharmaceuticals Division.

He denied to revealing the exact amount of the investment, only saying that it is a considerable amount.

Novartis Pharmaceuticals will launch six new innovated products in China and is significantly increasing the number of clinical trials conducting in China in 2009 versus 2008.

Novartis Group posted net sales of $41.5 billion and net income of $8.2 billion yuan in 2008, while its investment on R&D reached $7.2 billion.
"We are continuing investing in our R&D center in Shanghai and it's a long-term and scaled investment," said Jimenez. The company's R&D center in Zhangjiang Hi-tech Zone, set up in November 2006, is one of three core R&D facilities it has around the world. The other two are in Basel and Cambridge, Massachusetts of the US.

The Basel-based company will further strengthen its cooperation with the Chinese government and hospitals, eyeing the Chinese central government's 850-billion-yuan medical system reform package.

It will also pay more attention to community clinics and started carrying out community residents education and grass-root physician training on some common chronic diseases, such as cardiovascular diseases.

The pharmaceutical firm owns a series of products targeted at chronic diseases, including Diovan/Co-Diovan and Exforge for hypertension, Exelon for Alzheier's diseases, Xolair for asthma as well as Voltaren/Cataflam for pain relief.

Novartis has 3,500 employees in China, around 2,700 of whom work for Novartis Pharmaceuticals (its pharmaceutical arm). Some 500 of them joined in 2008. The global CEO said that a larger recruitment scheme is expected this year. A bulk of the new positions will be sales staff, he added.

"We are investing heavily at the time when others are starting to pull back. We are doing it because we believe if we invest now, at the end of the recession and along with the continuing economic acceleration of China, we will emerge as a much stronger company," the CEO said, adding that Novartis balances investment in China with reduction of investments in other markets, which do not have the same growth potential as China.

"We are reducing the number of people that we have selling, for example, in the US," he said. Novartis announced a restructuring of its US sales force last November, resulting in the elimination of 560 sales positions.

The company's China unit, which covers patent drugs, generics, healthcare products and vaccine sectors, generated turnover of 3.3 billion yuan last year, a 29 percent jump from 2007. It expected to achieve 30 percent year-on-year growth in 2009. Its pharmaceutical arm is growling at a similar pace in China.

Novartis Group had invested a total of over 3.3 billion yuan in China as of the end of last year.

BANGALORE, INDIA: Zinnov Management Consulting, a leading management consulting firm, today launched an in-depth study on China's R&D Service Provider Landscape titled "R&D Globalization – R&D Service Provider Landscape in China".

The study in totality brought to light the entire R&D service provider market in China and estimated the market to be USD 1.3 billion as opposed to a market of about USD 3.5 billion in India. It read that revenues related to R&D services for top 3 players in the China market is growing at a much faster rate than the industry average of 46.6 percent.

The China R&D offshore outsourcing market is dominated by Chinese service providers with relatively small presence of India and US based service providers. Though the overall R&D offshore outsourcing market is growing fast, most revenues come from low-end QA/ testing work.

"We have noticed that a majority of customers of China-based service providers are very uncertain about the capabilities of their partners owing to the nascent stage at which the market is in. However, at the same time, we do see an up-swing in the growth of US based companies trying to offshore their R&D related work to third party service providers in China", said Praveen Bhadada, Engagement Manager, Zinnov.

The report highlighted that the R&D offshore outsourcing market in China is highly fragmented with the top 10 service providers accounting for about 28 percent of the total market share. It also read that there are more than 10,000 large to small sized outsourcing service providers in China providing IT services/ ITeS / R&D services. Divulging specifics on how Indian service providers have fared in the market, the report said that the Indian players have not been able to scale up their operations in China, in spite of having ambitious ramp up plans since their inception.

"MNCs who were looking at diversifying risks related to R&D Globalization, chose Chinese service providers as a risk mitigation strategy for the market. Additionally, reasons like cultural and language differences, coupled with issues around recruitment and retention of key employees, acted as deterrents to their growth. "Therefore today, most of the top Indian service providers in China do not offer a broad array of R&D services as opposed to their Chinese competitors and the focus is primarily on IT services", said Chandramouli, Director-Advisory Services, Zinnov.

The report additionally highlighted that the cumulative revenues for top 4 Indian service providers is about USD 65 million of which R&D services constitutes only about USD 7.7 million.It read that the billing rates of service providers for R&D related work oscillates widely and primarily depends upon the kind of work, also adding that the rates for top 5 service providers are relatively higher owing to their experience, capabilities and quality of talent.

The strong ability of overcoming some of the most difficult challenges, coupled with favorable growth drivers have contributed towards the current state of the China offshore outsourcing market. Even today, communication issues with lack of scalability are primary reasons that are restraining its growth. However, low cost of operations along with the proximity to certain key markets in APAC region are some of the key drivers of growth.

The report also stated that in the near future, Chinese service providers would surely increase their focus on the US/ European markets by extending their sales operations in those geographies. The current high fragmentation would surely prompt the market, which is undoubtedly passing through a growth phase at the moment, to enter the integration phase observing increased M&A activities, as the top players would like to grow both organically and inorganically in a market which is expanding fast. Initiatives from Government and enterprises will also improve the talent capability which might act as a key driver in unleashing the market potential in the years to come.

"China is red hot and staying hot," said Jim Cramer on CNBC's "Stop Trading!" segment on Tuesday.

Vehicle sales are up in China, led by General Motors(GM Quote - Cramer on GM - Stock Picks). "People have to understand that the Chinese stimulus plan is really rooted in people's spending," Cramer said. It's "enough to be able to change spending habits, buy more, drive more cars."

He called China "the best market in the world" and predicted that it still has "far to go."

But there's a tradeoff, Cramer said, because China's stimulus plan isn't regulated by the rules of a democracy. "A democracy has a lot of different considerations to make it more difficult," he said. "I'll take the freedom over what they've got."

Cramer said that Verizon(VZ Quote - Cramer on VZ - Stock Picks) is going higher, and he recommended ag stocks such as Terra Nitrogen(TNH Quote - Cramer on TNH - Stock Picks) and Monsanto(MON Quote - Cramer on MON - Stock Picks).

"Monsanto's back," he said, adding that it had a "good" quarter, unlike Deere(DE Quote - Cramer on DE - Stock Picks).

He likes Terra Nitrogen for its dividend. "TNH is a great fertilizer play," he said.

March 6 (Bloomberg) -- Coca-Cola Co., the world’s largest soft-drink maker, plans to invest $2 billion in China over the next three years as part of its attempt to win more of the nation’s 1.3 billion consumers.

The investment plan includes a $90 million technology center that opened in Shanghai today, the Atlanta-based company said in an e-mailed statement. Coca-Cola’s proposed investment is 25 percent more than the $1.6 billion it had already spent in China since returning in 1979.

Beverage companies including Coca-Cola and PepsiCo Inc. are expanding in China, betting demand will continue to grow as the recession erodes consumer spending in the U.S. Coca-Cola’s planned spending may also aid its $2.4 billion acquisition of China Huiyuan Juice Group Ltd., which was announced in September and is now awaiting government approval.

“Coca-Cola’s investment is a positive for the Huiyuan acquisition,” said Kevin Luo, a consumer goods analyst with Guotai Junan Securities HK Ltd. in Shenzhen, southern China. “This investment will help create jobs, which would obviously be welcomed by the government, so even though it won’t have a direct impact on the acquisition’s approval, it can’t hurt.”

Pepsi said on Nov. 3 it plans to invest $1 billion in China in the next four years. Japan’s Asahi Breweries Ltd. in January paid $667 million for a 19.9 percent stake in Tsingtao Brewery Co., China’s biggest beer company.

Market Leader

Coca-Cola controls 54 percent of the Chinese soda market and Pepsi 31 percent, according to research company Euromonitor International.

Retail spending in China may rise 14 percent this year, the National Development and Reform Commission, the nation’s top economic planning agency, said in a report distributed yesterday to the country’s legislature. China has also cut taxes and increased welfare spending in a bid to boost consumer spending amid the worst financial crisis since the Great Depression.

“It’s wise for international companies to invest in China, especially at a time when China is trying to boost domestic consumption,” said Kenny Tang, executive director of Redford Securities Co. in Hong Kong. “There’s still room for growth.”

Coca-Cola’s sales by volume rose 19 percent last year in China and declined by 1 percent in North America, according to the company’s annual report.

“Our commitment and confidence in China never wavers,” Coca-Cola Chief Executive Officer Muhtar Kent said in today’s statement. The company will invest in new plants, distribution and sales and marketing, Kent said.

Coca-Cola and Huiyuan, which applied for approval from China’s Ministry of Commerce in September, said then that they expected a government decision by March 23.

