F REIGN TRADE - 中国国际贸易促进委员会

FEB. 2012 No. 519 Sponsored by CCPIT Since 1956CHINA’SF REIGN TRADEThe Export-Import Bank of China:Want to Be the Best in A Better WorldSpecial reportChina Charted EconomicPlan for 2012ECONOMYA Year of Not WorryingAbout InflationsurveyChina’s LogisticsEyes Growth AmidstChallengesDr. John H. Niu,President &Founder of McCullPharmaceuticals, Inc.国 内 邮 发 代 号 :80-799国 际 邮 发 代 号 :SM1581国 内 刊 号 :CN11-1020/F国 际 刊 号 :ISSN0009-4498http://www.ccpit.org

PoliciesNew measures to boost consumptionNew measures will beintroduced to boost consumption,especially for vehicles andelectrical appliances, as exportdemand weakens, China Dailyreported.With tax rebate policies onvehicles and appliances havingexpired or due to expire, “newmeasures are in the pipeline” toboost consumption, said HuangHai, former assistant minister of commerce and member of the economic andtrade policy consulting committee affiliated to the Ministry of Commerce.“The Ministry of Commerce has drafted a proposal to continue the stimulusprograms in the coming few years, but in different ways, and they are expected tocover vehicles and those related to real estate, say household appliances,” Huangtold China Daily in an interview.The measures may include subsidies for consumers in affordable housing tobuy appliances and for those planning to change their cars.Ministry of Commerce spokesman Shen Danyang also said the ministry ismulling over launching new programs on expanding domestic consumption.Huang also disclosed that under the instructions of Premier Wen Jiabao a nationalcirculation conference, the first of its kind, will be held around April.Government officials will discuss how to introduce concrete measures toboost consumption at the conference, he added.More than 10 central government departments including the Ministry ofCommerce, the National Development and Reform Commission and the Ministryof Finance, are expected to make proposals after conducting research before theconference, Huang said.China has sought to sustain fast economic growth through boosting domesticconsumption, given the fact that export growth has been declining during thepast few months with demand weakening from the European Union, China’slargest trade partner.In November 2011, the nation’s exports increased by 13.8 percent from a yearearlier, the smallest gain since 2009, accordingto the General Administration of Customs.The Ministry of Commerce has predictedthat a slowdown in the country’s exportgrowth could continue at least into the firstquarter of 2012 with a “more severe” outlook.“This year in China will be all about tryingto ensure a soft landing,” said Jim O’Neil, chairmanof Goldman Sachs Asset Management.“Growth, under downward pressure fromweakening exports and a fall in governmentsponsoredinvestment, will have to be led bystronger personal consumption if the economyis to grow by more than 8 percent.”It was agreed at the annual Central EconomicWork Conference in December thatChina will be committed to expanding domesticconsumption and improving people’slivelihood while trying to stabilize exports.Since the global financial crisis in 2008,the government has launched a series of preferentialpolices encouraging local consumers,through subsidies, to renew or purchasehousehold appliances and cars.“No matter whether the nation’s economyslows down or not, China will have to changeits economic growth model to consumptionoriented,rather than export- or investmentdriven,”said Lu Zhengwei, chief economistwith Industrial Bank Co Ltd.China to step up land reformthis yearChina is planning to launch new pilotFigures10%China aims to expandits foreign trade byaround 10 percent yearon-yearin 2012, significantlyslower than in 2011,as the country is facing a“grim situation” in terms of boostingexports, an official from the country’stop economic planning agency said onJan. 14.3.18tChina’s central bank saidJan. 13 that the country’s foreignexchange reserves topped 3.18trillion U.S. dollars by the endof 2011, up from 2.85 trillion U.S.dollars by the end of 2010.1.6tRevenues from customs duties inChina jumped 29 percent year-on-yearto more than 1.61 trillion yuan ($256 billion)last year, Yu Guangzhou, chief ofthe General Administration of Customssaid on Jan. 12.2.45%China’s automobile sales managed togain 2.45 percent year-on-year to 18.50million units last year, the slowest growthin 13 years, the China Association of2

Quotesprojects to promote land reformsthis year, Xu Shaoshi, the country’sminister of land and resources,was quoted as saying byXinhua.The ministry will summarizeits experiences from previous pilotschemes, especially from those relatedto land acquisition, which hasbeen an issue of wide social concern,said Xu at a national conference onland resources that closed in Beijingon Jan. 9.The new pilots programs willcover the examination and approvalof urban land use, the transferringof land under collective ownership,land management that supportseconomic zones, and differentiatedpolicies on land control, accordingto Xu.In China, the latest notable disputeover land use, financing andelections last year in the village ofWukan in the southern province ofGuangdong led to months of largescalevillager protests against localauthorities.The Ministry of Land and Resourceswill start pilot programs thatallow local governments to buildrental housing on construction landunder collective ownership, drawingexperiences from previous landprotection and compensation trialprograms, said Xu.“China’s financial system stable, but potential risksremain”China’s financial system isrunning on a stable course despitethe global financial crisis.However, apparent problemsand potential risks still linger,as the crisis has not ended, PremierWen Jiabao said.Wen made the remarks atthe two-day National FinancialWork Conference that concludedon Jan. 7. The meeting,held every five years, mappedout development plans for thefinancial sector in the upcomingfive years. Similar meetingswere held in 1997, 2002 and2007.“China’s economy has maintained stable and relatively fast growth withstabilized consumer prices and improvements in people’s lives. The financialsystem is running steadily. The good momentum of economic and social developmentremains unchanged,” Wen said.“China must brace for global shocks despite gooddomestic outlook”The global economy is going to face a string of difficulties and uncertaintiesin 2012, with the evolving debt crisis in the Eurozone, the uncertainU.S. economic outlook and the slowing growth of emerging countries, ZhouXiaochuan, governor of the People’s Bank of China, said in an interviewwith Xinhua.The government must watch carefully and be ready to pick appropriatepolicy instruments to combat external shocks at any time, Zhou said.Automobile Manufacturers (CAAM)said on Jan. 12.1.7%China’s Producer PriceIndex (PPI), a main gauge ofinflation at the wholesale level,rose 1.7 percent year-on-yearin December, the National Bureauof Statistics (NBS) said onJan. 12.4.1%China’s consumerprice index (CPI), a maingauge of inflation, rose4.1 percent yearon-yearin December,down0.1 percentagepointfrom Novemberonfalling non-food prices, the NationalBureau of Statistics (NBS) said onJan. 12.$408bChina’s cross-border trade settlementin yuan under current accountshit 2.58 trillion yuan ($408 billion) bythe end of 2011 since China launchedthe pilot program in July 2009, officialfigures showed on Jan. 11.3

PoliciesChina vows to continue development of west, northeastChina will continue to boost the development of the country’s less-developedwestern and northeastern regions, said a statement released after an executivemeeting of the State Council on January 9, reported Xinhua.The meeting, presided over by Premier Wen Jiabao, has approved guidelinesfor the development program of China’s west and the revitalization of the northeastold industrialbases in the country’s12th Five-Year Planperiod (2011-15), accordingto the statement.The two regionshave been at a newstarting point in history,said the statement.The vast westernregion is still a “shortplate” in the country’sregional development,and achieving its prosperityis an important but difficult task in the building of an all-round well-offsociety, it said.Priority should be given to the implementation of the strategy of large-scaledevelopment of the western region in the country’s overall regional developmentscheme, to maintain its continued stable and rapid economic and social development,said the statement.Efforts should be undertaken to keep the growth of the regional GDP and theresidents’ income higher than the national average in the five-year period, it said.More emphasis should be put on the construction of “development priorityzones” with their own development focus and priority according to their environmentalfeatures, natural resources, current development stage and developmentpotential, according to the statement.The State Council also underscored the importance of infrastructure construction,environment protection, promotion of advancedindustries and agriculture, and thedevelopment of small towns and villages,education and opening-up.The statement said that there were stillunsolved systematic and structural problemsthat have restricted the development of China’snortheastern region, and that local governmentsshould continue to deepen reformand accelerate transformation of developmentpattern in the 12th Five-Year Plan period.The State Council urged those involvedto make vigorous efforts to promote agriculturaldevelopment, further perfect modern industries,and optimize regional developmentstrategy in the northeastern provinces.Local governments should also work toensure sustainable development of resourcerichcities, improve infrastructures, enhanceenvironmental protection, boost employmentand affordable housing construction, and deepenreforms of state-owned enterprises whileaccelerating the growth of the private sector.The more developed eastern and centralprovinces should offer better assistance to thedevelopment of these regions, the statementsaid.China to support SMEs viagovt purchasingThe country’s Ministry of Finance (MOF)announced that the nation’s government departmentswill allocate at least 30 percent oftheir purchasing quota to small and mediumsizedenterprises (SMEs) from the start of2012, according to Xinhua.Figures8.3%China’s economy will grow 8.3percent this year, according to a reportby the Deutsche Bank.11.7%China’s power consumptionrose 11.7 percentyear-on-year to 4.7 trillionkilowatt hours in 2011, theState Electricity Regulatory Commission(SERC) said on Jan. 10.8%Shanghai, China’seconomic center, aims toincrease its gross domesticproduct (GDP) by 8 percentyear-on-year in 2012, agovernment official saidon Jan. 11.37%China’s land supply went up 37percent year-on-year in 2011 amid thegovernment’s tightening measure oncommercial property market, accordingto the Ministry of Land and Resources(MLR) on Jan. 7.1.43tI nsu rance companies i n China4

Meanwhile, 60 percent of the allocatedquota will be reserved for smalland micro-sized businesses, accordingto a new guideline jointly issued by theMOF and the Ministry of Industry andInformation Technology, a statement onthe MOF website said.The guideline urges relevant unitsto step up making plans to buy fromSMEs in 2012. It also forbids any institutionor any individual from impedingor restricting SMEs’ access to the governmentpurchasing market, the statementsaid.Furthermore, in regards to projectsthat are not especially oriented toSMEs, the government purchaser orpurchasing agency should first implementa 6-10 percent cut in productprices as reported by SMEs, and use thereduced pricing for bidding in order togive them advantages.The latest policy by the governmentcame after the State Council, or China’sCabinet, in October pledged strongerfiscal support for small and micro-sizedbusinesses, which includes raising thetax threshold for levying corporate,value-added taxes and business taxes.The MOF also announced lastmonth that the country will scrap thecollection of up to 22 items of administrativefees from small and micro-sizedcompanies during the January 1, 2012- December 31, 2014 period. Such feesinclude charges for companies’ registrationsand tax invoice purchases.“China faces more severe export situation in 2012”China is facing aneven more severe exportsituation featuringwithered demandand harsher competitionthis year, DeputyMinister of CommerceZhong Shan said onJan. 9.Zhong said othermajor exporters willcontinue providingstrong competition forChina, and some developingcountries are capturing market share in labor-intensive industriesas domestic labor costs rise in China.Zhong said the decline of market share had hit producers of the country’sseven major varieties of labor-intensive products: textiles, apparel,shoes, cases, furniture, toys and plastic products.“2012 trade deficit is likely”QuotesChina is likely to face a trade deficit in 2012, partly driven by the deterioratingeurozone crisis and a possible debt default by Greece, economistswarned on Jan. 9.Stephane Deo, managing director of European Economic Research withUBS AG, said China’s 2011 exports to the European Union (EU) registeredthe worst performance among the country’s main trading partners. The highlikelihood of a default by debt-ridden Greece, which some analysts predictwill happen in March, will further drag down the trade volume, making thefirst quarter the toughest for Chinese exports.reaped 1.43 trillion yuan (226.4 billionU.S. dollars) of premiums last year, up10.4 percent year-on-year, according todata from the China Insurance RegulatoryCommission (CIRC) on Jan. 7.175.1bChina’s central bank said on Jan. 30that banks lent 175.1 billion yuan ($27.77billion) to support the construction oflow-income housing in 2011.13%L a nd s a le s i n130 major Chinesecities d ropped 13percent year-on-yearin 2011, as propertymarket curbs continuedto bite the realtyindustry, accordingto the China IndexAcademy.49.88mChina’s crudesteel output postedi t s f i r s t y e a r l ydecline in November2011 to 49.88m i l l io n t o n n e s ,according to latestdata provided bythe country’s topeconomic planner.5

http://cft.ccpit.orgwww.ccpit-cft.net.cn2012/02 No.51908China would maintain its prudentmonetary policy and proactive fiscalpolicy in 2012.Special report08 China Charted Economic Plan for 201210 Official Statement on the 2011 Central Economic Work Conference13 China Aims to Balance Growth and Inflation16 Real Test is Still to Come17 Crucial Period of Change40Service demand for those over sixtywill increase dramatically.ECONOMY20 A China Round of Multilateral Trade Negotiations23 A Year of Not Worrying About Inflation26 Data Watch on China’s Foreign Trade and Investment in 2011Industrial Watch30 Agriculture Still Vital to China38 Still Young: China’s New Energy Vehicle Industry40 Opportunity Growing while Aging42 Clouds Gathering Around44 Mobile Internet Will Diversify IT Services46 How Could Chinese Private Bookstores Survive?66Manufacturing employment hasgrown faster in the US.survey48 China’s Logistics Eyes Growth Amidst ChallengesCase Study56 Safety Strategy of China’s Petro-Chemical Sector88With its five flat peaks, Mount Wutaiis a sacred Buddhist mountain.REGIONAL TRADE AND INVESTMENT60 New Starting Point in Advancing Cooperation between Poland and China62 Getting at the Pulse of the EU Debt Crisis66 Manufacturing Jobs Return to US as Asia Loses Edge68 Hawaii as a Bridge Between China and U.S70 Can Emerging Market Central Banks Bail Out Banks?

72 Central China Economic Zone Eyes Future73 Fujian Further Opens UpCover Story74 To Build a World-Class Global PharmaceuticalCompany in ChinaInfoRMATION78 2012 China Market Suppliers List80 China Fairs & Expos82 Investment Projects in Fuding, Fujian Province, ChinaLIFESTYLE84 Things from the Gallery Warehouse 4THIS IS China88 Mount Wutai — The Holy Land of Buddhism inNorthern Chinaeye on china92 Badgering China with Misleading Reports93 Why Flexibility Is a Must in China BusinessSponsored by ( 主 管 )CCPIT( 中 国 国 际 贸 易 促 进 委 员 会 )Published by ( 主 办 )Trade Development and Cooperation Center of CCPIT中 国 国 际 贸 易 促 进 委 员 会 贸 易 推 广 交 流 中 心社 长 President 杨 晓 东 Yang Xiaodong总 编 辑 Editor-in-Chief 孟 燕 星 Meng Yanxing副 社 长 Vice President 石 净 Shi Jing杨 复 强 Yang Fuqiang李 英 宏 Li Yinghong编 辑 部 副 主 任Editorial Deputy Director编 辑 部 Editorial DepartmentTel:86-10-68053271流 程 总 监 Operation Director英 文 校 审 English Polisher杨 蔚Yang Wei郭 艳 Guo Yan李 振 Li Zhen阎 漫 漫 Yan Manman竹 子 俊 Zhu Zijun崔 晓 玲 Cui Xiaoling张 越 Zhang Yue莫 雷 ( 美 )Adam Morley经 营 部 总 经 理 石 净 ( 兼 )Marketing Department Director Shi Jing副 总 经 理 Deputy Director 白 义 峰 Bai Yifeng石 林 峰 Shi Linfeng项 目 经 理 Manager 游 万 龙 You WanlongTel:86-10-68027947 李 小 冬 Li Xiaodong高 嵩 Gao Song推 广 部 总 经 理 李 英 宏 ( 兼 )Distribution Department Director Li Yinghong项 目 经 理 Manager 王 石 Wang ShiTel:86-10-68069328 王 岱 凌 Wang DailingCulture94 Eating Culture in China95 Food in Chinese秘 书 处 副 主 任Council Secretariat Deputy Director联 络 专 员 AssistantTel:86-10-68020773刘 晓 东Liu Xiaodong王 飞 Wang Fei于 洋 Yu Yang戚 英 杰 Qi Yingjie石 林 Shi LinIndex of Advertisements封 二 -011928-2952-55封 底Changchun First Automobile Works中 国 第 一 汽 车 集 团 进 出 口 公 司Weichai Power潍 柴 动 力 股 份 有 限 公 司Shaanxi Automobile Group Co., Ltd.陕 西 汽 车 集 团 有 限 责 任 公 司Zhengzhou Yutong Group Co., Ltd.郑 州 宇 通 集 团 有 限 公 司Anhui Jianghuai Automobile Co., Ltd.江 淮 汽 车Cooperation Media虚 假 新 闻 举 报 热 线 86-10-68053271General Distributor For Overseas Subscribers国 外 发 行 总 代 理China National Publications Import & Export (Group) Corporation中 国 图 书 进 出 口 ( 集 团 ) 总 公 司Add: 16, Gongti East Road Beijing, ChinaPost Code:100020地 址 : 北 京 市 朝 阳 区 工 体 东 路 16 号Tel: 86-10-65066688-8822 65063082China International Book Trading Corporation中 国 国 际 图 书 贸 易 总 公 司 (GUOJISHUDIAN)Add: Box 399, Beijing 100044, China地 址 : 中 国 北 京 399 号 信 箱 (100044)国 内 邮 发 代 号 80-799国 际 邮 发 代 号 SM1581国 内 统 一 连 续 出 版 物 号 CN11-1020/F及 国 际 标 准 刊 号 ISSN0009-4498AD LICENCE No. JXGS/G-0249广 告 经 营 许 可 证 号 京 西 工 商 广 字 第 0465 号Domestic Price 国 内 订 价 16 元 (RMB)Overseas Price 国 外 订 价 US$5设 计 制 作 北 京 锋 尚 制 版 有 限 公 司印 刷 北 京 瑞 禾 彩 色 印 刷 有 限 公 司License Mark of General Administration ofPress and Publication, the People’s Republic of China

20021998Tone of 1999:Pro-active fiscalpolicies2000Tone of 2001:Pro-active fiscalpolicies and prudentmonetary policiesTone of 2003:Pro-active fiscal policiesand prudent monetarypolicies2004Tone of 2005:Consolidate theachievements ofmacro-control1999Tone of 2000Do a good job inState-own enterprisesreform2001Tone of 2002:Boost domesticdemand2003Tone of 2004:Continue with themacro policesChina Charted EconomicPlan for 2012By Lesley CuiThe 2011 Central Economic Work Conference was held in Beijing fromDecember 12 to 14, 2011. As China’s highest economic meeting, it broughttogether the nation’s central and provincial government officials, the heads of thebiggest state companies and the army’s top generals.8

2006Tone of 2007:Prudent fiscal policiesand monetary policies2008Tone of 2009:Pro-active fiscal policiesand moderately loosemonetary policies2010Tone of 2011:Pro-active, prudent,flexible macro-control20112007Tone of 2008:2005Prudent fiscal policiesand tight monetarypoliciesTone of 2006:Prudent fiscal policiesand monetary policies2009Tone of 2010:Change from “maintaininggrowth” to “transformingthe pattern of economicgrowth”Tone of 2012:Pro-active fiscalpolicies andprudent monetarypolicies“Prudent monetarypolicy and proactivefiscal policy”Leaders at the conference reviewed the country’s economic works in 2011,analyzed the international and domestic economic situations, noted challengesto the country’s economic growth, and charted the country’s macroeconomicpolicies for 2012.At the meeting it was agreed that China will take a slew of measures toensure “stable and relatively fast” economic growth amid the “extremely grimand complicated” global outlook this year, while adjusting the economic structureand regulating inflationary expectations.Leaders decreed that the nation would maintain its “prudent monetarypolicy and proactive fiscal policy”, and make its macroeconomic regulationmore “targeted, flexible and forward-looking” in 2012.The Central Economic Work Conference has been held regularly by theCentral Committee of the Communist Party and the State Council, at the endof every year since 1994.The year 2012 is considered a crucial year in implementing China’s 12thFive-Year Plan (2011-2015), so the plans and strategies made in this conferencewill be significant for consolidating the sound momentum of China’s economyand further promoting the steady and relatively fast economic growth.9

Official Statement on the 2011Central Economic Work ConferenceBy Lesley CuiChinese PresidentHu Jintaoaddresses theconference.ChinesePremier WenJiabao speaksat the meeting.President Hu Jintao, Premier Wen Jiabao,top officials from the central bank, financeministry and economic planningagency as well as provincial officials attendedthe Central Economic Work Conference,held in Beijing from 12 to 14 December 2011.Their conclusions serve as a work plan for variousgovernment agencies and are announced throughshort statements.The following is a translation of the report onthe meeting by official Chinese news agency Xinhua.In his important speech delivered at the conference,Hu Jintao analyzed the current internationaland domestic situation in an all-round way,profoundly expounded on the major economicissues that must be successfully tackled in 2012and for some time to come, and put forward inclear-cut terms the overall requirements, policyguidelines, and main tasks of the economic workin 2012. In his speech, Wen Jiabao made a comprehensivereview of the economic work 2011 andspelled out the main objectives, tasks, and majorissues concerning the economic work in 2012.Achievements made in 2011The conference pointed out: In 2011, thestarting year of the 12th Five-Year Program, theparty Central Committee and the State Councilunited and led the people of all ethnic groupsin China to firmly grasp the theme of scientificdevelopment concept and to seize the thrust ofaccelerating the transformation of the mode ofeconomic development; strengthen and improvemacro-management; correctly handle the relationshipbetween maintaining steady and relatively fasteconomic development, readjusting the economicstructure, and managing the anticipated inflation;and promote the orderly shift of the economy fromone that relies on policy stimulus for growth toone that grows naturally without external stimulus.As a result of all this, the national economyhas been developing in the anticipated direction ofmacro-management with a strong momentum towardfaster growth, price stability, better economicreturns, and improved livelihood for the people.10

From a general perspective, in 2011China scored new achievement in socialisteconomic construction, politicalconstruction, cultural construction, andsocial construction as well as in buildingecological civilization and in partybuilding and realized a good beginningfor the 12th Five-Year Program.Challenges facing the ChineseeconomyThe conference stressed: Whilefully affirming achievement, we mustalso soberly realize that the contradictionsand problems of imbalance,incoordination, and unsustainability inChina’s economic development are stillquite prominent, there is downwardpressure on economic growth and thereis pressure of rising commodity prices;some enterprises are experiencing difficultiesin production and operation; thesituation in energy saving and carbonemission reduction is grim; and thereare hidden risks in the economic and financialspheres that cannot be ignored.We must remain sober-minded, and wemust step up risk assessment, preparecontingence plans as early as possible,and adopt prompt measures to effectivelydefuse the risks.Analysis of the global economicsituationThe conference held: Since the beginningof 2011, worldwide economicgrowth has slowed down, the rise ofthe international trade has dropped, theinternational financial market has beenexperiencing violent turbulences, andrisks of all kinds have clearly multiplied.In 2012, as we look at it, the overallglobal economic situation will remainextremely grim and complicated, withrising instability and uncertainty inworldwide economic recovery.Countermeasures against thecurrent economic environmentThe conference pointed out: Inthe face of the complicated, volatileinternational political and economicenvironment and the new developmentsand new changes in the operationof the domestic economy, we mustcontinue grasping the theme of thescientific development concept and thethrust of the accelerated transformationof economic development mode, firmlyfocus on expanding the strategic baseof domestic demands, put the emphasisof the expansion of domestic demandsmore on safeguarding and improvingthe people’s livelihood, accelerating thedevelopment of service industries, andincreasing the living standards of themiddle- income group. We must firmlygrasp the development of real economy,which constitutes the strong foundationof the economy, and strive to create asocial climate characterized by workingin a down-to-earth manner, starting anundertaking through diligent work, andgetting rich by running real businesses.“Maintain continuityand stability of themacroeconomicpolicy”We must firmly grasp the powerfulmotive force of accelerating reform andinnovation, seize the opportunities toachieve breakthroughs in some key areasand links as soon as possible, striveto increase the ability to make originalinnovation, make constant efforts toenhance integrated innovation, andabsorb and re-innovate imported technologies;firmly grasp the fundamentalpurpose of safeguarding and improvingthe people’s livelihood; increase financialinput; earnestly carry out importantand major tasks related to the people’slivelihood; and pay attention to raisingthe level of tolerance in the process ofdevelopment.Requirement for economic workin 2012The conference stressed: 2012 isan important year for implementing the12th Five-Year Program as it connectswhat has been done in the precedingperiod with what needs to be done insubsequent years, and our party willhold its 87th national party congress.The conference proposed that thegeneral requirement for the economicwork in 2012 is as follows: continue toimplement a proactive fiscal policy anda prudent monetary policy; maintaincontinuity and stability of the macroeco-11

nomic policy; make macro-managementmore target-specific, flexible, and forward-looking;continue to handle wellthe relationship between maintainingstable and faster economic development,readjusting economic structure, andmanaging anticipation of inflation; pushforward the transformation of economicdevelopment mode and economic structuraladjustment at an accelerated pace;strive to expand domestic demands;strive to enhance independent innovationand energy saving and carbon emissionreduction; strive to deepen reformand opening up; and strive to safeguardand improve the people’s livelihood;maintain economic stability and fasterdevelopment as well as the basic stabilityof the general price level; maintain socialharmony and stability.The conference held: To pushforward the economic and social developmentin 2012, we must lay stress ongrasping the general work guideline ofseeking progress amid stability. “Stability”refers to maintaining the basicstability of macroeconomic policies,maintaining steady and fairly rapid economicdevelopment, maintaining thebasic stability of the general price level,and maintaining overall social stability.“Progress” refers to continuing toseize and make good use of the periodof strategic opportunities, making newprogress in changing the developmentmode, scoring new breakthroughs indeepening reform and opening up, andachieving new results in improvingpeople’s livelihoods.Major tasks for economic workin 2012121. Strengthen and improve macroeconomicregulations and maintainstable and healthy economic development- Adopt proactive fiscal policiesand prudent monetary policies to preventeconomic risks;- Continue with structural tax reduction,step up investments to improvepeople’s livelihood and tighten managementof local government debts;- Fine-tune monetary polices accordingto economic situations, optimizethe credit structure and fend offfinancial risks;- Increase investment in agriculture,farmers, rural areas and affordablehousing construction, and continuesupporting technology innovation, environmentprotection, strategic emergingindustries and key infrastructureprojects.2. Reinforce supplies of agriculturalproducts- Increase subsidies to agriculturalproductions and bump up the minimumpurchase prices of grain;- Tighten rural infrastructure construction,including irrigation projects,roads and grids;- Strengthen efforts to promoterural compulsory education and secondaryvocational education, and expandcoverage of the new rural socialpension system.3. Speed up economic structuraladjustments- Encourage consumption andincrease income of residents, especiallypoorer population;- Propel innovation, protect intellectualproperty rights and sharpenindustrial competitiveness;- Cut back on outdated industrialcapacities, promote mergers andacquisitions, develop new energies,stimulate the modern service sector,invigorate the cultural industryand enhance energy conservation andemission reductions.4. Deepen reforms and furtheropen up to the outside world- Push forward the value-addedtax reform and the pilot program ofproperty tax, reform the resource taxsystem and research on the environmentprotection tax reform;- Deepen market reforms of interestrates, further reform the yuanexchange rate regime and ensure basicstability of the yuan;- Maintain steady growth of exports,upgrade export structure, expandimports and seek trade balance;- Attract foreign investments tothe central and western regions, widenoutbound investments and fight againstprotectionism in any form.5. Improve people’s livelihood- Increase the quality of education,promote employment and supportlabor-intensive industries and small andmicro-sized enterprises;- Improve the social safety net,expand pension systems and help migrantworkers in employment, housing,medical health and education of theirchildren;- Tighten funding, construction,operation and management ofaffordable housing projects, adhereto control measures of the real estatemarkets, bring house prices back toa reasonable level, expand suppliesof commercial houses and promotehealthy development of the propertymarkets.

China Aims toBalance Growth and InflationBy Cui XiaolingChina’s top leadership agreed on the generaldirection of the nation’s economicpolicy for 2012 at the annual three-dayCentral Economic Work Conference,which concluded in Beijing on Dec 14, 2011.They pledged to take a slew of measures to “makeprogress while maintaining stability” amid the“extremely grim and complicated” global outlook.The current “proactive fiscal policy and prudentmonetary policy” will be maintained.Stability as top priorityStability is still the key word at China’s annualCentral Economic Work Conference.According to a statement issued after theconference, “making progress while maintainingstability” will be the main theme of 2012. “Stabilitymeans to maintain basically steady macroeconomicpolicy, relatively fast economic growth,stable consumer prices and social stability,” thestatement said.Many analysts believe it is a sensible choiceto maintain stable growth given the internationaland domestic situations.Extremely grim global economic outlookin 2012The statement described the current globaleconomy as “extremely grim and complicated” asthe eurozone sovereign debt crisis has worsenedand economic recovery in the US remains weak.With the world economy slowing and internationalfinancial markets in chaos, the world’seconomic recovery is expected to remain unstableand uncertain, the statement said.Under the economic globalization, everycountry suffers and has to pay the cost. Quantitativeeasing policies, which are likely to be put intoplace in the United States and Europe to helpsolve the debt crises there, may create additionalinf lationary pressure on China, according toWang Tongsan, head of the Institute of Quantitativeand Technical Economics under the ChineseAcademy of Social Sciences (CASS).Faltering external demand will continue toweigh on China’s foreign trade and slow its exportgrowth in 2012, he added.Strives to shore up growth whiles reigningin inflationWhile noting the global economic malaise,Beijing conceded that China is in a tight spot itself,squeezed by both inflation and a slackeningpace of economic activity.Chinese policy makers strive to shore upgrowth while avoiding reawakening the inflationdragon, analysts said.“China must stabilize economic growth toprevent a sharp plunge, which might dampenemployment and cause social problems,” said ZhuBaoliang, deputy director of the Economic ForecastDepartment of the State Information Center,a government think tank.China’s economic growth has been slowingall year in 2011. Its GDP growth slowed to9.1 percent in the third quarter from 9.5 percentin the second quarter and 9.7 percent in the firstquarter.Growth of exports, one of the major enginesused to power China’s expansion, also slowed, to13.8 percent in November from 37.7 percent in13

January in 2011.“The global economic slump andsluggish external demand left littleroom for sharp increases in China’sexport volume. In the meantime, mostChinese exports are manufacturedgoods that face full competition andexporters tend to wage ‘price wars’when the world economy is weak, thussqueezing China’s exports,” said ZhangYansheng, a researcher of the Institutefor International Economics Researchof the National Development andReform Commission, China's top economicplanner.As China says it will continue tomaintain a prudent monetary policyand a proactive fiscal policy in the nearfuture, economists expect economicgrowth to fall below 9% and exportgrowth to slow to around 10% in 2012.China’s 4 trillion yuan fiscal stimuluspackage gives the country a quickrebound from the global economiccrisis, causes excess liquidity and putsa large debt burden on local governments.Growth of the consumer priceindex (CPI), a main gauge of inflation,eased to 4.2 percent in November, 2011from the year’s peak of 6.5 percent inJuly.However, even with the sharp fallin November, the country’s CPI rose 5.5percent year-on-year during the January-Novemberperiod, well above thegovernment’s full-year inflation controltarget of 4 percent.Although the CPI rise has slowed,there are still factors that may push upprices, including price increases triggeredby higher costs and uncertaintiesof imported inflation, said WangYiming, deputy head of the Academyof Macroeconomic Research under thecountry’s top economic planner, theNational Development and ReformCommission.Fine-tunes policiesChina will maintain “prudent”monetary policies and “proactive” fiscalpolicies, despite the easing of inflation.The yuan will be kept “basically stable”;interest rate and exchange rate reformswill continue; measures aimed at calmingthe property market will be kept;exports will be held steady whilst importsboosted to balance trade.Economists said the statementssuggested Beijing preferred to only finetuneeconomic policies, rather thanswing into an outright monetary easingmode to shore up growth, which is expectedby many analysts to slip below 9percent in 2012 for the first time in overa decade.“This year it’s a lot less drama,”said Tim Condon, an economist atING Bank in Singapore. “The statementsare much less thematic than2010 when they moved from a moderatelyloose to a prudent stance.”But China made clear that thepolicies will be flexible, which meansthe government will react when slowdowntrends are clear.“We will fine-tune monetary policyin an appropriate and timely manneraccording to the economic situation,and will use various monetary tools tokeep a reasonable growth in money andcredit,” the statement said.Economists say policy fine-tuningis already under way. Data showed Chinesebanks made 562 billion yuan ofnew loans in November, 2011, a shademore than forecast as Beijing gentlyeases tight credit conditions.China’s central bank announcedon Nov 30, 2011 it was cutting thereserve requirement ratio for its banksfor the first time in nearly three years toease credit strains and shore up businessactivity, and market watchers expectfurther reductions in 2012.Bolder steps such as cutting interestrates, however, appear premature fornow. While that may boost investment,China’s leaders fear it could also reviveinflationary pressures, especially in thehousing market, economists say.Keeps yuan value stableThe meeting noted that Chinaaims to keep the yuan’s value “basicallystable” whilst pushing ahead withreforms aimed at liberalizing the country’sinterest exchange rates.“However, the government probablywill have to take more positivemeasures to shore up economic growthin the first quarter, including slowingthe appreciation of the yuan,” Li Wei,economist at Standard Chartered Bank(China) Ltd, told China Daily.“But China doesn’t want to seelarge-scale yuan depreciation either,unless unemployment becomes a big issue,”Li said.“Through the whole year of 2012,there will be still a 2 percent appreciationof the yuan against the dollar.”A new exchange-rate regime couldpave the way for two-way currencyfluctuations, improve the reference to abasket of currencies and slow the accumulationof foreign reserves.Drives housing prices back to“reasonable level”Beijing promised to keep a tightpolicy leash on property at the conference.To ensure property prices “returnto a reasonable level”, China said it14

will uphold measures aimed at coolinghousing prices, which are still nearrecord highs, and increase the supply ofhomes.It will also push forward the trialsof property tax reform. Property-taxtrials were carried out in Shanghai andChongqing at the beginning of 2011 aspart of its efforts to curb skyrocketinghome prices and contain asset bubbles.Since April 2010, China has imposeda raft of measures aiming to calmproperty prices. They include higherdown payments, limits on the numberof houses that people can own, theintroduction of a property tax in somecities, and the construction of lowincomehousing.The government has vowed tobuild 36 million units from 2011 to2015 in an effort to give more midandlow-income households access tohousing and stabilize runaway propertyprices, with 10 million units plannedfor both 2011 and 2012.China’s housing authorities saidon Nov. 10, 2011 that the country hasalready met this year’s goal of startingthe construction of 10 million units.“The construction of affordablehomes will help curb excessive pricerises and fuel urbanization, which willin turn unleash consumption and investmentpotential and push the developmentof related industries,” said VicePremier Li Keqiang.In October 2011, 34 cities in astatistical pool of 70 major cities sawdeclines in new home prices from September,compared with 17 in September,data with the National Bureau ofStatistics showed.Cuts tax to aid economic growthMore tax reforms are on the 2012agenda as part of China’s “positive fiscalpolicies” intended to restructure andbalance the economy.An important part of the plan involvesfive tax reforms: a pilot programfor the value-added tax; one to theproperty tax; adjusting the scope andstructure of the consumption tax; expandingresource tax reform and studyingthe feasibility of an environmentaltax.Value-added tax reform, or replacingthe turnover tax with a value-addedtax, will see its first pilot program inShanghai starting on Jan 1, 2012.“This move would resolve the issueof duplicate taxes and lower the tax burden,especially for the service sector,”Liu Shangxi, deputy director of the financeministry’s Research Institute forFiscal Science, told China Daily.Liu said it hasn’t been decidedwhether the property tax pilot programin Shanghai and Chongqing would beextended to more areas or nationwide,but the tax would continue to serve as ameans of regulating the housing marketrather than a new source of fiscal revenue.“As for the consumption tax, thekey of the reform lies in changing thescope of assessment. For example, toredefine ‘luxury goods’ by moving somecosmetics products off the list,” Liusaid.China also shifted the basis of theoil and natural gas tax to value nationwidefrom volume, which raised the taxrate by about 10 times.“There will be more resources,such as coal, to be taxed by value ofproduction because easing inf lationgives more room for tax reform,” saidLiu.Environmental taxes, such as acarbon tax, are still in the researchphase and will not necessarily be implementedin the next year, but such taxeswill eventually replace some administrativefees, Liu added.These tax cuts will spur consumption,without disastrous consequencestriggered by a record 17.5 trillion yuan($2.8 trillion) of lending in 2009 and2010 that funded infrastructure projectsand real-estate speculation.Meng Chun, a senior researcherwith the State Council’s Development andResearch Center, said in a research notethat more such tax preferences should bedirected toward smaller businesses to helpthem move up the value chain and withstandthe global downturn.Tax burdens on the agriculturaland processing sectors should also beeased to stabilize food prices and easeinflationary pressure, Meng said.Fiscal revenue reached 9.73 trillionyuan by the end of November 2011, up26.8 percent year-on-year.Boosts domestic demandPolicymakers stressed the importanceof boosting domestic demandto accelerate the transformation of thegrowth model toward a more consumption-drivenone against the backdrop ofweak external demand.There will be more efforts to boostdomestic consumption. China will continueto increase the earnings of lowincomefamilies and build a strongermiddle-class. At the same time, it willdeepen education and medical reformsto keep more spending money in people’spockets.“If the country can spur domesticdemand, especially domestic consumption,it will get inexhaustible growthmomentum,” said Yao Jingyuan, aspecial researcher with the Councillor’sOffice of the State Council, or China’sCabinet.The Chinese leadership reiteratedtheir commitment to boost imports inorder to balance trade.The Ministry of Finance saidthat from 2012 China will reduce importtaxes for 730 categories of goodsincluding energy resources, parts andcomponents of strategic emerging industriesand daily necessities that couldpromote consumption.The move is likely to find favourwith European and US exporters, whohave long complained about the tradesurplus China has been running.15

