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Editorial Editor Jamshed Ullah News Editors Summer Wong Ji Long Mike Lincoln Jenny Alvin Research & Analysis Wang Aiguo He Cheng Shi Chengwei leon Ludwig Uzma Zafar
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FM’s amazing move
A
ccording to news reports, China’sForeign Minister Wang Yi has turned to a Hongqi H7 sedan as his official car, instead of using any luxurious foreign
model. The Hongqi H7 sedan, priced at between 299,800 Yuan ($48,950) and 479,800 Yuan, is a newly developed sedan of the First Automobile Works Group Corp, marketed to officials at the ministerial level or above. at a time when China's domestic automobile industry was going relatively weak, the decision by the Chinese Foreign Minister to use local car for his official use appears to be not merely a patriotic move but a bid to promote country’s Auto sector and to restore local and international confidence in abilities and capabilities of Chinese carmakers despite the fact that the Chinese government has already been introducing different ways and means to promote the production of the local Auto industry. it remains a fact that most of China's official cars are foreign made, despite the 2002 Government Procurement Law stipulating that domestic brands should be purchased. In 2012, the Ministry of Industry and Information Technology published an official car procurement manual, which included more than 400 different Chinesemade cars. We believe that the decision that the Chinese FM has taken and is being followed by his other colleagues from the government is an amazing example to be followed by the world leaders to promote their respective local industries. We also believe that such decisions would have a great impact on china’s economy in coming years and it would come as a great booster for the local industry.
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Editor
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in this issue 01, 07 July 2013 04
Cover Story
Watchdog steps up standards on recalls 06
FM opts to use local Sedan
Growth of China's foreign direct investment in May dropped to just under 0.3 percent, an indicator that global companies remain hesitant to expand in China amid its economic slowdown.
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in this issue 09
Wanda expands global footprint
China Mobile & Huawei take 4G to the Everest
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Chinese film industry still grapples with problems
China strikes back with world’s fastest computer
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Society
Watchdog steps up standards on recalls
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CED Monitoring HANGZHOU-The China Food and Drug Administration, or CFDA, the country's top food and drug watchdog, has vowed to further strengthen quality supervision over products to ensure timely recalls, particularly from overseas. The high-profile pledge came in an online notice issued by the administration, informing the public of a meeting between it and Johnson & Johnson, a US medical device, pharmaceutical and consumer packaged goods manufacturer. Since 2009, the company has issued 33 product recalls on the Chinese mainland, statistics from the administration show. However, the Health Times reported on Sunday that Johnson & Johnson has issued 51 product recalls since 2005 worldwide, of which 48 were not issued on the Chinese mainland. Products recalled ranged from blood-sugar meters to hip-implant parts, while most were over-thecounter medications, including the allergy medicine Zyrtec and pain reliever Motrin, reports said. Complaints about these products included musty smell, the presence of metal shavings and excessive dose concentrations. The company has withdrawn about 1.6 million bot-
tles of products, including the popular cold syrup Children's Tylenol, in South Korea in late April, citing a risk of liver damage. In early May, South Korea's Ministry of Food and Drug Safety ordered Janssen Korea to halt production of five drugs, including the children's syrup, citing improper concentration of the main active ingredient. Shanghai Johnson & Johnson Pharmaceuticals Ltd, the company's unit on the mainland, issued an announcement shortly after the recall alleging that the problem syrup was limited to South Korea. In response to public concern over double standard practices, the company issued another online announcement on Friday, saying the same standards of quality control and product recall are enforced in all of its markets, including China. All product recalls issued in China are carried out in line with the country's rules and regulations and are reported to the CFDA, it said. The company added that overseas recalls not issued in China are for products that are not registered, sold or produced in the country. According to China's regulations for drug recalls issued in 2007, the entity issuing the recall should be a specific producer of a problem drug.
Sun Zhongshi, a professor with the national monitoring center for the rational use of medication under the National Health and Family Planning Commission, said that recalls should be uniform in all countries if the problem detected involves the efficacy of, or an adverse reaction to, the drug products. For problems mainly concerning quality control, the company only withdraws products in the affected areas, he added. But Sun said that company should inform drug authorities in various markets of all recalls for reference purposes. Despite the fact the latest recall in South Korea didn't affect products sold in other markets, including China and the US, the CFDA met with the company on Thursday to address product quality and recall issues. Frequent recalls over quality concerns reflect possible flaws in the quality management system of Johnson & Johnson, and the company should carefully look into the sources of the issue to eliminate safety risks and ensure the quality of products for the market, the CFDA said in an online notice issued after the meeting. "Problem drug products recalled outside of China have to be recalled within the country as well," it pointed out. 05
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Society
FM opts to use local Sedan 06
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CED Monitoring BEIJING-Foreign Minister Wang Yi has turned to a Hongqi H7 sedan as his official car, which experts said is a sign Chinese officials are setting their sights on national brands. Wang's sedan was put into use on Monday, according to the ministry's official micro blog. The message was forwarded more than 2,500 times in three hours, and was quoted by major Chinese media. The Hongqi H7 sedan, priced at between 299,800 Yuan ($48,950) and 479,800 Yuan, is a newly developed sedan of the First Automobile Works Group Corp, marketed to officials at the ministerial level or above. FAW's share price rose abruptly after 1:05 pm, when the news broke. "Government officials should have used domestic cars earlier," said Huang Shengmin, director of the School of Advertising of the Communication University of China. "China's domestic automobile industry was weak. The government has been trying to promote the production of the industry. So officials should set examples for consumers through their own actions," he s a i d . Huang said the foreign minister is unique because people tend to pay more attention to his clothing and cars. Most of China's official cars are foreign made, despite the 2002 Government Procurement Law stipulating that domestic brands should be purchased.
