Recruiting in China

BEIJING -- When China announced in April it was easing its strict foreign-exchange rules to allow individuals and companies to invest offshore, markets in Hong Kong and other parts of Asia sensed quick profits.

Reality is starting to disappoint. In the past week, Industrial & Commercial Bank of China and Bank of China launched the first products through which Chinese savers will be allowed to access global markets. But now analysts don't expect more than a trickle of money from China anytime soon. That is bad news for any bulls anticipating a near-term boost to Chinese stocks listed in Hong Kong, which would be the natural first destination for Chinese-mainland funds chasing higher returns.

April's announcement that Chinese authorities had approved outbound fund flows under the long-awaited Qualified Domestic Institutional Investment, or QDII, system looked like an obvious boost for regional markets, particularly Hong Kong. China has some $4 trillion in savings, about half owned by individuals and half by companies, and most of it sits idly in banks collecting paltry interest. Companies like China Eastern Airlines and Sinopec Yizheng Chemical Fibre seemed like they could be the biggest beneficiaries, since their Hong Kong shares trade more cheaply than a separate class of their shares listed in Shanghai -- making the Hong Kong shares a natural arbitrage play for mainland investors.

In the longer term, that pattern may yet play out. But the QDII system is both cumbersome and costly -- making any quick expansion of the program unlikely.

The QDII system offers foreign-exchange quotas to approved banks, insurance companies and asset-management firms for overseas investment. But to protect novice investors, banks and insurers that control the bulk of China's savings will only be allowed to offer customers products that invest in fixed-interest instruments, like bonds, instead of more volatile equities. Asset-management companies will be free to offer equity funds -- but to selected clients, not the general public.

Heavy-handed regulation is likely to limit the Chinese public's interest in QDII investments, analysts say. The impact on global bond and equity markets of QDII outflows will be "virtually negligible" said Hong Kong-based HSBC analyst Zhi Ming Zhang in a research report last month.

One problem for banks offering QDII products is that they must contend with requirements that they give full protection to clients against currency risks that arise when they convert savings in yuan into foreign currency. This adds to the expense of running the funds -- and limits the range of products banks can sell, since no yuan hedging tools are available to cover currency risks on products with long maturities, like 10-year U.S. Treasury bills.

The Industrial & Commercial Bank of China's first QDII product, which went on sale Monday, will invest mainly in money-market notes with a six-month maturity. It promises investors returns of 3% to 7%.

Impediments aside, the hefty size of the first QDII quota allocations surprised many analysts -- a total of $4.8 billion was divided between Industrial & Commercial Bank of China, which received $2 billion; Bank of China, with $2.5 billion; and Hong Kong-based Bank of East Asia, with $300 million.

Kinger Lau, a Hong Kong-based Goldman Sachs analyst, says he expects Beijing will expand the quotas to $10 billion this year and says that "long term, it's very positive news" for the Hong Kong stock market. Mr. Lau says an obvious QDII winner will be Hong Kong Exchanges & Clearing, the listed holding company of the Hong Kong stock and futures exchanges, which will benefit from rising turnover. Hong Kong Exchanges' shares closed trading yesterday at 50.20 Hong Kong dollars (US$6.46), up about 56% since the start of the year, although off highs in May of about HK$65.

Morgan Stanley analyst Jerry Lou argues that in time there could be upside for Hong Kong-listed firms in sectors that are under-represented on mainland bourses, such as banking, insurance and telecommunications.

There are plenty of other head winds for outbound portfolio investments from China. For a start, China's own equity markets look enticing again after a long slump. The Shanghai index is up almost 40% since the start of this year. Among the star performers: Beijing-based Citic Securities has surged 160%, and car maker Shanghai Automotive is up more than 70%.

There also are strong incentives to keep savings in yuan amid expectations that Beijing will be forced to allow faster currency appreciation to narrow its huge trade surpluses, which are causing friction with the U.S. The few Chinese companies allowed to hold foreign exchange offshore for investment have been pulling their money back home. Shanghai-based Bank of Communications has repatriated all of the proceeds of its $2.2 billion stock-market listing in Hong Kong last year.

Wang Jizhou, a professor at the Capital University of Economics & Business in Beijing, says right now "money would rather stay in China." QDII, Mr. Wang argues, "is more meaningful in political terms than in economic ones" because it signals China's willingness to start draining its vast foreign-exchange reserves. The reserves, which stand at $941 billion, draw attention to China's politically sensitive trade surpluses.

BEIJING -- Raising the bar for competitors around the world, China is shifting its manufacturing resources to increasingly sophisticated goods, as shown by its rapid emergence as a global powerhouse in the auto-parts industry.