“We are in very regular contact with the Ministry of Commerce, and we try to be as helpful as possible in answering questions and providing supplementary information,” Kenth Kaerhoeg, a spokesman for Coca-Cola Asia, said by e-mail today.

LEO Pharma Establishes Strategic Company in China

SHANGHAI, China--(BUSINESS WIRE)--LEO Pharma is taking a giant leap into the Chinese market by establishing an affiliate with the ambition of eventually becoming the leading dermatological company in China.

The new company, LEO Pharma China, will market LEO Pharma's comprehensive portfolio of high-profile and patent protected drugs for the treatment of the chronic skin disease psoriasis and other dermatological products (pharmaceuticals for the treatment of skin diseases).

LEO Pharma's leading psoriasis brand, Daivobet®, has just been approved by the Chinese authorities and can now be marketed in China.

LEO Pharma's new company in China underpins LEO Pharma's long-term global strategy of providing patients that suffer from psoriasis with the best topical treatments possible.

"This is an interesting opportunity for LEO Pharma. We will be bringing our global knowledge of dermatology and comprehensive portfolio within high-profile, topical psoriasis drugs and other dermatological products into the new LEO company and out to the Chinese market for the benefit of the Chinese patients," says Poul Rasmussen, Chairman of the Board of LEO Pharma and of the sole shareholder, the LEO Foundation.

The setting-up of LEO Pharma China must be regarded as a long term investment for the LEO Group, says Gitte Aabo, CEO and President of LEO Pharma:

"The project in China can lead to significant investments for LEO Pharma, but the earnings potential in one of the fastest growing markets for pharmaceuticals can also be huge in the long term."

About psoriasis

Psoriasis often appears as raised red patches with silvery scales - known as plaques - in various anatomical sites.

It is primarily located on the elbows, knees and scalp, but can also appear elsewhere on the body. Severity can vary greatly.

Psoriasis affects 0.1 - 1 % of the population of China and is equally common in men and women. It can start at any age, but most patients develop psoriasis in their twenties. There is a peak of incidence in the late teens to early twenties and a second peak in the fifties.

The duration of an outbreak may vary, but in most patients, the cycle of remissions and exacerbations goes on for many years or even over an entire lifetime. If treated correctly many people with psoriasis can live regular lives with the condition.

Daivobet® is LEO Pharma's main product family for the treatment of psoriasis vulgaris. Daivobet® is a fast, efficacious, once-daily dosage product for the topical treatment of psoriasis. Daivobet® has been used by thousands of people with psoriasis, and the product is very well documented in clinical trials. Furthermore, a 52-week randomized safety study shows that Daivobet® can be used for long-term treatment of psoriasis.

About LEO Pharma

LEO Pharma is an independent research-based pharmaceutical company with headquarters in Ballerup, Denmark. LEO Pharma is wholly owned by the LEO Foundation and is a leader within the strategic focus areas of Dermatology and Critical Care. LEO Pharma maintains a strong focus on developing, manufacturing and marketing safe and efficacious drugs for treating psoriasis and other skin diseases as well as thromboembolic disorders. 96% of the turnover, which in 2007 was DKK 5.2 billion, was generated outside Denmark. LEO Pharma is represented in more than 90 countries and has nearly 3,000 employees around the world, 1,200 of whom are based in Ballerup, Denmark.

Read more about LEO Pharma at www.leo-pharma.com. Read more about psoriasis at www.psorinfo.com - www.daivobet.com.

By Swati Prasad, ZDNet Asia

As developed markets reel deeper into recession, global companies are sharpening their focus on emerging markets and launching new products and services tailor-made for these regions..

K.P. Unnikrishnan, Sun Microsystems' regional marketing director of emerging markets region, said in an e-mail interview: "Emerging economies are changing the global business landscape, providing incredible opportunities for companies like Sun."

Concurred Manish Bahl, research manager at Springboard Research: "Looking at the current global situation, we believe the strategy to focus on China and India is considered to be a safe and viable option for multinational companies (MNCs) that want to expand operations and even for those who plan to enter these markets."

In July 2008, Sun made a strategic business decision to strengthen its presence in fast-growth markets such as China and India. To closely align sales with key growth areas, Unnikrishnan said it created a business division focusing on emerging markets sales region, which includes Latin America, Greater China, India and SEE (Russia, Balkins, Africa, the Middle East, Turkey and Greece).

Manufacturers of consumer durables, car, telecom and infrastructure companies are also focusing more on emerging market in these tough times. For instance, LG Electronics India expects 15 percent growth in 2009 and believes India is not as badly affected by recession.

This month, IT security company Trend Micro set up three technology support labs in India as part of its Affinity Partner program. Amit Nath, the company's country manager for India and SAARC, said Trend Micro will continue to develop in India and work with its customers and partners in order to provide "the best-of-breed secure content management solutions".

Nath told ZDNet Asia in an e-mail interview: "There are not too many economies in the world that will grow at 7 percent."

Booming markets

The optimism over China and India is manifested in foreign direct investment (FDI) inflows. While China registered a total FDI inflow of US$92.4 billion in 2008, up 23.6 percent from 2007, India's FDI inflows rose from US$19.1 billion in 2007 to US$32.4 billion in 2008.

China and India had attracted the attention of MNCs way before the onset of the economic crisis. However, with the recession having a relatively lesser impact in these countries, it made sense to focus more on these booming markets.

Bahl said: "Favorable economic indicators such as rising per capita income, increasing domestic demand for goods and services, change in spending pattern of consumers as well as factors like well-controlled inflation, only go on to prove that a sharper focus on these economies can bring better growth for MNCs."

The results are already visible. For instance, Sun's emerging markets sales region reported revenues of US$1.969 billion in its financial year 2008, an increase of 13.8 percent over 2007. Total revenue for the emerging markets region in the second quarter of 2009 was US$558 million, up 20.5 percent from US$463 million in the first quarter of 2009.

Unnikrishnan said: "The emerging markets sales region opens more opportunities for Sun [to work] with governments, businesses and developers. This allows Sun to serve the unique needs of customers in these markets where infrastructure growth demands are very strong."

The flurry of new product launches and initiatives for emerging markets only goes on to reinforce this trend. For instance, Microsoft India recently showcased a host of custom-made offerings for the Indian market. These include initiatives such as language interface packs (LIPs) in 12 Indian languages, and Windows Live, which includes e-mail, instant messenger, online storage, photo gallery and social networking, in seven Indian languages.

Consumer durables company Philips, too, has created an emerging markets model.

Gerard Kleisterlee, president and CEO of Royal Philips Electronics, said at a press conference last year: "Executing on our strategic decision to scale up our presence in emerging markets has been an important element of Philips' transformation into a focused, less-cyclical company in recent years."

Last year, it acquired two companies in India in the healthcare domain--Meditronics and Alpha X-Ray Technologies--in order to step up its focus on emerging markets. Philips chose to focus on healthcare since it is a recession-proof industry. The Dutch global major hopes to generate maximum revenues from this sector over time.

Anjan Bose, Philips Healthcare India's senior director and business head, said: "In 2007, almost 40 percent of our revenues came from emerging markets. Going forward, emerging markets, especially India, will play a significant role for Philips."

Similarly, in December 2008, Sun rolled out a telecoverage model in the emerging markets. The model is aimed to help Sun reach out to high growth small and midsize businesses (SMBs), startups and Web 2.0 companies in these economies, thus optimizing its drive to success and profitability.

Ensuring faster recovery

China and India, however, are not completely free from recession.

Bahl said: "High domestic demand, coupled with the governments' spend on infrastructure, is largely helping companies to resist the recession."

Unnikrishnan added: "People need innovation in crisis. As companies face challenges, they need new ideas to overcome difficulties. IT companies could possibly survive the crisis if they innovate in the emerging markets."

In 2009, Sun sees businesses and governments in emerging markets increasingly using the latest open source technology to innovate at minimal cost.

Vivek Wadhwa, executive in residence at Duke University's Pratt School of Engineering, said: "I see China being in more trouble in the short-term because of its dependence on manufacturing. But, since they have such deep pockets, China may be able to spend their way out of the downturn.

"The Indian industry is taking a hit in the short term, but is likely to benefit as the economy recovers because it offers lower R&D (research and development) costs," Wadhwa told ZDNet Asia in an e-mail interview.

Bahl said emerging economies are expected to recover faster from the ongoing global recession. Of all the major economies, only China and India are projected to have a healthy GDP (Gross Domestic Product) growth rate of 7 percent and 8 percent, respectively.

"Therefore, China and India have much higher chances of emerging as stronger markets, post the recession," Bahl added.

Chinese firms are continuing to hire managerial staff despite the economic slump, with media professionals and accounts in most demand, an international poll has found.