In 2012, the Ministry of Industry and Information Technology published an official car procurement manual, which included more than 400 different Chinesemade cars. "Consumers may be able to choose between a domestic brand or a foreign brand, but government procurement, which uses taxpayers' money, should not have options other than domestic products," said Wang Yong, secretary-general of Brand China Industry Union. "The case is not unique to China. I visited the US, France, Germany and Japan, and all the official cars were local brands," he said. However, Jia Xinguang, a senior researcher of the Automotive Industry Development Institute, said the foreign minister's choice has more political significance than actual meaning for the industry. "Even if all the officials at ministerial level or above use national brands, they are too limited in number to revitalize the whole industry," Jia said, adding that officials at lower levels could buy foreign cars. On the other hand, he noted that since the Hongqi H7 sedan is designed for officials, few people would turn to it when choosing a family car. "The design of Hongqi H7 sedan, suitable for official use, is elegant, while most consumers would choose cars that have a more luxurious appearance and more comfortable interior design," Jia said. He said that foreign brands have advantages over domestic brands because of their better management. 07
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Finance
Wanda expands global footprint CED Monitoring BEIJING-Chinese conglomerate Dalian Wanda Group is to invest more than 1 billion pounds ($1.6 billion) to buy a British yacht maker and to build a top-end hotel in central London, in a bid to expand its overseas presence. The company said on Wednesday that it will pay about 320 million pounds to acquire a 91.81 percent stake in Sunseeker International Ltd, a Dorset-based luxury yacht manufacturer which is famous for providing yachts for James Bond movies. The remaining 8.19 percent stake will be acquired by Sunseeker's management team. The deal is expected to be com08
pleted by mid-August. Wanda Group also said it will invest 700 million pounds to build a five-star, 160-room hotel on the South Bank overlooking the Thames River. The investment marks the company's second major step in its overseas expansion strategy. Wanda set the current record for the biggest Chinese takeover of a US company when it bought the AMC Entertainment Holdings Inc cinema chain for $2.6 billion last year. "We choose the most developed economies in the world, such as the United States and the United Kingdom, as our top destinations for overseas expansion," said Wang Jianlin, chairman of
Wanda Group, which reported revenue of 141.7 billion Yuan ($23.1 billion) last year. "We'll not rule out investing in other developing countries, but we prefer to do our global expansion moves in well-developed markets with well-established laws and regulations," Wang said, adding the company's overseas operations are expected to contribute to the company's total revenue by 2020. Wang added that he's very confident about the potential of China's luxury yacht market. For instance, his company, which bought a Sunseeker Predator 108 Special Edition in 2010, will need to buy at least 30 luxury
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yachts for the future operations of three yacht clubs in three Chinese coastal cities as part of the company's plans to further develop its tourism and resort business. He said the company is also considering setting up a manufacturing base for Sunseeker in China to lower the price of luxury yachts in the country. The hefty prices are a result of high import duties, which can be as high as 43 percent. The booming luxury market in China and Chinese people's growing appetite for luxury goods are only part of reason for Wanda's expansion into the UK. The company's five-star hotel is expected to bring a Chinese touch to London and meet the needs of Chinese tourists, who are increasingly traveling overseas. According to Wang, the 200meter-tall hotel, located next to the Palace of Westminster and Battersea Power Station, is expected to become one of London's new landmark buildings. He said the company will build more five-star hotels overseas and
plans to expand into eight to 10 major global cities in the next 10 years. Sebastian Wood, the UK's ambassador to China, said he has seen a surge in investment from Chinese companies in the past few years. "The UK is the most open economy. As many as 500 Chinese companies operate there," he said. In 2011, the UK was the thirdlargest European Union destination for Chinese investment, after Luxembourg and France, according to the Ministry of Commerce. Chinese direct investment in the country in 2011 was $2.5 billion, it said. A report released by Rhodium Group, an economic consultancy, in June 2012, predicted that Chinese outbound direct investment will reach $1 trillion to $2 trillion between 2010 and 2020. The report said that a quarter of that will go to Europe through mergers and acquisitions or greenfield investments. Gary Liu, executive director of the CEIBS Lujiazui Institute of International Finance in Shanghai,
said that this is a "very good time" to invest in Europe due to the current period of economic turmoil. "Some European assets may be undervalued, but that doesn't mean they're bad, actually they have high potential growth and appreciation value," Liu said. "Also, the appreciation of the renminbi makes the cost of acquisitions much lower." But Liu also warned of the risks of overseas acquisitions, adding that the completion of a deal does not necessarily mean success. "The performance of the parent company can be damaged if it's unable to manage the company it buys, which likely has a totally different culture," he said. Wang Jianlin said the company will keep Sunseeker's existing management, workforce and production base in the UK. "We want to have a diverse culture and management style in Wanda Group because our goal is to become a global company," Wang said. 09
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Finance
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Chinese film industry still grapples with problems
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CED Monitoring SHANGHAI-Despite rapid growth, the Chinese film industry still faces some nagging problems that industry experts say must be resolved before it moves on to the next level of its development. Zhang Tian, the general manager of Shanghai's Culture Assets and Equity Exchange - the first pilot program backed by the central government for cultural enterprises to trade copyrights and equities told a film and TV finance workshop this week that inadequacies in intellectual property right protection, in particular, have continued to cloud the industry. What's more, Zhang said the lack of a formal channel for closer communication between filmmakers and investors has blocked the flow of investment money into the