Just a few years ago, Chinese-made automotive components were plagued by a reputation for poor quality, and often cost more than U.S. or German parts. Detractors said the precision engineering required for the best parts was beyond the reach of inexperienced Chinese companies and their low-cost workers.

Last year, however, China for the first time exported more parts than its fast-growing auto industry purchased from abroad. Quality has improved so much that major Western auto makers like Volkswagen AG and DaimlerChrysler AG say they plan in coming years to buy billions of dollars of Chinese-made components -- such as brakes, fuel pumps, wheels and steering systems.

Those gains show how China continues to evolve as a manufacturer, posing new challenges for rivals in the U.S., Europe and Japan. After earning its stripes as a maker of simple consumer goods, such as furniture and textiles, China has branched out, quickly coming to dominate more labor-intensive parts of the consumer-electronics business, such as computer assembly, and moving into a broader range of industries.

The country's production of machinery and transportation equipment has surged, and export of those goods -- which range from auto parts to forklifts to vacuum cleaners -- totaled $352 billion last year, a fourfold increase from 2000.

Meanwhile, motor-vehicle production here has nearly tripled, and China is on pace to overtake Germany as the world's third-biggest auto maker. It has become the world's second-largest car market in terms of sales as millions of Chinese buy cars for the first time. Millions more are expected to do so as their incomes rise and car prices fall.

Now, "China competes in the entire range of products from telecom equipment to textiles," says Hafiz Pasha, director of the United Nations Development Program's Asia bureau.

The transition comes at a sensitive time for the U.S. and Europe, which have been finding it harder to hold on to high-paying manufacturing jobs. Employment in the U.S. auto-parts industry fell to about 644,000 in 2004 from about 721,000 in 2002, according to government figures.

More job losses could be on the way: Some major U.S. parts makers -- including Delphi Corp., which has plants in China -- have sought bankruptcy-court protection. And small and midsize suppliers, which often don't have the resources to set up lower-cost operations abroad, are facing growing pressure.

"In the past two years, Chinese bids for auto-parts orders have driven customer price targets to a level below our costs on some products," said Larry Denton, chairman and chief executive of Rochester Hills, Mich., parts maker Dura Automotive Systems Inc., at a recent government hearing in the U.S.

U.S. parts makers have also raised concerns about their access to the huge Chinese market. Earlier this year, the U.S. joined the European Union in asking the World Trade Organization to overturn a Chinese tariff policy that the two trading partners say discourages imports of auto parts.

China says the policy, introduced in 2005, is designed to prevent tariff fraud. It imposes additional tariffs on auto parts that exceed certain thresholds in terms of value or number of components. China says the idea is to discourage anyone who might seek to circumvent its auto tariffs by importing dismantled vehicles at the lower tariff rate that applies to parts and reassembling them in China.

The growth of the Chinese parts industry comes as manufacturers here increasingly grapple with rising wages and higher energy and raw-materials costs. In China's booming coastal areas, where many factories are located, land and labor are no longer as cheap and abundant as they once were, says Lü Tie, a scholar at the Institute of Industrial Economics in Beijing. Those areas "are now pretty close to the level of middle-income countries. Their comparative advantage is changing," he says.

With local wages on the rise, Chinese manufacturers are seeking to improve their efficiency and reduce their reliance on low-cost labor. They are increasingly churning out higher-value products such as auto parts and shifting away from traditional exports such as textiles and toys.

Some Western companies are reaping the benefits of China's quest for greater productivity. Rockwell Automation Inc., a Milwaukee maker of high-end equipment and software to run factories, said it has seen its China business grow by more than 30% a year since 2003.

"There is a misperception" about China, says Scott Summerville, Rockwell's president for Asia Pacific. While China still has a lot of labor-intensive manufacturing, he says, "there's a big push right now to make Chinese companies globally competitive. You can't do that just with cheap labor."

Rockwell is part of an influx of foreign money and expertise that has contributed to the improving quality of Chinese-made auto parts and other products. The world's biggest auto companies are also bulking up in China, looking for growth that is increasingly hard to come by in mature markets. They, in turn, often demand that their parts makers be able to supply them directly in China.

In recent months, such major Western auto-parts suppliers as Robert Bosch GmbH, of Stuttgart, Germany, and ArvinMeritor Inc., Troy, Mich., have made significant investments in Chinese factories that can make parts for the local market as well as for export.

The higher standards that global companies have introduced, combined with the international growth of local auto-parts makers like Wanxiang Group, has spurred innovation. To gain access to more customers and better technology, Wanxiang has bought several U.S. companies and has expressed interest in buying some assets from Delphi. It says its sales have been growing an average of 26% a year and reached 25.2 billion yuan, or about $3.15 billion, in 2005.