Recruitment has remained relatively strong in China, with 43 percent of businesses taking on managerial personnel, according to a quarterly survey by Antal International this month.

The figure is expected to fall to 20 percent next quarter but the number of companies letting staff go will also drop, keeping the market stable, the survey said. "The global financial situation has certainly had an effect on the jobs market here, but conditions are still relatively strong," said Robert Parkinson, who runs Antal's operations in China.

"Hiring activity is down from the last quarter but at the same time so is the number of companies firing managerial staff," he said. "It suggests organizations are still looking for new talent but with caution, waiting to see what happens in the coming months."

The media, particularly for those with IT and Internet technical knowledge, is a strong employment area, with hiring expected to rise to 60 percent in the next quarter and firms laying staff off set to drop by 7 percent.

"The demand for IT and Internet media professionals reflects a demand in distant communication through technical assistance, a result of companies cutting traveling budgets during the economic slowdown," Parkinson said.

Hiring rates for accountancy firms plunged from 96 percent last quarter to 57 per cent, but sackings will fall from 27 percent to 7 percent next quarter, the survey said.

Automotive companies are expected to fire more people, with a predicted rise from 13 percent to 20 next quarter, while hiring dropped from 86 percent last quarter to 37 and is expected to fall again to 23 percent next quarter.

In banking "hiring has seen a rebound", says Parkinson. The economic crisis highlighted the importance of managing personal wealth, resulting in a lift in private banking and risk management services, he said.

(China Daily February 9, 2009)

More and more Australian companies are setting up their own presence in China in order to source products/services directly from China or enter the Chinese market. However, given the alien nature of local regulations and business environment in China, it is critical to be proactive and fully prepared before you take the strategic move to set up your own presence in China.

Here are some “must-knows” before you set up the business in China:

1.You have more than one option for a local presence in China. Your China presence may be in the form of a wholly owned foreign enterprise, a contractual joint venture, an equity joint venture, a representative office or a local representation by a third party (local secretary/representation service companies).

2.Carefully define your business scope for the China presence. China National Development and Reform Commission may prohibit, restrict, permit or encourage your business set-up based on your business categorization and scope. Hence it is critical to carefully define your business scope so as to be permitted or encouraged to set up the presence.

3.Select the right location for your China operation. China abandoned its preferential tax rate for investments of foreign companies from January 1st 2008. However, some areas still offer local preferential policies for foreign investors in terms of land leasing/procurement, staff recruitment and management, local tax etc.

4.Confirm the minimum registered capital for your China operation. The Chinese government requires certain minimum registered capital for various types of businesses. However, local Industry and Commerce Administrations may decide on your minimum registered capital based on their judgement of your business scope and operation scale. You need to confirm with local government agencies the minimum registered capital through local contacts before taking any other actions in case they require an amount far above your financial resources available for the China operation.

5.Integrate commercial clauses in the Articles of Association to maximise profit repatriation into Australia. You may have commercial arrangements between your Head Office in Australia and the subsidiary in China in order to guarantee maximum profit repatriation. However, some arrangements must be included as part of the Articles of Association to be valid. The Articles of Association is to be submitted to local government agencies for approval and filing during business license registration. Hence, you must incorporate necessary clauses in the Articles of Association in the first instance.

6.Fully understand employers’ responsibilities and liabilities in China. China issued the new Law of Labour in 2007 which specified issues on employment contract, redundancy, etc. Without preliminary knowledge of this law, you may end up spending a huge amount of time and money terminating the contract with under performing employees, as the structure of the contract was wrong. You also need to be aware of the mandatory employee welfare and benefits so as to include such cost in the budget.

7.Conduct thorough due diligence and credit check on your joint venture partners. Your partners may not be what they claim to be. China has the business culture to show their wealth and status by driving luxurious cars, wearing prestigious watches and owning an impressive factory. Hence your Chinese business partners may look financially viable and well connected but, as a matter of fact, live on bank loans and personal debts.

8.Develop a comprehensive local employee management system. It is a hard job to recruit the right staff in a foreign country. It is even harder to effectively manage the local staff in a foreign country. A sound and robust employee management system will encourage the engagement and commitment of local staff and avoid potential risks. You may include reporting and communication policies, staff training, performance assessment, remuneration, career management and employee management manual in the system.

Business set-up in China is a big project by itself, which requires financial and time commitments, business management knowledge and China expertise. Identifying a competent agent to manage the complex process will be a cost and time effective way to avoid potential pitfalls.

Information above is provided by Sara Cheng, Manager for Greater China, Australian Business International Trade Services.

By Chupsie Medina
INQUIRER.net

Filed Under: Marketing, Economy and Business and Finance
“What’s in store for me in 2009?”

With the current global economic downturn, “not a day passes without me receiving a call or two from owners of small and medium-scale businesses asking the question,” says marketing consultant Herbert Sancianco.

In the midst of all the talk about the Philippine economy likely to be hit next year by the recession bug that has already whipped the First World, and lately, even such big emerging economies like China, owners of small and medium-scale enterprises (SMEs) have not been having fitful sleep these past weeks.

For many of them, the threat of closing shop is all the more real.

As president of Market Bridges Philippines Inc., a medium-sized marketing services company that also gives advice mainly to SMEs and startup businesses, Sancianco knows only too well how any turbulence in the local economy could affect next month’s payroll.

“I have had to face the question of whether my business needed to be shuttered up twice,” he says.

The first time was during the Asian crisis when Market Bridges was barely four years old; and the second was in 2004 when there was too much political noise negatively affecting business, Sancianco says.

“The word now is survival,” he says. “And the key to surviving these days is how well you are able to review and reinvent your business,” Sancianco says. He should know, having actually been through the wringer twice, and seeing others hurdle such challenges.

“Understand your problem,” he says. “Then figure out what could be the right solution.”

Every SME owner must be able to get a good grasp of what his customer is up against in the coming months, the 52-year-old marketing consultant says. If the business can afford to get professional help, a good solid survey would immensely help.

Otherwise, simple and inexpensive backyard surveys that can extract unbiased views as well as suggestions would be very helpful. “Just don’t ask your friends for their opinion,” Sancianco warns. “Talk to your customers — know what they’re looking for and what they’re not looking for,” he adds.

There are also some basic tenets that need to be re-remembered. For example, if you’re in the retail business, customer service is key. Presentation is also very important, says Sancianco. Many businessmen, with the passing of time, tend to relax their watch on these important marketing principles.

On the housekeeping side, a review of how lean and mean your operations is, and acting accordingly either by slashing operating costs or downsizing human resources, is a very real option. Reviewing the central management system is also important if the business is bent on getting that second wind.

The other important key to survival is being able to reinvent the business. A change in the business’ operating environment resulting from the economic slowdown should challenge businessmen to find new opportunities or products to replace otherwise compromised sources of income.

Using the basic information derived from your survey, decide on which new direction the business would pursue. Again, Sancianco says, it makes sense to consult a professional who would be able to validate and even financially quantify the feasibility of any new venture.

“A third party will always have the vantage view of someone looking in and assessing the situation with open eyes,” he says.

At this point, creativity is highly valued. An example, says Sancianco, is the birth of the beverage C2, a product that the Gokongwei business empire introduced some years ago that successfully ate into the market of carbonated drinks.

“Many businesses are also not using the Internet as much as they should,” Sancianco says. It does not cost much to sign up with Yahoo Small Business, and yet the rewards can be so much more.

Some new entrepreneurs who find they do not have the right skills to run a business should set aside time for a diploma or even a certificate course from any reputable business school.

For many family-owned businesses, on the other hand, now is the time to give really serious thought to professionalizing their management.

“Many owners find that their children have grown up and away from the family business, and there is no one with the youthful energy to follow through on expansion plans,” Sancianco says.

Hiring competent people who can do the job would free the owner precious time that could be used to study how to bring the business to a higher level, thereby avoiding stagnation.

Lastly, Sancianco says, it does not help to put in more prayers and hope that this global crisis will be kinder to Filipinos.

In parting, Sancianco reminds us that hard times will only happen to people who lose their vision. Even before times get tough, it is best to be prepared.

By Yang Huiwen

WHILE retrenchments are occurring across many sectors, the lubricants business of oil major Shell is expected to keep hiring here as it continues to expand its regional operations.

No details were given on Monday on numbers but extra manpower is needed to expand its grease plant, where an upgrading is in process that will allow production capacity to be doubled. The work will be completed sometime next year.

The grease-making facility forms part of Shell's larger lubricant oil blending plant at a 5.5 hectate site in Woodlands North. The plant employs 170 people.

It produces greases and lubricating oils for the local and export markets.

About 90 per cent of its products are sold in 52 markets worldwide, including Australia, Indonesia, China and Kuwait.