industry. "More financing products, tools, and trading measures would help investors and film makers to make better use of various resources, and the exploration of further financing models would benefit the industry in the long run," added Zhang. These issues aside, however, China's film-making market has been growing fast since 2010. The country's combined box office revenues reached $2.7 billion in 2012, a 36 percent year-onyear increase. It is now the world's secondlargest film market just behind the United States, and the world's third-largest filmmaker, according to the Motion Picture Association. "China, and especially Shanghai, continues to be a popular backdrop and facility for both
local and foreign film productions," said Rance Pow, the president of Artisan Gateway, a leading film and cinema industry consulting firm, at the launch of a report on the economic contribution of the Shanghai film and television industry. His company was commissioned by the US Consulate in Shanghai to release the study. Pow added that it is essential to ensure that intellectual property rights are protected before considering how to raise film investment and make money out of any movie projects. Funding for filmmaking and television production has also been expanding. According to data from the Culture Assets and Equity Exchange, China now has 18 funds that specialize in filmmaking and 11
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Finance
TV investment, worth a combined total of more than 19 billion Yuan ($3.01 billion). Copyright evaluation and risk management for lenders, as well as intellectual property right breaches have also become major obstacles for the growth of China's filmmaking industry, and investors, under certain circumstances, may see filmmaking as a risky area, according to Zhang. Michael Ellis, president and 12
managing director of the Motion Picture Association, Asia Pacific, said establishing market conditions which make it attractive for sustainable theatrical and non-theatrical returns will benefit China's filmmaking industry. While around three-quarters of film revenue in the US comes from non-theatrical channels such as theme parks, hotels and comic products, in China only about 10 percent of total film revenue is
generated outside of theaters, which means China is yet to fully exploit that side of the industry, said Ellis. A recent report jointly commissioned by the China Film Distributors & Exhibitors Association and the Motion Picture Association estimated that China's total income from DVD, Blue-ray, and VCD sales and rentals in 2011 reached just over 350 million Yuan. Estimates suggest Shanghai's
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home entertainment market potential ranges between 140 million Yuan and 152 million Yuan. Jo Yan, senior vice-president of Walt Disney Studio Distribution, Greater China, emphasized that in China, it is not so much about how much is invested, but about the story. "Money has never been the key problem for China's film industry, and most of the recent blockbusters were not necessarily big
budget movies," he said. He added that the Chinese digital market is growing and consolidating and that he expected it to be very profitable in future for local film producers. In 2012, the total number of cinema screens in China grew to over 13,000 nationally after 3,832 were added during the year - an average of 10.5 new screens per day. About 91.5 percent of screens are 2K digital projection in-
stallations, and most are 3D capable. Yu Dong, chairman and chief executive officer of Bona Film Group Ltd, said that in five years he expects China to have a filmmaking industry worth $10 billion. But he added: "It is essential to make reforms to current filmmaking industry policies. Filmmakers need to improve product quality, and policy makers need to introduce a film rating system." 13
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IT
China Mobile & Huawei take 4G to the Everest CED Monitoring BEIJING-China Mobile's Tibet unit has held a 4G trial network launching ceremony and has announced that more than 50 4G experience locations were already deployed, and the 4G era is speeding up to embrace Tibet, a consecrated border land of China. Zhuo Feng, the General Manager of China Mobile's Tibet arm said, the operator has been committed to provide mobile communication service everywhere for customers by using the most information communication technologies, and help enhancing overall level of information in Tibet. Launching 4G trial network in Tibet, is not only to meet the development needs of Tibet Mobile, 14
but also to implement the national information construction strategy. And most importantly, it’s an important measure for the benefit of the people of Tibet. Zhuo also indicated that China Mobile plans to invest nearly CNY 300 million Yuan in Tibet to build more than 800 4G base stations this year. The plan aims at achieving continuous coverage in the urban core of Lhasa, and hot-spots will cover the general districts of Lhasa as well as the remaining six main cities in Tibet. Meanwhile, demonstration sites would be put into construction in each county town of Tibet. The highways and major scenic spots will get hot-spots coverage as well. China Mobile will further boost investment plans to
make the 4G network coverage available to all areas of the Tibet Autonomous Region including county, rural area and village, which is about to bring 4G era with fast and more convenient communication services to 3 million Tibetan people. At the scene of the launching ceremony, China Mobile demonstrated a series of new 4G technologies and offerings to more than 200 guests. What impress most is the HD video “transfer as you shoot” feature based on 4G, which successfully brings the pictures and sounds from all directions including Everest Base Camp, Shanan and Nyingchi business hall, the Potala Palace and other 4G coverage areas to the main venue in Lhasa in real time. Huawei’s project man-
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IT
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New 4G technologies and offerings to more than 200 guests ager who is in charge of Tibet network deployment said, in addition to the network in launching ceremony location, the TD-LTE base stations at Everest Base Camp, Shannan, Nyingchi business hall and other venues involved in the activity were all built by Huawei. Among all the difficulties, the construction of base station at Everest Base Camp can be on the top of the list. According to C114, it’s the second cooperation between China Mobile and Huawei at Mount Everest. In the second half of 2007, to ensure the safety of mountaineering tour and to support the 2008 Beijing Olympic Games torch relay, China Mobile, together with Huawei and other partners, realized GSM coverage at Mount Everest after overcoming a series of difficulties as weather, transportation,etc.Now, Huawei’s GSM base stations at Everest Base Camp has been running stably for many years and provide tourists invaluable communication services.