Real Test is Still to ComeBearish sentiment about theChinese economy has surgedin recent months, owing largelyto three conjectures. First,China’s housing market is on the brinkof collapse. Second, China’s fiscalposition will worsen rapidlybecause of massive local governmentdebt. And, third,the collapse of undergroundcredit networks in citiessuch as Wenzhou,Zhejiang province,will lead to a broad financialcrisis across thecountry.In fact, despite itsproblems, China’s economyremains on course and it is not yetanyway near to hitting the rocks.In the last decade, skyrocketinghouse prices, except for a short respiteduring the global financial crisis, havecaused serious social discontent in China.But after years of effort, the centralgovernment has finally clamped downon housing speculation. As a result,prices fell in October 2011 for the firsttime this year, while real-estate investmentgrowth fell as well.The fall in house prices is unlikelyto turn into a rout, because the demandfor houses will remain strong even afterspeculative demand is driven from themarket. As soon as house prices fall toan affordable level, buyers will re-enterthe market and set a floor under the decline.Moreover, because there are nosubprime mortgages in China anddown payments are as high as 50-60percent, even a significant fall in houseprices will not seriously damage China’smega-banks.Over the past decade, real-estateinvestment in China has been the singlemost important contributor to fixed-assetinvestment growth and therefore, to theeconomy. Indeed, since the late 1990s, thereal-estate investment-to-GDP ratio hasbeen far higher than it was in countriesLocalgovernment debtBy Yu Yongdinglike Japan and South Korea during theirhigh-growth periods.It is simply wrong for a developingcountry with per capita GDP of around$4,400 to concentrate its resourceson producing concrete andcement. Although a significantdecline in realestateinvestment willhave a negative impacton China’s growth, aslong as the fall is nottoo drastic, it is a welcomedevelopment.Local governmentdebts are arelatively new phenomenon.In 2009,local governments were encouraged tocreate special purpose vehicles, specifically“local finance platforms” (LFPs),to supplement China’s 4 trillion yuan($628.7 billion) stimulus package. TheLFPs would borrow from banks usingfuture government revenue as collateralto finance packaged investment projectsin Chinese localities. By 2010, some6,576 LFPs had been created.There is no denying that localgovernment debt could be a tickingtime bomb for the Chinese economy.According to China’s National AuditOffice (NAO) , the total borrowing ofthese LFPs amounts to 10.7 trillionyuan, of which 79.1 percent is bankloans. But it is equally true that China’slocal government debt has so far beenmanageable, and there is no reason tobelieve that all of it is bad. In fact, forthe majority of the LFPs, the cash flowgenerated by investment so far has beenenough to meet repayment of principaland interest. According to the Industrialand Commercial Bank of China(ICBC) the largest of China’s “big four”banks 93 percent of its loans to LFPsare being repaid regularly.Indeed, the ICBC’s non-performingloan (NPL) ratio for LFP loans is as lowas 0.3 percent, while the correspondingcoverage ratio the bank’s ability to absorblosses from NPLs is 1,066 percent. Accordingto the NAO, the NPL ratio forthe 10.7 trillion yuan in local governmentdebt is roughly 2.3 percent.In addition, given that local governmentdebt comprised 27 percentof China’s GDP in 2010, and centralgovernment debt stands at 20 percentof GDP and policy loans at 6 percent,the total public debt-to-GDP ratio isapproximately 53 percent lower thanGermany’s. So, while China should notbe complacent about local governmentdebt, panic is unwarranted.Finally, there is a long history ofunderground lending and borrowing insome of China’s east coast region, especiallyin Wenzhou. Whenever monetarytightening causes bank credit toshrink, small and medium-sized privateenterprises are prepared to borrow atsuicidally high interest rates from relativesor loan sharks.In recent years, real-estate speculationhas become another importantsource of demand for undergroundloans. When real asset prices fall andcause local credit networks to collapse,not only are hundreds of families leftfinancially shattered and enterprisesbankrupted, but banks suffer collateraldamage, as occurred recently in theWenzhou region.But the severity of Wenzhou’s undergroundcredit crisis has been exaggerated.In fact, Wenzhou’s undergroundcredit accounts for less than 20 percentof total credit in the region, while theregion accounts for less than 1 percentof China’s GDP. The total volume of affectedbank credit in the crisis was justmore than 3 billion yuan, roughly 0.5percent of bank loans in the Wenzhouregion. So, the damage that the breakdownof Wenzhou’s underground creditnetworks has inflicted on the regionalbanking system is limited, with scantnational impact.Thus, despite the high likelihoodthat China’s economic growth will slowsignificantly in 2012, a hard landing isunlikely. Nevertheless, while there is noneed to be overly bearish about China’sshort-term economic prospects, becauseof the slow progress in fundamentaladjustment and further reform, China’sgrowth is ultimately unsustainable. Sothe real test is yet to come.16

The Chinese economy has arrived at acrucial stage of all-round structuraladjustment. In the coming two orthree years, companies will start tofeel the pressure as economic growth will continueto slow and there is likely to be moderateinflation of between 3 to 5 percent. Given this,it is essential that the country presses ahead withstructural reforms.China does not need to worry about a hardlanding of its economy, because with its averageper capita GDP only $4,000 the economy stillhas lots of room to grow. China is a big economicpower with an extremely large domestic market.Its relatively poor and underdeveloped west,for instance, can take over production capacityfrom the east, and digest much of the excessiveproduction capacity now haunting the nationaleconomy as a whole.A basic feature of the Chinese economytoday is the excess production capacity, especiallyin the manufacturing sector, and theinadequacy of effective demand. Under such circumstances,Chinese manufacturers should beable to find ways to digest the pressure of risingcosts even if prices of raw materials rocket. Sothe Chinese economy will continue to grow forquite a long period of time.There are also three factors that provide asolid foundation for economic growth: urbanization;massive land development, which is closelyrelated to urbanization, such as the constructionof water conservancy and anti-seismic facilitiesand projects for the prevention and controlof other natural disasters; and the expansion ofconsumption.But although the Chinese economy willnot experience a hard landing, it is crucial that itundergo structural adjustment.While the Chinese economy has maintainedits high-speed growth during the pastdecade, especially since China adopted a stimuluspackage to combat the financial crisis, somefundamental issues besetting its economicdevelopment have become all the more evidentand they urgently need addressing. The mostpressing being the reliance of local governmentson land-sales-based financing, which is bothunsustainable and potentially risky.The slowdown of economic growth and theincrease in inflationary pressures are both forcesspurring China’s economic restructuring andthe effects of this restructuring are desperatelyneeded.A major factor causing economic growthto slow is the weakening investment impulse, asituation that can be directly blamed on changesin the investment sources accessible to local governmentsand the subsequent decrease in theirinvestments.The growing cost pressure on enterprisesis another factor slowing growth. Wages havecontinued to rise and the prices of raw materialsare going up day by day, eroding the low-costadvantage enjoyed by Chinese enterprises overthe past decades.Meanwhile, China will be unable to keepits inflation rate below 2 percent, as it did beforethe financial crisis, as major issuers of internationalcurrencies will continue their expansivemonetary policies, driving up the prices of rawmaterials and increasing the flow of hot moneyinto China. So moderate inflation of between3-5 percent is likely in the next few years.The relatively low rate of economic growthplus moderate inflation means some enterpriseswill start to feel the heat. Export-orientedenterprises, in particular, will find the goingharder than before, and no doubt some will gobankrupt during this process. But the structuralchanges would create a healthy environment forthose able to adapt.Government policies will undoubtedlyplay a vital role during this period of economicrestructuring and it is imperative the countrypresses ahead with reforms, including adjustmentof the central and local tax structure,implementation of structural tax reduction, advancementof the reform of State-owned enterprises,and increasing the ratio of direct financing.The coming two to three years are of vitalimportance to China’s continuing economicgrowth and there are enormous challenges toovercome. But if we can seize this opportunity,our economy will secure a solid foundation forlasting healthy development in the future.By Li DaokuiCrucial Period of Change17

ECONOMYA China Round of MultilateralTrade NegotiationsBy Aaditya Mattoo and Arvind SubramanianThe World Trade Organization’s(WTO) Doha Roundof trade negotiations is on lifesupport and there are intermittentand half-hearted efforts to resuscitateit. It would seem that the postwarframework for multilateral tradecooperation is under existential threat.It is, however, premature to draw thatconclusion.Beginning in the 1990s, when itwas becoming clear that China representeda huge market access opportunity,the United States and EuropeanUnion launched efforts to reduce China’strade barriers. This initiative was assistedby the fact that the Chinese leadership,or at least some parts of it underZhu Rongji, wanted to use the WTO asa means for furthering domestic reformand anchoring it in the WTO. Chinacommitted to substantially reducing itsbarriers in agriculture, industry, and services.China was not alone: A numberof Eastern European and other communistcountries like Vietnam also joinedthe WTO on similar tough terms.The trading system has accommodatedan emerging China. How willit adapt to and be shaped by a dominantChina? Our key argument is that whileChina will have strong reasons to sustainthe open trading order, that cannotbe taken for granted. The world needs totether China to the multilateral systemas an insurance against the small possibilitythat China will seek to translateits power into trading privilege.China’s current tradeascendancy and its implicationsChina’s trade ascendancy and presenceare not a distant phenomenon. Inmanufacturing trade, China is now alarge supplier to all the major markets,and its presence has grown significantlyover the course of the Doha Roundnegotiations. We identify the world’sten largest traders and for each of themalso identify the largest sources of supplyin the manufacturing sector. China’sshare in the major import markets hasdoubled between 2001 and 2009, and insome of the most important world marketsChina now accounts for more thana fifth of total manufacturing imports.China’s share of manufacturing importsin Japan is 35 percent, in the EuropeanUnion about 30 percent, and in theUnited States slightly over 25 percent.Two points are worth highlighting.First, in the most protected sectors,China’s share of imports in 2009is substantially greater than for overallimports and dwarfs that of any othersupplier in each of these markets. Forexample, China’s share in these sectorsin Japan is over 70 percent, inKorea over 60 percent, in Brazil about55 percent, and in the United States,Canada, and the European Union about50 percent each. Second, even in theseprotected sectors, China’s share hasincreased dramatically over the courseof the Doha Round. In many of theimporting countries, China’s share hasmore than doubled. Also striking is howmuch market share China has gained,even in countries such as Canada,Mexico, and Turkey, which have freetrade agreements with close and largeneighbors. Thus, liberalization underthe Doha agenda today, especially in thepolitically charged, high-tariff sectors,is increasingly about other countriesopening their markets to Chinese exports.In short, with some exaggerationone might say that the MFN tariff ofcountries is really a China tariff, or theChina tariff is really the least-favorednationtariff.The Green Room is the venuefor key WTO negotiations. And therethe great shared but unuttered fear isof competition from an increasinglydominant China. It seems today thatprogress in the Doha Round hingescritically on greater market opening,not in services or agriculture, but inmanufacturing (nonagricultural marketaccess or NAMA in WTO-speak).Services negotiations have been giveninsufficient attention and are nowwidely regarded as too complicated todeliver significant market opening inthis Round. In agriculture, with foodprices high and expected to remain so,import protectionism has become lesssalient. Rather, it is the threat of agriculturalexport restrictions that is moreserious, but addressing it is not on theDoha agenda anyway despite the effortsof some WTO members. So, Doha todayis mostly about the negotiations onmarket access in manufacturing. And inmanufacturing trade, as shown above,China looms large especially in themost protected sectors.But Chinese dominance perse should not have precluded mutuallybeneficial bargains. The Chinesemarket, despite China’s far-reachingWTO accession commitments, remainsprotected in a number of areas (such asfertilizers, vehicles, and certain othermanufacturing items). Moreover, asLaborde, Martin, and van der Mennsbrugghehave shown, other countrieswould also see increased exports fromthe proposed Doha liberalization byWTO members. The proposals of theUnited States and others to move furthertoward free trade in selected sectorscould translate into even greater exportgains.What then is stymieing the reciprocitymechanism that has deliverednegotiating success in the WTO inthe past? China’s trade dominance hasbeen achieved in large part by China’ssuccessful growth strategy, which hasincluded an embrace of markets and anunusually high degree of trade openness.The problem, however, is the20

strong political perception that China’sexport success has been achieved, andcontinues to be sustained, in part by anundervalued exchange rate.It seems unlikely and politicallyunrealistic to expect China’s tradingpartners to open further their marketsto China when China is perceivedas de facto imposing an import tariffand export subsidy not just in selectedmanufacturing sectors but across theboard. The evidence on the existenceand extent of undervaluation continuesto be debated. On the one hand, in asurvey of studies on renminbi misalignmentconducted by Cline and Williamson,17 of the 18 studies concludedthat the renminbi is undervalued; theaverage estimate of the undervaluationwas 19 percent for the 2000-07 periodas a whole and considerably higher forthe 2004-07 period. On the other hand,Dunaway, Leigh, and Li argue that allestimates of renminbi undervaluationare very sensitive to underlying assumptionsabout models and parameters andtherefore not reliable. Nevertheless, thefear persists that China will gain evengreater market share as a result of anytrade liberalization in the Doha Round,not just in countries’ own markets butalso in third markets, in each of whichthe effects of the exchange rate are likelyto be felt.One sign of this fear is that industrialand especially developing countriesare increasingly resorting to contingentprotection against imports from China.For example, the share of developingcountry antidumping actions againstChina (as a share of their total actions)increased from 19 percent in 2002 to 34percent in 2009. The corresponding figuresfor industrial countries were 11 and27 percent, respectively. But recourseto this instrument will become moredifficult when China attains marketeconomy status in 2016. Moreover, theproduct-specific transitional safeguardsthat were negotiated at the time of China’sWTO accession are due to expirein 2013. This leaves countries even moreanxious about competition from China.Consider most starkly Brazil’spredicament. Its currency has appreciatedsharply (40 percent) over the lastfew years, while those of competitors inAsia, especially China, have not. Brazilhas been trying desperately and repeatedlyto use capital controls to stem thesepressures on the currency. Its importsfrom China have surged, especially inthe most protected sectors. The politicaleconomy would have to be very odd ifBrazil, under the current circumstances,would lower trade barriers in these verysectors. And Brazil’s tariffs in these sectorsare about 25 percent on average. Itis therefore not surprising that BrazilianFinance Minister Guido Mantegasaid in January 2011 that in relation toexchange-rate policies, “China and theUnited States are the worst offenders.This is a currency war that is turninginto a trade war.” In fact, Brazil hassubmitted a proposal to the WTO arguingin favor of contingent protectionmeasures against imports from countrieswith undervalued exchange rates.Recently, the government raised, by 30percentage points, a tax on cars with alarge percentage of imported parts afterChinese-made car imports surged.From an economic perspective,it is the multilateral trade balance ofcountries that is important, which couldbe influenced by the exchange rate. Butgiven China’s large global trade surplus,the bilateral trade imbalance relativeto China, which has been attributedin part to China’s currency policy, hasbecome a political problem for manycountries.In effect, the whole basis for exchangingtrade policy concessions is beingundermined because a de facto tradepolicy instrument, the exchange rate,is seen as nullifying these concessionswhile remaining beyond the scope ofmultilateral negotiations and discipline.What China gives by way of trade concessions,it is seen as undoing throughits exchange-rate policy. This connectionbetween the exchange rate and reciprocaltrade liberalization has not receivedadequate attention and may be key tounderstanding the predicament today.A corollary of our analysis is thatunless Chinese currency policy changessignificantly, and unless there can becredible checks on the use of such policiesin the future, the perception weoutlined above will remain. There aresome signs that China has slowly butsurely embarked on a process of internationalizingits currency that will overtime eliminate the undervaluation ofthe renminbi. The horizon for renminbiinternationalization is as yet unclear butit is unlikely to happen over the nextyear or two.The dominance to comeWithin the next twenty yearsChina is likely to be economicallydominant: By 2030, China’s marketbasedGDP is projected to equal that ofthe United States, its purchasing powerparity-based (PPP-based) GDP will betwice that of the United States, its tradein goods will be nearly two times thatof the United States and Europe, whilethe renminbi stands a good chance ofnipping at the heels of the dollar, if noteclipsing it, as the main reserve currency.These projections do not requireChina to grow at anything close to thetorrid rates of 11 percent that Chinahas posted in the last fifteen years. Theyrequire China to grow at just under 7percent a year over the next two decades.Nor do these projections requireChina to maintain its current trajectoryof steeply rising openness.An economically dominant Chinawill be a China that, like other leadingpowers, acts out of self-interest, at leaston key issues. But it is not necessarilya China that will seek to roll backthe open trade and financial systembequeathed by the United States afterWorld War II. The view that Chinawill broadly continue the current systemrelies on the fact that it is exceptionallyopen.Taking account of China’s sizeand the fact that large countries tend totrade less than small countries, Chinais an exceptionally big importer andtrader. China’s openness, measured interms of trade outcomes, is far greaterthan anything achieved by the UnitedStates in the post-war period and re-21

ECONOMYsembles the levels of openness achievedby the United Kingdom at the heightof empire. To recap those numbers, theratio of trade to GDP for the UnitedStates rarely exceeded 15 percent duringPax Americana compared with China’scurrent ratio of 57 percent.The fact of China’s trade dependencewill tend to create a strong stakefor China in maintaining an open tradingand financial system. Historiansand political scientists have argued thattrade, and the intertwining of intereststhat it brings, is no guarantee againsteconomic or military conflict: Germanyjust prior to World War I was also amajor trader. But there are two criticaldifferences: China is trade dependent ina way that the United States and Germanynever were, and moreover, givenChina’s low levels of income, China’sstake in openness might be greater becauseits rise to prosperity, on which thelegitimacy of its government is predicated,will depend upon an open system.Moreover, the depth of China’sinternational integration may itselfpreclude protectionist measures. Industrialcountry firms have made largerelationship-specific investments inChina, outsourcing assembly and intermediategoods and services production;Chinese firms have formed strong linkswith locally established foreign manufacturingfirms, foreign banks, retailers,telecommunications and transportproviders, and are increasingly investingabroad. As a result, the business functionsof Chinese customers and suppliersof goods and services are highlyintertwined with their counterparts inother countries. Any protectionist actionwould threaten these relationshipsand be self-destructive. This mutual dependencesituation gives rise to politicaleconomy forces that could counteractprotectionist pressures.There is another reason for believingthat China’s stake in an open systemis deepening. China is in fact promotingand seeking the rise of the renminbi.The latest five-year plan states the goalof renminbi internationalization and“gradually” realizing renminbi convertibility.Over the last two years, it hastaken several steps to promote the internationaluse of the renminbi in tradeand financial transactions. As a result,the stock of renminbi-denominatedbonds issued overseas is expected toreach between 180 billion and 200 billiondollars from negligible amounts afew years ago.In this sense, it is encouraging thatChina is becoming more of a routineparticipant in WTO dispute settlementproceedings both as an initiatorof disputes and as a respondent. It isalso encouraging that so far, China haslargely agreed to comply with the termsof WTO dispute settlement proceedings.For example, of the eight casesbrought by the United States, three havebeen resolved by a memorandum of understanding,two are pending decision,and in three China has alleged compliancewith the decision of the DisputeSettlement Body.8 China’s actual compliancewill take some time to ascertainespecially given the vast amount of economicactivity controlled or directed bythe state. But there are indications thatChina takes its WTO commitmentsseriously.ConclusionAlthough we have framed thefuture issues for the trading systemaround China because of China’s likelydominant role, we recognize that futurenegotiations will not be just aboutChina. Indeed, other countries willhave a lot at stake in specific areas. Forexample Latin American exporters willbe key players in agriculture, the oil exporterson issues related to energy accessand foreign investment, and the UnitedStates and Europe on all issues. Futurenegotiations will thus have an essentialmultilateral character and trade-offsacross sectors will have to meet the demandsof some or all of these countries.But our contention is that the broadnature of issues involving China affordsthe possibility for securing satisfactoryreciprocal deals.There is also the question of China’swillingness to engage in this newagenda. We cannot be sure, of course,but three factors might be at play. First,the agenda includes issues that Chinahas an important stake in pursuing:clear investment rules, restraints onclimate-change-related trade action, aswell as assured access to resources (oiland food) and markets overseas.Second, the challenges for anopen system from the “decline of thewest” should not be underestimated. Ifgrowth in industrial countries does notrecover, income distribution continuesto worsen, and economic opportunitiescontinue to shrink, the intellectualand political consensus in favor of openmarkets, in which China has a strongstake, will come under threat. There arealready ominous portents.Third, even on those issues whereChina is currently defensive, there areincipient signs of domestic politicalshifts in line with shifting developmentpriorities. For example, China isbeginning to change its exchange-ratepolicy because of the need to curb risinginflation, to reduce export dependence,and to internationalize the renminbi.Similarly, China is taking action on climatechange because it sees competitiveadvantage in being the leader in greentechnology and because the retreat ofthe Himalayan glacier threatens its supplyof water. China also might eventuallymove away from or beyond its currenttechnology policy because it has itselfbecome an exporter of technology. If reformistsin China could use the relativelyone-sided WTO accession process toimplement key changes in policy, thensurely a more symmetric WTO negotiationcan empower progressive forcesnow to advance reforms that are in anycase in the broader national interest. Inthis respect, it would help for China toarticulate its vision for and role in forgingthe new system.The WTO has been, and cancontinue to be, unique among all the internationalinstitutions, a vital and effectiveforum for cooperation between themajor nations, even one that will be asdominant as China. The current DohaAgenda may be dying, but the WTO isalive and, with the right agenda, couldyet flourish. It could provide a muchneededgrowth boost to the status quopowers, and a means to consolidatecompetitiveness for the new powers. For,China it could provide an opportunityto signal its commitment to multilateralismand to being a benign hegemony, apanda bear rather than a dragon.(Author: from the Peterson Institutefor International Economics)22

A Year of Not WorryingAbout InflationBy Wei Li, Stephen Green• We expect CPI inflation to average 2.0% and 3.6%, respectively, in 2012 and 2013• We think of inflation as a three-year cycle; 2012 will be the bottom• We expect another RRR cut before end-2011, and five more cuts in 2012One of our non-consensuscalls for 2012 is very lowCPI inf lation in China.We expect CPI inflation todrop sharply in H1, before rising above4% y/y again in Q3-2013. We forecastaverage inflation at 2.0% in 2012 and3.6% in 2013 (see Chart 1). Here are thefoundations of our view:1. We believe that China has beenon a three-year inflation cycle for thepast decade, largely driven by policymakingdynamics. We see no reason forthis to have changed.2. Weaker external demand willexacerbate downward price pressures formost of 2012.3. Food is key to China’s CPI cycle.We expect 2012 to be characterisedby both strong supply growth and morerestrained demand growth (due to sloweroverall household income growth).4. With monetary policy still intransition, overall demand should bottomout only in Q1-2012; this shouldset us up for a turnaround in Q2 and astronger H2. We look for 6% q/q annualisedGDP growth in Q1-2011,rising to 12% in Q4. PMI readings arealso likely to remain below 50 in Q1.5. Barring a sudden demand shockfrom Europe, we do not expect a quickturnaround in policy, and monetarypolicy easing should continue to begradual. Given that prices take time toreact to recovering demand, we do notexpect CPI inflation to begin rising iny/y terms until mid-2012.6. Actual consumer price inflationmay well be higher than official CPIinflation, but we still believe officialinflation is an accurate portrayal of thetrend.The recurring three-yearinflation cycleChart 1 provides a straightforwardillustration of the three-year inflationcycle. Since 1999, China has had threeinflation cycles: April 1999 to April2002; May 2002 to around September2005; and July 2006 to July 2009. Thesecycles have two factors in common:1. Each one lasts about three years.2. Inflation rises in the first twoyears and declines in the third year.This is not a coincidence. We believethe three-year cycle reflects howthe economy and policy makers work.Generally speaking, after a year of ris-Chart 1:Three-year inflation cycles follow a consistent patternCPI inflation, % y/y10%Chart 2: CPI inflation breakdown by food and non-foodSub-components of CPI basket, weighted contributions, ppt10%8%6%Official CPI inflation8%6%Food contribution4%4%2%0%-2%Our CPI inflationforecast2%0%-2%Non-food contribution-4%Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13Sources: CEIC, Standard Chartered Research-4%Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11Sources: CEIC, Standard Chartered Research23

ECONOMYChart 3: Composition of the food basketSub-components of food basket, weightings, %45%40%35%30%25%20%15%10%5%0%MT VE GR AQ FR ED EG OTSources: CEIC, Standard Chartered ResearchChart 4: Breakdown of food inflation by food categorySub-components of food basket, weighted contribution, ppt25%20%15%10%5%0%-5%Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11Sources: CEIC, Standard Chartered ResearchChart 5: Pork prices are fallingLive pig and piglet prices, CNY/kg, 3mma4035302520151050Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-1125%20%15%10%Sources: CEIC, Standard Chartered Research5%0%-5%4035302520151050ing inflation, policy makers become worried aboutthe risk of an inflationary spiral and start to tightencredit. Suppliers of goods will also increase capacityafter having enjoyed improving profits for some time.These reactions lead to a decline in inflation after ayear or so.We expect China’s three-year inflation cyclesto continue, given that there is little evidence of bigstructural changes in the economy or significantchanges in the policy-making apparatus. This suggeststhat CPI inflation will fall in H1-2012, to around 1.3%y/y by July, according to our forecasts (after rising fortwo years from August 2009 to a peak of 6.5% in July2011). We expect y/y inflation to bottom out in H2-2012, and rise above 4% again in Q3-2013.A benign food inflation outlook for 2012Food is a key driver of China’s CPI inflation.Chart 2 shows the breakdown of contributions to CPIinflation into food and non-food sub-categories (on aweighted basis). Since 1999, food has been responsiblefor over 70% of overall CPI inflation, on average, despiteaccounting for only 31% of the basket.Chart 3 shows our estimates of the compositionof the CPI food basket. Meats (MT) are the mostconsumed foods in China, accounting for about 22%of the food basket. Pork (PO) is the most importantmeat, accounting for about 9.7% of the food basket(and 2.9% of the total CPI basket). Non-pork (NP)meats together account for about 12.2% of the foodbasket. The next most important food categories arefresh vegetables (VE) and grains (GR), accounting for9.7% and 9.0% of the food basket, respectively. Theyare followed by aquatic products (AQ ), fresh fruits(FR), edible oils (ED) and eggs (EG), with respectivefood basket weightings of 7.7%, 6.0%, 3.7% and 2.9%.‘Other foods’ (OT), those not included in the abovementionedcategories, together account for 39.3% ofthe food basket.Chart 4 shows how each type of food has affectedoverall food inflation since 2006. As one can see,meats (especially pork) and ‘other foods’ have dominated.Fresh vegetables and fruit were also importantdrivers of food inflation from March 2009 to November2010, but their supply fluctuates, so their effectsare less persistent. Grain inflation has been risingsince 2010, but given that the floor for grain prices islargely controlled by the government and grain stocksseem sufficient at the moment, we see little inflationrisk here.Pork prices have started falling, as we show inChart 5. The profitability of pig farming has improvedconsiderably, with the pig-to-feedstuff ratio (a measureof profitability) having recovered to above 7.0 as of November2011 from a low of 4.9 in June 2010, accordingto the Ministry of Agriculture (MoA); see Chart 6.Pig stocks are rising as a result of this improved profitability.According to MoA data, the number of sows24

ebounded to more than 48.8mn inOctober 2011 from a low of 45.8mn inAugust 2010, which suggests more pigsupply down the road.We expect pork inflation to dropsharply. Chart 7 shows historical porkinflation and our forecasts for 2012-13.We look for an 11% y/y price declineby July 2012. As a result, the weightedcontribution of pork inflation to overallCPI inf lation should drop from1.7ppt in June 2011 to -0.3ppt by July2012.Chart 8 shows our forecasts foroverall food inflation in 2012-13. Weexpect it to fall from 8.8% y/y in November2011 to around 3.3% by September2012. Food inf lation shouldstart to pick up gradually in H2-2012after policy easing in H1, and acceleratefurther to above 10% y/y in Q4-2013.Non-food inflation forecastsfor 2012-13We show our forecasts for y/y nonfoodinflation in Chart 9. We expectit to decline further to around 0.2% byJuly 2012 from 2.2% in November 2011,and stay close to zero for the remainderof 2012 before gradually recovering towards1.9% by end-2013.Us versus consensusInflation will not become a concernagain for the State Council until2013, in our view. We believe this is thelesson of the three-year inflation cycle.The current market consensus forecastsfor average CPI inflation are 3.75% for2012 and 4.25% for 2013, according toa Bloomberg survey of 12 economists.Our more benign CPI inflationforecasts (average of 2.0% for 2012 and3.6% for 2013) suggest that Beijing willhave quite a lot of room to manoeuvreon monetary policy in 2012. The transitionto monetary loosening has begun,but it will be a gradual process. Aftera first cut in the required reserve ratio(RRR) on 1 December, we expect anothercut before the year-end, as a preemptivemove to offset the negativeimpact on market sentiment of the 1January release of the December PMI(which we expect to fall further below50). We expect another five RRR cutsin 2012.Chart 6: Pork supply has recovered significantlyPig-to-feedstuff ratio (LHS, %), pig stock, 3mma (RHS, ’000)Chart 7: Pork inflation is expected to fall sharplyPork inflation, historical data and forecasts, % y/y8.58.07.57.06.56.05.55.04.5Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11470,000465,000460,000455,000450,000445,000440,000435,000430,000100%80%60%40%20%0%-20%40%Jan-05 Jan-07 Jan-09 Jan-11 Jan-13Sources: CEIC, Standard Chartered ResearchSources: CEIC, Standard Chartered ResearchChart 8: Food inflation forecasts for 2012-13 Chart 9: Non-food inflation forecasts for 2012-13Food inflation, historical and forecast, % y/yNon-food price index, SA; non-food inflation, % y/y25%20%15%10%5%0%-5%-10%Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-124%3%2%1%0%-1%-2%-3%Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12135130125120115110Sources: CEIC, Standard Chartered ResearchSources: CEIC, Standard Chartered Research25

ECONOMYData WatchChina’s Trade and Investment in 2011China’s foreign trade in 2011According to statistics of the Customs, China’sexports and imports in 2011 reached $3.64206 trillion,up 22.5% over last year. Specifically, exportsstood at $1.8986 trillion, up 20.3% year on year; imports$1.74346 trillion, up 24.9%. 2011 saw a tradesurplus of $155.14 billion, a decline of 14.5% from2010.In December alone, China’s foreign trade valueregistered $332.92 billion, an increase of 12.6%over 2010, 5 percentage points lower than that ofNovember. In detail, exports reached $174.72 billion,a year-on-year increase of 13.4%, 0.4 percentagepoints lower than November; imports reached$158.2 billion, a year-on-year increase of 11.8%,10.3 percentage points lower than November.China’s foreign trade in 2011 has the followingfeatures.The general trade saw rapid growth, whilethe proportion of the processing trade saw significantdecline. In 2011, general trade value increasedby 29.2% year on year to $1.9 trillion, making 52.8%of the total trade value, 2.7 percentage points higherthan 2010. Processing trade value increased by12.7% year on year to $1.3 trillion, making 36.1%of the total trade value, 2.8 percentage points lowerthan 2010.Steady increase in trade with Europe, theU.S. and Japan; rapid growth in trade withemerging markets. In 2011, China’s trade valuewith Europe, the U.S. and Japan increased by18.3%, 15.9%, 15.1% respectively, 4.2, 6.6, 7.4percentage points lower respectively than thegrowth of the nation’s total foreign trade value.China’s trade with ASEAN nations increased by23.9%, 1.4 percentage points higher than that ofthe nation’s total foreign trade value. China’s tradewith Brazil, Russia and South Africa increased by34.5%, 42.7% and 76.7%, all of which were higherthan the increase of the nation’s total foreign tradevalue.Exports of eastern China slowed down, whilethat of the central and western regions of the nationincreased rapidly. In 2011, exports of Guangdong,Jiangsu, Zhejiang provinces and Shanghaiincreased by 17.4%, 15.6%, 19.9% and 16% respectively,which were slightly lower than the nationallevel. Exports of Chongqing, Henan, Guizhou andJiangxi provinces increased by 165%, 82.7%, 55.5%and 63.1% respectively, which were significantlyhigher than the national level.Trade value of private corporations increasedfaster than the total trade, and the increase oftrade value of foreign-funded enterprises sloweddown. In 2011, trade value of private corporationsincreased by 36% to $1.02 trillion, 13.5 percentagepoints higher than the nation’s total trade value.Trade value of foreign-funded corporations increasedby 16.2% to $1.86 trillion, 15.2 percentagepoints lower than 2010. Trade value of state-ownedenterprises increased by 22.2% to $0.76 trillion.Utilization of foreign investmentIn 2011, China utilized a record $116.011 billionworth of foreign capital, an increase of 9.72%over 2010. China approved the establishment of26