Lubricant oils, or lube oils, are high-value products used to improve the efficiency of machinery by reducing wear and tear.

The plant also manufactures marine lubricants, which are supplied to ships that stop in Singapore through bunker vessels.

'Although not very big in land area, this plant has one of the highest production capacity in the Shell network globally, and is the primary source of Shell Lubricants' supply network in Asia,' said Shell Lubricants Asia-Pacific vice president Tim Ford.

'The growth in our Shell Woodlands North operations in the current economic climate is a testament to our proven track record and leadership in fuels innovation.'

Shell's regional expansion is driven by strong demand for lubricants in industrialising countries such as China.

Last year, Asia overtook North America as Shell's largest lubricant consuming region in the world, accounting for 38 per cent of sales compared with a 28 per cent share in the US.

Demand for lubricants in the Asia-Pacific is expected to grow at about 5.1 per cent a year until 2017, according to industry figures, while demand in the US and Europe is expected to decline.

Shell, the largest international lubricants supplier in Asia by sales volume, is also the leader in the lubricants business. It captured 13 per cent of the world market last year, two percentage points in front of Exxon Mobil, according to consultants Kline & Company.

Shell also has lubricant blending plants in Thailand, Malaysia, the Philippines, Indonesia and China.

It is building its sixth blending plant in China - in Zhuhai in Guangdong Province. This will start operating next year.

Shell's lubricants business employs about 10 per cent of the oil major's total workforce worldwide.

China has begun tightening its work visa application process for foreigners to keep out people with a criminal record, but critics say the implementation of the provision is "ill-conceived" and will impede even Fortune 500 companies' ability to hire expatriate talent.

Under the amended rules, foreigners applying for - or renewing - work visas (Z visas) must additionally submit a certificate from a police station in their home country - and authenticated by the Chinese embassy in that country - declaring that the applicant does not have a criminal record.

Initially, the additional paperwork requirement will apply only for foreign workers in Guangdong, the booming province in southern China that's better known as the "world's factory floor". But given that Guangdong has always been a "laboratory" for China's economic and administrative reforms, the provision is certain to be implemented nationwide, reckon immigration lawyers and business consultants.

The new regulation may have been inspired by some recent instances of Chinese businesses being defrauded by foreign-national employees who (it was later revealed) had previous criminal records in their home countries, say lawyers.

In itself, the 'no criminal record' certification isn't an unreasonable requirement. "The motive (for the introduction of the new provision) is to put in place reasonable criteria for people to obtain a work permit," says Chris Devonshire-Ellis, senior partner at Dezan Shira & Associates, a professional services firm providing FDI, legal, tax, accounting and due diligence services for multinational corporations.

But there are "serious shortcomings" in the manner in which it has been implemented, he adds. "It will have a negative impact on the ability of foreign-invested enterprises in China to be properly managed, and a negative impact in the way foreign business people view China as being a reasonable place to work."

As a result of this provision, "it's going to be very frustrating for well-meaning businessmen and employers to get the right quality of senior executives and expatriate personnel into position in China," says Devonshire-Ellis.

Indians face 'discrimination'. In particular, notes Devonshire-Ellis, "certain nationalities, among them Indians, face discrimination in obtaining China visas purely on the basis of their passport."

Although this appears to be a haphazard situation, implemented differently across the country, China's administrative infrastructure appears unable to determine whether an individual is "undesirable" or a senior executive in a multinational. "This is becoming an area of concern and is damaging China's foreign direct investment environment," he adds.

There appears to have been "little or no dialogue" between Chinese immigration authorities and the international community about the implications of putting in place the 'no criminal record' regulation, says Devonshire-Ellis.

In some countries, like New Zealand, there is no such certification process in the first place. In others, such as the US, "there is no formal or well-defined procedure to obtain such a document."

In effect, China has invoked its domestic administrative system, which is based on the restrictive hukou (household registry) system, and imposed it on foreign nationals who apply for a work visa. Under the hukou system, a Chinese national's personal records are stored in their hometown, which is their place of birth. All requests to relocate in China or to engage in business are serviced by the local police station in the hometown, notes Devonshire-Ellis. "But such a procedure simply cannot be assumed to be in place in other countries, and in fact it largely isn't," he observes.

Complying with the new regulation is also fraught with logistical nightmares for those who are already working in China and need to renew their visas. "The request for a certificate from a police station in the applicant's country of origin ignores the fact many expats have worked overseas for years and may not have any contacts with their local police station in their home country," points out Devonshire-Ellis. "Second, it requires an expensive trip back home to secure such documentation."

In any case, in many countries, the administrative procedure to supply such a document does not exist. Even if it does, it's unlikely to be issued by "the local police station" in countries such as the United Kingdom, most European nations, and the US and Canada, where the registry of criminal offenders is maintained at a national, not local, level.

The latest work visa measure comes barely five months after China tightened the provision for securing business (F) visas and tourism (L) visas. In the run-up to the Olympics, and following the riots in Tibet in March, China introduced stringent provisions that still remain in place. Immigration lawyers in Shenzhen expect the F visa and L visa provisions to be relaxed a bit after the Paralympics in Beijing, but with greater monitoring to prevent their abuse.

International hiring expectations have fallen across Asia from the previous quarter, but in China they are rising, the latest report from human resources firm Hudson said.

About 55 percent of respondents planned to increase their headcount in the third quarter, compared with 52 percent in the previous quarter, the report said.

But on a yearly basis the rate has dropped. In China, 60 percent of employers wanted to boost their headcount in the third quarter last year.

Employers in China still face the highest salary inflation in Asia, with only 8 percent of respondents saying they can negotiate lower wages for new managerial hires in the current economic climate.

The Asian edition of Hudson's quarterly report was launched in 1998. Its premise is that employer expectations of staffing levels reflect the general industry outlook.

Over 2,600 key employment decision makers from multinationals of all sizes in all major industry sectors were surveyed for the report, with 708 of the executives based in China.

Buoyant market

"China is the only market surveyed in Asia where employment expectations are rising this quarter, reflecting that the market is still buoyant, so employers have little scope to negotiate lower new-hire salaries, and few are experiencing any reduction in staff turnover rates," Angie Eagan, general manager of Hudson Shanghai, said.

The banking and financial services sector had the highest expectations: headcount growth forecast at 64 percent, compared with 57 percent in the March-June period.

Hiring is picking up after a period of consolidation, when banks were evaluating the impact of the subprime crisis and absorbing new regulatory measures. Much of that increased recruitment is in consumer and private banking.

But the biggest increase in hiring expectations was in the consumer sector, which went from a 45 percent forecast for headcount growth in the last quarter to 60 percent this quarter.

The third quarter is traditionally the peak season for the consumer sector, and August's Olympic Games boosted the retail and hospitality sectors. Expansion in tourism, retail and hospitality is also driving growth.

Wage pressure

Salary inflation is still a major issue for employers in China. Only 8 percent of survey respondents across all sectors said they had negotiated lower salaries for new managerial hires. Companies in the manufacturing sector were the most confident about paying less to new hires.

That's partly due to a trend for expatriate and Chinese returnee candidates to be offered local remuneration packages, the report said.

The media, public relations and advertising sectors had the lowest proportion of respondents who said they could negotiate on wages. There is a skills and experience shortage in this area and candidates are more likely to receive multiple job offers.

Of the employers able to negotiate lower starting salaries for new managerial hires, 35 percent said they had cut wages by 1 to 5 percent, while 52 percent had offered 6 to 10 percent less.

That suggests scope for lower starting salaries is limited in the current climate and that skilled staff are still in high demand in most sectors, according to the report.

"This is still a talent-short market, and the ongoing competition for strong candidates means that employers are not able to effectively combat the increases in asking salaries for new hires," Eagan said.

Staff turnover

Employers in China still face high turnover rates, with 71 percent of respondents saying there has been no reduction in the past year - the highest figure for all Asian markets surveyed, including Hong Kong.

Eagan said the market is still buoyant and there are many opportunities for skilled candidates. Consequently, staff turnover and retention are still major issues for employers in China.

The banking and financial services sector reported the highest retention rates, with 33 percent saying their staff turnover rates had decreased from a year ago. Many employers in the sector, particularly international banks, have developed human resources strategies to retain employees.

The information technology industry, in contrast, had the highest turnover rate with only 15 percent reporting lower staff turnover in the past year. Many in the industry tend to swap jobs regularly, to work with new products or systems.

Performance-linked bonuses and training and development programs are the most effective ways for companies to retain talented staff, the survey respondents said.

Across all sectors, 30 percent of the respondents said they offer performance bonuses, while 26 percent use training programs to encourage staff to stay.

Substantial pay increases are the third most popular way to keep staff, offered by 24 percent of the survey respondents.