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IT
China strikes back with world’s fastest computer
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CED Monitoring BEIJING-China is back on top of the supercomputing world with the successful operation of Tianhe-2, the world's fastest computer. A delighted Liao Xiangke, the 50-year-old chief designer, said his team's supercomputing dream will never rest. "Like astronauts' space dreams and sailors' aircraft carrier dreams, our supercomputing dream is part of the Chinese dream," he said. Last week, TOP500, an organization that evaluates highperformance computers worldwide, announced that
Tianhe-2 was the world's fastest supercomputer. It's ultra-high capability of 54.9 petaops, or 54.9 quadrillion calculations per second, outshone competitors from the United States and Japan. It will provide an open platform for research, education and high performance computing services for southern China. Jack Dongarra, the US supercomputing expert who compiles the TOP500 list, said there are a number of unique and interesting features of Tianhe-2, including the FT-1500 central processing unit. Li Nan, deputy chief designer and spokesman for the
Tianhe-2 project, said that of the many technological innovations on this "magic instrument", the FT-1500 is "his pride". Supported by national funding and developed by the National University of Defense Technology, Tianhe-2 was built in just 15 months with a calculation capability 11 times its predecessor Tianhe-1A. With a peak performance of 4.7 petaops, Tianhe-1A headed the TOP500 list in November 2010, becoming the ďŹ rst Chinese supercomputer champion. Yet by the end of 2012, the leading position had been lost to the K computer from Japan, and the Sequoia and the Titan from the
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IT
United States. Global competition in highperformance computers is fierce, Liao said, and Tianhe-2, facing rivals from the US and Japan, may only keep its edge until 2015. Li said the US still dominates the high-performance computing field, accounting for half of the top 500 supercomputers in the world. "That's why nurturing our own supercomputing talent is so important," he said. In November 2011, a cooperation agreement was signed by the Guangdong provincial government, Guangzhou municipal government, the National University of Defense Technology and Sun Yat-sen University to establish a Guangzhou supercomputing center by the end of 2015. The center aims to become China's fifth national supercomputing center after Tianjin, Shenzhen, Changsha and Jinan. The $407.5 million project features Tianhe-2, which consists of 170 computer cabinets. The leading supercomputer, covering an area of 720 square meters, also boasts memory of 1.4 petabytes and storage capacity of 12.4 petabytes. Tianhe-2 will reportedly be transferred to Guangzhou and put into operation in October. Wang Bingqiang is among the many scientific researchers in Guangdong province with high expectations of Tianhe-2. As head of the high-performance computing team of BGI, a leading genome research institution based in Shenzhen, Wang said that the company's scientific research and commercial projects rely on supercomputers like Tianhe-2. "Genetic research produces tremendous amounts of data that need to be stored and 20
processed by supercomputers," he said. "The better utilization of the supercomputer, the more time and resources will be saved for our benefits." BGI launched the Million Human Genomes Project in November 2011 to decode the genomes of more than 1 million people. This project aims to establish a research baseline and reference standard for specific populations, as well as to connect the phenotypes of diseases and traits with genetic variations to understand disease mechanisms. It will guide innovative clinical diagnosis and treatment, and ultimately advance personalized healthcare and improve human health, said Fang Lin, deputy director of BGI Research. He added that the current guide system will no longer satisfy the enormous needs of calculation and data processing of this project. "Suppose we are scanning for a high resolution genetic variation landscape over more than 500 human individuals. It would take a single computer more than four years to finish the work," Wang said. "With the guide system, it requires about five hours, yet with Tianhe-2 the same amount of calculation needs only 10 minutes." Not only companies and research institutions will benefit from the forthcoming supercomputer — people will also enjoy the convenience brought by Tianhe-2's vast storage and highspeed calculations. "For instance, an electronic medical records system can be established under Tianhe-2 so that a patient's previous diagnosis and treatments will be accessible by different medical institutions, avoiding repeated examinations as in the past," said
Lu Zexin, technical director of the Guangzhou Supercomputing Center. "More information sharing among different departments will also curb red tape and lift working efficiency," he said. Genetic engineering, biomedicine and animation industries have long prospered in Guangdong province. Li, deputy chief designer, said that scientists have considered demands from these clients during feasibility studies of Tianhe-2 to ensure it provides better service. So far, more than 600 users have registered. Concerns over Internet security have arisen in the wake of the recent revelations of US Internet monitoring by its PRISM program. Lu said that Tianhe-2 adopts the Kylin operating system, a quality research product with high security developed by the National University of Defense Technology. It provides strict data isolation to guarantee security according to the needs of clients. Sebastian Schmidt, an expert at the Juelich Research Center in Germany, said that the performance of Tianhe-2 and the design team are amazing. "Development of supercomputers in the future will require much closer international collaboration, since it takes joint efforts to combat global challenges and to find solutions," Schmidt said. Li, the deputy chief designer, said that the Juelich Research Center is now cooperating with the National Supercomputing Center in Tianjin on some challenging computational projects. "By joining hands with China, Europe will also reduce its dependence on the United States in the area of supercomputing," he said.
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Despite great progress, Liao, the chief designer, said that there remains huge room for improvement in energy efďŹ ciency, software application and development of a new generation of CPU. "In the future, we hope domestic demands for supercomputing are fully tapped to stimulate us to design and produce supercomputers with bet-
ter performance," Liao said. China's supercomputing dream started in 1978 when then-Chinese leader Deng Xiaoping chose the National University of Defense Technology as one of the major institutions to develop China's own supercomputer. Five years later, China's ďŹ rst supercomputer Yinhe-I came
into being, which could perform 100 million calculations per second. Supercomputing drew people's attention again in 2007, when Dawning, vendor of the Nebulae supercomputer, helped China National Petroleum Corporation discover 100 million metric tons of oil reserves under Nanpu in Hebei province. 21
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Industry
Economic Slowdown hits China’s FDI CED Monitoring BEIJING-Growth of China's foreign direct investment in May dropped to just under 0.3 percent, an indicator that global companies remain hesitant to expand in China amid its economic slowdown. According to the Ministry of Commerce, FDI was up just 0.29 percent from a year earlier to $9.26 billion, compared with a 0.4 percent increase in April and the slowest growth since February. While China's FDI growth decelerated, its outbound direct investment saw robust gains, expanding by some 20 percent in the first five months of this year to $34.3 billion, according to the ministry. The decelerating growth in inbound direct investment comes while the world's second-largest economy is further losing growth momentum. The economy grew at its slowest pace for 13 years in 2012. But Shen Danyang, spokesman for the ministry, 22
rebutted the notion that the nation is losing its appeal to multinationals as an FDI destination. He said that "from a global perspective, China's FDI trend remains comparatively stable and good ‌ and positive growth (in FDI) for four consecutive months, to a large extent, shows the recognition of global investors on the competitiveness of the Chinese economy and the nation's investment environment". Shen added: "I have to repeat that China's FDI growth this year will remain stable." FDI in 2012 hit a record high of $111.7 billion. The nation has remained the most attractive FDI destination among developing countries for more than a decade. But 2012 was the first year that the nation saw a drop in its annual FDI since 2009. According to the ministry, during the first five months of 2013, FDI was up just slightly more than 1 percent from a year earlier to $47.6 billion,
mainly led by developed nations and regions. Investment from the United States was up by 22.6 percent, and that from the European Union increased 24.1 percent from January to May. During a meeting with executives from more than 10 multinational companies that were to attend the Fortune Global Forum 2013 in Chengdu earlier this month, Premier Li Keqiang tried to clear up the foreign businesses' doubts by saying that "China has the ability and conditions" to sustain economic growth and "China will be committed to deepening the reform and opening-up policy". Li encouraged the foreign companies to "cash in on the huge opportunities resulting from the nation's economic development and efforts toward industrialization and urbanization". "Short-term fluctuations (in FDI) should not be a big concern. We have to see the bigger picture," said Wang
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Zhile, a senior researcher on foreign investment at the Chinese Academy of International Trade and Economic Cooperation. "Undoubtedly, the new Chinese leadership is very enthusiastic about furthering its opening-up policy and attracting foreign companies. This is a very positive signal for
China's prospects on FDI," he said. James Lee, regional director of the Institute of Chartered Accountants in England and Wales in China, agreed. "Some positive reforms and measures that China is taking on things such as urbanization are good news for foreign investors," he said.