27,712 new foreign-invested enterprises, an increaseof 1.12% year on year. In December along, the nationutilized $12.242 billion worth of foreign capital,a decline of 12.73% from 2010.The service industry surpassed the manufacturingindustry in terms of volume and increaserate of foreign capital utilization. In 2011, thesectors of agriculture, forestry, animal husbandry,and fisheries made an actual use of $2.009 billionin foreign investment, an increase of 5.07% year onyear and accounting for 1.73% of the national total.The manufacturing industry made an actual use of$52.101 billion in foreign investment, an increaseof 5.06% over the same period of last year and accountingfor 44.91% of the national total. The serviceindustry made an actual use of $55.243 billion,an increase of 20.54% year on year, and accountingfor 47.62% of the national total. For the first time,the service sector had received more foreign capitalthan the manufacturing sector.Among the service industry, such sectors asleasing, radio, film and television, special machineryequipment repair, food, beverage, tobacco, householdsupplies, tourism, and entertainment saw 60%-plus increases in the utilization of foreign capital. Asa result of the nation’s macro-control, the real estatesector saw 12.07% increase in the utilization of foreigncapital, 8.47 percentage points lower than theoverall level of the service industry.Asian nations were the major source of foreigninvestment in China, while investment fromEurope and the United States declined. In 2011,paid-in capital from the ten Asian nations and regions(Hong Kong, Macao, the Taiwan province,Japan, Philippines, Thailand, Malaysia, Singapore,Indonesia, and South Korea) was valued at $100.517billion, an increase of 13.99% year on year. Paid-incapital from the United States amounted to $2.995billion, down 26.07% from 2010. Paid-in capitalfrom the 27 European Union nations fell by 3.65%to $6.348 billion.Actual use of foreign investment in centraland western China outgrew that of the easternregions of the nation. In 2011, the eastern regionsmade an actual use of $96.604 billion in foreigninvestment, an increase of 7.51% from 2010 andaccounting for 83.27% of the national total. Thecentral regions made an actual use of $7.836 billion,an increase of 14.26% from 2010 and accountingfor 6.75% of the national total. The western regionsmade an actual use of $11.571 billion in foreigninvestment, an increase of 28.24% year on year andaccounting for 9.97% of the national total.Overseas investment and economiccooperationChina’s outbound FDIIn 2011, China’s domestic investors investeddirectly in 3391 overseas corporation in 132 nationsand regions, with a total of non-financial outboundFDI of $60.07 billion, an increase of 1.8% year onyear. By the end of 2011, China’s domestic investorshad set up 18,000 FDI enterprises in 178 nationsand regions, with a total of non-financial outboundFDI of $322 billion.Investments in Europe and Africa increasedrapidly. China invested $4.61 billion and $1.7billiondirectly in Europe and Africa in 2011, 57.3% and58.9% higher respectively than 2010. $4.278 billionin FDI went to the European Union, an increase of94.1% year on year.Mergers and acquisitions were made in abroader field. In 2011, $22.2 billion worth of FDIwas realized in the form of merger and acquisition,making up 37% of China’s total FDI. Merger andacquisition were made in such sectors as mining,manufacturing, electricity generation and supply,transportation, wholesale and retail. SinochemGroup’s Hong Kong subsidiary company bought40% stake of Norway’s national oil company PeregrinoOil Field in Brazil for $3.07 billion, markingthe largest overseas merger by Chinese enterprisesin 2011.Local investment had been robust. In 2011,FDI from local Chinese regions registered $20.3billion, an increase of 24.4% year on year and accountingfor 33.4% of the national total. FDI fromcentral China was 64.1% higher than 2010, thefastest increase among all regions, followed by thewestern regions with an increase of 42.9%. Zhejiang,Shandong, Jiangsu, Guangdong and Shanghaiwere among the top in terms of FDI.Overseas-contracted projectsIn 2011, China’s overseas-contracted projectsreported a turnover of $103.42 billion, an increaseof 12.2% year on year. $142.33 billion worth of newcontracts were signed, up 5.9% year on year. 498of the new projects were of a contract value of over$50 million, with a total contract value of $112.37billion, representing 79% of the total value of thenewly-signed contracts. 266 of the new projectswere of a contract value of over $100 million, comparedwith 261 in 2010.By the end of 2011, China had signed $841.6billion worth of overseas project contracts, with atotal turnover of $539 billion.Foreign labor service cooperationIn 2011, the number of all kinds of labor sentabroad was 452,000, an increase of 41,000 year onyear. At the end of 2011, there were a total of 812,000Chinese working abroad. By the end of 2011, Chinahad sent abroad a total of 5.88 million labor servicepersonnel of all types on an accumulative basis.(Source: Press conference of the Ministryof Commerce of China on January 18, 2012)27

Industrial WatchAGRICULTUREAgriculture still vital to ChinaIndustrial WatchXinhua reported on December 28 of 2011 that Chinesevice Premier Hui Liangyu said China must avoid mishapsin supply of major farm produce because agriculture isvital to ensure stable price levels, fast economic growth andsocial stability.Hui said the agricultural sector has witnessed continuous,comprehensive and faster development in 2011, whichhas played a key role in curbing inflation and maintainingsocial stability.The vice premier also highlighted the effective supplyof farm produce, fiscal spending on infrastructure building,and farmers’ livelihoods as the major fields on which thecountry will work next year.Government data showed grain output rose to recordhigh 571.21 million tonnes in 2011. The figure represented ayear-on-year increase of 4.5 percent and marked the eighthconsecutive year of growth for the country’s grain output.It also marked the fifth straight year that China’s totalgrain output exceeded 500 million tonnes, which indicateda more consolidated foundation for food security in theworld’s most populous nation.“Any slight failure in agriculture will hamper thecountry’s economic development and social stability,” PremierWen Jiabao said.Wen also said that agricultural work is of particularsignificance next year, faced with the complicated macroeconomiccondition and the dual pressures of an economicslowdown and a rising inflation. Meanwhile, he urged moreefforts to be taken to protect farmers’ rights in land properties.Gan Zangchun, a state-land supervisor with the Ministryof Land and Resources, said land requisition must bereformed to ensure farmers’ rights as rapid urbanization hasgiven rise to frequent land disputes in recent years.CommentScientific and technological advancement and transformation of the agriculture growth patternwill be the key and fundamental solutions to developing a modern agriculture, as environmentand resources impose greater constraints.Organic farming experiment couldrevitalize China's countrysideAccording to Xinhua on January 6, although she grew upin the posh city of Hangzhou in eastern China, Luo Yihas opted to settle down on a farm in a northern suburb ofBeijing.The 23-year-old woman graduated from college lastyear with a journalism degree. She was won over by the LittleDonkey Farm’s organic farming concept and communitysupported agriculture (CSA) model, and now she spendsher days watering vegetables, making pickles, and learningneedleworkWhile a large number of rural youths have abandonedthe traditional farming lifestyle in order to move to citiesfor more work opportunities, some young people from citieshave looked to the countryside for an alternative lifestyle ora new career path.She has stopped using her mobile phone and no longershops for new clothes. Instead, she has learned to alter herold clothes into new styles, and she exchanges clothes withher female colleagues at the farm.“My parents strongly opposed my decision to workin the farm. Over the past few months, they have beenshocked by the changes in my life, and they have graduallycome to understand me,” she said.The Little Donkey Farm was founded three years agoby Shi Yan, a young agriculture scholar from Renmin Universityof China. Shi was inspired by her six-month experienceas an apprentice at a CSA farm in Minnesota, UnitedStates.Shi has applied the CSA model to her farm, whichgrows organic vegetables and sells them directly to individualconsumers in Beijing.Consumers can sign a year-long contract to purchaseorganic vegetables grown by the farm, and choose to eitherpick up their produce at various locations throughout thecity or have the farm deliver it directly to their door. Theycan also rent a 30-square-meter plot at Shi’s farm to dotheir own gardening.More than 30 young people are currently working forthe farm, most of whom are from the cities and had notfarmed prior to coming here. They are working side-by-sidewith about 20 local villagers.When the farm was established in 2009, only 37 clientsplaced annual orders and 17 rented their own plots. Butnow over 460 clients order vegetables and 260 lease land,said Huang Zhiyou, vice general manager of the farm.Organic farms, which provide moreincome for farmers, might attract migrantworkers to come home and return to farming.The farm is also a way for urban residents tolearn more about rural areas and farming.Comment30

METALSChina’s gold imports from HK hitrecord highChinese mainland’s gold imports from Hong Kongsurged to a record high in November 2011 as demandscontinue to grow with the Chinese New Year drawing nearand investors turn to gold bars to hedge financial risks, accordingto China.org.cn.According to the Census and Statistics Departmentof the Hong Kong government, mainland China imported102,779 kilograms of gold from Hong Kong in November2011, up from the 86,299 kilograms in October. This alsomarked the fifth consecutive increase. In the first 11 monthsof 2011, Chinese mainland bought a total of 389,295 kilogramsfrom Hong Kong.Individuals buying gold bars or jewelleries accountfor the majority of China’s gold consumption. In the thirdquarter of 2010, China overtook India as the largest goldjewelry market, according to the World Gold Council. Thecountry is also the world’s biggest producer of gold.Imports were profitable as prices in Hong Kong mostlytraded at a discount to those in China in November. Goldfor immediate delivery of 99.99 percent purity on theShanghai Gold Exchange averaged 356.05 yuan a gram($1,753 an ounce) in November, compared with an averageof 434.68 Hong Kong dollars (353 yuan) at the ChineseGold & Silver Exchange Society.Xia Bin, adviser to the country’s central bank lastmonth called on China to increase its gold reserves as along-term strategy to diversify its foreign exchange reservesand promote yuan’s internationalization.Demand for gold is climbing in Chinaas individuals seek to protect theirwealth against sluggish property equity markets.CommentMining opportunities in AfricaQingdao Kingking Group, the second-largest candlemaker in the world, plans to invest $100 million todevelop gold and copper mines across the world in the nextthree years, according to China Daily report.“As part of an expansion plan, the company, togetherwith a trading company from Anhui province, is looking atbuying a gold mine in Mozambique,” said Huang Bao’an,administrative vice-president of Kingking Group. The mineoccupies more than 100 square kilometers.The Mozambique gold mine was once owned by aPortuguese company, and Kingking’s partner in Anhuiprovince has obtained development rights from the Mozambiquegovernment.The two companies agreed to exploit the mine together.Kingking is to provide the technology to be used in theventure and recently sent a team to examine the mine.“Beyond the mines in Mozambique, Kingking is lookingat similar sources of gold and copper in South Africaand other parts of Africa,” Huang said.In January 2009, Kingking bought oil fields occupying9 sq km from the State of Oklahoma in the United States,marking the first time a Chinese company has bought oilfields in that country.“The move helped us expand upstream and get a stablesupply of raw materials for making candle products,” Huangsaid.After the deal, the company purchased six oil fields occupying290 sq km in the US states of Texas and Louisiana.The six fields contain reserves equal to 600 million barrelsof crude oil and 15 billion cubic meters of natural gas.“Our success (in brokering deals in the US) stems fromthe global financial crisis, which led to financial troubles forenergy-investment companies and also forced the US governmentto loosen investment restrictions on energy deals,”Huang said.Chen Suobin, chairman of Kingking Group, was recentlyquoted by the China Business News as saying thatthe company plans to concentrate especially on the developmentof gold mines.In November 2011, the company announced a plan tobuy 80 percent of the shares of Rushan Daye Gold Mine inShandong province, which owns 16 gold mines.In March 2011, Kingking began working with a researchinstitute from Baoding in Hebei province, to learnmore about gold mines in the province.A large number of energy projects in Africa are in the hands of European companies. Due to thespreading European debt crisis, many European companies find themselves in difficulties andare looking at halting or withdrawing their investments. This has given Chinese businesses huge opportunitiesto invest abroad and develop natural resources.Comment31

Industrial WatchChina to increase coal-bed methaneIndustrial output WatchChina aims to increase coal-bed methane output thisyear while avoiding coal mine gas leak accidents, a seniorofficial said January 16.According to Xinhua’s report, the country’s coal-bedmethane output is expected to reach 15.5 billion cubic metersin 2012, up from 11.5 billion cubic meters last year, saidLiu Tienan, head of the National Energy Administration.Meanwhile, China targets a 10-percent reduction inmajor coal mine gas accidents and their resulting death tollsthis year, he said.Rising demand for coal and gas will complicate thecountry’s efforts to prevent accidents, Liu said while callingfor efforts to step up the monitoring of coal mine operationsand strengthen innovation of gas control technologies.China reported 119 mine gas accidents last year with adeath toll of 533, down from 155 accidents and 623 deathsin 2010.CommentENERGYProduction safety should always comefirst, ever.China to retrieve more natural gasChina’s output of natural gas is expected to increase by11 percent in 2012 to reach 113 billion cubic meters,the China Petroleum and Chemical Industry Federation(CPCIF) said on January 11, China Daily reported.The country is expected to use more than 200 milliontons of crude oil, an increase of 1.5 percent from the yearbefore. And it is expected to produce about 280 million tonsof diesel fuel and gasoline, an increase of 5 percent, the federationsaid.Buoyed by strong domestic demand, the country’s apparentconsumption of crude oil - which includes domesticoutput and imports but excludes exports - is expected toamount to 480 million tons this year. That will be an increaseof 5.3 percent from the year before.The demand for natural gas will call for the use of148.2 billion cu m of the fuel, an increase of 15.3 percentfrom a year ago, said CPCIF.The apparent consumption of crude oil is expected toincrease by an average of 5 percent during each year of the12th Five-Year Plan (2011-15). And the amount of naturalgas used is expected to increase by an average of 19.4 percenta year during that time, said Li Shousheng, executive vicepresidentof the CPCIF.The Federation said the amount of China’s refiningcapacity reached 590 million tons in 2011, an increase of6.9 percent from the year before. The strict controls thegovernment has placed on diesel fuel and gasoline prices arebelieved by many to have caused the country’s petroleum-processing industry to lose 4.98 billion yuan ($788.6 million)from January to October in 2011.The federation said the apparent consumption of dieselfuel and gasoline is expected to increase by 5.8 percent, hitting280 million tons this year.The domestic industry has overcapacity, Li said, addingthat the country will continue to consolidate domesticrefineries and close down small refineries that are inefficientand have slim capacities, he said.CommentTo increase the production is fine, butthe more important is to use the energyin a more efficient way.China says energy consumption iscontrollableLocal governments have formed a consensus on China’soverall plan to control total energy consumption, thenation’s energy chief said on January 11, as Xinhua reported.After some revisions, the plan will be submitted to theState Council, or China’s Cabinet, for approval, Liu Tienan,head of the National Energy Administration (NEA), said ata national energy work conference that concluded that day.The country aims to establish a unified nationwide indexsystem for energy consumption by 2015, and the systemwill be included in the performance assessments of localgovernments, said Liu.The index system, however, will not include recent additions,including consumption of renewable energy, coalgangue and mud used to generate electricity, coal-bed gasand shale gas, waste heat and excess pressure that works toproduce electricity, according to Liu.The energy chief admitted that the nation is undergreater pressure to ensure energy supplies this year as bothdemand and international competition for resources grows.He said the nation should improve relevant policiessuch as industrial, fiscal, pricing and financial regulationsto support the energy consumption control plan, addingthat authorities are studying a trading system for the energyconsumption index.China’s power consumption, a key indicator measuringthe country’s economic vitality, rose 11.7 percent yearon-yearto 4.7 trillion kilowatt hours in 2011. Growth in2012 is expected to slow to 8.5 percent amid the country’seconomic slowdown.Figures on the nation’s primary energy consumption in2011 have not yet been released. In 2010, China’s primaryenergy consumption rose 5.9 percent year-on-year to 3.25billion tonnes of coal equivalent, making it the world’s secondlargest energy consumer after the United States.In the end of 11th five year plan, someCommentareas in China once shut the daily use ofelectricity to achieve the goal of “emissions reduction”.Hope it won't happen again during the 12th Plan.32

ENVIRONMENTOfficials weighing green benefits ofcarbon taxationChina is considering levying a carbon tax within the nextthree years to tighten its regulations on polluting industriesand put the economy on a greener path, accordingto China Daily.A draft of a new system of taxation has been submittedby the Fiscal Science Research Center of the Ministry ofFinance to the ministry for review. The plan would imposea tax on emissions of greenhouse gases, Su Ming, deputydirector of the center, said on Jan. 5.Su said the tax is likely to be charged at a rate of 10yuan ($1.59) for each ton of carbon dioxide that a businessor other operations discharges. That rate is expected to increasegradually over time.The main targets of the tax will be large users of coal,crude oil and natural gas, and tax cuts will be given to companiesthat take steps to reduce their emissions, Su said.Jiang Kejun, a researcher with the National Developmentand Reform Commission’s Energy Research Institute,who helped draft the tax proposal, said the tax is likely to becollected only from producers and wholesalers of fossil-fuelbased energy. This will make it easier to collect the tax.“But it may still raise the price of energy,” Jiang said.China emitted 8.33 billion tons of carbon dioxide in2010, a quarter of total global emissions, according to areport by the UK energy company BP PLC. During theDurban climate talks last year, China pledged to reduce theamount of carbon dioxide produced for each unit of GDPby 17 percent by 2015.Even so, the recent Central Economic Work Conferencedetermined that a greater priority should be placed onreforming the country’s tax system in 2012 and on researchingthe possible effects of imposing taxes to protect the environment.“But 2012 may not be a good time to introduce carbontaxes, considering the risk (they might introduce) of slowingeconomic growth,” Su said.He said the taxes will begin to be collected by the endof the 12th Five-Year Plan (2011-15).“The carbon tax will bring many benefits,” Jia Kang,who heads the finance ministry’s research center, was quotedas saying by the Economic Information Daily.“One is to raise companies’ environmental costs andforce them to improve their production technology.”Meanwhile, the additional revenue from a carbon taxwill make it easier for the government to lower other sortsof taxes imposed on businesses, such as income taxes, hesaid.CommentAs a large country of carbon dioxide emission, China is duty-bound to adopt strict measures toreduce pollution for a greener economy and environment, though it will take a long time.China to construct large offshorewind farm in northern provinceChina will construct an offshore wind farm with aninstalled capacity of 300 megawatts (MW) in LetingCounty, north China’s Hebei Province, making it the country’slargest such project, said Xinhua.The feasibility report for the wind farm located nearPuti Island in Bohai Sea has recently passed expert reviewsthat were commissioned by the National Energy Bureau(NEB).Under the program, the wind farm, built with a totalinvestment of 5.76 billion yuan (914 million U.S. dollars),will comprise 100 units of 3MW offshore turbines. The approvalauthority will complete relevant procedures to sanctionthe project at the end of this year, and the project willbe connected to the grid before the end of 2015.When it goes into operation, the wind farm will generate752 million kilowatt-hours (kwh) of electric power annually,as well as 730 million yuan in annual sales revenues.It was also pay 58 million yuan in taxes to the local government.Leting County has 124.9 kilometers of coastline, or aquarter of Hebei’s total coastline. The county boasts rich exploitablewind power resources, totaling 3.7 gigawatts (GW).The county government established an offshore windpower development plan in early 2011. The NEB gave itsapproval for the county to prepare for the 300MW offshorewind power project in June 2011.The fast-growing wind industry inCommentChina has contributed a lot for thecountry’s economy and environment. Though,we should focus on its actual use and try to avoidovercapacity.33

Industrial WatchCREATIVITYIndustrial Cartoon industry Watchgets more animatedThe Chinese government announced at the end of lastyear that the nation will continue offering value-addedtax (VAT) refunds to the animation industry this year in itsefforts to boost cultural development, China Daily reported.For companies that develop and make their own animationsoftware products, VAT at 17 percent will be levied,but the portion of VAT which exceeds 3 percent of thetaxpayer’s actual VAT burden will be refunded upon taxcollection, the Ministry of Finance said in a statement on itswebsite.Meanwhile, business tax for animation companies andtheir income from sales of their copyrights will remain at 3percent.The statement said the policies had been in effect sincethe beginning of this year and will remain in effect for2012.Thanks to the country’s supportive policies, Chinaproduced 385 animated films in 2010, a 28 percent yearon-yearincrease. The industry also earned more than 500million yuan ($79 million) from exports in 2010, marking arise of 60 percent year-on-year, according to the State Administrationof Radio, Film and Television.China’s central authorities in October released the fulltext of a guideline adopted by a plenary session of the CommunistParty of China (CPC) Central Committee, urgingmore importance be given to cultural development.The 17th Central Committee of the CPC held itsSixth Plenary Session in Beijing from Oct 15 to 18, whenthe plenum discussed issues regarding the reform of thecountry’s cultural system.The Chinese animation industry has been striving toachieve international fame and promote Chinese culturethrough exports, a move that is being seen as part of thegovernment’s plan to strengthen its soft power and extendits influence, industry insiders and experts said.Industry insiders have also attributed the rapid exportgrowth to an emphasis on originality and creativity amongChinese animators.The industry previously operated as a mere “manufacturer”of foreign animation products, winning littleglobal recognition, said Ye Zhenghua, a professor from theGuangzhou Academy of Fine Arts. But the industry hasmanaged to quickly restructure itself and shift its focus tocreating original products, thus creating a more prosperousmarket, Ye said.CommentChina is making every effort to strength its soft power on the international stage by variousmeans. Cartoon industry is just an example.Officials call for support of thecultural industryTo compete with foreign rivals,Chinese cultural businesses shouldboth become stronger and adapt to theinternational culture market, a seniorcultural official was quoted as saying byChina Daily.From 2001 to 2010, the value ofChina’s exports of cultural productsincreased 2.8 times and its exports ofcultural services increased 8.7 times, accordingto the Ministry of Commerce.“In general, there is still a longway to go for the strength of our cultural trade to grow,since it depends on the development of the domestic culturalindustry,” said Hou Xianghua, director of the Ministryof Culture’s bureau of external cultural relations. “Amongeverything that should be improved, Chinese cultural enterprisesshould play a dominant role.”In September 2009, the State Council, China’s cabinet,released a Blueprint for Reinvigorating the Culture Industry.In keeping with the document’s goals, the governmenthas placed a priority on developing a central part of the industry:the production of content.“The cultural industry entails many risks,” Hou said.“Once one product becomes popular in the market, the lowcost of reproduction will turn it into a high-profit industry.”The government is in part supporting the culturalindustry by rewarding businesses that have successfully enteredthe international market andby providing subsidies to emergingcompanies.In recent years, the Ministryof Culture has supported domesticcultural companies throughthe distribution of informationpertaining to their business andthrough the use of financing andtraining.“To promote Chinese culturalproducts on the international stage,the most important thing is to adapt them to the needs ofthe international market,” Hou said. “That means conveyingChinese culture in a way that might strike a chord amongpeople throughout the world.”Running a cultural business requires that culturalproducts be invented, produced, marketed and managed.China, with its rich historical culture,Commentis seeing more and more changes andinnovations in the culture industry. However, thatis far from enough. More support including policiesand investment is needed.34

FINANCEChina's financial system stable, butpotential risks remainAccording to Xinhua on January 7, China’s financialsystem is running on a stable course despite the globalfinancial crisis. However, apparent problems and potentialrisks still linger, as the crisis has not ended, Premier WenJiabao said.Wen made the remarks at the two-day National FinancialWork Conference. The meeting, held every fiveyears, mapped out development plans for the financial sectorin the upcoming five years. Similar meetings were held in1997, 2002 and 2007.“China’s economy has maintained stable and relativelyfast growth with stabilized consumer prices and improvementsin people’s lives. The financial system is runningsteadily. The good momentum of economic and social developmentremains unchanged,” Wen said.In the future, China will stick to the principal of havingthe financial industry serve the real economy to preventvirtual bubbles from inflating the economy, he noted.Wen voiced his support for the development of financialinnovation, but stressed that this should not escapesupervision. “Risk-aversion should be the lifeline of our financialwork,” he said.He pledged to allow market forces a greater say indeciding fund allocation and to more clearly define thegovernment’s role. Financial oversight will be tightened andimproved, and banks should establish a more complete andprudent supervision system, he said.According to a statement released after the meeting,China’s assets in the financial industry totaled RMB 119trillion (US$18.8 trillion) at the end of November 2011, a149-percent increase from that at the end of 2006.As of the end of September 2011, the banking capitaladequacy ratio stood at 12.3 percent, 5 percentage pointshigher than that at the end of 2006, while the non-performingloan ratio was 0.9 percent, 6.2 percentage points lowerthan that at the end of 2006.CommentChina has resolutely pushed forward a series of financial reforms which have set significanthistorical milestones. Large commercial banks have remarkably improved their capabilities ofguarding against risks.Central bank suspends bill issue aheadof Lunar New Year holidayXinhua reported on January 6 that the People’s Bank ofChina (PBOC), the country’s central bank, said it willsuspend sales of bills in the open market to ensure bank liquidityahead of the week-long Lunar New Year holiday inlate January.The PBOC said it will conduct short-term reverserepurchaseagreement operations “if necessary” to injectmoney into banks through purchases of securities with anagreement to resell them at future dates.Increasing demand for cash ahead of the Lunar NewYear has already begun to squeeze banks’ liquidity.The central bank injected RMB 51 billion (US$8.07billion) into the banking system this week, the biggest liquidityinjection in two months, to help banks meetcustomers’ soaring demand for cash during the holiday.Banks’ liquidity is expected to tighten further,as only RMB 75 billion in bills and repurchaseagreements will be due in the coming three weeks,experts said.“People tend to spend more during the LunarNew Year holiday, adding to banks’ pressure to meetcustomers’ cash withdrawal and payment demands,”said Zhao Xijun, a finance professor at RenminUniversity of China.A falling monetary base due to the shrinkingyuan position for foreign currencies over the pasttwo months also led to tighter liquidity in the market,Zhao said.“The suspension of bill sales shows that thePBOC hopes to stabilize banking liquidity through openmarket operations, thus reducing the likelihood for thecentral bank to scale down banks’ reserve requirement ratio(RRR) in the near term,” Zhao said.CommentThe central bank’s move to suspend billsales is intended to prevent a tighteningof liquidity in the banking system.35

Industrial WatchCONSUMERIndustrial Time is right Watch for watchmakersNo matter in which part of the globe you stand, thechances are that you won’t be far away from a watchshop, and that many of the watches, expensive or not,will have come from one place: Shenzhen, China Dailyreported. Over the past 20 years the former fishing villagein southern Guangdong province has become the world’slargest outsourcing base for timepieces.Watchmaking in Shenzhenbegan to blossom when the industryin neighboring Hong Kongstarted to migrate northward intothe mainland in the 1980s. About1,100 watch companies now callShenzhen home, and they produced800 million watches in 2010, accountingfor more than 43 percentof global production, according tothe Shenzhen Watch and Clock Association(SWCA). More than 80percent were exported, particularlyto Europe and the US.But watchmakers in Shenzhenare no longer content to remain amanufacturing center for overseasbrands. They are trying to reshapethe old business models by investingheavily in branding their own independentlydesigned products, aspiring to upgrade Shenzhenfrom the hub for the world’s watch original equipmentmanufacturers (OEMs) to a place that produces itsown top brands.“Making our own branded items will not only helpto reduce our dependence on overseas orders but, moreimportantly, will ensure Shenzhen’s watch industry willdevelop sustainably,” said Zhu Shunhua, secretary-generalof the SWCA.Zhu said the global financial crisis has led to a sharpdrop in orders from Europe and the US, where most ofthe outsourcers are situated, forcing a rethink about Shenzhen’swatch industry.“Enhancing innovation, research and developmentcapabilities as well as strengthening brand-building efforts,are vital for Shenzhen watchmakers to survivethe increasingly intense competition both at home andabroad,” Zhu said.He added that by the end of last year more than150 watch companies in Shenzhen had set up their ownbrands, 37 percent of them having developed about 600 intellectualproperty rights and patents.As the world’s largest watch-outsourcing base, Zhu saidthe quality of Shenzhen-made watches is guaranteed, but thecity’s watchmakers will have their work cut out to step intothe high-end market because of a lack of brand-awareness.“The high prices of Swiss-made watches are a result notonly of their quality, but also of brand-awareness,” Zhu said.“Shenzhen watch manufacturers should learn from theirSwiss competitors to persuade more people to see ‘Made inShenzhen’ as a quality seal.”In the race to upgrade, some watchmakers in Shenzhenhave already made big strides.The Hong Kong-listed EbohrLuxuries International Ltd is one of anumber of pioneering enterprises thathave dedicated themselves to creatingChinese watch brands that will be recognizedby all.Ebohr, established in Shenzhenabout 20 years ago, started as a processingand assembly factory making watcheson order for companies in Europeand the US, but the slim profit marginsprompted Tao Li, the founder and managingdirector, to build his own watchempire.“We could only earn HK$8 ($1) foreach watch we made at that time,” Taosaid. He realized that the labor-intensiveoutsourcing business relied heavily onoverseas orders, resulting in restrictedroom for development in the long run.Ebohr’s rising popularity has drivenup its brand value, which was put at about 1.8 billion yuan($285 million) by the consultancy World Brand Lab in 2010.But Tao wants more: he would like Ebohr to rank amongthe world’s top watch brands.As part of the strategy to realize that ambition, Ebohrhas become the first watch business in Shenzhen to start usingadvanced 3D design software from Dassault Systemes SAof France to optimize its design process.It also works with Swarovski Crystal of Austria, using itsgemstones in its latest watch for women.Since 2009, the company has hired master designersfrom Switzerland, who not only design watches, but also provideextensive training for Ebohr’s Chinese staff.“Even Ebohr’s counter and merchandise displays in departmentstores are designed by our European professionals,”said Tao.As more international brands covet the vast Chinesemarket, the watchmakers in Shenzhen are also facing increasingpressure to win over more consumers in the domesticmarket, especially in the mid- to high-end segment.CommentWatchmakers in Shenzhen are upgrading the watch industry, a significant step signifying China’stransformation from “Made In China” to “Created in China”.36

ELECTRONICSAccording to Xinhua on December 20 of 2011, due tosteady global demand for consumer electronics, Taiwan’sexport value in November reached US$36.65 billion, up 2.54percent year-on-year.However, the figure showed a 560-million-U.S.-dollardrop from that of October due to the EU debt crisis continuingto hit the United States and emerging markets, an officialwith the department said.Orders from the Chinese mainland, Taiwan’s largestexport destination, registered US$9.2 billion in November,up only 0.14 percent year-on-year, the lowest level since July2009, the report said.Among all orders, sales of electronic products expandedby US$220 million, or 2.52 percent, year-on-year, thanks toglobal demand for consumer electronics that remained steadyin November and boosted orders for electronic parts manufacturedin Taiwan.Furthermore, due to strong global demand for Apple’siPhone and iPad, export orders for Taiwan’s IT products increasedby US$100 million, or 1.1 percent, year-on-year. Theproduction of Apple’s major electronic parts has been outsourcedto Taiwan and the Chinese mainland where its manufacturersand factories are located.Orders from the Chinese mainland are becomingincreasingly vital for Taiwan’s exportvalue thus strengthening economic ties betweenthe mainland and Taiwan.CommentHot sales of electronic products driveTaiwan’s exportsCES is a great place to connect withpartners and customers across thePC, phone and entertainment industries. Withthe way that people communicate with eachother change in speedy ways, it feels like theright time to put and end to a keynote.CommentMicrosoft to pull out of ConsumerElectronics ShowXinhua reported on December 21, 2011 that Microsoftannounced to pull out of the annual ConsumerElectronics Show (CES) held in Las Vegas, saying thekeynote and booth at the upcoming CES will be its lastat the event.The company’s Chief Executive Officer SteveBallmer will give the final keynote on Jan. 9. Microsofthas been a major participant in CES for 14 years, annuallyhighlighting its products and technology trends duringthe keynote.CES, known for technology debuts and productannouncements, has been said to have less wow factorsin recent years, as more big companies choose their owntimeline to introduce new products. Apple, the mostpopular and innovative in the industry, does not participatein the show.The Consumer Electronics Association, which putson CES, said in a statement that it had received expressionsof interest for the space Microsoft has used in pastyears, a major exhibit space at the trade show.GOME sues ex-chairmanAccording to Xinhua on January 5, a Beijing court heard alawsuit filed by a leading Chinese home appliance retaileragainst its former chairman over his allegedly misleading mediainterview that the company claimed “seriously damagedthe firm’s reputation and business operations.”GOME’s ex-chairman Chen Xiao was accused of givingan interview in May of 2011 to financial newspaper 21stCentury Business Herald in which he disclosed the company’soperations and warned investors not to hold GOME’s stocks.GOME’s executive chairman Zou Xiaochun told theBeijing No. 2 Intermediate People’s Court that Chen breacheda contract with the company upon his resignation in March of2011. The contract allegedly stated that Chen would be paidRMB 10 million (US$1.57 million) to keep his mouth shutabout the company. Zou asked the court to order Chen torepay the RMB 10 million.Chen was not present at the trial. His defense lawyerstated that the sum was paid in the name of “compensationfor senior executives” and there was no evidencethat the payment was intended to keep Chen silent.The court was adjourned two hours after the trialstarted. The judge announced that the trial would be continuedand asked both sides to prepare evidence.Chen, 52, was appointed as GOME’s chairman onJan. 16, 2009 after GOME founder and former chairmanHuang Guangyu was detained by Beijing police over suspicionof illegal business deals, insider trading and corporatebribery. Huang sought Chen’s ouster but was voteddown by shareholders in September 2010.Chen said he resigned “to spend time with his family.”But it was not until his resignation that Chen’s sourrelationship with GOME executives surfaced.CommentIn China, commercial law is far from perfect so that many people can take fully advantage of theso-called “policy holes” to seek benefit. As far as the GOME case is concerned, trying to find alegal solution is the best way expected.37

Industrial WatchAUTOIndustrial WatchStill Young:China’s New Energy Vehicle IndustryBy Cui XiaolingWhy is China so eager todevelop its new energyvehicle industry? Firstlet’s hear what Ge Yuan,Investment Director of Origo PartnersPLC said at the 2011 Global New EnergyVehicle Conference held on January5 and 6, Beijing. “China has growninto the world’s largest auto marketsince 2009, putting pressure on the nation’senvironment and energy security.The world’s second largest carbon emittingnation now imports more than halfof the crude oil it consumes. 60% ofthe oil was used for transportation,” Gesaid. Yes, final goal of new energy vehicledevelopment: ease environmentalpollution and enhance energy security.Actually, China is an early andhard-working bird in the field. Its newenergy vehicle industry started in 2001when the Ministry of Science andTechnology launched the “863 Program”or “State High-Tech DevelopmentPlan”. The new energy vehiclesat that time already included hybrid,electric and fuel cell ones. A morepowerful development plan and subsidyprogram was launched in February2009, under which an electric vehicle38could get a subsidy as high as 60,000yuan, hybrid 50,000 yuan, and fuel cell250,000 yuan. The Ministry of Scienceand Technology and the Ministry ofFinance later started a program aimedto put 1000 new energy vehicles intooperation in ten cities every year.A real pictureAfter more than a decade of development,how’s the industry now? It’sworth noticing that China’s new energyindustry is highly reliant on its governmentsupport. Since the governmentlaunched the subsidy program for thedevelopment of new energy vehicles in2009, many corporations have startedto foray into this field. Local governmentshave also been active in promotingthe utilization of new energy busesand public service vehicles. However,quite a number of new energy vehicleprojects were set up only to get governmentsubsidies. Huge amounts of fundswere not used as they were intended to.By the end of 2011, about 13,000new energy vehicles were put into operation,and most of them are buses. Newenergy vehicles are mainly used forurban transportation. The private carmarket is yet to be tapped into. Chinesecar maker BYD launched the E6 electriccar in October 2011. How it will bewelcomed by the market remains to beseen.By the end of October 2011,9,268 new energy buses were driving inChina, realizing 38.15% of the nation’starget of 24220 units, according to a reportreleased by D1EV.com, the host ofthe 2011 Global New Energy VehicleConference.“About 8,000 units of the newenergy buses are hybrid, 2,000 electric,”said Liu Ling, deputy chief engineerof Hunan CSR Times Electric VehicleCorp.“There are over 100 charging stationsfor buses nationwide, which couldcharge about 3000 cities buses,” saidLiu, “The infrastructure is not matureto support the large-scale utilization ofelectric buses.”Standards on charging for newenergy vehicles were unveiled at the endof 2011. Good news for those manufacturers.Li Zhongdong, Chairmanof Huan Yu Group in Henan provincesaid the standards would help enterprisescut costs on manufacturing and

esearch & development. He called onthe government to release standards onbattery in an early time.Problems aheadIt is widely agreed among industryinsiders that new energy vehicles inChina face the following major problems:high cost, immature battery technology,and local protectionism.“New energy vehicle industryis still in its infancy. High cost is thebiggest obstacle to the commercializationof new energy vehicles”, said FuYi, deputy manager of Pu Tian NewEnergy Corp. Fu added that the immaturebattery technology is anotherbig obstacle to the development of newenergy vehicles. His company is workingon technological breakthroughswhile waiting for the maturation of thebattery technology.Fu’s concern was echoed by ZhaoBo, Director of the Electronic InformationDepartment of the Ministry ofIndustry and Information Technology.“Immature battery technology is aninternational problem facing the industry.Current batteries are not reliable,stable, or durable enough for the largescalecommercialization of new energyvehicles,” said Zhao.Local protectionism prevents freemarket competition. “Local protectionand intervention have actually cutthe market, and impeded the spread ofadvanced technologies in the nation,”Ge Yuan told the China’s Foreign Tradereporter.Outlook :)“New energy vehicle is a verypromising industry in the long term.And there is huge market potential.However, the industry is still in aninitial stage. It will take at least 3 to 5years before it starts to take off,” GeYuan told the reporter.“Electric vehicles are the directionof future development. But they aredifficult to commercialize in the shortterm, because of the limitation of thebattery technology. Extended-rangeelectric bus is a viable solution, since itextends the mileage of the electric busand saves on petrol at the same time.Hybrid vehicle is necessary as a transitionfrom traditional vehicles to electricones,” explained Ge.“Renting batteries and compatibilityof charging and changing batterieswould be the right way to go,since it is convenient, reduces the costof the vehicle, and solves the problemsconcerning the maintenance, durationand extension of mileage of battery,”said Wei Zherui, General Manager ofChina Aviation Lithium Battery.“Battery is the key determinant ofthe cost of electric vehicles. Accordingto famous experts on battery at LawrenceUniversity, the performance ofbattery improves 3% to 5% year on year.Significant improvements would bemade to the stability, duration and costof battery in the next 10 years,” said WuZhixin, General Manager of QingyuanElectric Vehicles in Tianjin city.Wang Qingsheng, General Mangerof Dongsheng Energy TechnologyCompany, a power battery maker inthe City of Weihai, was optimistic thatin the next 3 to 5 years, the batterycapacity would double, and the pricebe halved, which would transform theelectric vehicle industry significantly.However, insiders agree that inthe foreseeable future, the developmentof new energy vehicles in China stillrely on government support. Liu Lingsuggested that the Chinese governmentshould formulate standards on batteryand supporting facilities; strengthensupport for electric vehicle battery technology;introduce stable, long-term developmentplans and subsidy programfor hybrid vehicles.:( for foreign partners thoughThe huge market in China is veryattractive to foreign new energy vehiclemakers too. But it is very difficult forforeign companies to tap into this market.Even though major Chinese carmakers cooperate with foreign companiesin the development of some technologies,they prefer independent researchand development when it comesto new energy vehicles, in order to getthe sizable national and local subsidies.“Besides Chinese car makers arenot as far behind their foreign counterpartsin new energy vehicles technologiesas they are in traditional technologies,”Ge Yuan told the reporter.Liu Tongbo, London City’s chiefrepresentative in China, said that thedevelopment of electric vehicles is basedon electric vehicle technology, chargingtechnology and infrastructure network.The charging network requires an enormousamount of investment. When theinfrastructure is not there, it is difficultfor Britain’s advanced technology holdersto make good progress in China.39