By 2030, 1 billion consumers will live in China's cities. Chinese and global companies are well aware of the huge size and potential of this emerging urban market. But businesses should shift their sights from a panoramic view of the opportunity to a close-up of the dynamics of urbanization. To be successful, they need to keep pace with the rapidly changing managerial strategies that city leaders are employing as their cities expand.

China's urbanization is largely a local phenomenon. City mayors are the most powerful movers and shapers of the process. Their effectiveness—or lack of it—should be a key component of companies' strategic planning for the Chinese market. New research by the McKinsey Global Institute (MGI) argues that business has a chance to play a key role as cities mature. Companies can bring not only capital but also an infusion of knowledge and can help guarantee greater efficiency and productivity from major public projects.

The scale of the urbanization phenomenon is startling. MGI estimates that, between now and 2025, China's cities could pave 5 billion square meters of roads and build up to 170 new mass-transit systems (twice the number that all of Europe has today). By 2025, cities will construct 40 billion square meters of floor space in 5 million buildings, of which up to 50,000 will be skyscrapers—the equivalent of building up to two Chicagos every year. The incremental growth alone in urban China's consumption between 2008 and 2025 will be equivalent to the creation of a new market the size of Germany's in 2007.

HUNGRY FOR ENERGY
On current trends, energy demand is set to more than double, requiring massive expansion in capacity—as much as 1,200 gigawatts of extra capacity between now and 2025, MGI estimates. China's freight volumes—largely carried by road—will quadruple by 2025. Beijing has recently allowed the private sector to participate in infrastructure building (such as toll roads), mainly in joint ventures with local governments or state-owned enterprises.

China's huge growth as a consumer market and its mega-sized infrastructure projects will doubtless offer rich rewards for business. Yet multinational corporations have tended not to look much beyond China's fast-growing eastern seaboard. In the next decades, however, it is China's midsize cities where most of the burgeoning middle class will live and where most residential construction growth will occur.

Some cities haven't even touched the edges of business' radar screens. During the course of MGI's research in China, we "discovered" an additional 195 urban centers that China does not designate as cities, but which are cities in terms of size, population, and stage of development. They are also growing rapidly. These cities could have substantial future commercial potential, and they illustrate the importance of looking beyond China's most high-profile economic powerhouses.

Pinpointing opportunities geographically is one aspect of any entry or market expansion strategy. Keeping pace with the evolution of urban development strategies is another. Cities that have spent the past 20 years or more maximizing their gross domestic product growth at virtually any cost—environmental and social—now face a heavy investment bill as they seek to mitigate the pressures that have mounted. Pollution and congestion are reaching critical proportions in many cities. This will provide openings for innovation in areas such as energy conservation, water recycling, and clean technology, not least in power generation and transportation.

MAXIMIZING EFFICIENCY
Beyond firefighting today's intensifying urban stress, China's city leaders know that they face a monumental managerial task as they seek to absorb an additional 350 million more urban dwellers by 2025, of whom 240 million will be migrants. Many cities are already thinking creatively about how to meet this challenge through policies that boost the efficiency or productivity of urban expansion—the efficiency of resources, of urban and transport planning, and of administration.

Business has an opening in helping mayors to fix not only the "hardware" but also the "software" of cities. Local governments have already shown themselves willing to enter into partnership with the private sector, including multinationals. Take training: A number of Chinese and multinational companies have instituted internship and training programs at the city level, aimed at raising graduate quality, in conjunction with provincial and city governments. Zhejiang province has encouraged private capital to invest in education, making funding more efficient and thereby producing improved results in terms of graduate employment rates for less money than richer provinces.

A nationwide program of "urban productivity," replicating vanguard cities' best practice and innovation across China, could save $220 billion in public spending by 2025, cut sulfur dioxide and nitrogen oxide emissions by upward of 35%, and halve water pollution. Business has the potential to play a partnering and enabling role in delivering these significant benefits—opening up new market opportunities for themselves in the process.

China announced it would provide more opportunity for foreign investment, Vice Premier Wang Qishan said on Monday at the opening of the 12th Xiamen International Trade and Investment Fair in the southeast Fujian Province.

China will insist on its opening-up policy continuing to perfect the policies for the utilization of foreign capital to provide more spaces for overseas enterprises in the country.

Chinese vice Premier Wang Qishan (C) attends the opening ceremony of the 12th China International Fair for Investment and Trade (CIFIT) in Xiamen, a coastal city in southwest China's Fujian Province, Sept. 8, 2008. (Xinhua/Zhang Guojun)
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As one of the main forces for the country's development, foreign investment had brought capital, technology and management experience, among others. As China was the developing country that had attracted the largest amount of foreign investment over the past 16 years, more fields covering agriculture, manufacturing and services, were being explored, Wang said. Many international companies viewed China as their first choice.

Wang announced five policies for future investment services, covering promotion of the investment environment, better utilization of foreign capital and encouraging Chinese enterprises to invest in foreign countries, among others.

China will raise the service qualities of governments and guarantee a fair investment environment with a transparent legal system.

The government is encouraging foreign capital to flow into high-tech, modern agriculture, energy conservation industries and modern services to enhance the independent innovation and harmonious development. It will also encourage foreign companies to invest domestically through founding local offices or participating in the reforms of domestic enterprises.

In the post-Olympic Games period China would insist on the opening-up policy and peaceful development, Commerce Minister Chen Deming said.

"I believe every friend here at the fair will receive the opportunity and benefit from the peaceful rise of China."

The Xiamen fair has become an influencial platform for mutual investment that is welcomed by governments, intermediate agencies and enterprises.

"The country (China) is committed to meeting its World Trade Organization obligations, which should boost FDI (foreign direct investment) even more," said Alessandro Teixeira, World Association of Investment Promotion Agencies president.

"Sectors such as domestic commerce, financial services, insurance and tourism are being gradually opened up. Geographic restrictions on where foreign companies are allowed to set up operations are expected to be relaxed in the coming years," he said.

"China's foreign investment policy has come to a turning point, and preferential treatment for foreign capital has been in principle abolished with the exception of certain sectors including high-technology," said Shoichiro Toyoda, the third chairman of the Japan-China Investment Promotion Organization. Its1990 establishment by Chinese and Japanese leaders was to improve the investment climate and promote investment in China.

At almost the same time, the China-Japan Investment Promotion Committee was established as its Chinese counterpart. Currently, Minister Cheng serves as its chairman.

At the time, few Japanese companies had launched operations in China. During the 18 years since its establishment, the Japanese committee has provided support and information for Japanese firms intending to invest in China. It has helped companies deal with problems they encountered.

Currently, its member companies number more than 370. In addition, it has provided advice on more than 20,000 cases.

According to Chinese statistics, Japan's investment in China was decreasing. Japanese statistics, however, indicated the amount of investment, including reinvestment by companies operating in China, had not decreased. It had remained relatively unchanged, Toyoda said.

"In my view, there are four key elements that we should focus on for further promoting new investment in China. They are energy-saving and green technology, smaller companies, the development of Central, Western and Northeast China, and special preferential treatment," he said.

The four-day Xiamen fair features 2,500 exhibitors, 1,000 more than last year. It has attracted 74 nations, including America, Australia, Brazil, Italy and countries from Africa and the Pacific islands. In all, 445 organizations from 104 countries and regions attended. More than 50 countries and regions were holding seminars to introduce their investment environment.

New projects signed at the fair this year have been reported at more than 5,300, including 320 from overseas.

As China's only annual fair for promoting mutual investment, the Xiamen fair has become the world's largest expo of its kind.

More than 100,000 guests from 144 countries and regions and more than 3,000 international companies have attended the fair over the past 11 years. It has drawn 7.7 billion U.S. dollars in investment into China with more than 13,000 projects signed.

51job Inc.'s (JOBS) financial results for the second quarter showed a lower net profit margin due to higher sales and marketing expenses and a higher tax rate. Both its revenue and EPS missed the market consensus.

Although 51job continues to have the highest brand recognition in the online and offline recruiting markets in China, the leading position hasn't gained any competitive advantage for 51job to improve its profit margin. Therefore, we are downgrading the stock from Buy to Hold.

China has 253 million internet users as of the end of June 2008. It has approximately 750 million workers now and more and more companies of different size begin to use low-cost online recruiting. This is a very positive tail wind environment in which to operate. Additionally, it is estimated that revenue of online recruiting services in China will reach RMB 2.63 billion in 2011. According to estimates, revenue of online recruiting services will amount for 45.3% of the total recruiting market in 2010.

Through a targeted sales and marketing strategy, 51job has been focusing on further building the '51job' brand as the 'one-stop' human resource services provider. Now 51job is the most famous brand in the recruiting market in China and this position has helped the company enter more profitable second-tier cities in China.