Shen said he was confident of the strong momentum that China's ODI will maintain this year. Developed nations and regions have led the robust growth. During the first five months, China's ODI into Australia gained by 93 percent, the United States 76 percent, and the European Union 47 percent, from a year earlier. 23
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Industry
Carbon trading begins in Shenzhen
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CED Monitoring SHENZHEN - The city of Shenzhen, in south China's Guangdong province, launched a carbon trading scheme on Tuesday, the country's first market for compulsory carbon trading. The scheme covers 635 industrial companies and some public buildings that account for about 40 percent of the city's carbon emi s s i ons , the S henzhen ca rbon trade exchange said in a s ta tement. Under the trading program,
those which emit below their quotas could sell their excess limits to other emitters and even investors for profit. The carbon intensity, or the amount of carbon produced per unit of gross domestic product, of the 635 industrial companies in 2015, will slump 32 percent from levels in 2010, the statement said. Eight deals, or 21,112-ton carbon quotas, were traded Tuesday at prices ranging from 28 to 32 Yuan ($5.2) per ton. China's National Development and Reform Commission, the top economic planning
agency, also approved pilot carbon emission trading schemes in six other areas: Beijing, Tianjin, Shanghai, Chongqing, Hubei and Guangdong. Experts and government officials hailed the pilot schemes as a landmark step for China in building a nationwide carbon emission trading market. The country has pledged to reduce carbon dioxide emissions 40 to 45 percent per unit of GDP by 2020, in comparison with 2005.
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Automobile
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Changan poised to sell JV cars home & abroad 27
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Automobile
CED Monitoring BEIJING-Changan Automobile Co Ltd, one of China's largest State-owned automakers, is poised to make a historic breakthrough by having one of its joint ventures both producing and selling Chinesebranded cars at home and abroad. The Chongqing-based carmaker and the French a u tom a k e r PS A Pe u ge ot C i troen established their joint v enture i n 2 0 1 1 i n S henzhen, called Changan PSA Automobiles Co Ltd, to accelerate the State-owned auto manufacture's internationali za ti on p roces s . "Within the next three years, Changan cars produced by our joint venture with PSA will be sold in China and overseas," said Ren Qiang, Changan's vice-president. "As China's largest national brand auto producer, Changan is now realizing this unprecedented success in joint-venture enterprise operation," Ren said. Since the 1980s, various automotive joint ventures have been set up in China. International carmakers have shared their manufacturing technology and know-how with Chinese State-owned partners to gain a foothold in the market. Shanghai's SAIC Motor Corp Ltd operates 104 joint ventures, including two of the biggest with Volkswagen and General Motors. Changan has also set up joint ventures with Mazda, Ford and Suzuki. Joint ventures have been selling foreign or joint-branded cars in the Chinese market with the Chinese companies having 28
little say on the marketing strategy, Ren said. China is now the world's biggest car market with international brands gaining huge popularity and joint ventures dominating the market. In 2011, 95 percent of total profits generated by all auto enterprises in China were from joint enterprises, and independent firms accounted for just 5 percent, according to a report released by Chinese Academy of Social Sciences last month. "Until now, none of the automobile joint ventures in China had ever introduced independent Chinese brands onto the market," said Jiang Aiqun, a spokesman at Changan, adding that with this breakthrough, the company has now achieved the business model of a true multinational group. Although already a major auto producing and consuming country, China's independent-branded auto companies are still at the lower end of the global industry, the Chinese Academy of Social Sciences report concluded. In a market investigation conducted by PSA in South America last year, unmarked Changan vehicles gained the same satisfaction reading as unmarked PSA products among local consumers, and Jiang said that was the main reason for the decision by both sides to launch Changan autos produced by CAPSA, in the Chinese market. The French company has been low-key about its plans to introduce Chinesebranded cars from the joint venture because the move is
so unusual, according to a worker at Changan. Chinese automakers are seeking various opportunities to increase market share for their own brands, in their fight against foreign counterparts. Companies including SAIC, FAW Group and Changan all plan to introduce middle- and high-end vehicles, an sector of the market now dominated by foreign brands. Overseas expansion is also one of their strategies. "By 2020, we plan to increase overseas sales of Changan autos to 25 percent of the brand's total sales volume," said Ren. In 2012, more than 1 million Chinese-branded cars were exported mainly by five leading companies: Chery Automobile Co Ltd, Geely Automobile Holdings Ltd, Great Wall Motors, GMAC-SAIC Automotive Finance Company Ltd, and Lifan Group, according to data from China Association of Automobile Manufacturers. Although still in its infancy, the Chinese automotive industry is now expected to step up its overseas expansion. From January to April, Changan registered 710,000 sales in total, a 23 percent year-on-year increase, and 10 percent higher than the industry average. Its independent brand sales reached 321,000, ranking it top among China's brands. "Having already started selling in Brazil, Changan's next s tep i s to es ta b l i s h component and processing joint factories overseas," said Ren.