Industrial WatchHEALTHOpportunity Growing while AgingIndustrial WatchBy Yang WeiOuyang, a 61-year-old lady living in Changsha, hasher busy routine life everyday. Get up at 6:00 am inthe morning, play taichi for 2 hours, watch healthTV program while having breakfast, take healthproducts before and after meals, take nap every noon, playmusical instrument in the afternoon, go dance on the complexsquare in the evening, and go sleep before 11:00 pm. “All Ido now is hoping to live healthier and happier,” she said, “I’mnow even busier than the time when I was at work a few yearsago”. She is a typical example of Chinese senior citizens. Whenpeople get aging, they pay more attention to their own health.Health care industry is emerging and developing quickly inChina, especially the health products industry.Aging era is comingFrom 2011 to 2015, China’s population aged 60 and abovewill increase from 178 million to 221 million, i.e. 8.6 millionpeople will join the ranks of senior citizens each year in average.The proportion of the sixty plus population will increase from13.3% to 16% by 2015, an average annual increase of 0.54%.China’s first growth peak of aging population will arrive. In thenext 20 years, China’s aging population will continue to grow.By 2030, it is expected this group will double from that of now.Service demand for those oversixty will increase dramatically. OnSeptember 17, 2011, State Council issuedChina’s Twelfth Five-Year Planon Aging Industry, highlighting theimportance of the health care industry.The Plan stresses to fully develop thehealth care industry for the elderly,including provide more education inhealth care, illness prevention, mentalhealth, and first aid, to make the healthcare knowledge available; encouragethem to have regular exercise andhealthy way of life.The cake of health productsChinese don’t have a culture oftaking health products however. “I beganto take health products when I wasover 50, when my family and friendsthought that I was old enough to takeextra health products.” Ouyang said.Again, she is not alone here. But it isthis culture background that highlightsthe opportunity of health products inChina’s aging era.“Chinese health products industryhas entered a second phase of rapiddevelopment. The driving forces ofconsumer promotion, policy, investment,and many other factors promotethe development of the industry,” saidWang Dahong, Secretary General ofthe China Health Care Association.He remarked that in 2010, China's salesof health care product totaled RMB90 billion, and it was for sure sales in2011 would surpass RMB 100 billion.“In the 1990s, China’s health productindustry embraced its first phase of fastdeveloping. From 2011, it is expectedto welcome the second phase of rapiddevelopment,” said Wang.A researcher from CITIC SecuritiesIndustry also mentioned that,currently China’s GDP per capita ismarching from US$4,000 to US$8,00040

and health products consuming hasgradually changed from optional goodsitem to daily necessities, especially forthe aging population. In the context ofconsumer upgrade, as well as China willenter an aging society era, the developmentof health products industry inChina will speed up.Liang Shuisheng, Vice Chairmanof the Board of By-Health, a healthproducts company based in Guangdong,China, thinks that the industry is developingfast. “There are two types of healthproducts in high demand of the market:the first kind is health products basedon modern western nutriology, such asdietary supplement and plants and animalextracts; the second is nourishingChinese herbs in line with TraditionalChinese Medicine, such as ginseng anddeer antler,” Liang said. “For the sake ofhealth, both kinds of products sell well,especially among the senior group.”More education in needAging population does create alot of opportunities for health productmarket; meanwhile the seniors do needmore education on how to take them.The following survey shows that it’sstill a long journey to educate the aginggroup on the health products consumption.The Industrial and CommercialBureau of Pinghu City, Zhejiang Provincerecently conducted a survey onhealth products consumption patterns ofelderly people. 600 questionnaires weredistributed in the survey to people over60 years old and 558 questionnaires werereturned. The results showed that 40%of the respondents take health productsregularly, and 75% had purchased healthproducts in the latest 6 months. However,41% of the respondents couldn’t distinguishthe difference between healthproducts and drugs. 39% of the respondentspurchase health products withoutany professional advice. Over 20%polled thought health products couldbe used to treat or cure disease withouttaking drugs (actually health productscan never take place of drugs nor killdiseases). Over 30% responded that theyfelt cheated or tricked by deceptive advertisementor overly hyped products bysales people. Here are the results of moreother questions asked:Why do you take health products?How much money are you willing to spend per year on healthproducts?Who buys health products for you?41

Industrial WatchICTClouds Gathering AroundIndustrial WatchBy Lesley CuiCloud computing has been dubbed a revolutionary technology of the informationera. Internet giants such as Microsoft, Google and IBM areall investing in the cloud business. The technology is also part of China’snational strategy for the development of the next generation of theIT industry. There will be a 60 billion yuan cloud computing market in China in2012, as estimated by the Internet Society of China.The concept of cloud computingBut what does the popular buzzword of “cloud computing” mean? To put itsimple, it means storing data, software and various kinds of services on remotecomputer servers that can be reached through an Internet connection. Users canaccess, change and interact with the data and services anywhere and at anytimeas long as they have a connection. With everything carried by the cloud system,they will not have to store data on a hard drive, or install software on their PCsto run them.And chances are, many people are already using it, by way of Google’sGmail service, social networking sites like Facebook or photo-sharing site Flickr,all of which store digital information on data centers all over the world.Dou Shuihua, deputy manager of ICT products of ZTE Corporation someof the major argued that “cloud computing” is a term coined from the perspectiveof the suppliers, and “cloud service” is a more appropriate term from the perspectiveof the users.Major cloud servicesAmazon, Salesforce.com, Google, IBM, Microsoft are cloud providers.They provide online data centers, software and applications to customers so thatenterprises don’t need to establish their own servers. The data and software canbe accessed via the internet with laptops, desktops, mobile phones, tablets andtelevisions. The following are the major cloud services in the world.Amazon: Amazon Web Services(AWS), which includes Elastic ComputeCloud (EC2), Simple StorageService (S3), SQS, and Virtual PrivateCloud (VPC)Google: Applicaions for Business(Gmail, Docs, Calendar etc.), AppEngine (development platform)Salesforce.com: Sales Cloud 2(CRM), Service Cloud 2 (support),Force.com (development Platform),Chatter (collaboration)IBM - Smart Business Developmentand Test Cloud, CSP2 (Telecom),LotusLive(collaboration), Tivoli Live(infrastructure), WebSphere CastIron Cloud Integration (Middleware,SaaS).Microsoft: AzureApple’s iCloud service can beused as a simple example of cloud service.Snap a photo on your iPhone andit pops up on your Mac or WindowsPC. Edit a document in the Pages appon a Mac, and that same edit appearson the Pages app on your iPhone. Buya song on iTunes on your Mac, and onyour iPhone you can re-download it;same with e-books you buy throughiBooks. Additionally, iCloudenables automatic wirelessbackups for iOS devices.Each Apple customer gets 5GB of free space for backups,documents and e-mail;the photos, music and booksdon’t count toward the 5GB.Development trendIt is widely agreedthat cloud computing has apromising future. TraditionalPC makers such as IBMCorp and Hewlett-Packard(HP) Corp have for yearsbeen shifting their business42

emphasis toward software development,especially cloud computing. Inpractice, using clouds to replace physicalservers has become increasinglypopular among enterprises and evengovernments.Cloud platforms and services aregetting more mature and sophisticatedat a very rapid speed. The cloud is revolutionizingcomputing as businessesand organizations shift from clientservermodel to cloud computing. Inthe next years, technology expertsand users expect to ‘live mostly in thecloud’ as they work through cyberspace-basedapplications accessed fromnetworked devices.Currently, cloud platforms arestill emerging, and there are stillplenty of issues, from the typical concernsabout management and security,to portability of applications and datafrom one cloud provider to another.Many are concerned about thesafety of storing data online. In exchangefor convenience, the technologycould make personal data lesssecure.“One reason you should not useweb applications to do your computingis that you lose control. If you usea proprietary program or somebodyelse’s web server, you’re defenseless.You’re putty in the hands of whoeverdeveloped that software,” RichardStallman, founder of the Free SoftwareFoundation, told the Guardian.Therefore, many large companiesare deploying “private clouds” that arebuilt within their organizations, tomake their data centers more efficient.Cloud computing overheatedin ChinaIn April 2011, the governmentof Chongqing became the first to announceits plan to invest 40 billionyuan in a cloud computing center thatwill be the largest in Asia. The planis called “Yun Duan” (Top of Cloud).Then Shanghai, Beijing, Shenzhenand Guangzhou all followed suit.Shanghai plans to build a “Asia PacificCloud Computing Center”, its plan iscalled “Yun Hai” (Ocean of Cloud),Beijing has a plan called “Xiang Yun”(Cloud of Blessing), Shenzhen has aplan called “Kun Yun” (Cloud of FlyingFish), Guangzhou has a plan called “Tian Yun” (Cloud ofSky), Ningbo has “Xing Yun” (Galaxy Cloud), Wuxi has “YunGu” (Cloud Valley), Hangzhou has “Yun Chao Shi” (CloudSupermarket) ……According to a report from China High Tech Herald,even poor cities like Lanzhou and Langfang joined the “cloudmaking carnival”. Langfang, a third tier city in Hebei provinceannounced its plan for a cloud storage center that is atleast tuice the size of the largest existing cloud storage centerin the world, which is in Chicago.Since then, investigative journalists have found evidencesthat suggest these projects are often launched before the officialsfigure out what cloud computing is about, and many ofthe projects consist of a lot of commercial property and fewelement of technology research. For example, a report fromEconomic Observer says that an unnamed cloud computercenter has so few customers that only the staff of the frontdesk are receiving their salary, and its technology team hasto make a living somewhere else. But it does not prevent itfrom being an “Image Project” which local government officialsshowcase to visiting colleagues. No wonder Li Deyi,academian of China Academy of Engineers, recently angrilysaid, “Cloud computing is a green way of calculating, it’s not acompetition of scale, equipment or warehouse. Developmentof cloud computing cannot be turned into a game for land andcapital possession.”Facing more and more critical views from experts andmedia upon large cloud computing zones with expensive infrastructurebut little content, the government is putting moreemphasis on making the cloud computing centers useful.Many technology companies were given priority and subsidyfor entering the cloud computing zones.Insiders pointed out that cloud computing in China isstill in its infancy when people are focusing on infrastructureand Internet Data Center, instead of data, software andservice-the essence of cloud computing.43

Industrial WatchICTMobile InternetWill Diversify IT ServicesIndustrial Watch— 10 Predictions about the Chinese ICT Market in 2012By Amy HuIn December, 2011, IDC (InternationalData Corporation) Chinaissued 10 predictions about theChinese ICT (Information andCommunication Technologies) marketin 2012. According to IDC, the Chineseeconomy will be generally confrontedwith risks and uncertainties yetwith steady and speedy growth. Undersuch expectation that export demandis to become sluggish and economicrestructuring will face greater pressure,competition in the domestic marketwill become more throat-cut. However,the IT market still maintain fastgrowth, such as continuous developmentfor cloud computing, Internet ofthings and corporate mobile Internet;the transformation of individual IT operationtype will revolute the traditionalconcept of IT channels; e-commercewill ever develop in an all-round manner;the mobile Internet will restructurethe model of the retail and the serviceindustries.Looking into 2012, such mainstreamtechnologies in the ChineseICT market as cloud computing, mobileInternet, the Internet of things andbusiness analysis would be widely usedin various industries, which would driveenterprises to improve product andservice quality, enhance the efficiencyof operation and management and toincrease business revenues and theiroverall market share, Wu Lianfeng,Associate Vice President of the ChinaIndustry Research and Consulting ServiceDepartment of IDC, told the reporter.In 2012, the Chinese IT marketwill expand into the 4-6-tier cities andIT technologies will continue to helpenterprises cut energy consumption andreduce emissions. As the key projectsin the 12th Five-Year Plan are beingcarried out, the popularity of intelligent44terminals will continue to engineer theindividual-consumption electronicsmarket and the Chinese ICT marketwill witness steady growth amid globaluncertainties.Prediction 1: The Chineseeconomy will step into the weakgrowingcycle, but the IT marketwill maintain rapid growth in the keyfields.In 2011, as the Chinese governmentadopted highly severe financialcrunch policies to restrain high inflation,the commodity price and thehousing price were basically stabilizedand a soft landing was almost achievedfor the economy. Looking into 2012,the Chinese economy will maintain astaggering growth momentum. Thelatest data issued by the EIU showsthat the growth rate of the ChineseGDP is expected to reach 8.6% in2012. As policies to restrain housingprice and high inflation will continue,investments will slow down and as theEuropean debt crisis and the weakeningUS economy will impact export,domestic consumption and investmentsin the key fields will become amajor drive for economic growth. TheCentral Government unveiled a stringof policies in October, 2011 to encourageconsumption, such as raising thestarting point for levying value-addedtax and reducing the administrativecharges for minor enterprises. In themean time, such key domains as smartgrid, next-generation information technologyand living service industry willpromise tremendous opportunities forthe IT industry. Besides, the national12th Five-Year Plan includes specialchapters to expound how to enhancethe overall informatization level, whichindicates that 2012 will see abundantopportunities for the IT industry. TheIDC predicts that in 2012, the ChineseIT market will reach a scale of RMB985.4 billion, up 19.9% over the previousyear; at the same time, in 2012 thetelecommunication service market willhave a scale of RMB 950.7 billion, up7.4% over 2011.Prediction 2: The Chinese ITmarket will develop in cities at threetiers.The IDC holds that cities at differenttiers play different roles: highgradecities serve as the center for datacollection and processing, low-gradecities is the terminal for data productionand consumption, and the mediumgradecities produce, collect, transmitand process data. The IDC predicts thatin 2012, the above-mentioned marketcharacteristics will gradually becomeclear and the cities at different tiers willfind their positions in the macro marketenvironment, which will drive thedevelopment of the local IT markets.The vertical industries will also specifythe positioning of different cities in themacro environment, correspondinglyincreasing input for various products.Prediction 3: Cloud computingwill be applied widely in the wake oflarge-scale infrastructure construction.In 2011, China’s cloud computingmarket experienced an upswing underthe government’s support: the localgovernments invested a lot in cloudcomputing and constructed numerousdata centers for cloud computing; telecommunicationoperators and Internetenterprises began to develop their owncloud computing businesses; by farmany users have begun to deploy theirbasic framework on the platform by

cloud computing service providers; newapplications of cloud computing andInternet of things began to emerge. TheIDC regards that the cloud computingservice market will reach a scale ofRMB 929 million in 2012, up 52.0%year-on-year.Prediction 4: Large-volumedata will make business analysisa top choice for CIOs to achievethe business value of IT and newrequirements will be raised for thesoftware and hardware system.The rapid development of mobileInternet, social media, e-commerce,Internet of things and cloud computingwill confront enterprises with challengesin terms of large-volume data in2012. The new pattern to process largevolume data will prompt revolutionin the IT industry: the large-volumedata era will bring challenge to usersin terms of data storage and the datacenter’s infrastructure, engineering thespeedy development of the businessanalysis market. The enterprise and industryusers enhancing IT applicationlevel and the advent of the “large-volumedata” make CIOs hope to achieve thebusiness value of IT by virtue of BAand then to enhance corporate competitiveness.Different from traditionaldata, large volume data analysis hasstricter standards in terms of performance,timeliness as well as the softwareand hardware system.Prediction 5: As IDC resourcesare allocated in different regions,“one-stop IDC service” integratingentrusting, monitoring and operation& maintenance services will wingreat popularity.Influenced by “cloud model” developmentand energy consumption ofdata centers, large-scale IDC servicebusiness data centers will divert tohigh-latitude regions in 2012, showinga trend of scattered deployment amongregions. In 2012, the number of the totalbusiness data centers is expected toincrease at a growth rate of 11.7% andthe IDC service market at an annualrate of 25.1%. To be more capable forlong-distance services, service providersof business data centers will launch onestopIDC business solutions integratingentrusting, monitoring and operation& maintenance services, aiming to helpclients efficiently utilize resources.Prediction 6: Corporate mobileapplication market will witness anupswing in 2012.With the popularity of mobileapparatus, the support of mobile broadbandand investments in constructionof WIFI sites, mobile application isdeveloping fast in China. The ever developmentof individual mobile applicationhas created essential conditions forthe development of corporate mobileapplication, which provides businessopportunities for the IT manufacturersof corporate mobile application andmobile application developers.Prediction 7: As the technologyenvironment of the Internet of thingsis maturing, market development willbegin to be driven by industry applicationfrom government policies.With the development of 3G andwireless network technology, the technologyenvironment of the Internet ofthings is maturing. The development ofwireless network and the developmentof the Internet of things well complementeach other. In the mean time,the Internet of things will be furtherapplied in industries, and power grid,transportation, environmental protectionand agriculture will become thekey industries for application of the Internetof things.Prediction 8: Transformationof individual IT operation type willrevolute the traditional concept of ITchannelsAs the IT terminal product structuregradually became clear in 2011,the multi-screen intelligent terminalindustrial chain consisting of PC,smartphones, tablet PC and smart TVwill gradually take shape. Manufacturersbegan to deploy future developmentplanning in 2011, but for theimplementation of the planning, theIT terminal channel is undoubtedly avital section along the industrial chain.The IDC holds that both the retail andbusiness-use IT terminals will necessarilytransform the traditional conceptto some degree, launching terminalaccess structure more suitable for individualIT operation type.Prediction 9: Mobile Internetwill diversify IT services and will becomea new growth point for servicedemands.Mobile Internet will become apopular sphere for the development ofthe IT service industry, as it not onlyhorizontally moves the traditional Internetplatform to the mobile terminal,but also exceeds the traditional Internetin an all-round manner in terms of clientbase, business model and application& development. Relevant softwareand its application have permeated intodaily life and its demand is mountingexplosively. The mobile Internet willnecessarily become a forceful drive forthe development of IT services, fuellingthe diversification of IT services.Prediction 10: As e-commerceever develops in an all-round manner,mobile Internet will restructurethe model of the retail and serviceindustries.Thanks to the diverse developmentof e-commerce services and the internalneeds for upstream and downstreamcontrol along the industrial chain, e-commerce has gradually turned to aplatform integrating online resourcesand offline entities from pure onlinetransaction, such as the combination ofe-commerce and searching engine andthe combination of e-commerce andoffline transaction. The profit-makingmodel of the e-commerce platform isdiversifying with a raised industry entrythreshold.In the mean time, the developmentof mobile Internet basing onspeedy mobile Internet and intelligentterminals gives the traditional PC Internetmobility (combination with LBSbasing on position service and information),perception (more and more colorfulinduction and sensing functionsprovided by intelligent terminals) andauthenticity (identity recognition anduniqueness featuring mobile terminals).These three features will be achievedvia such mobile Internet as SoLoMo(Social + Local + Mobile). SoLoMoapplication will revolute the retail andservice industries.45

Industrial WatchEXPOIndustrial WatchHow Could Chinese PrivateBookstores Survive?By Lesley CuiThe closure of Forest Song, Photosynthesisand several otherfamous bookstores in 2011 hassparked wide public concernover the survival of private bookstores inChina. It was reported that about 10,000private bookstores were shut down lastyear. The rest of the stores still in businessare struggling for survival.During the Beijing Book Expo lastingfrom January 8 to 11 at the ChinaInternational Exhibition Center, a forumwas held themed on the Survival of PrivateBookstores. Government officials,publishers, owners of private bookstoresand book critics participated in the meeting,voicing their thoughts on the difficultiesfacing private bookstores andthe ways out. It is agreed that in order tosurvive, private bookstores should seekgovernment support and innovate their business models at the same time.Why are private bookstores going down?Private book-selling business emerged in China when the nation started tomodernize, and reached its peak in the late 1990s, said Liu Suli, founder of AllSages Books. A wave of closure of private bookstores began in 2009, marked bythe shutdown of Sanlian Guangzhou, the Third Polar, Forest Song, PhotosynthesisShaanxi, etc. The reasons for the phenomenon were discussed at the forum.Strong competition from online storesCompetition from online stores is believed to be the major reason for thedownfall of private bookstores. “Low prices of online books are a grim challengefor traditional bookstores.” said Hao Zhenxing, director of China Press ResearchInstitute.Price wars between online stores such as Dangdang, Amazon, 360buy andSuning have driven book prices to levels unbearable by offline stores.Many people are sorry for reading books in offline stores and buying themonline. But how can we blame them for not resisting the low prices of online stores?Popularity of e-booksWith the development of information technologies, people spend an increasingtime reading e-books, as it is convenient and less costly. This is especially truefor the younger generations.46

Lack of government supportPrivate bookstores were not madelegal until 1996. Since their advent,they have not for one day enjoyed thefavors granted to state-owned bookstores. The State-owned ones haveprivileges in terms of rent, exclusiveselling right, national loan and otheraspects, putting the private ones at adisadvantaged position. “Today thequestion should not be why so manyprivate book stores were shut down,but why some of them have survived. Itis only normal that private bookstoresdied, and a miracle that some of themare surviving.” said Liu Suli, founder ofAll Sages Books.Poor managementSome participants at the meetingpointed that bad management is thesubjective reason causing the downfallof some of the private bookstores.What can be done?Although private bookstores facethe pressure of declining clients, andincreasing costs, people are still optimisticabout their future. “Paper booksand physical stores are irreplaceableby online ones,” as they agree. Whatshould private store do to stay in business?Offer added serviceNow many bookstores offer saloons,coffee, cultural products, andother kinds of services, to appeal tocustomers. For examples, WanbangBookstore in Shaanxi opened a tea sectionwithin the store, and opened twonew stores in 2011.Jiang Lei from Fang Suo Bookstorestressed that physical bookstoresare not just places to sell books, but alsocultural spaces. “We see ourselves aseditors, who share ideas with clients. Inthis way, we establish a close relationshipbetween books and people. Thisis how we differentiate ourselves withonline stores and digital reading.”Hu Hongxia, chief editor of JingNewspaper, suggested that private bookstores should be unique in style, selectionof books, and services.Seek government supportSun Yuemu, editor of China BookBusiness Review, said that governmentpolicies have huge impact on the developmentof book stores. Private book“WE SEEOURSELVESAS EDITORS,WHO SHAREIDEAS WITHCLIENTS.”stores are facing difficulties caused by fierce market competition.Adjustment of government policies in terms oftax, loan or other aspects might will helpful to private bookstores.Hao Zhenxing believed that private bookstores are animportant component of the publishing industry and distributionindustry. They deserve government support.Against the backdrop that the central Chinese governmentis promoting cultural development, the PublicityDepartment of the CPC Central Committee and the Pressand Publication Administration were granted a large numberof funds. Efforts should be done to attract the attentionof the government and apply for tax favors and other favorabletreatments, so as to keep private bookstores in business.Innovate in business modelsWei Hongjian, general manager of Wanbang Bookstorein Shaaxi, said that we should open our horizons, andinnovate in the business models. For example, Wan SuoBookstore was opened last December right beside LV andDior in Guangdong province. With the combination ofbookstore and top fashion brand, Wan Suo positioned itselfas a pursuer of life aesthetics.Learn from foreign bookstoresQu Jingfan, a journalist of China Book BusinessReview pointed out that the market share of private bookstoresin the United States has also been declining. Butmany of the bookstores managed to survive. He sharedsome of the successful ways used by foreign bookstores tokeep good business. For instance, obtaining the exclusiveselling right of some books; understanding the book preferencesof the local community via questionnaire; offer bookordering and delivering services; hosting book exhibitionswith several other bookstores; let community members participatein the setting up of the bookstore; host membershipbirthdays, reading saloons, dramas, summer campus andother activities; make a map of the physical bookstores inthe city; actively use digital technologies.47

China’sLogistics EyesGrowth AmidstChallengesBy Zhu ZijunThe past Chinese Spring Festival saw a hugegrowth in retailing, but also a huge growth incomplaints and reports of online shopping, mainlydue to the delayed delivery service of thosee-commerce enterprises. Those complaints of the logisticsaccounted for 40 percent of all the complaints during thefestival, according to China News Agency.Logistics plays a significant role in economic andtrade. The logistics problem in the festival may be understandableconsidering that the couriers in the sector headedhome for the holidays. When they are back to work, theproblem can be easily solved.However, China’s logistics is a far more complex matter.The fast-growing economy calls for highly efficientlogistics. Though the logistics in China is still far from satisfactory,it is developing gradually in face of various challenges.The complex logisticsFollowing the country’s economic expansion, China’stransport and logistics industry has been growing impressivelyin recent years. Data from the Hong Kong Logistics Associationshows that total logistics costs in 2009 were RMB 6.1trillion, up from RMB 3 trillion five years earlier.The goods transported by China’s logistics firms arebeing carried on a rapidly expanding transport network.Since 2008 when the government launched a RMB 4 trillionstimulus program to counter the effects of the globalfinancial crisis, China has seen a rapid growth in infrastructureconstruction including expressways, railways, andwaterways, according to a recent report by KPMG.However, the logistics costs in China are still veryhigh. While there are significant variations by region, overalllogistics costs amount to 18 percent of China’s gross domesticproduct, higher than many developed countries. Thegood news is this share is dropping, but slowly: in 2004, thefigure was 18.8 percent. The main brunt of this high costare users. For manufacturers, logistics costs can amount toas much as between 30-40 percent of production costs. Forcompanies wanting to distribute goods, the challenge ishaving to deal with numerous small operators. Transportationcompanies also suffer from reduced efficiency and an48

inability to pass on their high operating costs to the user.The report pointed out that one reason for China’shigh logistics cost is the fragmented nature of the sector.Carrying goods around the country can involve a mixtureof foreign, state-owned and domestic private businesses.The precise mix varies from sector to sector, depending onthe respective degree of liberalization.Transport and logistics companies are subject to arange of taxes and regulations. Currently transport businesses,for example, pay business tax at a 3 percent rate;warehousing and freight forwarding both have a businesstax of 5 percent.Companies that span different parts of the supplychain have to pay multiple taxes to different bodies at differentrates. However, changes likely are on the way as theState Council has pledged to unify the different taxes applicableto the goods sector from the services sector by phasingout business tax and replacing it with a system where allcompanies pay VAT.There are also tolls levied by provincial and city governments.For trucking companies, these can account forone-third of their total costs. All of this further compoundsthe challenges facing small operators by making it harder toestablish standardized processes and effective managementcontrols. In turn, it makes practices such as overloadingmore common.China’s high rate of economic growth, while fuellingdemand for logistics services, also creates challenges for operators.Wage costs are rising sharply, for example.Part of the reason why logistics costs are high as aproportion of GDP is China’s manufacturing orientation:measured by value, moving industrial products accounts foraround 90 percent of all goods moved; in developed countries,with their far greater reliance on services, logisticscosts are certain to account for a far lower share of GDP,said the report.Another part of the reason is that regulations governingthe sector have remained fragmented. The transportand logistics sector is subject to oversight by a range of differentbodies, with many jurisdictions overlapping, said thereport. Attempts to overhaul the regulatory sector remainwork in progress.The report indicated that for companies looking tonavigate China’s logistics industry either as an industryplayer or to move their goods around within the country,understanding the industry’s development will go a longway to explaining both its complex and contradictory structure.Reform is on its way, but it will take time to implement.Challenges of the logisticsAs domestic consumer market is burgeoning, China’stransport and logistics infrastructure faces fresh challengesand fresh scrutiny from businesses and government planners.In the context of transport and logistics, the challengeis for logistics to keep pace with industrial relocation withinChina and also with the growth of domestic demand, thereport said.Anyone doing business in China will admit that managinglogistics continues to be not only a complex, but alsoa relatively costly, part of their operations. Moving goodswithin China remains particularly challenging. High feeslike road tolls, can encourage transport companies to overloadtheir trucks and breach safety measures.Performance can also be hampered by the availabilityof experienced staff, especially at a managerial level. WithChina’s economy continuing to expand strongly, wages andland are becoming more expensive, particularly in the leadingcities.The government has also acknowledged that efficienttransport and logistics are key for long-term developmentand it is committing huge funds to build airports, roll out anational expressway network and, expand and upgrade thecountry’s railway system.Geographically, the heavy investment in transportinfrastructure has left almost every part of the country accessibleby highway and most of it by rail. The outcome ofthis investment is that the less-developed central and westernregions are finally starting to become linked by reliabletransport routes to the east coast.Aside from the sheer scale of investment, the widelytouted solution for many of the industry’s ills is consolidationleading to the creation of a smaller number of largerand more efficient companies. Mergers and acquisitions aretaking place, but they show no sign of accelerating.49

China’s shift towards domestic private consumption isunderway, but it will take time. The logistics and transportsector will play a key role in making it happen. Indeed, thepossibilities that a modern logistics sector can offer havebeen demonstrated over the past two years with the suddenemergence of online shopping as a major new business.The government is now actively supporting such measures.In February 2009, in the aftermath of the globalfinancial crisis, the government launched its Plan to Adjustand Rejuvenate the Logistics Industry. Its objective was torationalize the industry by encouraging such practical measuresas establishing technological and other standards, acceleratingthe rate of mergers and acquisitions, supportingtraining schemes, and increasing the utilization of informationtechnology through investment in research and developmentand the application of new technologies relevant tothe industry.The broad-brush strokes of the plan have since beensupplemented by more concrete measures, most recently ina set of eight measures announced by the State Council inJune 2011.With these preferable policies, the logistics is to beupgraded over the coming decade, though most likely inan incremental fashion rather than through any single boldleap forward.Task for enterprisesThe report pointed out that finding logistics businesseswith a true single nationwide reach can be a demanding taskfor retailers and other companies wishing to sell goods nationwide.Companies are succeeding by exploiting niche opportunitiesand investing in their own systems and processes.Some companies are developing in-house logistics capabilities.Those with big enough pockets have tended to overcomethe challenges of China’s fragmented logistics industryby developing their own logistics arms. For instance, KFC,China’s biggest restaurant chain, with some 3,300 outlets in700 cities, runs its own logistics network. Domestic companiessuch as Taobao and 360buy.com are also making massiveinvestments in distribution centers across the country.“To facilitate our trade, we have established warehousingcenters and logistics team in six major cities in China,”Dixon Yuan, Chairman of Yesmywine, a leading online retailplatform for imported wine, told China’s Foreign Trade.Companies need to invest in systems and people. Forcompanies that lack the means to handle logistics in-house,moving goods around the country can be a slow process,typically requiring multiple transfers between a host ofoperators, making it hard to keep track of shipments andoffering many opportunities for wastage either by theft,breakage or carelessness. Leading operators are differentiatingthemselves by addressing these issues and focusing theconsistency and reliability of their service.This is something which requires a significant investmentin systems, processes and human resources. Havingcommitted to what can be a sizeable investment, establishingand embedding processes that effectively link peoplewith systems and infrastructure is critical.If companies can fully realize the return on their investmentin systems, they have an opportunity to establisha competitive advantage; domestic players may be wellplaced if they can develop processes which employees feelcomfortable with in the local context.Moreover, China’s talent base is deepening, but attractingtrained and experienced staff to the logistics sectoris a challenge.Companies also need to tap opportunities in expressdelivery and e-commerce. Fuelled by the exponentialgrowth in its online shopping, China’s e-commerce industryis expanding rapidly. By 2015, the e-commerce marketis expected to possibly surpass the size of the U.S. market,according to a survey by The Boston Consulting Group.E-commerce in China was stymied by the lack of reliablepayment systems for years. In 2008, express deliverycompanies started collecting payment when they droppedoff goods — creating a new industry overnight. This businessis set to continue growing rapidly.One of the main reasons DHL and FedEx launchedtheir domestic express services was to tap into China’s risingconsumption. Running such businesses is clearly expensive.In a sector where low cost operators feel the pressureof high fuel costs and burdensome regulations, it couldbe the higher value services that are best-placed to thrive.Outlook for the logisticsChinese officials are now working on strengtheningthe operational environment to upgrade the logisticsindustry. The government’s 11th Five-Year Plan for the period2006-2010, set out a number of initiatives to establishtransportation and logistics markets in support of the developmentof service industries as well as the growth of theeconomy as a whole. Now, with the 12th Five-Year Plan,covering the period 2011-2015, the emphasis has switchedtowards broader encouragement of developing a moresustainable economy through higher technologicalstandards and innovation, according to thereport.50