Smaller Chinese companies are also climbing the technology ladder. Huaxiang Group, based in the coastal city of Ningbo, started out in 1982 making plastic caps for medicine bottles. Now it makes molded plastics for auto interiors. Though it has been supplying VW's China operations, about 20% of its 2005 revenue of 2.25 million yuan came from exports, says Xu Peiqi, who runs the office of the board of directors. Huaxiang opened an office in May in VW's hometown of Wolfsburg, Germany.

"The companies are very focused on exports," says Huang Xiaohua, secretary general of the Auto Parts Industry Association of Ningbo. "Products are going up-market," as local manufacturers are increasingly becoming first-tier and second-tier suppliers for the major auto makers, he says.

"When we started exporting in 1997, people argued that you couldn't make" auto parts cheaper in China, says Jack Perkowski, chief executive of Beijing-based parts maker Asimco Technologies Ltd. "People also argued that China would never be a large car market."

Now, he says, "the conventional wisdom is that China can copy but not create. That's going to go too."

Thursday June 8, 9:30 am ET

KELOWNA, BRITISH COLUMBIA--(MARKET WIRE)--Jun 8, 2006 -- PACIFIC ASIA CHINA ENERGY INC. ("PACE") (TSX VENTURE:PCE.V - News) is pleased to announce that its PACE - Mitchell Drilling Joint Venture Company has appointed Mr. Peter Pacey as Country Manager of its China drilling operations. Mr. Pacey will oversee all aspects of the joint venture activities in China as the Joint Venture Company prepares to deploy Mitchell Drilling Contractors Pty Ltd's proprietary Dymaxion Surface to In-seam Drilling System later this year.

Mr. Pacey is from Australia and has spent more than 30 years in the drilling industry, including twenty years of coalbed methane gas experience. He has worked for a number of Australian drilling companies and is well versed in CBM drilling operations. Mr. Pacey will be based in Kunming, Yunnan Province, China where PACE's President, Mr. Tunaye Sai, and his operational team are located.

As previously reported, the PACE has contracted for the construction of a Dymaxion Drill Rig as part of its commitments to the PACE/Mitchell Drilling joint venture company. This drill rig is expected to be completed in September 2006 and will be ready to be deployed for independent pilot coal mine degasification contracts and for the company's own test production plans expected in early 2007. Degasification of Chinese coal mines represents a significant business opportunity due to China representing one-third of the world's coal reserves and is the world's largest coal producer, and the government mandate to improve coal mining safety standards. An additional drill rig has been ordered to meet the expected needs of the joint venture.

This news release may contain forward-looking statements. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.

PACIFIC ASIA CHINA ENERGY INC. is a Canadian based resource company specializing in the strategic development of Coal Bed Methane projects in China. Common Shares of PACIFIC ASIA CHINA ENERGY INC. are listed on the TSX Venture Exchange under the symbol "PCE".

ON BEHALF OF THE BOARD

Tunaye Sai, President

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Wednesday, May 31, 2006

SUNNYVALE, Calif.: SonicWALL Inc., a provider of continuous data protection and network, has appointed Tommy Tam as its country manager in China.

The firm also announced today that it will open a new engineering centre at the Fudan University High Tech Park in Shanghai to provide quality assurance, engineering and support for the China market.

Tam joined SonicWALL this year with responsibility for all sales, marketing and pre-sales activities in China.

He is also responsible for developing a network of business partnerships throughout that country.

?CyberMedia News

Foreigners who intend to work in China can have interviews with employers in China through the Internet.

From May 29 to June 4 this year, an online recruitment campaign will be launched by China Association for International Exchange of Personnel.

Foreign job hunters just log on www.e-jobfair.com, view the vacancies, submit their resumes, and ask to "meet" and "talk" with the employers through an audio-visual interaction system on the web.

The whole process is free and there is no need of downloading any plugs. It is the first time that such face-to-face online international recruitment has been made possible in China.

More than 500 Chinese educational institutions and companies have registered on the web site and more than 4,000 foreign job seekers have put forward their resumes there.

The web site also links with the world's top three English teacher associations: TESOL, TESL Canada and IATEFL.

An incomplete statistics show that some 100,000 foreign teachers and experts are working in China. Nearly 5,000 universities and colleges have been approved by the State Administration of Foreign Experts Affairs to have foreign teachers.

By People's Daily Online

By LARRY RINGLER Tribune Chronicle

YOUNGSTOWN — It’s well known that China is quickly becoming the world’s manufacturing center.

It might not be as obvious that it’s also closing the gap in research and development, which someday will be the seed corn of China’s homegrown manufacturing base.