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Automobile
‘Volvo Cars committed to West China uplift’
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“Volvo since three years ago have started building our 3rd world-class or state-of-the-art manufacturing plant in Chengdu. We will also build logistic center, Volvo Museum and Brand Experience Center as well as training center in Chengdu�
STOCKHOLM -- Volvo Cars Group is committed to the development of West China, Hakan Samuelsson, the company's President and CEO said. "We are very committed to Chengdu and our development in West China Exploration," Samuelsson, who attended the 2013 Fortune Global Forum in China's western city of Chengdu on June 6-8, said in a recent interview with Xinhua. He said his company, as an official partner, hosted one of the Special Roundtable Discussions on the future of transportation. The forum focused on the monumental changes that are defining China's future and shaping the course of global business for the 21st century. Samuelsson believes that for purposes of "both economic prosperity and a better life for the Chinese people" illustrated in the "Chinese dream" President Xi Jinping raised over the last few months, West China plays a critical role in closing gaps created in the past. "It is the right direction for China and the start of a transformation as we are doing for Volvo Car Corporation," he said. Having witnessed great changes of Chengdu over the past decade, where many other Fortune 500 companies have set up offices and poured in investment, Samuelsson said that he was "glad
Volvo is a pioneer in this regard," referring to a new "world-class Automotive Industrial Base in this city." According to the company's latest financial report, Volvo Cars will inaugurate in Chengdu its first Chinese manufacturing plant, which Samuelsson vowed will follow the same principles and processes as its European car plants. Like many other global companies, Volvo Cars believes that Chengdu is a very good choice for regional hub. "Volvo is coming to start a new chapter of itself and Chengdu, shifting the city and province by adding the automobile industry to IT," said Samuelsson. "Volvo since three years ago have started building our 3rd worldclass or state-of-the-art manufacturing plant in Chengdu. We will also build logistic center, Volvo Museum and Brand Experience Center as well as training center in Chengdu," said Samuelsson. "Chengdu is a very high priority for the entire organization. Chengdu and the surrounding region is not only a huge market but also a good location to invest based on talent, cost, government support and supplier base," he said. "The automobile industry has a very fierce competition in China. In the first quarter, our sales volume grow by 30 percent and far above the 31
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Automobile
market average," he said, expressing "confidence" that after the Chengdu plant starts production and six new models are launched in China this year, "we will make our China Growth 32
Plan a success and Volvo's success in China is very important for our global transformation." Samuelsson emphasized that Geely Holding Company, based in China, as Volvo Cars'
parent group is the company's "good advantage." Talking about structural change in Volvo Car products for China, he said, "we apply global and consistent sourcing
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and supplier management, manufacturing technology and quality standard as in Sweden and Belgium while our competitors might do it a little different."
"Also we are studying car electrification and have provided C30 electricity vehicle and V60 plug-in hybrid for test drive in Shanghai," said Samuelsson.
"In short, Volvo regards China its 2nd home base and is building a full-fledge capability and strategic investment in China," he said. "We are happy with our progress."(XINHUA) 33
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Construction
China Railway targets freight transport market
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The China Railway Corporation will simplify procedures regarding customers' needs in freight transport, such as offering direct and fast services via its platforms including hotlines and its Internetbased service platform 12306
BEIJING -- The China Railway Corporation, a commercial arm separated from the nation's ex-railways ministry, said Saturday that it will push its freight transport services to cover a bigger market. A company spokesman said it will work toward that goal through a slew of reforms focused on efficiency and better services, in efforts to transform the company's freight transport into a modern logistics business. The China Railway Corporation will simplify procedures regarding customers' needs in freight transport, such as offering direct and fast services via its platforms including hotlines and its Internet-based service platform 12306.cn, the spokesman said. The website is also the primary service providing passengers with online ticket bookings and ticket refunds in case passengers want to cancel a trip. In March, China dismantled its Ministry of Railways into administrative and commercial arms to reduce bureaucracy and improve efficiency. The ministry, both a policymaker and service provider, had long been criticized for low efficiency and unpleasant services. (XINHUA)
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Real Estate
Golden touch to green building
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Energy-saving models of housing on display at an expo in Jinan, Shandong. With more buildings coming up, construction companies are being urged to make their buildings greener. CED Monitoring BEIJING-When Ben Pape, a founder of the UK-China EcoCities and Green Building Group, first came to Beijing in the early 1980s, the capital was building the 48-kilometer Third Ring Road. When he came this year, it was working on a seventh, 940 km long. The frenzied expansion of the capital is only part of the biggest and most rapid population shift in human history. In just three decades, hundreds of millions of people in China have moved from the countryside to the cities, resulting in an incredible mushrooming of building and infrastructure construction. In 1980 when 20 percent of China's population was classified as urban, the average housing space per head in China's cities was about 7 square meters. The number jumped to 30 sq m in 2011, by which time about half of the country's population lived in cities. Those figures indicate the extent of China's building spree and its effect on the country's environment. Factories and cars have taken most of the blame for polluting China's air and water, but buildings account for at least 20 percent of China's total energy consumption. This has a major bearing on government plans for reducing energy consumption, says Yang Hongwei, 37
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Real Estate
An apartment with zero-carbon emission in Chongqing director at the energy efficiency center of the National Development and Reform Commission, China's top planning organization. With a predicted 1 billion people living in urban areas, with most in bigger apartments, by 2030, China's new leadership is calling for a new model of sustainable urbanization, supported by new types of buildings. In January, the State Council issued the Green Building Action Plan, a clear indication that the industry is now a policy priority. In the plan, the government has set ambitious targets, including adding more than 1 billion square meters of green building floor area by 2015 - 14 times the area at the end of 38
last year. Insiders say that many companies, from real estate developers, architects and building materials suppliers to IT companies and financial institutions, may soon benefit from a boom in the market for green buildings, especially ones from the West. Pape of the UK-China EcoCities and Green Building Group, a government-to-government platform set up in 2010, says the West is in good position to help China because it made a lot of mistakes on the environment and has a lot of experience in trying to right those wrongs. "The West focused greatly on economics in the past," Pape says. "If you looked at the development of the West