Encouraging greater private consumption and movingthe Chinese industry up the value chain will help in thisrespect. As the country embraces more service and hightechindustries, companies will need stronger logistics supportto improve their efficiency. In turn, this will call forbetter management practices, a far more widespread use ofinformation technology and systems that can integrate andmonitor the movement of goods and materials both acrossthe nation and in and out of the country.Eight measures announced by the State Council inJune 2011 further underline how the government is lookingto help the development of the sector through reformingthe environment in which it works rather than giving itexplicit support.One area that could see dramatic change is the taxregime. Currently, those parts of the logistics sector in thetransport and communications category pay 3 percent oftheir turnover as business tax, while others, such as warehousing,because they are defined as services, pay 5 percent.With their margins already low, companies are lobbyinghard for the rate for the entire industry to be unified at 3percent.While these rules in theory affect many types of businesses,China-based transport companies that move goodsinternationally are particularly vulnerable, with all thework they do outside the country potentially being subjectto Chinese business tax.The report showed that the officials are taking theseissues seriously. The State Council haspledged to unify the different taxes applicableto the goods sector from theservices sector by phasing out business taxand replacing it with a system where allcompanies pay VAT. This objective moveda step closer to fruition in late 2011, whenthe State Administration of Taxation and theMinistry of Finance finalized details for a pilotprogram in Shanghai. Transportation, logisticsand modern services industries were the sectorsmarked for inclusion in this program. Replacingthe varying rates now used would both be simpler,and therefore easier to oversee, and fairer.Concerns about regulation largely centre onthe weak or inconsistent enforcement of existingrules, rather than a need for any major overhaul.Also important would be a greater emphasis onuniform practices and standards for basic itemssuch as pallets.The challenge is that thebest domestic transportcompanies willuse their low-costbase as a foundationfor out-maneouveringboth other local andforeign companies.The best of thesecompanies will of-fer formidable competition to the international companies,whose greater experience is offset by their higher costs.Customs procedures could be improved. Accordingto the World Bank’s logistics index, clearing customs takesan average of 3.4 days when there is a physical inspectioninvolved, compared to 1.6 days in Germany and 2.2 daysin the US. China inspects 9 percent of shipments that gothrough customs compared to 3 percent in the US and Germanyand 2 percent in the UK.However, all the companies interviewed for this reportagree that further opportunities for them to grow theirbusiness can only emerge in China. The report believed thatChina’s logistics industry enjoys a promising future thanksto the following reasons:First, the physical infrastructure is in place allowinghuge and rapidly growing volumes of goods to be distributedbetween almost any two points in the country. Buildinga nationwide network may entail working with a host oflocal companies, but it can be done.Second, there is a recognition centrally of the need tochange – most obviously by eliminating overlapping taxation.If a simpler regulatory system can emerge from thecreation of the Ministry of Transport, then a host of competingand conflicting standards may also be resolved. Thetransformation will not occur overnight, but the latest governmentproposals suggest there is recognition that changeis necessary, while technology can be an enabler in comparativelysimple ways, from streamlined transit proceduresat toll stations to quicker approvals and payment systems.Third, and perhaps most importantly, customers aredemanding change. As other costs rise, manufacturers arelooking to new points on their supply chain to drive efficiency.Logistics has become critical to many businesses’competitiveness.Many international transport and logistics companiesare focused on finding and serving customers willing to paya premium price for quality and reliability of their services.For domestic companies, the challenges are varied.Smaller and medium-sized private companies are lookingfor ways to raise standards without being squeezed out byless scrupulous competition. Others will need to securefinance in order to acquire complementary or competitorbusinesses. The companies which are best placed to succeedare those with a clear vision of their long-term goals andaccess to the financial resources necessary to be able to investin people and systems.All of the eight steps proposed by the government canin turn encourage the longer term goal of industry consolidation.Bigger, more efficient logistics companies wouldnot only help manufacturers move their goods around moreefficiently, it would also help farmers get both their inputsand their produce to markets as cheaply as possible, potentiallyhelping to keeping a lid on food inflation.As such, increasing the efficiency of China’s logisticssector would not only benefit business, but society as awhole. The biggest incentive to overcome the challengesfacing China’s transport and logistics industry is the lure ofthe domestic market.51

case StudySafety Strategy of China’sPetro-Chemical Sector— A Game of Anti-dumping in Integration PatternBy Xu FanAs a traditional pillar industry,petro-chemical sector hasbeen a key field of internationaldumping and antidumpingdispute. China’s access intothe WTO launched the global economicintegration process in a real sense,which exerts far-reaching inf luenceover China’s petro-chemical importsand exports. While expanding marketsworldwide, China opens the door todumping of foreign products. The authorapplies advantageous trade theory,global economic integration theory aswell as game theory to analyze the currentanti-dumping situation of Chinesepetro-chemical industry before presentingmacro measures concerned.Current situation of Chinaregarding dumping of foreignpetro-chemical productsSecond only to textile and machinerymanufacturing industry, petrochemicalsector has already been thethird largest industry in China andplays an important role in our overalleconomic situation. Because of lack ofdemand in world economy, serious accessof capacity in petro-chemical sectorand continuing lowering of our importtariffs, China is becoming the victims ofthe dumping of petro-chemical productsdue to dumping strategies by foreignpetro-chemical enterprises.The huge impact of foreign oilrefining enterprise is dramatically diminishingthe price of our domesticoil production. Let’s take the Middleeast’spetro-chemical products whichhave strong competitiveness in price asan example. Some one in Petro Chinareveals that the productivity of threemain kinds of polyethylene productionin 2012 will be twice higher than theone in 2007 and with the new refineriesputting into operation, much moreproducts with higher quality will surgeinto China in the second half year of2009. The domestic market will beunder long-time potential pressure asthe speed of petro-chemical productionis increasing and outpacing the speedof import of petro-chemical productsin China. Besides, the large quantityof stock in chemical plant and themacro background of general economicdownturn are also key factors leadingto short-time decreasing of the price.During the dumping period, our Chinesepetro-chemical enterprise sufferedinsufficient operating rate, negative pretaxprofit of same category productionand many petro-chemical enterprisesare on the verge of deficit and bankrupt.Current situation of Chinaregarding anti-dumping inpetro-chemical sectorSince December 2008, an obvioustrend is trade integration of China’s petrol-chemicalproducts as well as diversificationof importing places. BesidesMiddle-east, Japan, Singapore, Taiwan,Thailand and some other competitorsare all targeted on the Chinese market(Chart.1). Up to March 2009, the stockChart 1: The Global Production Capacity of Ethylene (Categoried byRegions) 20084.80%27.50%16.20%4.40%15.50%31.50%the Asian- Pacific region Western Europe North American Free Trade AreaEastern EuropeMiddle east region and AfricaSouth America56

of methanol has come to its max in history.The import of PVC’ for the wholeyear is estimated to be 2.3 times thanthat of 2008. Moreover, many petrolchemicalenterprises of different placesare facing a significant increase of risk.As is known to all, the complex factorslike the price level in history and theconsequences of potential trade frictionwill lead to a lengthened anti-dumpinginvestigation. Even so, the MethanolOrganization of China (MOC) stillsubmitted an application of antidumpinginvestigation to the Commerce Departmentin early 2009.The anti-dumping of our domesticindustry has gone through three periodsin general from the perspective of thequantities and the trend of anti-dumpingcases.Passive response outnumberedthe active counter-attack during thefirst period. Around the year in whichChina join the WTO (1995 to 2002),the manufacturing industry frequentlyencountered anti-dumping measuresin the international market and someproducts were subjected to heavy antidumpingduties. During the sameperiod, foreign products poured intoChina. It’s a regret that seldom Chineseenterprise had the capacity to deal withanti-dumping lawsuits and they werevery passive in general. Psychologicalfactor is that the intrinsic Chinese Cultureof consultation is far away from themodern business spirit. Factor regardinglaw is that weak legal basis cannotestablish a mature legal environment.Besides, economic factor is that majorityof small and medium industries areunable to bear the high cost of the legalcost alone.We were transformed fromspontaneous reactions to tackling theproblem consciously during the secondperiod. After experiencing several tradedisputes Waterloo, the legal sense ofour domestic enterprises was awakened.Take the anti-dumping investigation ofimports of newsprint in 1997 to 2003for example, the number of China’santi-dumping cases grew dramatically(see Chart 2). During that period oftime, the anti-dumping cases whichwere initiated by the domestic chemicalindustries accounted for 70% to 80%of the total cases and the cases of antidumpingof petro-chemical productsshowed a corresponding downwardtrend (see table 3). Up to March, 2007,we had initiated 49 anti-dumping casesand 35 of which were relevant to petrochemicalproducts. Among the 28 antidumpingcases of petro-chemical productswith final ruling, China had won22 cases with the winning rate of 78.6%.The Methanol Organization of China(MOC) restarted the anti-dumpinginvestigation of the PVC against Korea,Japan, Russia and Taiwan China in October2008.We Initiated attack with reasonand restrain during the third period. InAugust, 2007, trade protectionism wason the horizon under the cloud of U.S.subprime mortgage crisis. A number ofcountries including Western countriesmade various anti-dumping rules. Tomake matter worse, those countriesabandoned the international standardof measuring dumping and all focusedon Chinese products. According to thejournalist of Legal Person who recentlylearned from the Ministry of Commerce,in the period of January to Aprilin 2009, on the one hand, the numberof anti-dumping suits initiated by foreignenterprises against China reachedmore than 90 cases. On the other hand,China raised approximately 48 antidumpingcases. The number of twosides had a slight increase comparedwith that of last year (see Chart 3),China was still suffering the most fromanti-dumping lawsuits than any othercountry. Regardless of the oppositeopinions from domestic industry associationsand international organizations,Barrack Obama approved the applicationfor investigation of China’s “tiressafeguard case”. China then announceddouble investigations against part of theAmerican cars and the broiler subsidiesand dumping. This is the typical case ofChina using anti-dumping weapon tocounter the trade protectionism proactively.The effects of anti-dumpingraised by China’s petrochemicalsector and theremaining problemsAfter series of anti-dumpingmeasures taken by our petrochemicalindustry effectively curb the trendof dumping of foreign products, thereis a steady rise of the domestic petrochemicalproduct price and trade orderreturns to normal. What’s more, sincewe levied anti-dumping taxes againstSBR of Russia, Japan and South Korea,the largest domestic petrochemicalproducer-QiLu Petrochemical’s capacityhave been released and its earningper share has risen form 0.02 Yuan in2002 to 0.22 Yuan in the first threequarters of 2003. In addition, the rulingto levy anti-dumping tax on imports ofPVC has made the quantity of importsdecreased significantly and a rebound inprice has been obtained, and therefore,the long-term slump result from dumpingin Chlorine-alkali industry hadbeen reversed. This also provides a footnotefor the theory that anti-dumping isoften able to deter and force exportingcountries to accept voluntary exportrestraints. Anti-dumping and transferpricing can also cause damage to publicinterests and have some other adverseeffect. After the withdrawal of thedumping products from Chinese market,other products often take advantageand make it difficult to maintain the effectivenessof anti-dumping. Some lightprofit, heavy polluted small chemicalcorporation may get protection accordingto this policy.The anti-dumping policyfor Chinese petro-chemicalindustryOur current research on antidumpingfocuses mostly on benefitsand losses, relations between upstreamand downstream sectors, public interestrules and so forth. In the contextof global financial crisis, the tradingsituation of China is changing dramatically.Western big trading countries thatenjoy the rule-making rights are notcontent with the current irreciprocaltrading rules. Those countries abusethe WTO anti-dumping rules as wellas take covered protective measuressuch as setting green barriers, sanitarybarriers and technical barriers. Somecountries even bring forward the policyof purchasing domestic products. Antidumpingis obviously not an isolatedinter-sector behavior, but rather a crosssectorsystematic policy. Anti-dumpingpolicy for Chinese petro-chemical can57

case Studybe presented in the following three waysin the case of trade integration.Firstly, protective trading networkcan be constructed to bar dumpingproducts from coming into China. Areport of Ministry of Commerce ofPRC indicated that EU brought antidumpingaccusations against China in1979, while China had not began to useanti-dumping measures to protect its interestsuntil 1997. Trade dumping whichoriginates from the mercantilism erahas so far the history of hundreds years.It is imperative to take economic measures,administrative means, and legalmethods as well as matched industrialpolicy in order to offer comprehensiveprotection to Chinese petro-chemicalcompanies which have a low integratedlevel. The rules that duties shall be leviedretroactively in the 2004 new antidumpingregulation have some deterrentpower over a spate of import volumebefore preliminary determinations.Secondly, it is time to bar tradeprotectionism and to remove the chainreaction hidden danger. In the recentdecade, developed countries have continuallyexpanded the anti-dumpinginvestigation scope and raised antidumpingtax rate. Those countries havereinforced trade protectionism by meansof law and reduced trade deficit againstChina. In the meantime, they have setvarious trade barriers and most of thosebarriers are asymmetry sanctions withstrong points against China. To makematters worse, non-market economystatus is a trump card played by westerntrade partners to protect themselves. Itis obviously discriminatory to calculatenormal value of our exported productsby a third country. Its demonstrationeffect will definitely disrupt trade order.It is our inevitable choice to give a sharpreply to this trend.Thirdly, industrial upgradingshould be promoted to provide a bufferfor anti-dumping. Industrial competitivenessis the corporate power of companies’strength in the industry of onecountry. It is hard to take anti-dumpingmeasures against high-end productsdue to its irreplaceability. AlthoughAdvantageous trade theory is in conformitywith the national conditions tosome degree and is helpful to accelerateeconomic growth, this theory ignoresthe sustainable development of economyand will do harm to the evolution ofindustrial structure as well as systeminnovation. Therefore, it is fundamentalto handle the following three relationswhen it comes to the adoption of antidumpingmeasure.(1) Long term and short termrelation. According to theories of advantageoustrade and opportunity cost,WTO offers its members multilateralnegotiation mechanism to release theircapacities and promote the free flowof factors. In the long term, tradingpartners can maximize resources andrealize the ultimate goal of social welfaremaximization only if elements canflow in a complete free condition. Antidumpingis just a self-protection tool interms of crisis. The final way to solve theproblem lies in improving the technology.According to China PetrochemicalIndustry Association, energy consumptionof petrochemical industry accountsfor 40% of the total energy consumptionin China. Energy consumption costper unit is 4.1 times higher than that ofUSA and Canada. Obviously, based onthe theory of comparative advantage,our petrochemical industry shouldfocus on the structure adjustment ofexport industry in the long run and tryto achieve a breakthrough to have ourown intellectual property right concerningthe core technologies. Moreover, weshould improve the energy efficiency(especially in the west area of Chinawhere energy reserves are abundant)and reverse the situation of relying onthe imports of basic raw materials andtechnology.In addition to strengthen the investmentsin the Middle East oil-producingcountries, we should acceleratethe diversification process with respectto oil-importing countries of originand began to import oils from CentralAsia, Russia, Australia and neighboringcountries such as Southeast Asia. Moreover,we need to encourage Chinesecompanies to bid for oil assets overseasto safeguard the country’s strategic oilsupply security. Besides, building the oilrefineries in the vicinity of oil-producingarea is also a way to improve the energyefficiency since transportation cost canbe saved.(2) Upstream and downstreamrelation. Calculation of the losses causedby dumping of foreign products shouldnot be limited to the loss of the enterpriseitself, but should be based onthe loss of the whole industrial chain.The function of antidumping is like adouble-edged sword. On the one hand,it offers effective protection to the domesticindustry. But on the other hand,it may damage the industrial chain andaffect the downstream companies. Atpresent, antidumping is common in thedomestic chemical area. Duties imposedafter winning the suit are bound to pushup prices of imported chemical raw materials.The production cost of the textileand other downstream industry will riseaccordingly. Obviously, if we give up theright of antidumping due to the considerationof the enterprise, it will inevitablydamage the enterprises involved.And the related rise of importing priceswill cause damage to the downstreamcompanies. Therefore, it is crucial tomake an overall estimate of the effect ofanti-dumping prior to the application ofthe antidumping investigation.(3)Part and the whole relation.Firstly, during the anti-dumping proceedings,in addition to coordinating theinterests of the domestic petrochemicalenterprises, we should enhance industrialefficiency of allocating resources internallybased on the early implementationof the strategy. And we should combinewith key partners in the internationaltrade environment for the country’s tradepolicies for dynamic analysis, so thereis time to put a collection choice, thereare anti-lock objects as well as effortsto loose a tight grasp. In 2009, China’sPVC imports continued to increase forthe root reason of the technical advantagesof overseas counterparts whichenables the cost of similar products tobe still lower than that of Chinese evenafter China levied anti-dumping duty onthem. Technical and price advantages offoreign industries force China’s petrochemicalindustry which is in the criticaltransition period to knock out thoseenterprise lack of economies of scaleand to protect small businesses withtremendous potential until they have theadvantages of backwardness. Secondly,we should strengthen state-owned jointventure with foreign companies andget advanced technology through the58

domestic market and cost advantages.Thirdly, during the production gap periodof short supply when upgrading theindustrial structure, there is usually anopportunity for competitors to dump.Our government should be close monitoringand timely warning and exercise,if necessary, the anti-dumping rightsgranted by WTO.China began to truly integratewith the global economy after its accessionto WTO. The Government isactively expanding regional and bilateraltrade negotiations as well as insisting onmultilateral trade agreements. The twomost important bilateral agreements arethe United States – China Agreementsigned in November 1999 and the EU -China agreement signed in May 2000.The free trade agreement with ASEANis proceeding in an orderly way. TheChart 2: The Filing and Ruling of Antidumping CasesConcerning China from 1997 to April 20091210864201997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009.4filing preliminary ruling final rulingChart 3: The Trend of Filing and Ruling of Antidumping CasesConcerning China from 1997 to April 2009121086420766 6 6 6 6 6543 3 332 21 1 1 1 1 1 1 1 100 01997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009.4filing91189 9preliminary rulingGovernment also launched free tradenegotiations with the South AmericanCustoms Union (SACU) and the GulfCooperation Council (GCC). Differentlevels of trade agreements providea stable protection mechanism for theorderly development of China’s petrochemicalproducts trade.In order to fulfill its WTO commitments,China’s overall tariff hasdropped to 9.9% in 2006, more than40% lower than the level of the earlynineties, and its imports growth hasbeen higher than that of exports in recentyears. Competition from the MiddleEast petrochemical products heatsup. The limited market size and excessproduction of downstream petrochemicalenterprises make the Middle Easttarget the Chinese market. A numberof petrochemical projects will be completedand put into production in 2009-2010. According to a chief engineer ofChina National Petroleum Corporation,Middle East which exported largequantities of petrochemical productsto China in the first quarter of 2009will increase its exports. Plans recentlyreleased by State Department to expandethylene production capacity will makethe competition fiercer in the future.We should be wary that China’s hugedomestic demand stimulus plan maycut down the profit margin due to overcapacity. If China revalued RMB underthe pressure of the United States and Japan,the high import prices of raw materialswould impede downstream enterprisesexpanding production capacity.What we should also pay attention to iswhen many small businesses are closeddue to restructuring or environmentalreasons the shortage of domestic marketsupply may become more intense. Atthis point the Government should takethe reverse action, relaxing the antidumpingmeasure degree appropriatelyto facilitate the inflow of foreign lowpricedproducts.ConclusionThroughout the whole processof trade liberalization, integration isclearly the general trend. The dumpingand anti-dumping game between specificindustries in different economieswill become the distinctive feature ofmodern trade. China, whose trade volumeranks third in the world, will undoubtedlyplay a more important role.The external shocks that China’s petrochemicalindustry faced will continue.As a cross-cutting and cross-sectorstrategic system, we need to co-ordinatelong term and short term relation, upstreamto midstream relation as well aspart and the whole relation. The policyshould be adjusted according to localconditions in order to effectively protectthe interest of national industry. At thesame time, we should also take into accountof the promotion of internationaltrade and the healthy and steady developmentorder.(Author: PhD and lecturer inChina Institute for WTO Studies,University of International Businessand Economics)59

Regional Trade & InvestmentEuropeNew Starting Point in Advancing Cooperationbetween Poland andChina—The first visit by a President of Poland in 14 yearsBy Guo Yan60At the end of December 2011,Polish President BronislawKomorowski finished hisstate-visit to China. This visitwas garnered much attention becauseKomorowski is the first Polish head ofstate to visit China in 14 years and thevisit was fruitful. During the visit, thetwo heads of states signed a joint statementthat extended bilateral relationsto a new level of strategic partnership,signifying that the relationship betweenChina and Poland has entered a newphase. Komorowski said before thistrip that he hoped his upcoming visitto China would help the two countriesfurther lift bilateral ties to a new highand deepen cooperation in variousfields.Strengthening the bilateraltrade cooperation is keyPoland is a leading country inCentral and Eastern Europe. Since theoutbreak of the financial crisis in 2008,Poland’s economy has performed betterthan other European countries withthe growth of 1.7% every year. Polandhas been China’s largest trading partnerin region for the past six years and accordingto official statistics, the tradevolume between Poland and China in2010 increased 23.8% over the previousyear to reach a record-high of 11.14billion U.S. Dollars. However, accordingto the introduction from SlawomirMajma, President of the Polish Investmentand Information Agency (PAIIZ),the investment from China in Polandin 2010 only accounted for 0.1% of thetotal volume of Poland’s foreign capitalinvestment. Thus signifying the cooperationbetween Poland and China isstill limited. Polish ambassador TadeuszChomicki expressed that Poland attachesgreat importance to the visit, especially inthe terms of economics and trade.President Komorowski was accompaniedby a 150-strong delegationof businesspeople, scholars and highrankingofficials. During his visit inShanghai and Beijing, he not only metwith several Chinese national leaders,but also attended forums on theeconomy and education and witnessedthe signing of a series of agreements.According to the introduction fromPolish President Komorowski, Industrialand Commercial Bank of Chinawill set up a representative office inPoland, which is the first representativeof Industrial and Commercial Bank ofChina in Central and Eastern Europe.The office will open in the first half of2012. Meanwhile, Komorowski saidthat in June 2012, the non-stop flightroutes would open between China andPoland. This is very important for bothcountries, especially for the relationshipof trade and economics. As of rightnow, the flights from Beijing to Warsaware routed through either Moscowor Frankfurt.Many Polish companies andChinese companies signed cooperationagreements during the visit. Polishcopper firm KGHM said it has signeda deal estimated to be worth from PLN6.3 billion to 12.6 billion to providecopper cathodes to China Minmetalsfrom 2012 to 2015. KGHM CEOHerbert Wirth said in Beijing that

EuropeChina Minmetals would buy 100,000tons of copper cathodes a year “withoptions signed on an annual basis”.Chinese construction equipment manufacturer,Guangxi Liugong Machinery,signed a preliminary agreement to buyPolish state-owned manufacturer HutaStalowa Wola’s (HSW) civil equipmentarm. Furthermore, Haier and SanyHeavy Industry Co.,Ltd. now intend toinvest in Poland.The strategic partnershipreflects the profoundsignificanceKomorowski gave high praise onthe development of China. He said,“During the last 14 years, great changeshave taken place in both countries.Now Poland is the sixth-largest countryin Europe, has become a member ofNATO and the European Union and isthe 20th largest economy in the world.Meanwhile, China has witnessed rapideconomic development, as well as anenormous increase of its political cloutand has developed as the second largesteconomy in the world.” Komorowskipointed out, “Under the new situation,bilateral economic and trade cooperationwill enjoy a solid foundation andhas much potential. We think it is agreat opportunity to show Poland as agood, strong and attractive partner forChina.” This visit opens up a new chapterbetween China and Poland. Thevisit not only elevates bilateral relationsto the level of a strategic partnership,but also promotes bilateral trade. Theresults are very encouraging.During this visit, there was animportant signal that President Komorowskiissued a statement in supportof China’s market economy status. Thishad also been expressed earlier whenPoland undertook its EU Presidency,leading to speculation that Europecould change their stance on the questionof when to admit China’s marketeconomy status. Meanwhile, Polandwelcomes investment from all Chineseenterprises. Komorowski suggested,“Other than traditional investment,Poland welcomes Chinese companiesto buy Polish bonds and to invest in thearea of finance and the privatizationof state-owned enterprises.” He hopedthat this visit could create a good politicalenvironment for investment, andafter 20 years of reforming, the Polishprivatization programs have reached theend point, so he hoped more Chineseinvestors could grasp this opportunity.Slawomir Majma, gave his suggestionsto Chinese enterprises for investmentin Poland, he said that Poland wishesthe Chinese companies to invest in informationtechnology, communicationstechnology, machinery manufacturing,new energy, biotechnology and businessservices outsourcing (BPO).Concerning the European debt crisis,President Komorowski expressed hispoint of view, “Don’t over-exaggeratedthe current European debt crisis.” Heremarked that the average level of publicdebt of EU members accounted for 86%of GDP, the U.S. public debt to GDPis 98%; while in Japan this figure hasreached to 200%. “So I think that thelevel of public debt itself will not causethe collapse of the European economy,it only means that the rate of future economicgrowth in Europe will decline.”he commented. Lastly, he still believesthat the EU would maintain its positionin the world economy and the EU is therichest area globally in the long term.Feng Zhongping, director of theInstitute of European Studies at theChina Institutes of ContemporaryInternational Relations, thought thatthe visit was so important to developingrelations is not only important forChina and Poland, but also for Europeand the European Union as a whole.Kong Tianping, director of Central andEastern Europe of Chinese Academy ofSocial Sciences, also thought that thisvisit came at the right time. He pointedout that though bilateral cooperationhas developed rapidly, the total amountis not large and the level of cooperationis low. The potential should be furtherdeepened and enlarged. Poland’s maintrade partners are other Europeancountries, but it has noticed the influenceof China, so Poland eyes China asthe key destination for foreign capitalattraction. The visit could deepen thedepth by the largest extend and let Polishenterprises know more about theChina market, Chinese enterprises andfurther promote Polish companies toinvest in China, as well as improve thebilateral trade structure.61

Regional Trade & InvestmentEuropeGetting at the Pulse ofthe EU Debt Crisis— Exploring the Roots and Possible Prescriptions tothe Crisis from the cases of Iceland and GreeceBy Edwin Way, Li XiaoxueThe European debt crisisstarted with Greece inthe winter of 2009. Andsince the outbreak ofthe crisis, the EuropeanCommission andEuropean Central Bank,as well as the nationalgovernments havetaken various financialmeasures to rescue thecountry’s economy.The root of the crisisIceland and Greece are perhapsthe most famous of the victimsof the European debt crisis.What is most interesting about thecases of Iceland and Greece is thatalthough the origins of the financialcrises were very similar -- financialliberalization and hot money inflows– their responses have beenvery different.Fraud was present in bothcases and on the side of both thedebtor countries and their internationallenders. As the New YorkTimes reported in February of 2010,Goldman Sachs helped the Greekgovernment conceal the extent of itsbudget deficits in order to convinceinternational lenders that Greekgovernment bonds were a safe investment.In the case of Iceland,investigative work by the Americanfilmmaker (and MIT Phd) CharlesFerguson, has revealed that Iceland’sprivate banks paid American academiceconomists to write reports that describedIceland’s financial system as extremely stable.The American credit ratings agencies gaveIceland high ratings up until a few monthsbefore the crisis.International banks also behavedrecklessly in lending to Iceland, Greece andother debtor countries. In the case of Iceland,most of the hot money inflows camethrough private banks in Ireland, Englandand the Netherlands. In the case of Greece,it was primarily banks in Germany, Franceand Italy that did the lending, as a recentreport by Barclays shows. In all cases, thesebanks enjoyed an implicit hidden guaranteefrom their national governments that ifsomething went wrong the government andtaxpayers would bail them out.Why can’t Iceland or Greece payback their international lenders? For one,in both cases the debts are too high relativeto the size of the Greek and Icelandiceconomies. In September of 2008 Iceland’scentral bank estimated that Iceland’s threeprivate banks had debts greater than 50Table (1): The Greek Government’s Proposed Policy StepsPolicies Implemented or Proposed1 Reducing deficit in 2010 by 12 billion euros or 5% of GDP2 New social security system3 An effective state with “Kallikrates”4 Total implementation of the principle of transparency5 Opening up many closed professions to create more employment6 Improving the business environment to create more employment opportunities7 Reform of the tax mechanism and systematic fight against tax evasion8 Rationalization of the health system9 Creation of a new school, a new university for the future generations that will be in charge of thecountry’s future.10 Changes in Greek institutions and justice system.Sources: Medium Term Fiscal Strategy 2012-2015, Athens, June 2011.62

Europebillion euros, even though Iceland’stotal GDP was only around 10 billioneuros. Greece’s government and banksowe foreigners 550 billion euros, whichis also larger than Greece’s economy,which amounts to only roughly 310 billioneuros.It is hard for Iceland and Greeceto pay back their creditors for anotherimportant reason. Debt crises typicallyoccur after periods of hot moneyinflows. The problem with hot moneyinflows is that they help to reduce theability of debtor countries to pay offtheir debts.Across Europe there is a strongcorrelation between countries that in2008 had large trade deficits – a proxyfor capital inflows – and the increase ingovernment debt caused by the crisis (seefigure).Norway, which had a large tradesurplus before the crisis, was the onlyEuropean country to see its governmentdebt decline between 2007 and2009. In contrast, Iceland had a tradedeficit equivalent to 26% of total GDPin 2008, and Icelandic government debtas a share of GDP increased by a whopping60% in just two years from 2007to 2009.These trade deficits were partiallythe consequence of policies undertakenin Northern European economies,particularly Germany. German economists,Eckhard Hein, Achim Trugerand Till van Treeck of the MacroeconomicPolicy Institute have arguedthat the key origins of the peripheralEU debt crisis are trade and financialimbalances within the EU. Germanycarried out policies to lower wages andreduce inflation that have made its unitlabor costs significantly lower thanits European trading partners on theperiphery, many of which experiencedlarge real estate and financial bubblesthat drove up wages and the price level.What are suitableprescriptions?All financial bubbles eventuallypop. When they do, a country canface a sovereign debt crisis. What arethe possible solutions to this crisis? Inbroad terms, the prescription can bedivided into unorthodox and neoliberalresponses.(Unit: 01.billion dollars)The Monthly Trade Value Change(Greece,2008.05-2011.07)9080706050403020100Sources: IMF Outlook Database, updated on 2011.11.Exchange Rate(US Dollar/Euro)1.81.61.41.210.80.60.40.202008.052008.072008.102008.122009.022009.042009.102009.122010.022010.042010.062010.092010.122011.022011.042009.062009.08The main neoliberal response is toforce the debtor government to reduceits budget deficit, primarily by reducingsocial spending, in order to pay internationalcreditors. This is often accompaniedby new lending from either creditorcountries or international financialinstitutions such as the IMF. The neoliberalresponse has been endorsedwidely by American economists suchas Harvard’s Kenneth Rogoff, as wellas many popular pundits including theNew York Times’ Thomas Friedman.The main unorthodox response isfor the debtor country to suspend debtpayments and maintain governmentbudget deficits. Debtor countries mayimpose tariffs on imports, taxes on agriculturalexports, and encourage theircurrency to depreciate quickly. Capitalcontrols are often used. One leadingchampion of unorthodox policiesamong US economists has been NobelPrize winner Joseph Stiglitz.These two approaches havestrengths and weaknesses for both thedebtor and creditor countries. There areunavoidable tradeoffs between thesepolicy approaches, and history is thebest guide for policymakers in weighingtheir choices.Neoliberal responseThe neoliberal response focuseson allowing repayment of debts. Thisapproach has a major advantage forExport Import SurplusSources: European Central Bank, ECB: Euro Exchange Rate USD.2011.062011.080-10-20-30-40-50-602008-8-12008-10-12008-12-12009-2-12009-4-12009-6-12009-8-12009-10-12009-12-12010-2-12010-4-12010-6-12010-8-12010-10-12010-12-12011-2-12011-4-12011-6-12011-8-12011-10-12011-12-163

Regional Trade & InvestmentEurope(Unit: 01.billion dollars)The Monthly Trade Value Change(Iceland,2008.05-2011.07)76543210Sources: According to the data published by the Ministry of Commerce of thePeople`s Republic of China.Exchange Rate(Isk/Us Dollars)160.0140.0120.0100.080.060.040.020.00.02008.052008.07Agu.2008Oct.20082008.092008.112009.012009.032009.052009.07Dec.2008Feb.2009Apr.2009Jun.2009Agu.2009Oct.2009Dec.2009Feb.2010Apr.2010Jun.2010Agu.2010Oct.2010Sources: Central Bank of Iceland Central Bank, Monthly exchange rate.Export Import Surplus2009.092009.112010.032010.052010.072010.092010.112011.012011.032011.052011.07Dec.2010Feb.2011Apr.2011Jun.2011Agu.2011Oct.2011Dec.20112.521.510.50-0.5-1-1.5-2-2.5-3creditor countries, at least in theory: theywill get their money back. In practice,there have been many financial crisesin which creditor countries did not gettheir money back. For debtor countriesthe neoliberal approach has a major benefit.It may help the country to maintaingood relations with its creditors. Thedebtor country may also retain access tointernational financial markets and beable to borrow money in the future.The problem for debtor countriesis, however, that reducing governmentexpenditure may end up worsening therecession. Their economy will contractfurther, which will make it even moredifficult for it to pay back its creditors.With a shrinking economy, privatelenders may actually be less likely tolend the country more money even ifit is implementing an IMF approvedausterity package. In addition, with acontracting economy, the debtor countrywill demand fewer imports fromoverseas, and this will hurt the interestsof its creditors.The neo-liberal response is typicallyfavored by banks and governmentfinancial officials because it allows thebanks to pretend that the loans theymade to foreign governments will notlose any value. Even for the creditorcountry, the costs to the neoliberalapproach are paid by other domesticgroups, namely taxpayers and manufacturers.Unorthodox responseThe unorthodox response is oftenbitterly opposed by the banking interestsin Western countries. However,the interests of taxpayers and industryin creditor countries are often betterserved if the debtor country takes unorthodoxmeasures.Debtor countries often argue thatthe foreign banks bear some responsibilityfor bad lending decisions. Banks havean obligation to engage in due diligenceand a responsibility to their depositorsto be very careful in making decisionsabout how they lend. The current financialcrisis shows that many private bankscan be reckless with other people’s savings.If banks are forced to bear the costof bad decisions, including firing bankexecutives or reducing their salaries theymay be more careful in the future.The priority of the unorthodox responseis encouraging economic recoveryin the debtor country. In the longrun, this makes it easier for the debtorcountry to pay back its debts. In additionto government spending, anotherunorthodox way to increase aggregatedemand is to encourage exports anddiscourage imports.At the same time, the debtorcountry may encourage its currencyto depreciate. The danger comes if thedebtor country’s debts are denominatedin a foreign currency. In that case, depreciationwill raise debt costs. Evenwhen debts are denominated in a foreigncurrency, depreciation can be verygood for the domestic economy. In thecase of Korea, Indonesia and Thailand,exports grew very rapidly after theircurrencies depreciated. This helped toencourage economic recovery.A critical factor that must beconsidered is energy imports. Wherea country is very dependent on oil imports,rapid depreciation can lead toinflation by causing the price of energyto rise rapidly. If the country can switchto domestically produced energy suchas geothermal energy in Iceland, or coalin the case of China, depreciation is lesslikely to create inflation.Greece and Iceland: Responsesto the crisisSince 2008, Greece has beentaking a largely neoliberal path whileIceland has taken a more unorthodoxpath. This section will discuss thesepolicies, their economic impacts, andthe impacts of these policies on creditorcountries, including China.Greece: OrthodoxyIn a recent book on the Greekcrisis, economist Jason Manopolous64