Using a P/E multiple of 18.2x our fiscal year 2009 earnings per ADS estimate of $0.70 yields a target price of $12.75, which can reflect company's great growth prospects, in our view.

Chinese government will spend 12.7 billion yuan ($1.85 billion) on upgrading lower-yield farmland this year, the State Office for Comprehensive Agricultural Development said on Wednesday.

The money, which is 10.27 percent more than last year, will transform 1.77 million hectares of lower-yield farmland into high-yield. As a result, three billion kilograms will be added to China's total annual grain production capacity.

Around 7.69 billion yuan, or more than 60 percent of the funds, will go to the 13 major grain producing regions of Heibei, Henan, Heilongjiang, Jilin, Liaoning, Hubei, Hunan, Jiangsu, Jiangxi, Shandong, Sichuan and Anhui provinces and the Inner Mongolia Autonomous Region.

Lower-yield farmland is farmland that has an output less than 20 percent of the regional average, calculated on a three-year base.

The measures to upgrade lower-yield farmland varies from different places and the major means includes:

-- to improve the irrigation system and road system;

-- to transform mountainous farmland into terraces, making it easier for the machines to work;

-- improve the soil quality by increasing organic matter content in the soil;

-- to improve farming efficiency by training the farmers.

Altogether 35 water-efficient projects for the medium-scale irrigated regions will be initiated this year with an investment of 301 million yuan, said the office.

The rush in modern China to turn traditional farming areas into industrial zones or residential areas for expanding cities has caused continuous shrinkage of China's farmland in recent years. So the nation has drawn a critical line of 120 million hectares as the official minimum of arable land to feed the world's largest population. But statistics reported the amount of arable land fell to 121.73 million hectares last year.

From 1988 to 2007, China invested 320.3 billion yuan in comprehensive development of agriculture, including 99.2 billion yuan by the central government and 76.8 billion by local governments. Of the total, 34.3 billion yuan was bank loans, and 110 billion yuan was raised by farmers and other sectors.

This year, the country could see the fifth consecutive bumper harvest of summer grain, the first such run of harvests since 1949, the Ministry of Agriculture has said.

Summer crops, which usually account for about 23 percent of the total annual grain output, would surpass the 115.34 billion kilograms produced in 2007, the ministry said.

China yielded approximately 500 billion kilograms of grain last year.

German Continental AG said Thursday it plans to scale up investment in China and introduce environmentally friendly technology to improve competitiveness.

Continental, the biggest auto parts supplier in Europe, said that 10 percent to 12 percent of its current earnings comes from Asian markets, where its sales are expected to double by 2015.

Continental has recently invested 55.5 million euros (88.2 million U.S. dollars) in Changshu in China's southeastern province of Jiangsu to build a hydraulic brake factory..

The company said it will make Changshu its production center of the hydraulic brake system in East Asia.

Continental, a world-leading manufacturer of tires and brake systems, has become one of the top five international auto parts suppliers after acquiring Siemens VDO.

Taobao.com, China's top consumer-to-consumer (C2C) site, will receive a further two billion yuan ($291.32 million) in investment from its parent Alibaba Group over the next five years.

The decision was announced at the five-year anniversary ceremony of the group by Ma Yun, founder and CEO of the Hong Kong-listed corporation.

"The two billion yuan investment will be spent in the next five years on technology, innovation, introduction of talent and other aspects," he said.

The huge amount is the third and largest investment from Alibaba since the establishment of Taobao.com, far exceeding the 1.45 billion yuan it received from its parent starting from 2003.

Ma set a long-term goal for Taobao.com to surpass US giant Wal-Mart, the world's top retailer, whose trading volume reached 3.5 trillion yuan globally last year. The estimated trading volume for Taobao.com this year was 100 billion yuan.

"Wal-Mart needs to buy more market sites, equipment and warehousing if they want to win another 10,000 customers. But for Taobao.com, we only need to get several new network servers," he said.

Taobao.com is currently the nation's dominant online retailer with 67 million registered accounts. About 10 million customers visit Taobao daily.

Hankou Bank, which was launched yesterday after the restructuring of city lender Wuhan Commercial Bank, said it plans to introduce foreign strategic investors and go public.

The bank aims to attract one to two foreign lenders as strategic investors to get more capital and improve its equity structure, it said. Sources from the bank said it is in talks with several foreign banking groups.

Hankou Bank plans to achieve a stock listing within the next three to five years, sources told China Daily, without elaborating.

The erstwhile Wuhan Commercial Bank, which had 88 branches in this capital city of Hubei province, had total assets of almost 37 billion yuan ($5.38 billion) and a registered capital of 568.4 million yuan by the end of last year. Its capital adequacy ratio stood at 12.17 percent at that time.

Hankou Bank said it will expand its businesses into other regions in a drive to become a national lender.

The bank has obtained the go-ahead from the China Banking Regulatory Commission to open a branch in Ezhou, a smaller city in Hubei, in the second half of this year. It also aims to set up outlets in other provinces next year.

Many other city commercial banks, such as those in Beijing, Nanjing, Ningbo, Tianjin, Dalian, Chengdu and Chongqing, have been renamed and are expanding their businesses into other regions as part of China's banking reforms. Three lenders in Beijing, Nanjing and Ningbo have gone public.

The launch of Hankou Bank is also part of efforts of Wuhan, the biggest city in Central China, to become a regional financial center.

According to a plan unveiled by the Wuhan government in March, assets of rural credit cooperatives in Wuhan and eight other cities in Hubei will be integrated to form a new bank, named Wuhan Rural Commercial Bank.

Local authorities will also encourage private investors to run small and medium-sized shareholding banks.

There are five foreign banking groups and 19 domestic lenders with branches in Wuhan.

FOREIGN direct investment in China rose 37.94 percent in May from a year earlier to US$7.76 billion, the Ministry of Commerce said yesterday.

The growth decreased from the peak in January when FDI posted a 110-percent hike and compared with an increase of 54.97 percent in the first five months.

New foreign-funded firms fell 10.94 percent in May to 2,425, while the data through May dropped 20.95 percent from the previous year to 11,915.

"China is very cautious about the inflow of hot money, or speculative money, when the yuan has accelerated in appreciation. The slower pace of FDI and the cut in new foreign-funded firms indicated such concerns but also demonstrated investors' focus on bigger and more capital-intensive projects," said Li Maoyu, an analyst with Changjiang Securities Co.

The Chinese currency has appreciated about 5.3 percent so far this year against the dollar. The pace was much faster than the combined growth of 7 percent for the entire year of 2007.

But what can't be denied is that China's rapidly expanding consumer market also made the country an attractive destination for investment.

Robert Brown, chairman of Watson Wyatt Global Investment Committee, said China was fit for stable investment in the long term because of the dynamics and the established infrastructure here. Watson Wyatt provides investment consulting services to clients, including many institutional investors.

Meanwhile, the slower pace of FDI growth can help ease government concern over excess liquidity and lead to a less harsh macroeconomic control after consumer prices also eased in May, analysts said. The central bank ordered lenders to set aside more money as reserves last Saturday to curb liquidity and inflation.

The Consumer Price Index, the main gauge of inflation, eased to 7.7 percent in May from April's 8.5 percent, the National Bureau of Statistics said yesterday.

Investment from United States companies increased 25.09 percent in May from a year earlier while spending from European Union countries gained 35.2 percent.

Last year, China's FDI grew 13.6 percent to US$74.8 billion.

In the first five months this year, the figure jumped by 54.97 percent to US$42.8 billion.

SKF, the world's leading bearing supplier, announced on Friday a new investment of 580 million yuan ($83 million) to the second phase of its Dalian factory in Northeast China's Liaoning province.

With a 25,000 sq m facility added its current 80,000 sq m factory, completion of the second phase project in 2009 is expected to double manufacturing capacity.

The new factory is to support continued business growth in China and other parts of Asia, especially in the areas of renewable energy, metalworking, mining, construction and industrial transmission industries, according to Tom Johnstone, president and CEO of Sweden-based SKF group.

As a leading global supplier in the areas of bearings, seals, mechatronics, services and lubrication systems, SKF is represented in more than 130 countries and has 15,000 distributors worldwide.

The Dalian factory mainly manufactures large and medium size bearings. It was planned to go through three phases as it was launched in March 2005.

"Reviewing the past three years since the company's establishment, the company's business develops fast, stable and healthy," said Sunny Chan, general manager of SKF (Dalian) Bearings and Precision Technologies Co Ltd.

The investment in the first phase of the Dalian factory was $20 million.

Johnstone said the group decided to accelerate the second step of the Dalian project because of "the strong demand of customers" and "strong performance of the facilities in Dalian".

Earlier this year, SKF Dalian won the SKF group's Excellence Award as well as the 2007 Dalian Preferred Employer Award.