about 100 years ago, the damage to the environment was severe. "There was smog in London, like Beijing has today. I can remember as a young man that if I put my hand out, I couldn't see the end of my fingers. It was unbelievable. Now London is very clean, so given the right policies, the pollution problems can be solved." Pape says the Chinese government has recognized this, and that after years of educating the public on the importance of livable cities and green buildings, it is high time for action. In Beijing, from June 1 all new buildings have had to meet the criteria for green buildings. They must be more efficient in the use of energy,
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water, building material and land, as well as providing a living place that is healthier than conventional buildings. For NDRC's Yang, a member of the Green Building Action Plan team, the reason behind the initiative is simple: China is the world's largest energy consumer and emitter of greenhouse gases. He says the country's annual energy consumption surged from 1.38 billion tons of standard coal in 2000 to 3.25 billion tons in 2010, and is expected to jump to 7 billion tons by 2020. "Buildings, which consume one-fifth of China's energy, are certainly considered a priority in the country in terms of reducing energy consumption and carbon intensity," Yang
says. As a relatively new entrant, China's regulations for green buildings are not as strict as in the West. China has been developing a star-rating system related to energy efficiency and consumption, while Britain requires all new houses to be carbon neutral in 2016, and Copenhagen in Denmark aims to become a zero carbon city by 2015. Although the standards may not be set as high, many Western companies believe China is the place in which to develop green buildings because of its giant market size. "Green building is no longer a discussion but a demand in China," says Kristian Lars Ahlmark, a partner Schmidt Hammer Lassen Architects of
Denmark. Ahlmark says the potential of the green building market in China is one of the key reasons his company set up an office in Shanghai in 2011, although it had worked on projects in the country since 2002. The global financial crisis of 2008 hit the company hard, and its residential projects in China were stopped. "It forced our firm to think where they can see steady growth in the years to come. And we think the green building sector in China is the answer." Ahlmark's firm has grown from three architects to 20 within 18 months of opening the Shanghai branch. Using the "passive design" concept of energy-efficient 39
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Real Estate
A demonstration of a zero-carbon emission building in Shanghai. building, his firm has worked on a mountainside residential community in Wuxi city in East China's Jiangsu province, where the buildings are designed and positioned to maximize natural light while being sheltered from cold winds. If you can control the daylight, you can control the energy in the building, Ahlmark says, adding that design alone can greatly reduce energy use before other technologies are applied. "We expect to double the architects we have now in Shanghai within the next two years because of the momentum in China's green building 40
sector." Chris Twinn, senior sustainability consultant with Arup, a renowned international company of designers, planners, engineers, consultants and technical specialists, says China is catching up fast in the green buildings sector. UK-based Arup, noted for its work on the Sydney Opera House, Pompidou center in Paris and for the 2008 Olympics in Beijing, is constructing its first zero-carbon building in Hong Kong as a demonstration project for potential clients, especially on the Chinese mainland. But China's work to promote green buildings is mostly from the top down, Twinn says.
"The politicians say the right thing, pass the regulations and policies but there needs to be improvement from the bottom," he says, adding Chinese clients are interested in green buildings as long as they do not cost more. When he started working on zero-carbon housing about 15 years ago, the cost was about 30 to 40 percent more expensive than conventional housing. Costs have fallen, but by 2016 they are likely be about 5 percent dearer, he says. In Hong Kong, his team plans to build the zero-carbon building at zero extra cost. If
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they succeed, he says, it will be a game changer in the sector. Meanwhile, the higher costs of green building has a fundamental influence on real estate developers. Zhang Xuezhou, vice-president of China Real Estate Chamber of Commerce, says the expensive upfront cost is the main challenge for the future development of green buildings in China. But Stanley Yip, a research associate at the Centre of Urban Planning and Design at Peking University, says the cost very much depends on the technologies used in a design. Based on a research sample of
50 million sq m of China's certified green buildings with one to three-star ratings, the extra cost for green buildings in China can be as low as 0.43 Yuan a square meter and as high as 306 Yuan ($50; 38 Euros) a sq m. Yip says development of the green-building sector will not move into top gear until a city's GDP exceeds 600 billion Yuan a year. In 2011 as many as 16 cities in China had reached that level. Zhang of the China Real Estate Chamber of Commerce says incentives are needed to better promote green-building development before more cities become wealthy enough
to embrace the sustainable lifestyle. In May 2012, the government released national subsidies for two-star green buildings of 45 Yuan a sq m, and 80 Yuan a sq m for threestar ones. "These incentives are for developers," Zhang says. "Most of them use the best technologies in green buildings for their high-end projects. But it is the ordinary buyers who really decide the market. "If there were subsidies for buyers, like the government has done with green-energy cars, the sector will grow much faster and on a much bigger scale." 41
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Real Estate
HOME pRICES RALLy 7TH STRAIGHT MONTH CED Monitoring SHANGHAI-Home prices in China extended their rally for a seventh straight month in December, with 57 of the 100 major cities monitored seeing higher prices, according to the latest industry report. The average price of new residential properties across the 100 cities edged up 0.23 percent from that of a month earlier to 9,715 Yuan (US$1,542) per square meter, according to the China Index Academy's report released yesterday. That compared with an increase of 0.26 percent in November. Twenty-six cities registered a gain of more than 1 percent, compared with 17 cities in November. Harbin in the northeast led the gainers with a 3.68 percent rise. Fortythree cities, meanwhile, reported price drops, with 21 seeing a fall of more than 1 percent, compared with 10 in November. "Strong sentiment among end42
users fueled a continuous rally in price while robust demand for midto low-end houses led to a decelerating pace in average price growth," said Sky Xue, an analyst with China Real Estate Information Corp. The average price for a new home in China's 10 largest cities advanced 0.45 percent from November to 16,157 Yuan per square meter. That compared with a gain of 0.39 percent a month earlier. Year on year, it rose 1.06 percent. It also accelerated from a 0.15 percent increase in November. Transactions of new apartments, excluding subsidized affordable housing, exceeded 1.2 million square meters in Shanghai in December, the highest monthly volume in two years, Shanghai Uwin Real Estate Information Services Co said in a separate report. That represented a rise of 23 percent from November and a 109 percent surge
year on year. The new homes were sold for an average 21,943 Yuan per square meter across the city, an increase from November of 0.77 percent and a decrease from December 2011 of 1.06 percent, Uwin data showed. "Though the monthly volume hit a 24-month high, the minor growth in average price indicated that ďŹ rsttime buyers with limited budgets continued to be the mainstream consumers," said Huang Zhijian, chief analyst at Uwin. "I don't expect any new tightening policies to be rolled out anytime soon despite the notable rebound in sales since all reinin measures were aimed to curb speculation." Last year, Shanghai saw new home sales exceed 9.38 million square meters, annual surge of 28.9 percent. They cost an average 22,461 Yuan per square meter, up 2 percent from 2011.