Europeblames the real appreciation of theGreek exchange rate as the key factorin the Greek crisis, as well as a politicalculture in which Greek politicianssubsidized favored interest groups, mostprominently public sector employees.The result of these imbalanceswas that by the end of 2009, Greecewas faced with the biggest crisis inits recent history: chronic pathologiesand fiscal instabilities, combined withan environment of unprecedenteduncertainty in the international bankingsystem, contributed to the gradualexclusion of Greece from internationalcapital markets and made it impossiblefor Greece to continue borrowing as ithad through the last two decades. Thiscountry`s policy responses are presentedin Table (1).The center piece of Greek policysince the crisis erupted has been to attemptto lower the government budgetdeficit by freezing and reducing wagesfor government employees, laying downof government employees, and reducingthe generosity of the Greek welfaresystem. The consequence of fiscal tighteninghas been to deepen Greece’s recession,which has lowered governmentrevenue and made it difficult for Greeceto meet its deficit reduction targets. In2008, GDP shrank a modest 0.2%,which was followed by a decline of 3.3%in 2009 and 3.5% in 2010Fiscal austerity has been combinedwith rapid privatization of state assets.As a part of its second bailout packagethe Greek government agreed to privatize50 billion euros worth of state assets,including the port of Piraeus (nearAthens), the largest electricity utility,and the country’s train operator.Capital flight has already begunto occur in Greece as wealthy individualsmove their money offshore, frequentlyto Cypriot branches of Greekbanks. Poorer Greeks are withdrawingsavings and putting it under their mattresses,which reportedly has led to anincrease in home burglaries. There is acredit squeeze in Greece, where evenexporters are having trouble gainingaccess to trade credit because of theperception that Greece’s banks are unstable.The problem for Greece is thatunlike many other countries that experiencefinancial crises, Greece does nothave its own currency, so it is impossiblefor it to export its way out of the crisisso long as it remains in the Eurozone.Monthly data shows that the Greektrade deficit has not declined, eventhough imports are plummeting. As weshall discuss below, this is a sharp contrastwith Iceland. After the debt crisiserupted in December of 2009, the Eurocontinued to appreciate, and the tradedeficit has remained high at between 2to 4 billion dollars per month.Iceland: A heretical approach?Iceland experienced a deep recessionafter its banking crisis erupted inOctober 2009, and experienced a sharpdecline in both exports and imports.On November 19, 2008, Iceland andthe International Monetary Fund(IMF) finalized an agreement on a $6billion economic stabilization programsupported by a $2.1 billion loan fromthe IMF. Following the IMF intervention,Denmark, Finland, Norway, andSweden agreed to provide an additional$2.5 billion.Iceland's banking system had collapsedas a culmination of a series ofdecisions the banks had made. Accordingto Economy of Iceland 2010, publishedby the Central Bank of Iceland,right before their collapse, the total assetsof the Icelandic banks amounted tomany times Iceland’s GDP. Increaseddoubts aboutthe viabilityof the bankin g s y s t e m ,coupled withdeterioratingaccess to globalliquidity, ledto a suddenstop of capitalA more independentand elastic exchangerate policy is beneficialfor a country whenit emerges from afinancial crisis.inflows in early 2008, as the foreignexchange swap market, the primarychannel of inflows and a major wholesalefunding market for the Icelandicbanks, broke down.There was a deep and quick depreciationof Iceland’s currency after thefirst several months from Sep.2008 toDec. 2011(see table The Monthly TradeValue Change). Then the exchangerate changed to stable from that timeon. This helped Iceland to reduce thetrade deficit at this time of crisis. Thetrade deficit peaked in July 2008, butthen recovered quickly with the krona’sdepreciation. The trade surplus peakedin December 2009 and has been at astable level since then.Iceland has maintained largegovernment budget deficits, and eventook the extraordinary step of refusingto fully compensate foreign investorsfor their lost investments and accountswith Iceland’s banks. And in the end,Iceland essentially defaulted on theloans Iceland’s private banks contractedwith the Dutch and British.Both Iceland and Greece passedthrough hard times after the crisisbroke out. However, as this article hasdemonstrated, Iceland has performedmuch better than Greece, even thoughIceland’s initial crisis was arguablymuch deeper. The trade surplus in Icelandhas been kept stable; however thetrade deficit in Greece has continuedto deteriorate due to Greece’s inabilityto control its own currency. Iceland’seconomy grew strongly in 2011 andunemployment has fallen to around sixpercent after peaking at 10 percent in2009. Statistics Iceland forecasts GDPgrowth of 2.4% in 2012 after 2.6%GDP growth in 2011.Iceland’s more rapid economicrecovery has also benefited its tradepartners. Although Iceland’s initialeconomic collapse and currency depreciationdecreased imports, withIceland’s more rapid recoveryimports have also grown steadily.The contrast with Greece suggestsflexibility is beneficial notonly to debtor countries themselvesbut also their creditortrade partners.Different trade policies havehad different implications forIceland and Greece, and the lesson forChina may be that a more independentand elastic exchange rate policy is beneficialfor a country when it emergesfrom a financial crisis.(Authors: Edwin Way, doctoralstudent in political science at IndianaUniversity; Li Xiaoxue, PhDcandidate in China Institute for WTOStudies, University of InternationalBusiness and Economics (UIBE)65

Regional Trade & InvestmentNORTH AMERICAManufacturing Jobs Return to USas Asia Loses EdgeBy Lesley CuiManufacturing employment has grown faster inthe US than in any other leading developedeconomy since the start of the recovery, raisinghopes for an American industrial renaissance,according to Financial Times on January 17.The US has added more net manufacturing jobs sincethe start of 2010 than the rest of the Group of 7 developedcountries put together, with only two other economies, Germanyand Canada, increasing factory employment at all.At 11.79 million, employment in US manufacturing isstill about 2 million below its pre-recession levels. About 2.3million factory jobs were lost in 2007-09, and 328,000 jobs(seasonally adjusted) have been created since then.However, hopes are rising that the US is entering asustained manufacturing revival.Since the start of 2010, manufacturing employmenthas risen 2.9 per cent in the US compared with 2.4 per centin Germany and 1.9 per cent in Canada. In Japan, the UK,Italy and France it has fallen.Mark Zandi, chief economist of Moody’s Analytics,said, “I think we are at an inflection point for manufacturingin the US. Employment in the industry has been in declinefor decades, but it is now at a point where it is going fromquite strong to stronger.”A furniture business as an exampleBruce Cochrane’s family furniture business illustrateswhat may be the start of a US industrial renaissance.The Cochranes were in the furniture business for fivegenerations, employing more than 1,000 people in theearly 1980s. But by 1996 the going had become too hardand they decided to sell out. Under the new owners, theirfactory in Lincolnton, North Carolina, was closed, theequipment was dismantled and production was moved toAsia.Mr. Cochrane worked for 12 years as an import consultant,advising companies on how to source furniture fromAsia to sell in the US. But by last year, he had come to theview it was viable to make furniture in the US again, evenagainst competition from China.66

NORTH AMERICAProductivitygrowth, subduedwages, thesteady decline inthe dollar since2002 and rapidpay inflationin emergingeconomies havecombined tomake the US amore attractivelocation.“Back in 2000, the average wage in Chinawas about 50 cents an hour; now it’s $3.50,” hesays.Non-wage costs have also risen in China.The Chinese authorities have become “muchmore aggressive” about environmental regulation,he adds. Taking into account the higherproductivity of US workers, and shipping costs,the competitive advantage of Asian manufacturingwas disappearing, he said.So last year, he announced that LincolntonFurniture would open up productionof high-quality wooden beds, tables, chairsand cabinets in his family business’s oldplant. “The ‘Made in the USA’ label is moreimportant now than it’s ever been. Peopleare looking for American-made,” he said.“I’m convinced that our timing is exceptionallygood.”Causes of the job returnProductivity growth, subdued wages, thesteady decline in the dollar since 2002 and rapidpay inflation in emerging economies have combinedto make the US a more attractive location.In 2002-10, US manufacturing unit labourcosts in dollar terms fell 11 per cent, comparedwith rises of 3 per cent in Japan and 41 per centin Germany.The US has also been improving its relativecost position compared with China, wherewages have been rising annually by 15 per centor more for most of the past eight years.“Over the past decade, the US has hadsome huge gains in productivity, and we haveseen unit labour costs actually falling,” saysChad Moutray, chief economist at the NationalAssociation of Manufacturers. “A lot of ourmembers tell us that it sometimes is cheaper toproduce in the US, especially because labourcosts are lower.”The increased competitiveness of US productionhas been reflected in manufacturing jobcreation plans in the US announced by Ford,GM, Caterpillar, Sleek Audio, Farouk Systemsand many others in the past couple of years.In some cases, companies say that theyplan to bring back to the US production previouslydone in emerging economies such asChina and Mexico. President Barack Obamarecently called it a “hopeful trend”.Higher oil prices, which raise transportcosts, and the shale gas boom that has cut localenergy bills have also made the US a more attractivelocation.Mark Perry of the University of Michigan-Flint said: “All these factors are coming together:the stars are aligning to favour US manufacturing.The sector has been getting stronger, andI expect that to continue in 2012 and beyond.”Lack of highly skilled workersMr. Cochrane’s story also offers insightsinto the pitfalls facing manufacturers wanting tobuild up their US production.Although there was a substantial populationof unemployed and under-employed formerfurniture workers in Lincolnton, many did notknow how to use the latest equipment.“People have to be retrained for the newmachinery,” Mr. Cochrane says. “Even peoplewith experience of computer-aided woodworkingmachinery are amazed at the new technologythat’s available.”It is the flipside of the improvement inproductivity. Modern factories are now highlysophisticated, using automation and otheradvanced technology. This enables them tocompete against producers in China while stillpaying much higher wages. The result, however,is that they need fewer people, and theytend to be more highly skilled.Mei Xu is a Chinese-born entrepreneur whohas become a standard bearer for “re-shoring” productionin the US. Chesapeake Bay Candle, hercompany, employs about 120 of its 2,000 staff infactories in Maryland and California.At a meeting at the White House last weekto discuss what the administration has dubbed“insourcing”, she stressed the need for workerswith the right skills and aptitudes.“We really need high school kids to getsome vocational training,” she says. “Theyneed the skills to be able to work in a factorythat is entirely automated. Workers in their50s may be willing to work, but may not havethe computer skills to use the technology.”James Guyette, the chief executive forNorth America of Rolls-Royce, the aero-enginecompany, who was also at the White Housemeeting, agrees that “the education system mustimprove”.Rolls-Royce is creating about 600 highlyskilled jobs in the US, but has cut some lower-skilledones, so the net gain in its employmentis lower. The company is working withuniversities, colleges and even schools in anattempt to raise skill levels in the states whereit has its plants and research and developmentfacilities.Mr. Guyette warns that however strongthe recovery, the labour market will never returnto what it was.“Many of the jobs that have been lost inthis country are never coming back,” he says.“And those are the low-skilled jobs.”67

Regional Trade & InvestmentNORTH AMERICAHawaii as a Bridge BetweenChina and U.S-An exclusive interview with Brian Schatz, Lt. Governor of theState of HawaiiBy Fu LigangBrian Schatz, Lt. Governor of the State of Hawaii(middle)Q: Every year, Hawaii hosts lotsof international conferences; theparticipants and tourists consume agreat deal of energy which makes Hawaiias the most oil-dependent statein the USA. What kinds of measureshave you taken to solve this problem?A: In the United States, we havethe most aggressive clean energypolicy, and we have a lot of requires inorder generating 70% energy by 2030.We also have tremendous memorandumin terms of moving forward cleanenergy. Because not only are we overlydependent on fossil fuels but we arepaying too much.The advantage of our situation isthat the financial analysis has changed,so that a project that might not makea profit in other places becomes profitablein Hawaii. Because renewable energyis so competitive when comparewith our fossil oil import. At the sametime, we are also the headquarters forthe United States Pacific Command,and the president of the Departmentof Defense throughout the Asian-Pacific region. And our DOD (theDepartment of Defense) has committedto fueling their fleets and baseswith clean energy, so we are developingthe strong partnerships in that areaas well.Q: During the APEC summit,more than 300 Chinese successfulbusinessmen come to Hawaii, allof them like this city very much. Theyexpress their desires to invest and holdconferences here. Do you have somepreferential measures for them in thefuture?A: We have an agreement betweenour state department of businessand CCPIT to work together on cleanenergy projects. We are also developingstrong relationship with CCPITin terms of attracting investmentand showcasing the investment opportunitiesthat Hawaii has offered.We understand the face to face meetingsare critical, that’s why I visitedChina, and so did the governor. I willbe following up in 2012, hopefully tomeet CCPIT again to continue thework on our energy agreement andexplore new opportunities. Hawaii iswide open for business, anyone whois interested in conducting business inHawaii can call our office and we willbe happy to assist. We are able to givepreferential treatment to any particularinvestor.Q: Hawaii and CCPIT have wellcooperated for many years inmulti-aspects, such as the clean energyagreement that you’ve mentioned,is there any further cooperation plansor expansions in new fields? I foundthat Hawaii has very good facilitiesfor meetings and exhibitions; do youhave intentions to develop exhibitionindustry?A: We have strong desire to conductmore international meetings. Inthe convention sectors, we have excel-68

NORTH AMERICAlent infrastructure. For this APEC summit,our hospitality in the street has shown whatthey can do. We are going to work hard toattract meetings and conventions. For manyyears, the convention sector was focusing primarilyon North American market. And nowwe are reaching out as aggressively as we can tothe Asian market and particularly China.Q: What’s your point of view about thissummit and what’s the highlight of it?A: For us, the highlight is to provide comfortableenvironment for high level discussionsto occur. We feel strongly that when people arecomfortable physically, culturally, that they aremore productive. I think the APEC meetingitself was productive for all the participating ineconomics because we provided the culturally andphysically comfortable infrastructure for moreproductive meetings. That was the bottom lines.I think the highlight for me was the bigsurprise that the leaders from 21 countries andwhat they need to face the great challenges. Iexpect things to run quite as smoothly as theydid, it was very well run and every single personI met across the Asian-pacific region waspleased with our performances and loves Hawaiiand loves to come back.Q: Hawaii is a well-known resort thatpeople call it “The Haven of the Tourists”.In your view, what are the elements of being aworld-famous tourist attraction?A: We’ll differentiate Hawaii from otherlocations, it’s the people, the spirit of“aloha” that sounds sometimes a little bithard understand for people haven’t come toHawaii, but if you just spend a couple of daysin Hawaii you will understand what I mean.It is in fact the best climate in the world, itis one of the most beautiful places on the planet,but what we really make Hawaii memorable is theinteraction you have with its people. People arenever disappointed by Hawaii, whether you comefor business or for pleasure you will be happy.I love Beijing, people are friendly, foodsare excellent, and we have many productivemeetings. And I expect to visit it again soon.Hawaii iswide openfor business.We areable to givepreferentialtreatment toany particularinvestor.69

Regional Trade & InvestmentLATIN AMERICACan Emerging Market Central BanksBail Out Banks?-A Cautionary Tale from Latin AmericaBy Luis I. Jacome H., Tahsin Saadi Sedik, and Simon TownsendThe recent financial crisis in mature markets has putthe role of central banks in financial stability in thespotlight. In the large advanced economies, centralbanks played an active role to prevent the collapseof their financial systems. Central banks initially provided aggregateliquidity in money markets without expanding theirbalance sheets as they were able to mop up excess of liquidity.Later, they granted large amounts of financial support to individualilliquid and even insolvent, banks and reserve moneyeventually increased. Central banks provided assistance notonly to banks, but also to non-depositary institutions, arguingthat the former are no longer the only financial intermediariesthat pose a systemic risk.This paper argues that emerging markets and developingcountries should be cautious when using central bank moneyto cope with financial crises as large scale monetization maycause further macroeconomic unrest. The main conclusionis that pouring money into the financial system to confrontbanking crises tended to fuel macroeconomic and financialinstability as it increased the chances of a simultaneous currencycrisis.The response of central banks and itsmacroeconomic impactLatin America has a long and painful history of bankingcrises. Recurrent episodes of financial turbulence becamea key source of macroeconomic instability up to the mid-2000s. Specifically, Latin America had 28 systemic bankingcrises from 1970 to 2007, which is a disproportionate numbercompared with other regions in the world, except for Africa.Systemic banking crises were more frequent in the wake ofthe debt crises of the early-1980s, and during the mid- andlate-1990s and the early-2000s, following episodes of termsof trade deterioration and/or of capital outflows.We start by identifying the episodes of financial distressand crises. We consider both full-fledged banking crises andalso small idiosyncratic episodes. Thus, we include the wellknown banking crises in Argentina, Ecuador, DominicanRepublic, Mexico, Uruguay, and Venezuela, and also somesmall crises, which are almost unknown in the banking crisisliterature.The root cause of these crises is not very different thanin the recent financial crises in the advanced countries. Thestory that better describes the origin of Latin Americanbanking crises is the well known “boom and bust cycle.”Latin America had liberalized financial markets during thelate-1980s and early-1990s and this encouraged growingcapital inflow, attracted also by increasing macroeconomicstability. As a result, real interest rates declined and the domesticcurrencies appreciated, all of which fostered a creditboom. Unfortunately, financial liberalization was not coupledwith better financial surveillance and enforcement capacityof bank regulators. Thus, the combination of financial liberalization,capital inflows, and loose financial supervision, laidthe ground for the development of a variety of new and riskyfinancial transactions. This cycle of credit expansion only lasteduntil successive shocks hit Latin America starting in themid-1990s, which triggered massive capital outflows. Theseresulted in liquidity and credit crunches in many countries,bringing to the forefront significant deficiencies in the qualityof banks’ assets and leading eventually to banking crises.In the recent history of financial instability in LatinAmerica, central bank financial support was often used intensivelyto cope with banking crises. In many cases, a lackof appropriate institutional foundations to effectively addressbanking problems forced the central bank to step in, in orderto prevent the collapse of the payments system. In some cases,it may also have been that in the absence of central banks’autonomy, governments induced them to monetize bankingcrises to avoid using, or at least postponing in the short-term,tax payers’ money to fund the cost of resolving the crises.In a number of countries, central bank money was alsoused to support bank restructuring and resolution. This policytypically aimed at cleaning the troubled banks’ balance sheetand at easing its subsequent rehabilitation or purchase by anotherbank. For instance, central banks issued securities andswapped them for nonperforming assets of the impaired bankdirectly or through a bank restructuring institution (Bolivia1999, El Salvador, Mexico, among others). They also issuedsecurities to be used in purchase and assumption operations(P&A) (Nicaragua), or simply extended credit to the acquiringinstitution to pay deposit withdrawals following P&A(Brazil).As in several advanced economies during the recent financialcrisis, the Latin American countries injected centralbank money in large scale during periods of systemic crises.14A number of central banks more than doubled their balancesheets during the first two years of their crisis, like the70

LATIN AMERICAincrease observed in various advanced countries, during therecent crisis. However, while in the latter group of countriesthe monetization of banking crises served to mitigate the economicdownturn and did not fuel inflation, in Latin Americasimilar policies induced macroeconomic disarray.In non-systemic crises monetization also took place,but in smaller amounts, and hence, central banks managedto mitigate the adverse macroeconomic effects. Bolivia andParaguay in the mid-1990s, and Guatemala in the late-1990sand early-2000s, are cases in point. In this group of countries,in addition to providing liquidity assistance, the central bankhonored most or all withdrawal of deposits fearing the possibilityof contagion. However, since the crises were small,central banks managed to mop up the expansion of liquidity.In general, as financial turbulence escalated, monetarypolicy no longer fulfilled its primary role of preserving pricestability. This is because central banks put at the forefront thegoal of containing the banking crisis and preserving financialstability. However, the large use of central bank money tocope with banking crises and its effect on the exchange rateeventually fueled inflation. In small and open economies, likethe Latin American countries, the transmission mechanismfrom money to prices generally passes through the exchangerate, because of the direct impact of depreciation on the priceof tradable goods. So as the excess money supply increased,the exchange rate depreciated and inflation accelerated. Insome countries, where the exchange rate peg was abandonedin the midst of the financial crisis, there was exchange rateovershooting and inflation soared.The impact of the monetization of banking crises oneconomic growth was also negative. There are at least twochannels through which injecting large amounts of centralbank money could affect growth in the short-run: an exchangerate channel and an indirect interest rate channel,although they may operate in opposite directions. Providedthe central bank can hold inflation below the rate of nominaldepreciation, real exchange rate depreciation materializesand, thus, exports may increase, thereby fostering economicgrowth. On the other hand, there is a negative impact oneconomic growth because the sustained exchange rate depreciationalso induces an increase in domestic interest rates,which, in turn, fosters a decline in credit demand. Furthermore,because of the dislocation of money markets resultingfrom financial distress, and since sound banks hoarded excessliquidity as a precautionary measure against possible contagion,chances are that the availability of credit disappears. Infinancially dollarized economies, exchange rate depreciationsimmediately hit unhedged bank borrowers, they suffered asudden and sharp decrease in net wealth—which not onlydamages banks’ balance sheets, but also undermines aggregatedemand and, hence, economic activity.Against this background, the vast majority of countriesin our sample that suffered large crises also experienced aneconomic contraction, as real GDP shrunk by at least 3 percent.While large nominal and real depreciations boostedeconomic growth in the medium term, in the short run, asthe crises unraveled, economic activity was almost frozenand plunged because credit market collapsed as a result of theuncertainty associated with the deterioration of the countries’macroeconomic and financial conditions.Concluding remarksThe role that central banks played in the industrial worldin the recent financial crisis will probably set a new standardfor policies of LLR. Injecting large amounts of money tosupport troubled financial institutions averted a financialmeltdown and later, in tandem with fiscal stimulus, mitigatedrecession trends, without fueling inflation pressures. It is likelythat other countries worldwide would be led to implementsimilar policies in a future parallel scenario.Based on the Latin American experience, this paperstresses that emerging and developing countries should becautious if they want to follow the same strategy to tacklefinancial crises. As opposed to the United States and mostEuropean countries, these countries do not issue a reservecurrency. This makes them more vulnerable to currency depreciationsand volatility in the event of large scale injectionsof central bank money to cope with banks’ distress. Whilemany of these countries have strengthened central bankcredibility, improved macroeconomic fundamentals, createdbuffers to absorb external shocks, and strengthened fiscalinstitutions, these new conditions have not been fully testedagainst the effects of simultaneous real and financial shocks,like those that hit the developing world in the past.Thus, revisiting the recent history of financial crises inLatin America is warranted. Subject to the caveats establishedabove, we found that confronting banking crises usingexclusively monetary policy was not effective to avert andmanage financial crises. Moreover, expanding central banks’balance sheets tended to exacerbate macroeconomic instabilityand fueled currency crises.Alternatively, the roadmap to cope with financial distressin these countries should put bank restructuring andresolution at the forefront. Countries should design a comprehensivestrategy to prevent and manage banking crises inwhich central banks are part of the policy response. Effortsshould focus on imposing corrective actions before liquidityand capital shortages become severe, and on implementingbank resolution measures before the crises unfold. Strengtheningfinancial regulation and supervision to keep the pace ofthe permanent innovation of financial instruments is also amust.In addition, maintaining strong macroeconomic fundamentalsis critical to help reducing the uncertainty that wouldotherwise invade markets’ perceptions and feed financialinstability, including attacks on the domestic currency. This isparticularly relevant for emerging economies because they areclosely integrated to global markets, which makes them morevulnerable to the vagaries of capital flows. Thus, emergingcountries should build more resilient economies, in particular,maintaining flexible exchange rates, keeping public financesand debt in check, strengthening international reserves, developingmoney and capital markets, and reducing financialdollarization.(Authors: from the International Monetary Fund)71

Regional Trade & InvestmentLOCALCentral China Economic Zone Eyes FutureBy Zhu ZijunThe blueprint of Central China EconomicZone has been unfoldingsince it has been upgraded as a nationalstrategy by the State Councilin 2011. Central China’s Henan Province, themajor component of the zone, is longing forfurther all-round development under the blueprint.The economic zone is centered in Henanand radiates to its adjacent areas. It coversmainly Henan province and parts of neighboringShandong, Shanxi, Hubei and Anhuiprovinces, with a population of about 150 million,or one-tenth of China’s total.Henan has set its goals which are to beachieved by two steps: first, the zone is tohighlight its advantages in the 5 years to come;second, within another five years, the zone isto rise to play a significant role across China.The recent Henan Province’s ConstructionOutline of the Central China Economic Zone(Draft) submitted to the provinces’ governmentconference indicated that, by 2015, thezone will preliminarily take shape as an economicregion with vitality and strong growth;by 2010, the zone will see prosperity in urbanand rural economy, well-being of the people,good ecological environment and social civilizationand harmony.The goals, with strong orientation and inline with the current situation and developmentmomentum of the zone, will finally beachieved through great efforts, said Li Ke, viceprovincial governor of Henan Province.In September 2011, the state councilpromulgated a guideline on supporting HenanProvince’s efforts to speed up the developmentof the Central China Economic Zone,signifying that it has turned into a nationalstrategy. Before that, the zone had been listedin the nation’s major functional zones and inthe 12th Five-Year Plan (2011-2015).The Central China Economic Zone willserve as a test for the country’s balanced developmentof industrialization, urbanization andagricultural modernization.The guideline clarified the positioningof the zone: the nation’s key bases for foodproduction and modern agriculture; the demonstrationzone with coordinated developmentof new urbanization, industrialization andagricultural modernization; the nation’s importanteconomic pillar; the nation’s strategicfulcrum for regional coordinated developmentand modern integrated transport hub; the innovationarea to inherit China’s rich historyand culture.The special layout of the zone is to followthe principle of “The core takes the leadwith the development of the axis belt and itsadjacent areas”. The core means the provincialcapital Zhengzhou should play a leadingrole by upgrading its service functions oftransport hub, business, logistics and finance,and promote the integrated development of“Zhengzhou-Kaifeng” and the “Zhengzhou-Luoyang Industrial Corridor”, thus increasingits leading ability in the regional development.Besides, the zone should enhance its relationswith neighboring provinces and economiczones to promote the syncretic developmentof the region, and complement each other’sadvantages.In the blueprint, the central city groupwill give full play to its capabilities. Thanksto its increasing innovation ability and creativity,its comprehensive competitivenesshas topped in the Midwest city groups andhence become the frontrunner in the rise ofCentral China.Zhengzhou Comprehensive Bonded Zone72

LOCALFujian Further Opens UpBy Zhu ZijunPingtan Comprehensive Experimental AreaFujian Province will furtherenhance its introduction offoreign capital, and promoteits open economy in 2012and achieve new breakthroughs in attractingForture 500 companies, saidSu Shulin, provincial governor of theprovince when delivering the governmentwork report on Jan. 12 in a governmentalconference.Looking to the new year, Sustressed his key points such as to furthercreate Fujian’s advantages in theopening up and reform, bring aboutnew situation in cross-Strait cooperation.To achieve these goals, Fujianneeds to maintain its growth momentumin foreign trade, lift its levelof utilizing foreign capital, deepencooperation with Hongkong andMacao, and further open up to theoutside. Moreover, by implementingthe Pingtan Comprehensive ExperimentalArea Overall DevelopmentPlan, Fujian is expected to foster itseconomic cooperation and culturalexchange with Taiwan across thestrait.Since 2011, the first year of the12th Five-Year Plan, Fujian has beenmore and more opening up thanks to aseries of preferential national policies,including the supports on the EconomicZone on the West Coast of the TaiwanStrait, Pingtan Comprehensive ExperimentalArea, Xiamen ComprehensiveCoordinated Reform.Opening-up has become the mostimportant key word in Fujian’s development.In the Development Plan of WestCoast Economic Zone, “To build anopen economic zone” is listed as the oneof four goals of the area, which centerson Fujian Province and also includessome parts of neighboring provinces likeZhejiang, Guangdong and Jiangxi.The Pingtan Comprehensive ExperimentalArea Overall DevelopmentPlan also sets sights on deepening reformin new era and new channels for furtheropening up, hence forming the pattern ofall-round opening.The passing 2011 saw Fujian’soverall foreign trade volume amountingto US$ 143.3 billion, up 31.7% yearon year. Its import and export growthboth top the list of the country’s leadingforeign trade provinces and cities. Theforeign investment in actual use rose toUS$ 11 billion.With the Economic CooperationFramework Agreement (ECFA) in orderto further promote cross-Strait economiccooperation, the economic andtrade cooperation between Fuijan andTaiwan have moved to a higher levelwith a larger range at wilder scale. Thatis evidenced by that Fujian’s utilizationof Taiwan’s investment comes top inthe mainland, especially in agriculturewhere its utilization ranks first, andFujian’s investment in Taiwan also takesthe lead in the mainland.Fujian is expected to continue itsdemonstration effect in China’s openingup by deepening opening up, upgradethe level of opening up and intensifyingvitality in the regional development,said Su.As a key point in the West CoastArea construction and Fuijan’s development,Pingtan Comprehensive ExperimentalArea firstly takes the try andactively explores the new cross-Straitcooperation model, thus becoming thenew highlight in the opening up strategy.According to the Fujian Industrialand Commercial Bureau, the newlyincreased foreign-owned enterprises inPingtan climbed to 676, up 87 percentyear on year; the new registered capitalhit RMB 3.75 billion, 42 percent yearon year. Among those, there were 22newly Taiwan-funded enterprises, doublethat of the previous year and taking75 percent of the newly increasedforeign-owned enterprises.Pingtan, the city adjacent to Taiwan,has therefore become a hot spot forinvestment rather than an isolated islandyears ago. It is estimated that the GDPgrows 18.3 percent in 2011 in the city,with the investment in infrastructureover RMB 30 billion. Pingtan is usheringin a promising future.Fujian Province, as a whole, isturning step by step its blueprint intoreality by building an open economiczone on the West Coast.73

To Build aWorld-ClassGlobal PharmaceuticalCompany in China— An exclusive interview with Dr. JohnNiu, President & Founder of McCullPharmaBy Lily WangBefore making the decision to start anew business back in China, John Niuhad worked in the US pharmaceuticalindustry for 18 years. With the dreamof vision and entrepreneur spirit, John Niu, togetherwith a group of scientists created a newcompany “McCull Pharma” in Delaware, theU.S., and served as the CEO in full time since2009.In 2010, McCull Pharma selected an importantindustrial city Nantong to establish theirmodern cGMP pharmaceutical production basein China. Nantong is adjacent to Shanghai andis one of the fast-growing coastal cities in China.Dr Niu then had more connection with China.Originally born in China, Dr. Niu lived inthe U.S. for about 22 years. After coming backin China, John Niu received an adjunct professorshipfrom Nantong Medical University. Hewas then selected as a candidate of China’s “onethousand talents” program, and received the “Innovationand Entrepreneurship” award in 2010.There is an interesting poster on the wallof Niu’s office, saying “Whatever you can do ordream you can, begin it. Boldness has genius andmagic in it!” quoted from Johann Wolfgang vonGoethe (1749-1832). Dr. Niu told China’s ForeignTrade “We have prepared this for years, and wefeel confident to build up a modern global pharmaceuticalcompany in China”.74

“McCullPharma hasexperiencesandinternational‘know-how’to developinnovativeproducts andbuild up aworld-classpharmaceuticalcompany inChina.”China’s rising importance inpharmaceuticalsJohn Niu told the reporter during the interviewthat “China’s rising importance in pharmaceuticalsis a major reason for us to start the newbusiness here”.“We are aiming to become a top Chinesepharmaceutical company with global-level capabilities,and we will be committed to developingproducts that address significant unmet medicalneeds in the world.” said Dr. Niu. “However, ourcompany is not competing with the big pharmas;instead, McCull will collaborate with partnersat different phases in drug development and willprovide cost-effective products and quality servicesfor them.”Based on Dr. Niu, the global pharmaceuticalbusiness constitutes a massive industrial valuechain, with every piece of its link representingpotential commercial products.The global pharmaceutical industry is undergoingdramatic change nowadays. On theone hand, the R&D costs of new drug developmentis surging; on the other hand, the patentsof many global brands are about to expire. Undersuch circumstance, the global pharmaceutical giantswill have to change their business strategiessomehow. It is becoming increasingly evidentthat more and more CRO/CMO outsourcingsare shifting towards the emerging countries, suchas China and India, for cost advantages.Dr. Niu pointed out that the Chinese pharmaceuticalmarket itself is huge and attractive;It has grown at double-digit rates (>20%) overthe past decades, compared with about 1-3%increase rate of US and European countries. It isforecasted that China is likely to overcome USto become the world largest market within thenext decade. “The future decade will see a goldenera for Chinese pharmaceutical industry. Thatwe chose to start our new business in China issimply because China’s rising importance for thechanging world and the opportunities to grow inthis emerging market,” added Dr. Niu.According to Dr. Niu, the internationalbrands by multinational companies or joint ventureshave been leading forces in the Chinesemarket. Most Chinese pharma companies aregeneric drug manufacturers, and the medicalproducts manufactured are unable to find theirway into the world mainstream. In contrast,More than a dozen Indian companies have enteredthe highly regulated markets of Europe andU.S. Not like “Made in China” that can be seen allover the world, China’s pharmaceutical industryof the finished products has not made significantprogress in the global market, even though manycompanies are making strides in the most lucrativesegments of global value chains.“China itself is a part of the global pharmaindustry, so Chinese companies inevitably facegreat challenges from their international counterpartseven at home,” said Dr. Niu. China hasbecome one of the world’s largest suppliers ofbulk drugs, but not the finished dosage forms inthe global market. “For a long time, the Chinesepharmaceutical industry in general has been atthe low-end of the industrial value chain. If Chinesecompanies only compete at home, they willlose more opportunities. In term of globalization,China’s pharmaceutical companies are laggingfar behind those Indian companies.”“In recent years, the low-cost competitionand overcapacity of production are becomingmore and more severe in China’s pharmaceuticalindustry. The leading Chinese pharmaceuticalcompanies are facing the bottlenecks in development.The advertising blitz and hospital end-userstrategies would not solve the fundamental problemsfor future growths,” said Dr. Niu.The international market has great potentials,but the regulation standards are also veryhigh. “McCull Pharma has experiences andinternational ‘know-how’ to develop innovativeproducts and build up a world-class pharmaceuticalcompany in China,” said Dr. Niu.Build up innovation platform for newproduct developmentMcCull is intended to be an innovative companyin China. For the new molecule entity, Mc-Cull will mainly focus on pre-IIa preclinical drug75

development, and then cooperate with globalpharmaceutical giants to finish the new drugdevelopment and put it in the global market. “Wehave experiences and resources in both Chinaand western markets,” said Dr. Niu.At present, McCull’s strategy is to developthe finished products and biological “Blockbusters”or “niche-busters” that present one or morecompetitive barriers to entry, such raw materialsthat are technically complex or difficult tosource, new formulation and special handlingrequirements. Dr. Niu told the reporter that “Weemploy our proprietary technologies and formulationskills to develop value-added bioequivalentversions of selected brand pharmaceuticalswith no IP infringement. Commercially, we arestrategically positioning in some selected nichemarkets that big pharma are not willing to do, orcould not do well.”China’s pharmaceutical industry still lacksresearch and development capabilities for realinnovation. There is a saying to describe the Chineseway to tap home and overseas market: “followHisun (a Chinese pharma company) at home,and imitate India overseas”. McCull, however,proposed to learn more from Japan in drug innovation.In the past 30 years, Japanese companieshave created many world popular drugs in theglobal markets. China does not have significantnumber of branded drugs with intellectual propertyrights, while the traditional herbal medicineis hardly accepted by the international mainstreammarket.For new drugs development, it is hard towin the recognition of the highly regulated globalmarkets without following the internationalcompliance system and development regime.However, if a new drug could not enter the globalmarket, the R&D costs will be very hard torecover for the manufacturer and the profitabilitywill be limited.According to Dr. Niu, Chinese scienceresearch institutions and universities may havestrong technology research ability, but should notserve as major platforms for new drug developmentand international outsourcing. Many talentswho came back from oversea in earlier yearsare from areas such as organic synthesis researchand clinical studies. China needs to attract moretalents with new drug development experiencesand industrial manufacturing background.Dr. Niu told China’s Foreign Trade thatnowadays more than 98% drug products manufacturedin China are generics. Many Chinesepharmaceutical companies are just seeking shorttermbenefits and lack incentives to increaseinvestments. The Chinese drug approval systemis more tailored to the generics, and the price76