TAKASHIMAYA Co plans to invest as much as 5 billion yen (US$48 million) to open a department store in Shanghai in its first foray into China, people familiar with the company's plans said.

The 55,000-square-meter outlet may open as soon as 2010 as Japan's third-largest department-store operator seeks to offset a decline in its home market, the three people, who refused to be identified before talks with a Chinese developer are completed, said.

LENOVO Group Ltd, the world's No. 4 personal computer maker, announced yesterday its net profit in the first quarter more than doubled as a result of a one-off gain from the sale of its cell phone unit and strong revenue from the Chinese market.

Lenovo posted a net profit of US$140 million between January and March against earnings of US$60 million a year ago. The first quarter net income included a US$65 million gain from selling its money-losing mobile phone business. The result beat expectations of US$129.2 million by analysts polled by Reuters.

The revenue, excluding the mobile handset business, rose 13.5 percent year on year to US$3.7 billion, higher than the 10 percent revenue growth projected by Citigroup's analyst Jim Liang.

"Lenovo continued to demonstrate strong execution of our strategies in the past quarter, achieving the eighth consecutive quarter of profitable growth," Lenovo's chairman Yang Yuanqing said in a statement.

A slowdown in technology spending in the United States is affecting enterprise-oriented PC firms, like Dell Inc and Lenovo, which bought the Thinkpad brand of laptops from IBM. Meanwhile, Lenovo's consumer PC business is also facing pressure from bigger rivals like Hewlett-Packard Co and Acer, which has purchased Gateway.

In China, Lenovo's revenue was US$1.29 billion in the quarter, a jump of 18 percent year on year.

Lenovo is the top sponsor of the coming Beijing Olympic Games and will use the event to launch PCs and laptops that have the Olympic torch design etched on them, Du Ruochao, Lenovo's general manager of East China region, said at a torch bearers' welcome conference in Shanghai yesterday.

Lenovo's share price dropped 2.86 percent to HK$6.45 (92 US cents) yesterday while the Hang Seng Index lost 1.64 percent.

ORANGE Business Services, the business communications subsidiary of France Telecom Group, said China is the fastest growing regional market in Asia and it will bring great-volume investment into the country.

OBS' customers come from two segments: multinational companies in China and home-grown firms which want to expand globally, said Yee May Leong, OBS' senior vice president of Asia Pacific.

"Our strategy focuses on the emerging markets (this year) as China and India," Leong told Shanghai Daily from the sideline of the Women's Forum in Asia in Shanghai.

China is the company's third biggest regional market in Asia Pacific.

"China will finally outrank the leaders (like Australia) and it will come very soon, I think," Leong said.

Leong declined to reveal the detailed investment plan in China but she confirmed the company will invest a lot in the country in future.

OBS has expanded into about 200 tier-two and tier-three cities in China through cooperation with domestic carriers like China Telecom, covering Dongguan, Dalian, Guangzhou, Shenzhen and Xiamen.

OBS has 2,000 multinational clients in Asia Pacific, including Airbus China and port and finance clients based in Shanghai.

BEIJING, May 11 (Xinhua) -- Chinese companies' foreign direct investment expanded 353 percent in the first quarter compared with the same 2007 period as domestic firms sought out a more open global market.

The investment hit 19.34 billion U.S. dollars in the first three months, Vice Minister of Commerce Chen Jian said Sunday at a forum. The figure stood at 18.76 billion U.S. dollars for the whole last year.

China set forth the "going-beyond-the-border" strategy in 1999,encouraging domestic enterprises to invest and do businesses abroad.

To support the outbound investment momentum, the government also offered help, including scrapping unnecessary controls on foreign exchange reserves and simplifying administrative procedures.

More than 12,000 Chinese companies have established firms in about 172 countries and regions by the end of 2007. Foreign investments rose nearly sevenfold from 2002 to 2007.

BEIJING, May 15 -- Toyota plans to invest 1.5 billion yuan to boost production capacity at a facility in northern China by 50 percent to 150,000 vehicles a year. The expansion at the plant in Tianjin Municipality is due to be completed by the end of 2009.

The move would boost annual capacity of FAW Toyota, its venture with China's FAW Group, to 470,000 units, and Toyota's overall capacity in China to roughly 690,000 units.

Software giant Microsoft yesterday said it will invest 280 million U.S. dollars to build a research and development center in Beijing and significantly expand its research team in the country.

The new R&D campus, set to accommodate 5,000 employees, will become Microsoft's largest research center outside the United States when it is completed in 2010, said Zhang Yaqin, the company's China chairman.

"Through investments such as this, we are building on our capabilities as one of Microsoft's key global R&D centers," said Zhang.

He said the company will hire 1,000 new research employees in China in the next fiscal year, which starts in July.

Microsoft currently has 3,000 research staff in the country, with 1,500 full-time employees and another 1,500 working on a project basis, Dow Jones has reported. The company has said it will double the number of its full-time research employees in China to 3,000 in the next three years.

Last year, Microsoft invested about 280 million dollars in its R&D activities in the country, said Zhang Hongjiang, chief technology officer of Microsoft's China R&D Group. The company also recruited 1,000 new employees to its China R&D Group last year, making it Microsoft's largest research team outside the US.

About 80 percent of the company's 3,000 research staff in the country develop products for worldwide users and only 20 percent of them work specifically for demand from emerging markets such as China, Zhang said.

"But I expect this percentage to grow in the future," he said.

Microsoft started its first R&D center in China as early as 1995. The company now has research facilities in Beijing, Shanghai and Shenzhen.

These investments are said to have helped Microsoft win support from the Chinese government and boosted sales in the Chinese market.

PC shipments in China reached 36.84 million units last year, research firm IDC has said. It predicted the number to grow at an average rate of 17.2 percent until 2011, when shipments will hit 64.94 million units.

The country also has the world's largest number of Internet and mobile phone users, offering what is believed to be huge opportunities for IT companies.

Microsoft does not disclose its revenue from the Chinese market. But Fortune Magazine estimated in a story last year that the software giant's revenue from China would exceed 700 million dollars last year, about 1.5 percent of Microsoft's global sales.

Almost 480 of the Fortune 500 companies have invested in China during the past 30 years, Du Ying, deputy minister in charge of the National Development and Reform Commission said here on Monday.

From 1978 to 2007, China's total use of foreign investment exceeded 760 billion U.S. dollars, the largest amount among developing countries and the second largest worldwide, said Du at a national economic conference held here.

In 2007 alone, China's foreign direct investment reached 83.5 billion U.S. dollars and outbound investment stood at 18.7 billion U.S. dollars, both soaring from less than 20 million U.S. dollars in 1978 when the country initiated the policy of reform and opening up to the outside world.

Meanwhile, the country's foreign trade also experienced a rapid growth, from 20.6 billion U.S. dollars in 1978 to 2.17 trillion U.S. dollars last year.

"By using both the markets and resources from home and abroad, China has improved its international competitiveness remarkably," he said.

SAMSUNG Group has announced its largest ever investment plan, saying it will increase hiring just a week after the conglomerate's long-serving chief announced his resignation.

Samsung said yesterday that it will boost investment 24 percent to 27.8 trillion won (US$27.9 billion) in 2008 in everything from semiconductor production to shipbuilding.

The investment will account for about 30 percent of the combined total of the 600 largest South Korean corporations this year, it said.

Exports by Samsung Group companies account for up to one-fifth of South Korea's exports, according to some estimates. Key investments under the plan include 8 trillion won for semiconductors, 5.3 trillion won for flat panel displays and 1 trillion won for shipbuilding.

Samsung Electronics, South Korea's biggest company, said on Friday that its first-quarter net profit rose 37 percent on strength in displays and mobile phones. It is the world's second-biggest handset manufacturer after Finland's Nokia Corp.

Samsung Heavy Industries Co, meanwhile, is the world's second-largest shipbuilder after South Korea's Hyundai Heavy Industries Co.

Samsung also said that group companies plan to hire 20,500 employees this year, an increase of 28 percent from last year.

Separately, Lee Kun-hee, who led the conglomerate for two decades, officially resigned yesterday from his position on the board of directors of Samsung Electronics, the company said.

Lee announced last week he was stepping down following his indictment on tax evasion and other charges.

Shares in Samsung Electronics rose 3.8 percent Monday to close at 716,000 won.

CHINESE e-commerce firm Alibaba.com Ltd has teamed up with more than 300 universities to train e-commerce professionals, the Hong Kong-listed company said yesterday.

It will launch courses to teach online trading and aim to cultivate 10 million professionals over three to five years to boost the business mode. Earlier, Ma Yun, board chairman of Alibaba.com, said the firm will invest 10 billion yuan (US$1.42 billion) to build an e-commerce chain in the next three to five years.