That’s why two area business and labor leaders say it’s important to tap the skills of U.S. engineers, production experts and other skilled workers who face losing their job at shrinking American companies.

Think Warren-based auto parts maker Delphi Packard Electric. John Russo and Jim Cossler certainly are.

‘‘Delphi is in the forefront of making components for wiring harnesses. They could leave their technology in joint ventures that aren’t competition to them,’’ said Russo, codirector of Youngstown State University’s Center for Working Class Studies in Youngstown and a recent visitor to China.

Delphi Packard has a proven ability to generate patents. The Community of Science database of patents for the Warren-Youngstown area lists the Delphi Corp. division with 82 patents from 2000 to 2004 — more than the next seven companies combined.

Such brainpower is needed to keep pace with China, which is getting technology from joint ventures with Delphi, General Motors Corp. and other U.S. companies that are jockeying for a piece of the burgeoning market.

Russo got a sense of China’s meteoric growth as he recently visited Nanjing in eastern central China and Shanghai on China’s eastern coast.

Delphi Corp., he said, is investing $50 million to employ 1,500 Chinese engineers by 2009. The knowledge the Chinese glean from Delphi likely will help fledgling Chinese car companies such as Geeley Holding Co. and Chery Automobile Co. to export cars to the U.S., he said.

Chery, which is China’s largest car company, could start shipping vehicles to the United States by 2009, especially if it gets a $200 million investment from billionaire investor George Soros. Auto industry trade paper Automotive News carried a story last week that Soros may pump that much into Chery to help the company begin exports.

Russo noted Chinese automakers such as Chery, Geeley and Brilliance Automobile Corp. that make their own vehicles can export them. Shanghai GM, a joint venture with General Motors Corp., and other such collaborations can’t export their products.

China has encouraged joint ventures because the country lacked the technical expertise needed to design and build vehicles. Joint ventures also allowed vehicles to be made more cheaply because the Chinese company didn’t need to develop its own research and development, Russo said.

The same American technology that China covets would be valuable in the Mahoning Valley, Russo and Cossler said.

Cossler, whose Youngstown Business Incubator includes fast-growing software company Turning Technologies Inc., said he was ‘‘stunned’’ when he saw some of Delphi’s software.

‘‘I’m sure they don’t want rivals to have it, but we see it as of tremendous interest to any company that does business in electrical controls,’’ he said.

‘‘Delphi always focuses on making their plants as efficient as possible,’’ Cossler added. ‘‘We’d love to work with Delphi to examine the intellectual property they use. If they’re laying off some engineers, we’d like to help those engineers start new technology companies in the Mahoning Valley.’’

Delphi Packard’s parent, Troy, Mich.-based Delphi Corp., filed for Chapter 11 bankruptcy reorganization last October. Deep wage and job cuts for hourly workers have garnered most of the headlines, but the company also plans to shed *thousands* of engineering and other white-collar jobs.

Cossler and Russo noted Delphi holds the patents on inventions and processes developed by its employees. The division is a world leader in designing and building complex wiring harnesses that most often are used in vehicles to power the growing array of electronic devices, but which also could be used in computers, appliances and medical equipment.

They believe that by licensing the technology or forming a joint venture with a startup company, Delphi could benefit as the new company explores different markets for the product or process.

‘‘Our suggestion,’’ Cossler said, ‘‘is to take the training and experience of those workers and think electrical controls outside (Delphi’s) vertical markets.

‘‘We need innovative ways to work with Delphi on new technology that they may not even recognize,’’ he added.

Delphi Packard is well aware of the role its technology could play in local startup companies. The division held discussions last year about what role it might play in the incubator program but no talks have been held lately, spokeswoman Ann Cornell Vickers said.

‘‘The incubator is Ö a great idea for the area,’’ she said, ‘‘but we’re a company in bankruptcy, so we’re not able to enter into funding development of other companies. We need to focus on getting this company turned around.’’

Delphi Packard already has a number of agreements to license its technology, Cornell Vickers said, adding, ‘‘We’d certainly entertain discussions with the incubator.’’

She said she didn’t know the terms to which departing engineers would have to agree, such as promising not to develop products that would compete with Delphi Packard.

‘‘The particulars would have to be done in private discussions,’’ she said.

Cornell Vickers said Delphi Packard also has a number of engineers and other workers who can either retire or who are close to retiring. The company has announced its intention to trim its salaried work force globally, but no plan has been communicated to workers.

‘‘Everything right now is at the choice level’’ as to whether a salaried worker will decide to retire or leave, she said.

‘‘We’ve had some excellent engineers leave and go to work at universities. They may consider taking some of their expertise and parlay that into a development at the incubator or other companies,’’ she said. ‘‘Their knowledge doesn’t end just because they retire.’’