“It is the right time for Chinacompanies to invest more in new drugsdevelopment.”system could not well support innovation. MostChinese companies don’t have experiences fordeveloping drugs at a global level in innovation.In recent years, Chinese new drug registrationhas improved progressively. Dr. Niu believesthat it is the right time for China companies toinvest more in new drugs development.To build a superior CMO ManufacturingService platformWhile focusing on new drug R&D, Mc-Cull also establishes cGMP (Current GoodManufacturing Practice) production facilities forCMO outsourcing services with the U.S. FDAregulation standards.As the world pharmaceutical industry ischanging, the GMP (Good ManufacturingPractice) production capacities of the emergingcountries such as India and China will attractmore attention of the global drug manufacturers.However, Dr. Niu believes that the internationalregulation standard is still the biggest obstaclefor the emerging countries. McCull is dedicatedto becoming primary global CMO outsourcingcompany in China following the high standardinternational regulations. The McCull staff hasmany years of GMP experiences with world famousbig pharma.For the international market, the businessoperation model that McCull adopts is differentfrom the traditional “U-shape”, Dr. Niu called itDouble “Y” Model. The advantages in the ExportProcessing Zone would allow McCull to enjoythe special favorable tariff policies.McCull will pay more attention on injectables.In recent years, more and more injectionsand transfusion products will lose IP propertyprotections. “McCull predicts that the futuredecade will witness a robust growth of the injections,”said Dr. Niu. McCull will provide CMOservices for global partners with great advantagesin “product quality”, “cost” and “speed”.To build high standard quality andcompliance systemDr. Niu considers international complianceand the quality management system as the mostimportant factors for Chinese pharma industry inthe process of globalization. “Mr. Deng Xiaopingonce commented that ‘the scientific technology isthe primary productive force’. For global pharmaceuticalmanufacture, however, technology is notall. Without sufficient compliance and qualitysystem, technology would hardly be turned intoproductive force in the highly regulated globalmarket,” said Dr. Niu.Dr. Niu said that advanced quality andcompliance management should be an integratedpart of technology innovation and should be consideredas important as innovation.McCull’s team members from overseaswere highly trained in the U.S. pharmaceuticalindustry, and the management team membersfrom China are talents with experiences inphamaceutical companies such as WuXi AppTec,Yangtze River Pharmaceutical and CP GroupPharmaceutical Co. More than half of the Mc-Cull managers hold master or doctor degrees.In addition, McCull offers training courses on aweekly basis and Dr. Niu has given presentationson the courses associated with drug developmentand global compliance regulations.Dr. Niu told the reporter that althoughthe Chinese SFDA (State Food and Drug Administration)has enforced GMP regulations inrecent years; many Chinese companies are stillat the early stage in the GMP practice. GMP isonly the basic requirements for pharmaceuticalmanufacture practices though. The current U.S.cGMP is based on the 1978 version with newlyissued FDA guidelines. Companies have theirown responsibilities to implement the detailedguidelines and specific operation procedures toensure the manufacturing process is compliancewith the GMP principles. Dr. Niu said that Mc-Cull is drafting their own “Quality Manual”documents based on their industrial experiencesand international “know-how”.Dr. Niu stressed that McCull also paysmuch attention on building the corporate cultureand HS&E (Health, Safety and Environment)system. McCull drafted a Social Charter to illustrateits responsibility for staff, environment andthe society. “As a global company, McCull willfollow strictly the international rules for businessconducting,” Dr. Niu concluded.77

INFORMATION2012China MarketSuppliers ListCompany Name: Yiwu GanghuaPlastic Products FactoryCompany Profile: Yiwu GanghuaPlastic Products factory specializes inPP/PVC/PET clear packaging, PPPlacemats, PP stationeries and PPpromotional gifts. Our products aremainly exported to North America,Europe, and Japan. With advancedtechnique and management, Ganghuahas passed the audit of WAL-MART.Our products can pass tests of toysand food in European and the US.High-quality products, good service,and fast delivery bring us preciouscustomer loyalty. Our goal is to be themost powerful and competitive enterprisefor clear packaging products inChina. Our factory is very near YiwuInternational Trade City, with just 15minutes by taxi, two or three hoursaway from Shanghai, Hangzhou, andNingbo by train. We are confident ofGANGHUA’s bright and brilliantfuture!Equipped with the most advancedclear folding box productionline of China, Heidelberg XL-75-6UV offset printing machine from Germany,GANGHUA makes its clearpackaging boxes more Scratch-resistant,static-resistant, impact-resistant,and with no visual defects.Ganghua clear packaging productsare widely used in electronic products,hardware, medicine, cosmetics,food, daily-use products, stationeries,etc, and will create bright and vividimages for your products!Add: 1559th, XiCheng Road, YiWuCity, Zhejiang Pro, China, 322000Tel: 86-579 - 85239251Fax: 86-579 - 85239131Company Name: Shenzhen GodsendStationery Co., Ltd.Company Profile: Shenzhen GodsendStationery Co., Ltd. is a professionalmanufactory which producesseveral of stationery such as set-packingstationery, office stationery, andstationery tape and so on. We havemore than ten years experiences in designand manufacture so have maturetechnology. More than 90% of ourproducts are exported to internationalmarket and all of them are welcomeby our clients. We’re taking ISO9001Quality System seriously and will alwaysgive you high quality productson best price. With your support we’llhave a better tomorrow!Add: Rm.1302, KINT Building,No.238, West Zhongshan Avenue,Tianhe District, GuangzhouTel: 86-20-85571080 /18927594387Fax: 86-20 - 85571050Company Name: Foshan Ruixin NonWoven Co., Ltd.Company Profile: Rayson Non Wovenis a excellent brand under RaysonGlobal Inc, Established in 2007 , it isa Sino-US joint venture company, hasmore than 400 workers, located in thecentre of Guangdong-Nanhai DistrictFoshan city with space over 80,000 sq.mt, and only 30 mins driving Distanceto Guangzhou Baiyun InternationalAirport and Canton Fair ExhibitionHall.Rayson mainly produces spunbondednon woven fabric ,non wovenproducts (like non woven bag ,gift bag,storage bag), mattress inner springs,and mattress. Rayson has its ownimport-export authority, Closed byFoshan port, Guangzhou port andShenzhen port, 90% of the productsare exported to oversea markets withthe export volume more than 100 millonRMB per year. Relied on goodprestige and service, we have beenwell-known as a trustful supplier andpartner in Asia, Australia, Europe,Africa, also have built up a link withfamous sales network. Rayson is a preferredsupplier for purchasing the nonwoven fabric, mattress inner springs,non woven bag and mattress, its productquality is convinced by the overseacustomers day by day.Add: Rayson Industrial Zone. HongxingVilliage, Guanyao, Nanhai DistrictTel: 86-757-81196638Fax: 86-757-81192378Company Name: Shandong OrcalHousefitting CO., Ltd.Company Profile: Shandong OrealHousefitting Co., Ltd. is establishedin 20 07, and it is located in thebeautiful city of Jinan springs. It’s aprofessional company which is specializedin kitchen glassware; we havea group of highly educated, highqualityprofessionals. We can designa variety of household glass productsand follow-up process by ourselves.Our company main products areglass candleholder, lantern, container,storage jar, spice bottle, oil and vinegarbottle, all kinds of condimentbottle, glass mug, glass bottle, glassplate As well as other glassware, etc.more than 30 series and more than1,000 varieties of products, can supplydecorated, hand-painted, sets ofskin, carving and other deep-process.The company has strong technicalstrength of professionals and only 3-7days of new product development.The company has numbers of decorated,painting, outline in gold, handpainted, thermal transfer and manyother production lines. ShandongOreal Housefitting adhering to the“innovation, quality, service” businesspurposes, and won the trust and supportof customers, products exportedto Europe, America, Southeast Asia,the Middle East, more than 20 countriesand regions. Oreal Housefittingalways for the majority of merchantsset up to provide the latest ideas, themost high-quality products, the mostperfect service.Add: No.149, Jiqi Road, Huaiyin District,JinanTel: 86-531-82665279Fax: 86-531-8599157178

Company Name: Haining Xing YingFurnitureCompany Profile: Haining XingYing furniture limited company islocated in Haining Jianshan new area,is Sen Bridge Group Holdings of theSino-foreign joint ventures, covers anarea of 1500 acres, more than 3000employees, with an annual output of100000 sets of the living room and80000 sets of solid wood bedroomfurniture production enterprises, isChina’s largest solid wood furnitureexport enterprises. The company paidgreat attention to product quality, notonly by the person featured in Europeand the United States production oak,beech, birch, birch and other high profilewood as raw materials, and the investmentfrom Germany, Italy, Taiwanand other countries and regions of theintroduction of advanced equipmentmore than 300 Taiwan, built 6 modernproduction lines, cutting boards, logsfrom the blanking, molding, paintingand machining process are the realizationof automation, product qualityand the production efficiency can begreatly improved. Companies pay attentionto the core competitiveness ofenterprises. Namely uses the old withthe new, the division with only traditionalpractices, and implement themanagement by objectives, ISO9001quality management system, budgetmanagement and advanced managementmethods, improve the managementlevel. And with an efficient andpragmatic, innovation, has the senseof responsibility of the managementteam, the team determined to makeprogress, innovation, with advancedhardware and excellent managementteam to support, it is with the marketoriented, strain every nerve to meetcustomer demand.Add: NO. 8 Jinniu Road JianshanHainingTel: 86-573-87800335Fax: 86-573-87801660Company Name: Foshan Andy ElectricalAppliance Co., Ltd.Company Profile: Foshan AndyElectrical Appliance Co., Ltd wasestablished in 2008, specializing indevelopment and producing electricalparts, and has accumulated rich experiencein the electrical appliance area.Andy Electric Co., ltd is professionalmanufacturer of development,production and selling toaster, electrickettle, meat grinder and air cooler. Theindustry manufacturing bases is locatedat the one of the four Guangdongtigers—Shunde. Invest in RMB 10million, it has over 20 professional engineers,technical persons and over 100employees, the factory building areaamounts to 8000 square metres, ownsmodern production lines, perfect testingequipment, branch companies havenbeen set up in Hong Kong, The UnitedStates and other countries and regions,the products are exported around theworld. Andy will continue to join handswith partners, make “Andy Electric” forthe household appliance industry leaderin home appliance industry, dedicatedto the comprehensive development ofthe brilliant-based industries to maketheir own contribution.Andy Electric holds the developmentphilosophy of “good faithmanagement, a win-win”, and activelyseeking domestic and internationalwell-known chain of retail establishlong-term strategic cooperative partnership.Add: B202 Idea Industry Park, FengxiangRoad, Daliang, Shunde, FoshanTel: 86-757-22663789Fax: 86-757-22911877Company Name: Victcry Knife &Scissor FactoryCompany Profile: Located in Yangxi,Yangjiang City, Guangdong Province,Victory Knife & Scissor IndustrialCo., Ltd. is an excellent manufacturerwho has passed the evaluation with ofISO9001 certification. We mainly producescissors, which are widely used infamilies, schools, kitchens, beauty parlorsand gardens. Our products featurewith sharpness, innovative appearance.We use stainless high-strength steel asraw materials and comply with strictproduction operation to manufacturehigh quality products.SUPPLIERSOur company has made a strongcommitment to product quality productsand established an advancedmanagement system. We provide ourcustomers with high standard servicerelying on fine quality, high efficiencyand sound credit. Our products areexported to overseas countries such asSoutheast Asia, Europe and America.Add: No.2, Industrial Zone, YangxiCounty, Guangdong, ChinaTel: 86-662-5891588Fax: 86-662-5880638Company Name: Hangzhou HuichangCrafts Co., Ltd.Company Profile: Hangzhou HuichangCrafts Co., Ltd. is one of themordern enterprises of metal meshcrafts and metal mesh accessories withthe collection of the production, developmentand sales.The company produced variousplastic coated (dipping and spray) metallicmesh craft products. The productsbasically fall into 3 series, namelyoffice stationery series, householdcommodity series and bicycle basketseries. We have already owned thepen and paper basket, document andmagazine shelf, combined stationery,memo box, letter, household goods,etc .It has hundreds of specifications ofproducts and also welcomes the businessof processing on customers providedsamples and designs.Huichang’s motto is “pursue highquality eternally and go all out for customers”With scientific management,fastidious work manner, high qualityproducts and excellent after-sale service,the company enjoys high reputationat home and abroad.HUICHANG located in the suburbof Hangzhou, has a very favorableenvironment and convenient traffic.The General Manager and its staffwarmly welcome friends far and nearto visit the company for business cooperation.Add: No.214 Nanjiang Village Linpuxiaoshan Hangzhou ChinaTel: 86-13067995791Fax: 86-571-82447198(Source: Canton Fair Online)79

InfoRMATIONChina Fairs& ExposCommercial Trade2012 China Hefei Consumer Goods Fairfor Spring FestivalDate: January 30-February 7, 2012Venue: Anhui International Conventionand Exhibition CenterExhibits: Garments, shoes and beddings,art gifts, sugars, cigarettes, specialtyfoods, etc.Host: The Organizing Committee of2012 China Consumer Goods Fair forSpring FestivalOrganizer: Anhui Daming InternationalExhibition Service Co., Ltd.Add: Rm 109, Tongshan InternationalShopping Mall, Economic DevelopmentZone, Hefei, 230601Tel: 86-551-2783338Fax: 86-551-2783397Email: xuechao11111@yahoo.com.cnContact Person: Xue Chao2012 Fuzhou Spring Festival Goods FairDate: January 30-February 10, 2012Venue: Fuzhou International Conference& Exhibition CenterExhibits: Food, beverage, wine, grocery,etc.Add: No.4, Xiyang Road, FuzhouFax: 86-591-83300308police cars, bullet proof vehicles, policemotorcycles, etc.Add: 10-3, GuangyujinxinBuilding, 13 Jianxindong Road,Jiangbei Dist, Chongqing, China,400020Tel: 86-23-86830282Fax: 86-23-868300692012 China Chongqing InternationalCommunity PublicSecurity Products and TechnologyEquipment ExhibitionDate: March 25-March 27, 2012Venue: Chen Jiaping International ExhibitionCenterExhibits: Biometric technology andequipment, access control system, etc.Add: 10-3, Guangyujinxin Building,13 Jianxindong Road, Jiangbei Dist,Chongqing, China, 400020Tel: 86-23-86830136Fax: 86-23-86830137Information Technology, Network,Communication, BroadcastThe 2012 China Content BroadcastingNetwork ExhibitionDate: March 23-March 25, 2012Frequency: YearlyVenue: China International ExhibitionExhibits: Film and TV production,equipment, system and technology ofmanagement and transmission, etc.Add: No.2 Fuxingmenwai Street, Beijing,ChinaTel: 86-10-62126805Fax: 86-10-62126807Web: www.ccbc.cnEnergy and resources, MiningIndustry, Metallurgy, Welding,Electric PowerWeb: www.fuyang.com.cn2012 China Guangzhou InternationalPower Transmission and Control TechnologyExhibitionDate: March 4-March 7, 2012Frequency: YearlyVenue: Chinese Export CommoditiesFair Pazhou ComplexExhibits: Fluid power transmission, mechanicaltransmission, air compressingtechnology, etc.Add: Rm 3104, Tianjunge, No.365Tianhe Road, Tianhe District, Guangzhou,Guangdong, China, 510620Tel: 86-20-38823660Fax: 86-20-38823677Web: www.fuyang.com.cnEmail: info@fuyang.com.cnGlass, Ceramics, Plastic, RubberThe 5th Dongguan International Die-Casting and Foundry ExhibitionDate: March 17-March 20, 2012Frequency: YearlyVenue: Dongguan International ExhibitionCenterExhibits: Die-casting equipment, etc.Add: 402 Jin’ao Garden Hotel, 33Dongcheng-dadao Dongguan, Guangdong,China, 523008Tel: 86-769-22388565Fax: 86-769-22387875The 8th Dongguan, International ElectroplatingIndustry and Surface TreatmentExhibitionDate: March 17-March 20, 2012Venue: Dongguan International ExhibitionCenterExhibits: Plating, electroplating bathand raw materials, surface finishingproducts, etc.Public Security and Fire Control2012 China Chongqing International PoliceAnti-Terrorist Technology and EquipmentExhibitionDate: March 23-March 27, 2012Venue: Chen Jiaping International ExhibitionCenterExhibits: Police protection equipment,The 16th China Guangzhou InternationalIndustrial Control Automation andInstrumentation ExhibitionDate: March 4-March 7, 2012Frequency: YearlyYear of the first Event: 1997Venue: Chinese Export CommoditiesFair Pazhou ComplexExhibits: Fluid power transmission, mechanicaltransmission, etc.80

FAIR & EXPOSAdd: World Trade Expo Co., Ltd, Rm 01,21F, Times Center, 928-930 Cheung ShaWan Road, Kowloon, Hong Kong, ChinaTel: 852-21392280Fax: 852-21392281Web: www.shimaobolan.comThe 8th Dongguan International CoatingsExhibitionDate: March 17-March 20, 2012Frequency: YearlyVenue: Dongguan International ExhibitionCenterVenue: Dongguan International ExhibitionCenterExhibits: Plating, electroplating bathand raw materials, surface finishingproducts, etc.Add: World Trade Expo Co., Ltd, Rm01, 21F, Times Center, 928-930 CheungSha Wan Road, Kowloon, Hong Kong,ChinaTel: 852-21392280Fax: 852-21392281Web: www.shimaobolan.comThe 2012 Beijing Stone FairDate: March 15-March 18, 2012Frequency: YearlyVenue: China International ExhibitionCenterExhibits: Marble, granite and otherkinds of stones, quarry stones, slabs andblocks, artificial stone products, tombstones, stone-carved crafts, etc.Add: China International ExhibitionCenter, No.6 Beisanhuan East Rd, ChaoyangDist, Beijing, China, 100028Tel: 86-10-64630548Fax: 86-10-84540980Web: www.build-expo.comThe 9th China International Explosion-Proof, Electric Technology and EquipmentExhibitionDate: March 22-March24, 2012Frequency: YearlyVenue: China International ExhibitionCenter (New Hall)Exhibits: Explosion-proof controller,explosion-proof air conditioning system,explosion-proof wireless network datacontroller, etc.Host: Beijing Zhenwei Exhibition Co.,Ltd, etc.Add: Rm 801, Building E. Kaixuancheng,No.170 Beiyuan Road, ChaoyangDist, Beijing, China, 100101Tel: 86-10-58236588Fax: 86-10-58236567Email: expec@zhenweiexpo.comElectrical Apparatus, Heating, AirconditioningThe 12th China International HeatingVentilation & Air-Conditioning ExpoDate: March 15-March 17, 2012Frequency: YearlyVenue: China International ExhibitionCenterAdd: Rm 380, 4F, Hall 1, China InternationalExhibition Center, No.6 EastBeisanhuan Road, Beijing, 100028Tel: 86-10-84600666Fax: 86-10-84600669Email: gaoqian314@126.comThe 12th China International Heating,Bentilation & Air-Conditioning ExpoDate: March 15-March 17, 2012Frequency: YearlyVenue: China International ExhibitionCenterExhibits: Solar thermal collector, vacuumtube collector, flat-plate thermal collector,water tank, etc.Host: China Council for the Promotionof International Trade Construction IndustrySub-Council, China InternationalExhibition Center Group CorporationOrganizer: Beijing B & D Tiger ExhibitionCo., Ltd.Tel: 86-10-84600666Fax: 86-10-84600669Email: CIHE-HVAC@163.COMThe 12th China International HeatingVentilation & Air-Conditioning ExpoDate: March 15-March 17, 2012Frequency: YearlyVenue: China International ExhibitionCenterAdd: Rm 380, 4F, Hall 1, China InternationalExhibition Center, No.6 EastBeisanhuan Road, Beijing, 100028Tel: 86-10-84600666Fax: 86-10-84600669Email: gaoqian314@126.comSound, Musical instruments, Lighting2012 The 10th China Guangzhou InternationalExpo on Pro Sound and LightDate: March 10-March 12, 2012Frequency: YearlyVenue: China Import and Export CommoditiesFair Exhibition ComplexExhibits: Special sound, lighting, stagemachinery and equipment, KTV equipmentLED display, etc.Add: No.171, Lianxin Road, Guangzhou,Guangdong, China, 510033Tel: 86-20-83560265Fax: 86-20-83549078Web: www.soundlight.cn2012 The 9th China Guangzhou InternationalMusic Instruments ExpoDate: March 10-March 12, 2012Frequency: YearlyVenue: China Import and Export CommoditiesFair Exhibition ComplexExhibits: Copper pipe music instrument,electronic music instrument, keyboardmusic instrument, etc.Add: Guangdong International Scienceand Technology Center, No.171, LianxinRoad, Guangzhou, Guangdong, China,510033Tel: 86-20-83560265Fax: 86-20-83549078Web: www.guangzhou music.cn2012 Fuzhou International LED &OutdoorLighting ExhibitionDate: March 11-March 13, 2012Venue: Fuzhou Jinshan Exhibition CenterExhibits: LED chips, epitaxial wafer,Epi Wafer and outdoor lighting, etc.Tel: 86-10-68660512Fax: 86-10-68666067Email: bjlzhb@163.com81

InfoRMANTIONInvestment Projectsin Fuding, Fujian Province,Chinaterminal can be developed here. The project is located inthe island that lies between Dianxia Town and JiayangTown, which is known as “Garden Island on the sea”. Theisland has beautiful scenery and pleasant weather, whichhas become tourism resource with greatly exploited value.Construction Scale: It covers an area of 720 mu.Total Investment: RMB 200 millionCooperation Mode: sole investmentProgress of Preliminary Work: 100 mu of land hasbeen expropriated under the first phase of construction.Project Name: Taimu Mountain CablewayProject Location: The cableway starts at Caibaocai Village,Qinyu Town. When it reaches the statue of TaimuGoddess, tourists will be transferred to the main peak inthe scenic spot.Person-in-charge: Wang Shaoyan 86-593-782093386-13905932389Contact Person: Ye Lirui 86-593-785677886-13860351199Fax: 86-593-7856177Project Overview: This project selects two spots to buildcableway: one at Caibaocai Village and another near thesquare of Qinyu Railway Station because of their convenienttransportation condition. The railway and ShalvLine (a provincial-level highway) will help to collect anddistribute tourists so as to increase the reception capabilityof the scenic spot. This project will occupy a land of 220mu (40 mu for the building of hotels and parking lot, and180 mu for the building of recreation and cableway servicecenter).Total Investment: RMB 350 millionEconomic Results Analysis: The annual profit is estimatedto be 40 million Yuan, and the payback period willlast 8 years.Cooperation Mode: sole investment or joint ventureProject Name: Changyu Island Leisure Tourism Developmentin Dianxia TownProject Organizer: Dianxia Township GovernmentProject Location: Xucheng Village, Dianxia TownPerson-in-charge: Hong Long 86-593-729100086-13509591199Contact Person: Lin Jizhong 86-593-729100086-13706938133Fax: 86-593-7292777Project Overview: The projects such as eco-tourism, seafishing, leisure tourism, charming fishing village, ferryProject Name: Leisure Tourism of Yanzhou WatersideVillage and Fishing Village in Bailin TownProject Organizer: Bailin Township GovernmentProject Location: Shuangtoutou Island, Yanzhou Village,Bailin TownPerson-in-charge: Huang Yingxing 86-593-737606686-13706022898Contact Person: Zhan Huangshou 86-593-737145586-13959386006Fax: 86-593-7371154Project Overview: The project lies in ShuangtoutouIsland of Yanzhou Village, Bailin Town, is 3 kilometersfrom Bachimen Inter-linking Exit of Funing Highway, 12kilometers from the downtown, 20 kilometers away fromTainmu Mountain in the northwest. With unique anddiverse scenery, the island of 600 mu whose three sidesfacing sea is an ideal place for fishing. When the projectis completed, it will developed to a comprehensive leisuretourism project with most “Mountain and Sea” characteristics,which combines leisure, vacation, amusement, sightseeingas a whole.Construction Scale: 600 muTotal Investment: RMB 100 millionCooperation Mode: sole investmentProgress of Preliminary Work: The preliminary planninghas been completed.Project Name: Cuijiao Ancient Houses Tourism inBailin TownProject Organizer: Balin Township GovernmentProject Location: Cuijiao Village, Bailin TownPerson-in-charge: Huang Yingxing 86-593-737606686-13706022898Contact Person: Zhan Huashou 86-593-737145586-13959386006Fax: 86-593-7371154Project Overview: More than 260 years ago, CuijiaoAncient Houses was built in 1745, the 10th year Qianlongreign in Qing Dynasty. It is the largest and best preservedfolk house at present in South China, which covers anarea of 14,000 square meters with a total construction area82

INVESTMENTof 5000 square meters. The building is grace and decent,combining the royal glory of imperial architecture withthe exquisite taste of Jiangnan residential features. Theornamental, artistic and historical nature of this house canmatch with Yongding Earth Building, so it has been wellknown as the treasure and a “living fossil” of Hua Hsiatraditional residential houses. Cuijiao Ancient Houses issituated in Bailin Town which lies in Taimu MountainNational Key Scenic Area. It enjoys advantageous geographicalposition with 37km away from the downtown,convenient in traffic.Construction Scale: The repaired area of the ancienthouses occupies 10000 square meters; the constructionof folk customs exhibition center and folk customs showshould be carried out.Total Investment: RMB 10 millionCooperation Mode: joint venture or cooperationProgress of Preliminary Work: The general planningof the ancient house has been completed and the FudingAncient House Tourism Development Limited Companyalso has been established.Project Name: Sangcui Lake Tourism Development inPanxi TownProject Organizer: Panxi Township GovernmentProject Location: Panxi TownPerson-in-charge: Yang Zuliang 86-593-793313186-13706022777Contact Person: Chi Changfeng 86-593-793313186-l3706932204Fax: 86-593-7399151Project Overview: Panxi Sancui Lake, located in the westside of Taimu Mountain, is an artificial lake. Surroundedby mountains and girdled by a river, the lake has beautifulscenery and abundant tourism resources. The scenery ofSancui Lake attracts the people by its pretty and calmness.Wandering leisurely in the mountains and the woods, fishingor boating quietly on the lake, it is easy to hear the singingof birds and enjoy the great fun in the nature. Jiuli (NineCarps) Stream Waterfall Scenic Area and Dujiazai OutdoorExtention Activities Leisure Center have been developedin this town, which have brought great tourism incomes. Itis believed that the tourism exploitation of Sancui Lake hasunlimited business opportunities.Total Investment: RMB 20 millionCooperation Mode: sole investment or cooperationProgress of Preliminary Work: The general planning ofthe project has been completed.Project Name: Baisheng New Hospital District of FudingHospitalProject Organizer: Fuding Health DepartmentProject Location: Baisheng New District, ShangqianCommunityPerson-in-charge: Liu Xiangdong 86-593-783900086-l3809571632Contact Person: Chen Jinting 86-593-783900086-13706022886Fax: 86-593-7852415Project Overview: Located in Baisheng Village,Shanqian Community, Fuding City, the new hospitaldistrict of Fuding Hospital occupies 300 mu with over308,000 square meters building area. The first term ofthe project that covers an area of 180,000 square metersprovides 1500 beds, which can satisfy the medicalrequest of 1.5 million populations in the area where Fujianmeets Zhejiang.Construction Scale: The project occupies 300mu withover 308,000 square meters building area.Total Investment: RMB 620 millionCooperation Mode: Build Transfer (BT) modelProgress of Preliminary Work: The project research,land requisition and procedures for land use have beencompleted and the land smooth is being carried out.Project Name: Four-star Hotel of Dianxia TownProject Organizer: Dianxia Town GovermentProject Location: The east side of Fu’antang Huandao,Dianxia Town (Reaching Jingshisi Road on the east,Jinshiwu Road on the west, Weiwu Road on the south,Wei’er Road on the north).Person-in-charge: Zhong Houlu 86-593-729100086-18950501929Fax: 86-593-7292777Project Overview: With Yangqin Secondary Roadand Bachimen-Yangqi Road passing through, theproject is 42 kilometers away from the downtown, 12kilometers from Taimushan Railway Station and TaimushanHighway Inter-linking Exit. In addition toadjoining to Taimu Moutain Nation Key Scenic Areaand Niulanggang Seashore Resort, Dianxia Town alsohas beautiful seashore landscape in Yuandang. It is surethat the tourism development here has broad prospects.As the pilot construction of small towns in Ningde, DianxiaTown will be built into an integrated service area,which indicates that there is a great potential for tourismand investment.Construction Scale: This project is planned to occupy aland of 62 mu, wherein 20 mu for the commercial applications(the Four-star hotel) and 42 mu for the commercialhousing.Total Investment: RMB 280 millionCooperation Mode: sole investmentProgress of Preliminary Work: The land requisitionhas been carried out and procedures for land use have beenbeginning.83

ART & GALLERYLifestyleThings From The Gallery Warehouse 4Duration: 1PM-6PM. Feb 11– Mar 31,2012.Venue: ShanghART H-Space, 50 MoganshanRd., Bldg 18 ShanghaiArtists: Shi Qing, Li PinghuIn past 3 years, the series exhibitions“Things from the gallery warehouse”presented large-scaled installationworks that stored in the warehousefrom ShanghART gallery. After celebratingtraditional Chinese New Year,ShanghART Gallery is so pleased topresent “Things from the gallery warehouse4” to public.The installation work “Plant Republic”by Shi Qing is a quite complicatedand unique system since plant iscreated as ecological structure and organizationalsystem. Seemingly disorderedwood combinations build a senseof order. Video work “Flight Line” byLi Pinghu presented in the exhibition address an interest in the spaces betweenplaces and objects and between the work and the viewers. Hope it could bringviewers different thoughts and experience when they entering the space.Shi Qing, born in 1969 in Baotou, Inner Mongolia, lives and works in Beijing.Recent exhibitions: Not long enough, Space Station, 798 Art District, Beijing (2010);Halfway House, Shi Qing Solo Exhibition, ShanghART Beijing (2009).Li Pinghu (b. 1976) lives and works in Shanghai. Recent exhibitions: A Pile ofPassion, ShanghART Gallery (2011); FIAC, Grand Palais, Paris, France (2010).THE UPPER REGIONS – Wu Yuntie Painting ExhibitionEssay: Lin HaiOpening: 16:00 - 18:00 / 11. 02. 2012Duration: 10:00 - 18:00 / 11. 02. 2012 – 23. 03. 2012Address: ANART. 2F, Building 13, 50 Moganshan Rd, Shanghai, 200060Wu Yuntie barely makes hispaintings according to sketches,photographs or other pictures. Hehas a very strong visual memoryand unrestrained expressions inpainting. Only when facing thecanvas does he feel at ease. Healways starts from a corner of thecanvas following the flow of ideas,keeps adding or erasing formsand allows various images spreadout themselves, finding their ownspaces on the canvas. Therefore, hisprocess approximates to the Surrealistic‘automatic writing’. Oncethe brush starts to move, Wu Yuntiewill intently follow his hand toproceed and enter an unexpectedstrange world, which is yet straightfrom the bottom of his heart. Thusthe painting process is also the processfor him to recognize, suspector prove himself. As he said, suchprocess carries a function of ‘selfmedical treatment’.Compared with many selfcenteredyoung artists, Wu Yuntiedoesn’t present the restless psychologicalsubject, the claustrophobicillusion and narcissistic sentimentin his paintings. Instead, the workshave a private game nature as wellas serious psychoanalysis. At thesame time as he faces himself, healso points out the extrinsic rootwhich creates the ego, so that hisself-analysis includes criticizing andsurpassing the reality. Wu Yuntie isno doubt more like a surrealist.Extracted from A Surrealist inPost-industrial Age – Wu Yuntie RecentWorks by Lin Hai84

LifestyleApichatpong Weerasethakul: For Tomorrow For TonightDate: November 26th 2011-February 10th 2012Venue: UCCA Middle RoomCurator: Jérôme Sans, UCCA DirectorAssistant Curator: Joy BloserFor Tomorrow For Tonight, a newinstallation by leading Thai film directorApichatpong Weerasethakul leadsvisitors through a cinematic narrationof night. Night, a time for sleep, darknessand quiet, is the natural space fordreams and desires, a time as the artistsays, “when you can’t see and yourmind takes over.” Weerasethakul leadsus with his subtle language of suggestionto consider a compressed reality ofmemory and dreams, which is both immediateand infinite. For Tomorrow ForTonight blends video, images and soundfrom three of his original films and onesound work to create an intensely lyricalatmosphere. The photographs thataccompany the video works allow usto pause and contemplate these “frozenmoments”, and the jarring soundevokes the stark contrasts found in contemporaryThailand. With a potency ofimagery, Weerasethakul relies on feelingsand abstraction rather than a linearnarrative to draw the audience into thememory of a shared cinematic dream.Apichatpong Weerasethakul, bornin Bangkok in 1970, received his degreein architecture from Hon Kaen Universityand his M.F.A. from the ChicagoInstitute of Art. He has been creatinghis own films since 1994. His numerousawards include the prestigious CannesFilm Festival Palme d’Or (2010) forUncle Boonmee Who Can Recall His PastLives, the Cannes Film Festival JuryPrize (2004) for Tropical Malady, andmany others. In addition to his filmsand art installations, Weerasathekulactively promotes independent Thaifilmmaking through his company Kickthe Machine, founded in 1999.85

ON STAGELifestyleOriginal Singing and Dancing Poem The Paintingof Four BeautiesTime: 2012/2/11-2012/2/14Venue: NCPA-TheatrePrice: RMB 200/320/480/580/680/880Tel: 400-610-3721; 6417 7845The Four Great Beauties engraves on Chinese mind formore than a millennium and enriches Chinese descendants'boundless imagination. Why can they emerge as the symbolof delicacy and beauty[.] This is not only because they areendowed with admirable looking, but also distinctive andlegendary experience: their fates are closely linked with thoseof their states. Beauty is more than static features, archedeyebrows, piercing eyes and cherry-shaped lips, but ratherdynamic options and choices.Born in trouble times, when the Four Beauties either enticethe enemies into trouble or save their nation out of imminentperils, the individual affection and their lives are reducedinto the meaningless vacancy. What they leave are traces ofsolicitude and attachment toward their motherland,which warm and inspire numerous later generations,and trigger our endless associations in mind.The recall on beauties reveals the query anddeliberation raised by modern people. Is beautyeternal[.] If it is not, we should cherish beautyrather than destroy it. The vanishing of beauty is irresistible,what can do is to cherish. Youth is beautiful,time is beautiful, friendship is beautiful, andtrust is beautiful...The beauty starts from elegance, which turnsinto grandeur, and then pathos, and finally pageantry.Li Yugang is the watcher of beauty, and eventhe watcher of love. Without this faithful watch, thefour distinctive styles of beauty are hard to be unveiled.The sentiments of our watcher are unleashed throughfive interlinked modern poems.Music dance works display the beauty of beauties,while the modern poems express the beauty of Li Yugang asa beauty watcher, which are integrated via screen and stage,shadow and form, with a view to uttering his query for beautydifferentiated from others.Moonglow Cabaret February Hits Beijing -Swedish Super Band Opeth 2012 Beijing ConcertTime: 2012/2/11Venue: TanGoPrice: RMB 300/380Tel: 400-610-3721; 6417 7845Opeth is a Swedish heavymetal band from Stockholm,formed in 1990. Though the grouphas been through several personnelchanges, singer, guitarist,and songwriter Mikael ?kerfeldthas remained Opeth’s drivingforce throughout the years. Opethhas consistently incorporatedprogressive, folk, blues, classicaland jazz influences into theirusually lengthy compositions, aswell as noticeable influences from black metal[1] and deathmetal, most notably in their early works. Many songs includeacoustic guitar passages and strong dynamic shifts, as well asboth death growls and clean vocals. Opeth rarely made liveappearances supporting their first four albums; but since conductingtheir first world tour after the 2001 release of BlackwaterPark, they have led several major world tours.Opeth has released ten studio albums, three live DVDs,three live albums (two in conjunction with DVDs), and two boxsets.The band released its debut album Orchid in 1995. Althoughtheir eighth studio album, Ghost Reveries, was quite popular inthe United States, Opeth did not experience major Americancommercial success until the 2008 release of their ninth studioalbum, Watershed, which peaked at number twenty-three on theBillboard 200, and topped the Finnish albums chart in its firstweek of release.World Violin Virtuoso Nigel Kennedy Asia TourConcert 2011Time: 2012/2/16Venue: Beijing Exhibition TheaterPrice: RMB 180/280/480/680/880/1080/1280Tel: 400-610-3721; 6417 7845For over twenty-five years, Nigel Kennedy has been acknowledgedas one of the world's leading violin virtuosos and86