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Agriculture
GRAIN FOR GREEN IN NW CHINA bENEFITS FARMERS
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BEIJING -- A curtain of dust used to blur the sight all year around and the blowing sand would even block the doorways of local people’s home at times. Beginning in 1990, Zhang Chengxiang spent one decade trying to plant a green fence around the village to fend off sandstorms. But ten years of efforts went nowhere, the former employee of a local forestry farm said. "The sandstorms were so heavy. It took you so much strength just to even open the door, and when I returned home everyday, my body was covered with sand," villager of Duolun County in Inner Mongolia Zhang Chengxiang said. As the sandstorms continued to expand their reach, Zhao was forced to move homes two times a year. "But things have changed a lot since 2003. Trees can grow here now, and as you see, it’s green all around," villager of Duolun County in Inner Mongolia Zhang Chengxiang The coverage of forests, which has increased by 3 fold over the past decade, is contributed to the "grain for green project" initiated by the local government 12 years ago.
Under the program raising livestock was forbidden, and local herdsmen were encouraged to grow trees, with subsidies from the government. "The profits turned out to be good, I have 500,000 saplings. The combined income of the past 5 years is over one million," villager of Duolun County Huang Guolin said. The policy has attracted local farmers back from the cities. They used to migrate to cities as a result of land desertification. Feng Jichun was one of them. He began planting strawberries 5 year ago, and they are now selling well in the market. "The income from planting crops is more satisfying now than in the past. My annual income now reaches 100,000 yuan," said Feng Jichun, villager of Strawberry Planting Assoc., Duolun County Most of the villagers in Duolun County, who used to raise livestock for a living, are now engaged in industries like fruit and tree planting, and tourism. Village farmers say, the "grain for green project" has not only improved their local environment, but also raised their incomes.(Agencies)
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Agriculture
IMpORT OF GM SOybEANS AppROVED BEIJING -- China’s Agricultural Ministry has announced that it recently approved the import of three types of genetically modified soy beans. GM modified products are a controversial topic, not only in China, but around the world. Three years. That’s how long it took the three new types of genetically modified soy beans to get permission to enter the Chinese market. Peng Yufa, Deputy Director of National Transgenic Crop Committee, said, "We needed to check all the documents, and verify the growing environment and safety, before approving a new type 46
of transgenic crop. The crop should also pass tests from individual testing centers." The three types of newly approved genetically modified soy beans, are from the US transgenic giant Monsanto, and the German Company BASF. Chinese government officials say the crops will not be on the market directly. Peng said, "The imported GM soy beans are to be made into cooking oil. The final product will not contain transgenic protein. So there is no food safety threat." Although officials say genetically modified products
are safe, there has been increasing attention to the issue in China . Liu Jingliang, Information Director of Jinxiudadi Food Wholesale Market, said, "The government requires all GM products to be clearly labeled. And now more and more people are asking if the food they buy is genetically modified." Even in the US, where genetically modified foods are widely used, there has been public concern over their safety. And sometimes protests. US protestor Tracy Heier said, "What I want is a ban of
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genetically modified organisms from our food and seeds supply. We would like to have a world-wide ban." China began to import transgenic soy beans in 1997. By now, imports of 8 types of genetically modified soy beans have been approved into the country as materials for processing. Liu You, a farmer in Keshan County of northeast
China's Heilongjiang Province, stopped planting soybeans last year, due to the crop's low yield and economic return. He grows corn instead, which yields much more than soybean and brings more income. "The price of soybeans has kept almost unchanged while the prices of corn and rice have been rising in recent years," says Liu. In Keshan County, the
plantation area of soybeans nearly halved from 2007 to 2012, showing farmers have less interest in planting the crop, a trend that is playing out in many other rural areas. The root for the decisions taken by Liu and his peers can be found in China's rising imports of genetically modified (GM) soybeans. By virtue of the modifications, GM soybeans are more economical 47
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Science and Technology
to produce than their conventionally-farmed equivalents. With large-scale production of GM crops not yet approved in China, domestic farmers of soybean are being priced out of the market as the country proves happy to look to imports for this most quintessential of Chinese foodstuffs. However, this is far from the only troubling aspect of imported GM food. GM remains controversial over doubts as to its safety. As it flows into China, the country is having to face up to such questions. Last week, China's Ministry of Agriculture announced the approval of three varieties of GM soybeans to be imported as processing materials. The news triggered fresh domestic concerns about safety, although there has been large-scale commercial plantation of GM crops for years in the United States and many other countries. China began to import GM soybeans in 1997 to meet surging domestic demand, according to Peng Yufa, a senior member of the coun48
try's GM crop bio-safety committee and a researcher at the Chinese Academy of Agricultural Sciences. Last year, China imported 58.38 million tones of soybeans while the country's own soybean production was about 13 million tones, official statistics showed. For Chinese farmers, the plantation of corn per mu, a Chinese measurement which equals about 667 square meters, can earn them about 300 to 400 Yuan (about 48 to 65 U.S. dollars) more in revenue than that of soybeans on average. This has prompted more farmers to stop planting soybeans. In Heilongjiang, a major soybean producer in China, the area used for plantations of this legume reduced to about 40 million mu last year from about 70 million mu in 2009. Although edible soybean oil made from GM produce is common in Chinese supermarkets, most citizens worry about its safety despite relatively lower prices than equivalents such as peanut oil. "When I buy edible oil, I
will make sure whether they have GM marks. After all, there is no final conclusion as to the safety of GM products," says a lady surnamed Zheng in Guangzhou, capital of south China's Guangdong Province. Results of an online survey conducted by Chinese news portal Sina.com showed on Wednesday that about 85 percent of the 30,000 voting netizens said they would not buy GM products and 78 percent believed GM is harmful to people's health. To woo consumers, some companies in Heilongjiang have tried to highlight their non-GM soybeans. For example, the Heilongjiang Jiusan NonGM Soybean Trade Center was set up last September. "The key is to allow and encourage Chinese scientists to catch up with others and come up with quality products, including safe GM products. Only in this way can we change the status quo of China's soybean products," says Rao Yi, dean of the School of Life Sciences at Peking University.(Agencies