The increase of actual use of foreign investment in China's western regions exceeded the nation's average by 128 percentage points in the first two months this year, said an official of the ministry of commerce on Sunday.

During the first two months, the western regions' actual use of foreign investment was 1.393 billion U.S. dollars, more than double over the same period of 2007. A total of 254 foreign companies were approved to invest in the region, said Ji Xiaofeng,a ministry official in charge of foreign investment management at the ongoing 12th Investment & Trade Forum for Cooperation between East and West China.

Ji attributed the increase to the nation's encouraging policy for foreign investment to the middle and western regions. She said the ministry was advocating a transfer of foreign investment from the eastern regions to the western areas and encouraging local governments to use the investment in an innovative way.

She said the ministry would continue improving regulations on foreign acquisition and merger and establish an anti-dumping investigation mechanism. Foreign investors would be welcome to participate in reforms of state-owned companies.

According to statistics available, a quarter of the nation's tax revenue came from foreign invested companies at present. By the end of Feb., the number of foreign invested companies accumulated to 637,000 nationwide and the amount of the actual use of foreign investment reached 781.1 billion U.S. dollars.

During the first two months, 4,372 foreign investors came to China and the actual use of foreign investment rose 75 percent to 18.1 billion U.S. dollars.

DONGFANG Electric Corp says it proposes to sell up to 65 million new shares in China to raise funds to invest in energy-related infrastructure projects.

China's third-biggest maker of power-generation equipment said it intends to use the funds make total investments of up to 3.96 billion yuan (US$565 million) on wind power projects in Hangzhou, eastern China, and Tianjin in northern China, and a nuclear power renovation project in Sichuan Province.

Dongfang said it proposed to sell not more than 65 million new A shares, representing 7.96 percent of the total shares of the company currently in issue.

The sale will be subject to approval by shareholders and relevant Chinese authorities, Dongfang said in a statement to the Hong Kong Stock Exchange.

The company also said profit for 2007 fell 1.9 percent to 2.41 billion yuan, from 2.46 billion yuan in 2006. Earnings per share dropped to 2.723 yuan from 2.777 yuan the previous year, the Deyang, Sichuan-based company said.

The directors proposed a final cash dividend of 0.24 yuan per share for 2007, compared with 0.20 yuan a year earlier.

Patrick Burnson, Executive Editor -- Logistics Management, 3/19/2008

SAN FRANCISCO—As reported here yesterday, shippers are telling LM that sourcing manufactured goods from China will have a few new wrinkles in the coming months. According to Saji Daniel, president and CEO of Tradex International, it is now time for U.S. shippers to take a fresh at look trade issues now if they are to remain competitive in this marketplace.

“The Chinese government is taking deliberate steps to shift manufacturing to high-tech industries,” he said. “Last summer, the government reduced value-added tax (VAT) rebates on thousands of products. These rebates provide tax relief for exporters, but were removed for many commodity goods and products requiring high levels of energy to manufacture.”

Daniel also made note of a new labor law enacted January 1, which substantially increased production costs by requiring employers to pay insurance, overtime, and severance benefits to eligible employees.

“Our company has experienced direct increases in cost as a result of this new legislation, with labor costs estimated to have grown between 30-to-40 percent,” he said.

In the short-term, said Daniel, businesses in and around Beijing may also be seriously impacted by the 2008 Olympics. The government plans to reduce pollution prior to and during the games by shutting down factories surrounding the city, effectively stopping production for over a month.

Not that it will require a global sporting event to earn media scrutiny, he noted:

“The most publicized example is Mattel,” noted Daniel, “which recalled millions of toys last summer following the discovery of lead in many of its products produced in China. The recalls impacted not just toy manufacturers, but all importers, as questions regarding the safety of Chinese products drew international spotlight.

Daniel said that Mattel’s lack of oversight exemplifies the complexity of manufacturing overseas; issues like lead content, long ago dissolved in the United States, must still be considered in China.

“In a marketplace characterized by instant, global communication, one mistake can significantly damage the reputation of your brand both in the United States and worldwide,” he said.

By way of transport advice, Daniel suggests shippers stick with reliable ocean carriers with a proven record in the trade lane.

“Historically, Hanjin, Hyundai, Cosco, and CMA CGM have provided us with the best lead times and service,” he said. “The nature of our business does not require the use of air freight, as our chief concern is cost rather than delivery time. We maintain ample levels of safety stock domestically to satisfy any interruptions in the supply chain.”

Nor does Daniel recommend taking on too many of the intermediary functions of goods sourcing:

“We continue to find benefit from the use of freight forwarders, and utilize several different services to varying degrees. Freight forwarders reduce our staffing requirements by handling procurement, and our EDI capabilities enable us to monitor shipments by providing automatic updates from our forwarding partners,” he said.

In conclusion, Daniel observed that freight forwarders also provide his company with “peace of mind” by enabling them to delay its insurance liability for shipments until they arrive.

Agility, a logistics provider, has appointed James Gagne as CEO for Greater China.

Gagne’s appointment is part of a new regional management structure at Agility that will help to better manage its growing network of offices and to engage specialists for industry vertical sectors.

“We are delighted to have James on board as he brings 12 years of experience of working in China with a leading logistics services provider and he will be a key player as Agility continues to grow its business both organically and through strategic acquisition,” said Wolfgang Hollermann, CEO, Agility, Asia Pacific.

Agility is to strengthen its management team as a result of continuing high levels of growth in Asia Pacific and has set up five new regions and appointed leaders to manage these regions.

The five regions and their leaders are: North Asia (Japan, Korea, Philippines, and Guam), Olaf Tauschke; South East Asia (Cambodia, Indonesia, Malaysia, Singapore, Thailand and Vietnam), Mykell Lee; South Asia (Afghanistan, Bangladesh, India, Pakistan and Sri Lanka), Mahesh Niruttan; Australasia (Australia, New Zealand, Papua New Guinea and South Pacific Islands), Mick Turnbull; Greater China (China, Hong Kong and Taiwan), James Gagne.

The Asia Pacific region is part of the Global Integrated Logistics (GIL) unit of Agility. The GIL unit has four regional CEOs – one for each geographical region. In Asia the CEO is Wolfgang Hollermann, in the Americas, Mike Bible, in Europe, Beat Simon, and in Middle East and Africa, Elias Monem.

The GIL unit is headquartered out of Baar, Switzerland and is managed by Essa Al-Saleh, president and CEO, Global Integrated Logistics.

South Africa will increase its investment in China this year to strengthen the economic ties between the two fast-growing emerging markets, said a South African minister.

"We would like to increase our investment in several sectors such as automotive and energy," Rob Davies, deputy minister of South Africa's department of trade & industry, told China Daily.
South Africa's investment in China hovered around $700 million in 2006. The figure for 2007 is not yet available.

These investments mainly went to breweries, hotels and the energy sector. The biggest investments have been made by South African giants such as MIH, SAB Miller and Sasol, who are striving to expand their presence in China.

Multinational media giant MIH, which already has stakes in several newspapers in China, including the Beijing Youth Daily, Titan Weekly and Anhui Daily, is eyeing the mobile TV market in China as the country is poised to launch the facility before the Olympic Games.

Energy tycoons Sasol and Anglo-American are also accelerating their billion-dollar projects in China, one in coal-to-petroleum and another in coal chemicals. SAB Miller, one of the world's largest breweries, is looking for more opportunities after its joint venture in China acquired five local brands in the 2006 fiscal year ended March 31.

Sources said major South African banks such as ABSA and Investec are initiating a China fund aimed at investment opportunities in the world's fastest growing economy.

"The scale of the fund will be larger than any investment South African companies have ever made in China," a source said.

China has invested thrice as much in South Africa as the latter in China, Davies said. Most of the rapid increase in Chinese investment has come through China's largest lender ICBC's takeover of a 20 percent stake in South Africa's Standard Bank. The $5.46 billion deal was completed on March 4.

"Trade and economic cooperation is a major strategic area in the cooperation framework of South Africa and China," said Davies.

This year will mark the 10th anniversary of the establishment of the two countries' diplomatic relations.

Bilateral trade has developed over the past decade from a negligible figure to $9.86 billion in 2006, according to statistics of the Ministry of Commerce. China is now South Africa's second largest source of imports after Germany and its sixth largest export market.

"The trade imbalance between two countries has been largely improved," said Davies, adding South Africa's exports to China grew much faster than imports from China last year.

While boosting investments in China, South Africa is also urgently looking for more Chinese investment, particularly in the infrastructure and raw material processing sectors.

"We would like to have more value added to our mining products before exporting them," Davies said.

Talks have been on with some Chinese companies including Sinopec and Sinosteel for cooperation toward that end.