ON STAGEis, without doubt, one of the most important violinists Britainhas ever produced. His virtuoso technique, unique talent andmass appeal have brought fresh perspectives to both the classicaland contemporary repertoire. He is the best selling classicalviolinist of all time.Nigel Kennedy is a passionate Aston Villa fan and attendsas many games as his schedule allows. He has one son,is married to Polish lawyer, Agnieszka, and they divide theirtime between homes in London and Krakow.had a thing about themed parties—Cocoon’s summer residenciesat Amnesia, for instance, have gone through conceptslike Disco Invaders, Freakshow and Party Animals,all of which come with photo shoots that show what goodsports Richie Hawtin and Ricardo Villalobos can be. Muchlike the 10 Years of Cocoon motif from 2009, the conceptbehind Vath’s trek across Asia is a commemorative one,honoring the three decades he’s spent behind the decks.Based on a lengthy post he wrote for Cocoon's website, themilestone seems to have put Vath in a nostalgic mood. “Ican vividly recall when I heard Kraftwerk for the first timein 1981 at the Dorian Gray,” he writes. “It literally blewmy skullcap!”Westlife Greatest Hits Farewell Tour 2012Time: 2012/2/22Venue: MasterCard Center (Formerly the Wukesong Arena)Price: RMB 288/388/488/588/1088/1288Tel: 400-610-3721; 6417 7845Sven Vath’s 30 Years Deejay Celebration HitsBeijingTime: 2012/2/17Venue: TanGoPrice: RMB 200/300Tel: 400-610-3721; 6417 7845With more than 30years experience as a DJ,label owner, promoterand ambassador of thearts, Sven Vath is one ofthe most important protagonistsof German musicculture and one of itsmost respected ambassadorsabroad. Cool DJAgency is thrilled to announcethat Sven Vath,will coming to Beijing toplay a very special showat Tango Club on Friday,February 17, 2012In honor of threedecades spent behindthe decks, the Cocoonfounder will play a veryspecial show in China.Sven Vath has alwaysThe GreatestHits Touris the twelfthconcert tourby Irish boyband, Westlife.The tour, visitingthe UnitedKingdom andI reland, w il lsupport the group’s compilation album, Greatest Hits. Whenthe tour is complete, the group will disband after performingfor 14 years.In October 2011, the group revealed plans for the releaseof a compilation album, spanning their entire career. Manymedia outlets speculated the band would tour the album. Anofficial announcement was made on 18 October 2011, a mereweek after ending their previous tour in Southeast Asia. Onthe statement released on the group’s website, it reported theywould perform all 14 of their number one hits along with otherfavorites. After announcing the tour, tabloids rumored theband would breakup after their tour was done. On 20 October2011, the members of the band made an official announcementof their disbanding. They responded:“We see the greatest hits collection and the farewell touras the perfect way to celebrate our incredible career alongwith our fans. We are really looking forward to getting out onthe tour and seeing our fans one last time. We would like tothank our fans who have been with us on this amazing journeyand are part of our family too. We never imagined whenwe started out in 1998 that 14 years later we would still be recording,touring and having hits together. It has been a dreamcome true for all of us.”87

CTHIS ISCHINAMount Wutai— The Holy Land of Buddhism in Northern ChinaBy Lily WangMount Wutai (Wǔtáishān, 五 台 山 ) is located in the northeastern part of WutaiCounty of Shanxi Province, covering an area of 2837 square kilometers.With its five flat peaks, Mount Wutai is a sacred Buddhist mountain. Thecultural landscape is home to 41 monasteries and includes the East Main Hallof Foguang Temple, the highest surviving timber building of the Tang dynasty, with life-sizeclay sculptures. It also features the Ming dynasty Shuxiang Temple with a huge complex of500 statues, representing Buddhist stories woven into three-dimensional pictures of mountainsand water. Overall, the buildings on the site catalogue the way in which Buddhist architecturedeveloped and influenced palace building in China for over a millennium.88

Mt. Wutai, literally, “the five terrace mountain”,is the highest in Northern China and is remarkablefor its morphology of precipitous slopes with fiveopen treeless peaks. Temples have been built on thissite from the 1st century AD to the early 20th century.“Qingliang Mountain”Mt. Wutai is a famous scenic spot under nationalprotection. It is famous for its Tibet-like brightblue sky and the breath taking natural beauty —beautiful surroundings, with trees covering ancienttemples and monasteries. The buildings look exceptionallyimpressive, and the stone carvings are ofsuperb craftsmanship. The painted sculptures are ofvarious shapes and types and no two sculptures are ofthe same kind.In the mountain area, spring arrives in April,snow falls in September, and even in mid-summerit is cool and pleasant. The cool and pleasant summerclimate of Wutai has also given rise to anothername: “Qingliang (Cool and Pleasant) Mountain”.The mountain has been regarded as an ideal place forescaping summer heat since ancient times.The beautiful scenery of Mount Wutai is a masterpieceof exquisite acts of nature, predominantlyvisible over the five main peaks: Wanghai Peak inthe east, Guayue Peak in the west, Jinxiu Peak in thesouth, Yedou Peak in the north, and the central CuiyanPeak.1 kilometer east of Taihuai Town in WutaiCounty, there is Wanghai Peak. Visitors standing onthe top of the peak can appreciate the height of 2,795meters. It is wonderful to see the sunrise in the morningfrom this location. Out of a sea of floating cloudsand writhing mist, the sun rises with thousands ofgolden rays. It fills visitors with amazement, as theycan believe it is the sun rising above the real sea.Guayue Peak reaches an altitude of 2,773 metersand is 13 kilometerswest of Taihuai Town. This peakprovides unique imagery in the evening when visitorscan see the elegant and serene sight of the gracefulbut hazy moon hanging above dense pine trees.Jinxiu Peak is 2,485 meters high and 12 kilometerssouth of Taihuai Town. This peak’s beauty isin the colorful flowers that grow all over it, and emitscents and perfumes from early May until late August.They decorate the peak by making it look as if itis wearing a floral silk coat.Peak of Flourishing Leaves is the highest pointof Mt. Wutai, as well as the highest in NorthernChina, at 3,058 meters. On the terrace of the peak,there is a natural pool that is over 300 square meters.From the terrace looking towards the north, Mt.Hengshan looms blanketed in endless greenery.According to the name of Cuiyan Peak (Peakof Green Rocks), you can easily guess the scenery ofthis peak. The rocks are green not because of theirown color, but because of the moss on their surface.The huge rocks resemble moving dragons when seenin sunlight, from which the name “dragon-writhingrocks” has been derived.Holy land of BuddhismMount Wutai is one of the Four Sacred Mountainsin Chinese Buddhism. Each of the four mountainsare viewed as the abode or place of practice(dàochǎng, 道 场 ) of one of the four great bodhisattvas.Wutai is the home of the Bodhisattva of wisdom,Manjusri in Chinese.Numerous temples of different dynasties formedthe place. A summer resort with a moderate climateand beautiful scenery tinted with a thick atmosphereof Buddhism. For many centuries, Mount Wutaiserves as the Holy Land for both the Han and TibetanBuddhism. Because of its Buddhist activities, itbecomes a popular place for many to worship.The Tang Poet Du Fu once wrote poems topraise the influence of Buddhism on the commonpeople. Two lines of his poem: “Four hundred eightytemples from Southern Dynasty; Countless terraceswithin mist and rain.”The poem described the temple constructionin Mount Wutai during the thousand years from89

CTHIS ISCHINAthe Southern and Northern Dynasty to Tang Dynasty(420~907A.D.). Mount Wutai takes a very important positionin Buddhist construction and is regarded as the “TreasureHouse of Ancient Constructions”.Nowadays, besides the morning and evening Buddhistscriptures singing lessons, lectures and discussions on Buddhismare the main activities in Mount Wutai. The lectureris often a famous monk.According to historical record, people attending thelecture ranged from few believers to thousands. In the reignof Emperor Dezong in Tang Dynasty, when Buddha MasterCheng Guan gave lectures in Grand Huayan Temple on“Explanation on Huayan Buddhist scripture” draw thousandsof monks came to the temple to listen.Mt. Wutai represents the holiest land in all of ChineseBuddhism. You can find over 40 spectacular temples in thearea, including a few massive temples dating back almost2000 years. The temples in Mount Wutai became popularsince Sui and Tang Dynasty.The Nanchan Temple, Foguang Temple, YanqingTemple and many others represented the ancient woodstructure works. They were regards as the “Treasures ofThousand” by architects from home and aboard.These wood structures set examples for the later generationto emulate on. Take Nanchan Temple as example,built in 782AD, the Buddhist statures in the temple arealmost identical as those in Dunhuang Mogao Grottos andhave very high artistic value.Today, most of the temples are still in good condition.Within their walls is a rich legacy of over 100,000 superbsculptures and paintings, along with a great quantity ofBuddhist cultural relics.Xiantong TempleXiantong Temple has the longest history and is themost prestigious. Occupying an area of 80,000 squaremeters, it was built initially in 68, during the Eastern HanDynasty (25-220), with the additions built by succeedingdynasties. Now it plays the most important role among thetemples, therefore, the Buddhist Association of Mt. Wutaiis situated there. The court-styled construction of it includesseven palaces, in one of which Manjusri Bodhisattva’s statuewas engraved and worshiped. The copper bell in front ofthe gate is the biggest bell on the mountain, with a weightof 22,045.9 pounds. Its toll can be heard around the entiremountain.Tayuan TempleThe 75.3-meter-high Tayuan Temple is the symbolof Mt. Wutai, so it becomes a “must-see”. Principally itpossesses the white Tibetan-style, which is called DabaiPagoda (Big White Pagoda). Since it stands in front of theother temples in Taihuai Town, it is even more eye-catching.Accompanying the graceful temple, there is also WenshufaPagoda where it is said that Manjusri Bodhisattva’shair is preserved, and the Dacangjing Pavilion (Collecting-Lections Pavilion) where volumes of lections are collected.90

Manjusri TempleLegend has it that Wenshu Bodhisattva dweltin the temple, so it is also called “ZhenrongYuan”or “Bodhisattva Summit”. It was built originally inNorthern Wei Dynasty (386-534). In the time ofEmperor Yongle of Ming Dynasty (1368 -1644), Lamaistsbegan to be stationed in Mt. Wutai, and thegreat Lama resided there. From then on, it becamethe principal temple of Lamaism. Emperors Kangxiand Qianlong of the Qing Dynasty (1644-1911) bothwent there and left ever-lasting epigraphs.Luohou TempleTo the east of the Xiantong Temple, LuohouTemple was set up as a Lamaist temple in the TangDynasty. One of its wonders is a wooden lotusshapedflower. Machinery turns it and the woodenpetals open and close. Inside are carved Buddhistfigures on a square platform.For tourists who want to visit all Manjusri Bodhisattva’sstatues in the five temples but cannot fortime constraints or other reasons, Dailuo Peak (DarkGreen Snail Peak) is a wonderful place to visit, becauseWufang Manjusri Palace (Palace of ManjusriBodhisattvas from five directions) houses statuesresembling the five Manjusri Bodhisattvas of eachterrace. It is located to the east of the temple group inthe center of Taihuai Town. 1,080 steps lead to thetop of the snail-shaped peak and a cable car is alsoavailable for convenience.If you are Buddhists, Mount Wutai is the rightplace for you to purify your hearts; if you are interestedin historical relics and old constructions, you arerecommended to come here, and you won’t be emptyhanded,just like those who have been back from amountain of treasures; if you are someone who wantto enjoy a quite and relax holiday, Mount Wutai cansurely bring you to an undisturbed fairyland.91

Badgering China withMisleading ReportsBy Adam MorleyThe key tounderstanding Chinais to put everythingin the proper contextand localize it asa report about aspecific area andnot the country as awhole.92China is a thriving country thatis taking the world by storm.China is a poor country withserious problems and bubblesare about to burst. China is an agrariansociety. China is an urban country.Chinese government is savvy. Chinesegovernment is corrupt. Chinese businesspeopleare successful through hard work.Chinese business-people are successfulthrough cheating. These are conflictingstories, yet you’ll find all of these themeswidely reported. None of these reports arerepresentative of China, yet none of themare inaccurate either. The key to understandingChina is to put everything in theproper context and localize it as a reportabout a specific area and not the countryas a whole. It is essential to rememberthat one in a million in a population poolof 1.3+ billion happens much more frequentlythan the phrase would otherwisesuggest.China is a massive country withgreat geographic and cultural diversity.The country is further segmented by thefact that local politics often trump nationalagendas and what laws you may seeenforced in Beijing won’t necessarily beenforced in other localities and vice versa.This is only natural in trying to governthe world’s largest population. For somecontext, the Qing and Mongols were consideredforeigner invaders just 100 yearsago, yet their homelands now constituteshuge tracts of modern China. The followingwarlord era, where the country wasdivided into fragments, is recent enoughthat it remains in living memory. Thatfragmentation was no accident as it is thenatural state of things for such a diverseand vast territory. What may be true inone city in China won’t necessarily be truein a neighboring city, let alone in the restof the country.A friend recently asked, “So howoften do you eat badger meat?” To mysurprise, he’d read on Wikipedia thatbadgers are commonly eaten in China andreadily available in markets. To my shock,the source of this information was from aBritish shaving brush company that gaveout this information as a way to assuagefears of badger cruelty – implying thatthe badgers that supplied the hair for thebrushes were killed regardless of existenceof badger shaving brushes. While therewas no intention of slander, this informationwas taken out of context and broughtto a much wider audience by a well-meaningperson on Wikipedia. I made a simpleedit to correct this misinformation butmy edit was rejected. As there aren’t anyarticles available that refute that badgermeat is commonly eaten in China, I hadnothing other than anecdotal evidenceand my edits were rejected. It wasn’t untilI got creative and posted links fromChinese online shopping sites that clearlysupported my cause that the oppositionconceded that is was wrong to argue forsomething of which they honestly knewnothing about despite that a shaving companysaid otherwise.That’s the problem with China, ithas such a wild reputation from being soclosed off and has such a massive varietyof people and culture under one flag thatpeople are more inclined to generalize andsimplify. You’ll find exotic things elsewherein the world but unlike China, itwon’t be all united under one banner butrather spread out among different countries.When an Ecuadorian eats guineapig for lunch, the reputation doesn’t carryover to Brazilians as well. Pele has neverhad to respond to questions about Ecuadorianculinary habits but Yao Ming isconstantly asked about whether or not heeats dog despite that the practice of eatingdog is very distant to his native Shanghai.Given enough scrutiny, any randomlyselected population of over 1 billion isgoing to flood the news with coverage ofunbelievable reports. While what you mayread is most likely true, it’s important toask yourself if it’s just another Wikipediabadger article.

Why Flexibility Is a Must inChina BusinessBy Miguel Ataíde CoelhoLet me start by saying that it is alwaysdangerous to make generalassessments, as there will alwaysbe cases that point to another direction.Let me also state that I believe thatflexibility is a must to doing business in anypart of the world. Therefore, my commentsare always personal and on relative, averageterms.The frequent changes in policies inregulations usually impact both Chineseand foreign businessmen. Both have to beable to adapt. Even when a certain rule targetsessentially foreign products or importprocedures, it also affects Chinese businesses,namely the importers.In Portugal, Europe and the West ingeneral, the concept of legal certainty andstability is very dear to the business communityand a cornerstone for business development.It includes, in most cases, aspectssuch as avoiding retroactive application ofnew legislation, involvement of the affectedplayers in commenting and/or drafting thenew legislation and adaptation periods tothe new Laws. How would you be able toplay Mahjong if the rules kept changingand you were not even involved or given advancednotice? The same question applies tobusiness and investment decisions.I believe that Chinese Authoritiesand businesses also value legal environmentstability, but the fact that the openingand change of China’s economicsystem and its inclusion in the world economicsystem are relatively recent makerules and regulations more subject tochange. It is to a certain point natural, butno excuse not to improve it.Regarding the frequent changes ofopinion of Chinese businessmen, my opinionis that this feeling arises mainly fromtwo characteristics that may be attributed todifferent cultural interpretations of decisionmaking and of written contracts.Decision making in China tends to bea collective process that involves more horizontaland vertical layers than in most ofits European/Western counterparts. Consequently,it may take longer and face morechanges. I should stress that, obviously, thedecision making process of a Chinese privatelyowned SME is substantially differentfrom the one of a large scale SOE.Furthermore, European/Westerncompanies tend to focus its negotiationstrategies on reaching a written contract thatprovides legal certainty, being strictly abidedby the parties or forcefully enforced by anindependent and easily accessible judiciary.Trust between the parties and their ownreputations are based on their capability offulfilling these written agreements and theseare the main reasons why these instrumentsare so important.This is not always the case in Chinawhere trust may depend more on personalrelationships, where the written contracttends to have a more “loose” interpretation(it is viewed sometimes as a minimumframework of understanding and subject tochange) and where access to the legal system,specially in the case of a foreign SME,may be complicated and expensive in relationto the values at stake.In the end, I would say that foreignbusinessmen have to make an effort to understandand differentiate between differentcultural approaches to negotiation and decisionmaking and bad faith tactics to avoidcommitments and responsibilities. The samegoes for Chinese businessmen.In my opinion, the numbers of tradeand investment f lows demonstrate thatmutual understanding is on the rise. This iscertainly the case when it comes to the bilateraleconomic relations between Portugaland China.I have once heard a Professor statingthat Chinese and Western businessmen aredifferent, but have no reason to look at eachother as extraterrestrials, because they areall human and all have, in the end, commoninterests and incentives. I could not agreemore: if the business opportunity is there,everyone should try to overcome “businessenvironment” difficulties. Otherwise,money will be left idle at the table.Decisionmaking inChina tends tobe a collectiveprocess thatinvolves morehorizontal andvertical layersthan in most ofits European/Westerncounterparts.(Author: Economicand Commercial Counselorat the PortugueseEmbassy in Beijing;Director of the BeijingOffice of the PortugueseBusiness DevelopmentAgency. This article expressesstrictly personalviews of the author.)93

CultureEatingCulture in ChinaEating is a dominant aspect of the Chinese culture. Family reunion, business talk, friends party, big day celebrationare all in forms of a kind of eating in China. Chinese cuisine is also highly popular in other parts of the world— from Asia to the Americas, Australia, Western Europe and Southern Africa.Traditional staplesFlour and rice are the two main food staples in China. Ingeneral, rice ( 米 饭 mǐ fàn) is the major food source for peoplefrom rice farming areas in southern China. Rice is also usedto produce beers, wines and vinegars. In wheat farming areasin Northern China, people largely rely on flour based foodssuch as noodles, breads, dumplings and steamed buns.Noodles ( 面 条 miàn tiáo) are symbolic of long life andgood health according to Chinese tradition. It is also a traditionto eat noodles at one's birthday. They come dry or freshin a variety of sizes, shapes and textures and are often servedin soups and fried as toppings.Tofu ( 豆 腐 dòu fu) is another popular product often usedas a meat or cheese substitute. It is a soy-based product whichis highly nutritious, inexpensive and versatile. It has a highprotein/fat ratio.A tradition of Chinese big banquet is called the ManchuHan Imperial Feast ( 满 汉 全 席 mǎn hàn quán xí). It is a feastthat consisted of at least 108 unique dishes from the Manchuand Han cultures- is one of the most notable Chinese cuisinessince the Qing Dynasty.Regional cuisinesA number of different styles contribute to Chinese cuisine,but the best known and most influential are Shandongcuisine ( 鲁 菜 lŭ cài), Sichuan cuisine ( 川 菜 chuān cài), Jiangsucuisine ( 苏 菜 sū cài) and Guangdong (Cantonese) cuisine( 粤 菜 yuè cài), which are called the Famous Four Cuisinesin China ( 四 大 菜 系 sì dà cài xì). These styles are distinctivefrom one another due to factors such as available resources,climate, geography, history, cooking techniques and lifestyle.Sichuan style favours the use of lots of garlic and shallotsover lots of chilli and spices, while Guangdong favors preparingseafood over other meats and fowl. Jiangsu cuisine favorscooking techniques such as braising and stewing, while Sichuancuisine employs baking, scalding, and wrapping.Hairy crab is a highly sought after local delicacy inShanghai, as it can be found in lakes within the region. BeijingRoast Duck is another popular dish which is well knownoutside China. Based on the raw materials and ingredientsused, the method of preparation, and cultural differences, avariety of foods with different flavors and textures are preparedin different regions of the country. Many traditionalregional cuisines rely on basic methods of preservation suchas drying, salting, pickling and fermentation.Inviting guestsIn China, eating out is one of the most accepted waysto treat guests. Similar to Westerners drinking in a bar withfriends, eating together in China is a way to socialize anddeepen friendship.There are common rules for inviting guests over. Whenthe guest of honor enters into the room, the hosts stand untilthe guest of honor is seated. The host then orders the dishesbrought, and the guest should be silent. When the dishesarrive, the meal begins with a toast from the host, and theguests then make a toast in turn in the honor of the host. Theguest of honor should be the first one to start the meal. Thebest food in a dish should be left for the guest of honor. Whenthe hostess says her food is not good enough, the guest mustbe courteous and tell her it is the best food he has ever tasted.Guests should never “split the bill” with the host. A guestwho “split(s) the bill” is very ungracious and embarrassing tothe host. However, it is expected for the guest to offer to payfor the meal multiple times, but ultimately allow the host topay.Chopstick usageIn most dishes in Chinese cuisine, food is cooked in bitesizedpieces and easy to grab and eat. Therefore, chopsticks( 筷 子 kuài zi) are used at the table instead of forks and knives.Since chopsticks are often used in many dishes in Chinesecuisine, knowing the correct chopsticks usage is essential.The most common chopsticks usages are the following:* It does not matter whether you grab the chopsticks inthe middle or at the end, but you should make sure that theends are even.* Chopsticks are not used to move bowls or plates.* Chopsticks are not used to toy with one's food or withdishes in common.* When not in use, chopsticks must always be placedneatly on the table with two sticks lying tidily next to eachother at both ends.* Treat chopsticks as extension of your fingers, and donot point at other people or wave chopsticks around.* Do not suck the tips of chopsticks.* Do not pierce food with chopsticks.* Do not point the chopsticks at another person. Thisamounts to insulting that person.* Do not bang your chopsticks like drums. It impliesyou are a child.* Do not stick chopsticks vertically in a bowl of rice; itimplies the food is for the dead.Question:What is the eating culture inyour country?94

吃chī biàn zhōng guó遍 中 国Food in Chinese包 子 bāo zi steamed filled breadbun, usually meat (pork)煎 饼 果 子 jiān bǐng guǒ zipancakes with vegetable filling馒 头 mán tou steamed bun春 卷 chūn juǎn fried spring roll窝 窝 头 wō wo tóubread bun with a hollow bottom粥 zhōu congee饮 料 yǐn liào Drinks肉 类 ròu lèi Meat牛 肉 niú ròu beef猪 肉 zhū ròu pork鸡 肉 jī ròu chicken鸡 蛋 jī dàn egg咖 喱 鸡 gā lí jī curry chicken北 京 烤 鸭 běi jīng kǎo yāroast beijing duck烤 羊 肉 kǎo yáng ròuroast lamb糖 醋 排 骨 táng cù pái gŭpork chops with sweet andsour sauce咕 噜 肉 gū lu ròusweet and sour pork海 鲜 hǎi xiān Sea Food鱼 yǘ fish螃 蟹 páng xiè crab大 闸 蟹 dà zhá xiè hairy crab虾 xiā prawn龙 虾 lóng xiā lobster蔬 菜 shū cài Vegetables芦 笋 lú shŭn asparagus玉 米 yǜ mǐ corn黄 瓜 huáng guā cucumber蘑 菇 mó gū mushroom绿 豆 芽 lǜ dòu yámung bean sprouts洋 葱 yáng cōng onion荷 兰 豆 hé lán dòu snow peas西 红 柿 xī hóng shì tomato老 醋 花 生 lǎ o c ù h uā s h ē n gpeanuts in aged vinegar水 果 shuǐ guǒ Fruit杨 梅 yáng méi bayberry fruit火 龙 果 huǒ lóng guǒdragon fruit橙 子 chéng zi orange葡 萄 pú tao grape苹 果 píng guǒ apple香 蕉 xiāng jiāo banana梨 lí pear樱 桃 yīng táo cherry蓝 莓 lán méi blue berry汤 tāng Soup西 红 柿 鸡 蛋 汤 xī hóng shì jīdàn tāngtomato and egg soup紫 菜 汤 zǐ cài tāngdried purple seaweed soup珍 珠 白 玉 汤 zhēn zhū bái yǜ tāngmeat ball and bean curd soup主 食 zhŭ shí Main Dish米 饭 mǐ fàn rice炒 饭 chǎo fàn stir-fried rice面 条 miàn tiáo noodles米 粉 mǐ fěn rice-noodle饺 子 jiǎo zi dumpling (with vegetable and meat stuffing)啤 酒 pí jiŭ beer冰 的 bīng de ice热 的 rè de hot常 温 cháng wēnroom temperature白 酒 bái jiŭChinese white alcohol spirits五 粮 液 wŭ liáng yè wuliangye贵 州 茅 台 guì zhōu máo táikweichow moutai绿 茶 lǜ chá green tea红 茶 hóng chá red tea热 巧 克 力 rè qiǎo kē lìhot chocolate牛 奶 niú nǎi milk酸 奶 suān nǎi yoghurt咖 啡 kā fēi coffee果 汁 guǒ zhī fruit juice橙 汁 chéng zhī orange juice佐 料 zuǒ liào Condiments辣 椒 là jiāo hot pepper油 泼 辣 子 yóu pō là zithe oil sprinkles over the chili / hot pepper盐 yán salt胡 椒 hú jiāo pepper麻 油 má yóu sesame oil酱 油 jiàng yóu soy sauce醋 cù vinegar糖 táng sugarOther expression in restaurant服 务 员 fú wù yuán waiter菜 单 cài dān menu点 菜 diǎn cài order the menu买 单 mǎi dān pay the bill打 包 dǎ bāo take away95

Member List of Councilof China’s Foreign TradeHonorary Chairmen:Wan JifeiHe GuangweiLi KenongConsultants:Chairman of China’s Council for the Promotion of InternationalTradeFormer Director General of China National Tourism AdministrationVice Minister of General Administration of China CustomsShi Guangsheng Vice Director of Financial and Economic Committee ofNPC’s Standing CommitteeFormer Minister of the Administration of Foreign Economicand Trade CooperationGan Ziyu Vice Director of Financial and Economic Committee ofNPC’s Standing CommitteeFormer Vice Director of National Development and ReformCommissionYu Xiaosong Consultant of China’s Council for the Promotion of InternationalTradeFormer Chairman of China’s Council for the Promotion ofInternational TradeChairman of the Council:Zhang WeiStanding Vice Chairmen:Wong Kam HongLin ZhuoyanVice Chairman of China’s Council for the Promotion of InternationalTradeDeputy Chairman of Midland Holdings Ltd.Chairman of the Board of Director and Chief Executive Officerof Outlet (China) Ltd.Benjamin Fok Board Member of Fok Ying Tung Group Co., Ltd .William Chiu Chairman of Beijing Badaling Cableway Ltd.Huang XueshengYan QimingPresident of Eurasia GroupGeneral Manager of Sumitomo Chemical Investment (China)Co., Ltd.Vice Chairmen: (Names in Alphabetical Order)Alexandru Ioan Executive Chairman of China Town Group, RomaniaAlyce Su Founder of China Queen Capital (HK) Ltd.Angela A. Chao Vice President of Foremost GroupAnnie Wu Suk-ching Chairman of Hong Kong Sub-Association, World Trade.Center Association / Vice Chairman of Beijing Air CateringLtd.Banthoon Lamsam Chief Executive Officer of The KASIKORNBANK PublicCompany LimitedCao Xiaopeng Chairman of Rongji Investment Ltd., MacaoCai ChenghuaChairman of Ji Tong Thai Long-Bis Science Croup Co., Ltd.Chau Pui YinChen JinlongChen RenaiChen MinChen XiaopingChen XiaofengDirector of Accordion Troupe Hong KongSenior Director of Far East Holding Group Co., Ltd.Chairman of Jinghua Trade Company, ItalyChairman of Zhejiang Fuheng Metal Product Co., Ltd.General Manager of Zhejiang Hongyang GroupChairman of Wenzhou Chengwen Import & Export Co,.Ltd.Chen Xiaozhong Chairman of Wenzhou Xingyu Stationery & Sports ManufacturingCo., Ltd.Chen Zhiling Operating Chairman of Wynn MacauChu Jiwang Chairman of Ningbo Ruyi Joint Stock Co.,LtdDato’ Lim Hock San Managing Director of LBS BINA Group Berhad, MalaysiaDuan Jing General Manager of Beijing Glory Glamor InternationalCommerce & Exhibition Co., Ltd.Gallant Y.T. Hong Kong PhilanthropistGao Kecheng Chairman of Jibao Enterprise Development (Singapore) Co.,Ltd.He Chaoqiong Managing Director of Shun Tak Holdings LimitedHe Jinsheng President of e-Phone Group (USA)Hu Zhiqiang Chairman of Foster, Andrew & Co., Inc.Hu Anhua Chairman of Neonlite Electronic & Lighting (HK) Ltd.Huang Guoyu Founder and Chairman of 4th World Chinese EntrepreneursConvention and of Canada Founding & Development SocietyHu Yunming Executive Director of King Wong Development Co., Ltd.Huang Yizong President of United Overseas Bank (China) Ltd.Ip Sio Man Managing Director of Vang Kei Hong Trading Co. Ltd.Jacky Chen Chairman of Thailand Council for the Promotion of Economyand Trade of Small and Medium-Sized EnterprisesJia Baojun General Manager of Sinosteel CorporationJorge Mora Asia-Pacific President of Veolia waterJohn Gong Chairman of ICP DAS USA, Inc.Judy Yu President of the Carsac Story Ltd.JP Mr. Wu Yunyuan Chairman of IWA, AustraliaKampol Srethbhakdi President of The Thai Malleable Iron and Steel Co.,Ltd.Kong Lingfa President and General Manager of Tianxiang Group (Anhui)Co., Ltd.Lai Xiaomin President of China Huatong Asset Management CorporationLeow Yoon Loy President of IPC Shopping Services Ltd., MalaysiaLei Yayun Chairman of East West CroupLi Daohe Chairman of Ma’anshan Songyuan GroupLi Hexun President of Tetra Pak China Ltd.Li Jinyou Managing Director of County Height Holdings, MalaysiaLin De Cheng, Xue Ping Cristin C.E.O. & Executive Director of i-FinancialProGroup Ltd.Li Songzhi Chairman of Myanmar International Business Promotion Centre.Li Jinyuan Chairman & President of Tianjin TIENS Group Co., Ltd.Lin Dexiang Chairman of GITI Tire (China) Investment Co., Ltd.Lin Hailin President of China National Automotive Industry InternationalCorp.Lim Chee Oun Executive Chairman of Keppei Corporation Ltd., Singapore

Lu Jianfei Chairman of Angola Nantong Holding Corporation Ltd.Ma Renlin General Manager of Shanghai Meiheng Investment Co.,Ltd.Mimy Mock de Fung Chairman of General Committee of Sino-Venezuela Trade,Industry, Agriculture and TourismOuyang Riping Chairman of the board of DaTong Group (West Africa)Qiu Dachang Vice Chariman & Executive President of Far East DevelopmentCo., Ltd.Ren Zhijie President of Beijing Century Boai International MedicineTechnology Development Ltd.Shen Yaozhang Chairman of Shanghai Baoyao Minmetals Import & ExportTrade Co., Ltd.Sun Ziyu Managing Director of China Harbor Engineering CompanyLtd.Teo Cheng Keng Chairman of Bride of the World Pte Ltd.Wang Yanping Chairman of Fujian Guohang Ocean Group Holdings Ltd.Wang Jian Chairman of Dutch China Trade And Economic PromoteAssociation/Chairman of YEHWANG Industry and TradeGroup Holdings Ltd.Wang Shousong Chairman of Wang’s Corporate Group, HollandWang Zhenling Chairman of Hanxing (China) Group Ltd.Wang Jiaming Chairman of Canada Ebridge International Ltd.Wang Qinghai General Manager of Shougang Group Council of China’sForeign Wang ShufangChairman of Chinese Committee of Golden Coast, AustraliaWang Wu Managing Director of Central Huijin (Beijing) InvestmentLtd.Wang Wenhan Chairman of Hong Kong I Link Group Co., Ltd.Wang Yingwei Executive Vice Chairman and Executive President of HsinWilliam Kuan Executive Director of Victory Real Estate Development Co.,Ltd.Wu Yingmei Chong Construction Group Co., Ltd.Xiao Dexiong Chairman of Tw Fok Holding Co., Ltd.Xie Bingzhen Chairman of Strategic Decision Committee of China MachiGroupXie Liqun Chairman of Yunnan Anhong Real Estate DevelopmentCo., Ltd.Xie Mingcheng Chairman of China Win-Win Group LimitedXu LiChairman of the board of Nankai Transport International(HK) Co. Ltd.Xu Zhiming Chairman of Yuemei GroupXue Baojin President of Beijing Smart Garments Co., Ltd.Yang Jinhua Chairman of King Far B.V., HolandYang Luming Managing Director of Australian Chen Enxi Group Co.,Ltd.You Kaicheng Chairman & General Manager of Binhtien Imex Co., PTE.Ltd.Zhao Hui Manager of Wuhu Cigarette Factory, Anhui ProvinceZhang Xiqing Chairman of Union of Overseas Chinese GreeceZhang Jianwei President of Sino-trans LimitedZhang Qian Executive President of MM Marketing CommunicationsConsulting Co., Ltd.Zhang Weizhi Chairman of Macau-Portugal Chamber of CommerceZheng WeiguangZhou JinhuiZhu ShanyiZhuang YaozhiChairman of Ji Tong Thai Long-Bis Science Croup Co., Ltd.Chairman of Legendale Constructive Co., Ltd, MacauChariman of Jiangsu Mingda Mining Investment Co. Ltd.Honorary Chairman of Global Petrolum Industry DevelopmentCo. Ltd.Zheng Wanchun President of China Great Wall Asset Management CorporationZhong Shenqiang Executive Director of Cheung Kong (Holdings) LtdZou Weimin Chairman and General Manager of Metallurgical Corporationof China Overseas Ltd.Executive Directors:Chen Mingzong Chairman of Intan Group IndonesiaHong Guiren Wijayakusuma Group Coal Mining and Power StationIndonasia-China Cooperative InvestmentLi Zhimin Chairman, Xinjiang Tianhai Lvzhou Group Co., Ltd.Michael Kwan Associate Director of Shun Tak Holdings LimitedMisha Lu Marketing Director of TÜV SÜD in Mainland China,Hongkong and TaiwanThura Lwin Chairman of Tah More Hnye Chan Tnar Comneroe Co.,Ltd.Wu Conglin Chairman of the U.S. Guam JJQ International Trade Co.,Ltd.Yang Zongde(Lin) Managing Director of GLENCAIRN InternationalGroupYu Mingquan Chairman of Juhai Group, RussiaDirectors:Chen CaijiChairman of PT. Gunung Garuda BrazilCai Zhipeng Chairman of Shantou Diming Trade Co., Ltd.Dato’ Yan Mengjie Executive Chairman of VIBRANTWAVES S.D.H.BHD,MalaysiaHuang Biyun Chairman of Huada Industry and Trade Development Co.,Ltd.Huang Jianlong Vice President of SANY Group Co., Ltd.Huang Weimin Chairman of Weimin International Holdings Co., Ltd.Hu Huafeng Chairman of Italy Hengsheng Trading Co., Ltd.Hung Chi Ching Chairman of HCC Assets Management Ltd.Huang YiLi WeihuaLin JiashuiLuo MeilingGong XuebinOuyang HaipengTong QiangWang WeiXin WeihuaYang ChuanliZhang YinChairman of Dunfeng Holdings Inc.President of the U.S. Houston Internation Trade CenterExecutive Chairman of Unimech GroupExecutive President of Life Enlightenment Charity FoundationCo., LimitedChairman of Longda Foodstuff Group Co., Ltd.General Manager of Patent International Logistics (Shenzhen)Co., Ltd.Chief of Zhaizhen Coal Pit, Shandong Taishan Energy Co.,Ltd.Chairman of Beijing Long-young Technology Co., Ltd.Chairman of Shandong Wanbao Group Co., Ltd.Chairman of Jingu Jewellery Ltd.Chairman of Nine Dragons Paper (Holdings) Limited