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Editorial Editor Jamshed Ullah News Editor Arshad Chaudhry Research & Analysis Uzma Zafar Raja Pervaiz Hussain Suzie Worng Waqas Wiki Designing & Layout Asmat Ullah Khan Awais Shehzad Technical Support Sultan Haroon Iqbal Bukhari Co-ordination Sobia Noreen Internet Edition John Nelson Rehmat Chughtai

Contact Head office:

CASH Mass Media, 1102-1103 11th Floor, Longhang No 555, Nathan Road, Mongkok, Kowloon, Hong Kong

Islamabad Office: Mail House, Shakeel Chambers 01 Khayban-e-Soharwardy, Islamabad Email: editor@ccedigest.com newseditor@ccedigest.com webeditor@ccedigest.com ads@ccedigest.com

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ccording to the reports, China's import will total $10 trillion in the next five years, about three times of Germany's gross domestic product (GDP). In recent years, China's share in global trade has been expanding. In 2012, China registered a total goods trade value of 3.87 trillion dollars, overtaking the United States to claim the top ranking in this regard. However, it is also believed that on the wrangling battle field for the right to set down international trade rules in the 21st century, China faces huge challenges, and even the risk of being marginalized. The major pressure comes from the United States. With the unsolved deadlock in the Doha Round and a weak World Trade Organization (WTO), the US, as the world's largest economy, is establishing a US-dominated new 21st-century global trade pattern, backed by two pillars - the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). TTIP will bind together two large economies - the US and the European Union, with their combined GDP and trade value accounting for half and one-third of the global total respectively. Using their dominant positions in international trade, the US and EU further push the formulation of new rules for global trade to cope with the rise of new economies, including China, while TPP is aimed at subjecting the stability of Asia-Pacific region to the new order, with security dragging trade against the backdrop of US "Return to Asia" strategy. The CED believes that under such circumstances, China has to weigh between two options: to stay away from this US initiative and set up its own version or wait to see the progress in TPP negotiations and find an opportune moment to extend its olive branches? We also believe that for China's foreign trade, a smooth transition to quality growth from the past quantity-featured glory holds key to its future boom and even for the sustainability of the overall Chinese economy. In the months to come, major world economies will have to continue their battle against slow growth amid debt problems and the trend will remain that powers cooperate with and compete against each other at the same time. We believe that China holds a very pivotal role in the future global trade, keeping in view the prevailing and emerging trends in the global economy.

Editor


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in this issue 19, 26 May 2013 04

Cover Story

China remembers Wenchuan

China marked the fifth anniversary Sunday of the 8.0-magnitude Wenchuan earthquake in Sichuan Province by mourning for some 70,000 victims and holding a post-quake relief drill, right after a 7.0-magnitude quake struck...

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Mao’s portrait grabs $55,300 at Beijing auction A photo of Mao Zedong relaxing in a wicker chair against a scenic backdrop of Lushan Mountain has fetched 340,000 Yuan ($55,300) at auction, 10 times the pre-sale estimate.

A sheep implanted with a new type of artiďŹ cial heart developed by Chinese scientists using cuttingedge aerospace technology has lived for 62 days thus far, the heart's developers have announced.


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in this issue 09

Fund for SW China

Nokia Siemens Networks opens global delivery hub in China Nokia Siemens Networks have inaugurated a Global Delivery Center (GDC) hub in Zhengzhou, province of Henan

12

Chinese airlines to get first 787 Dreamliners this month

China's Internet giants in acquisition spree China's Internet giants have gone on a new acquisition spree in recent months as they ramp up efforts to diversify businesses amid the industry's constantly changing dynamics.


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Society

China remembers Wenchuan CED Monitoring BEICHUAN-China marked the fifth anniversary Sunday of the 8.0magnitude Wenchuan earthquake in Sichuan Province by mourning for some 70,000 victims and holding a post-quake relief drill, right after a 7.0-magnitude quake struck another part of the province on April 20. Mourning for the victims of the two earthquakes was seen across Sina Weibo, while public drills on postquake relief work and disaster reduction took place nationwide on Sunday to mark the anniversary. Disaster reduction pamphlets were distributed, the location of public shelters was publicized and information boards containing firstaid tips and emergency response advice were put up across the country. The country's ability to launch relief efforts has been tested following the Lushan earthquake and the reaction this time was widely applauded. The provincial government launched a contingency plan 10 04

minutes after the quake, while the first team of rescuers set off for the quake-hit area within 30 minutes, the Xinhua News Agency reported. Unlike the Wenchuan quake when people across the country were strongly encouraged to arrive at the quake-hit area and offer help, media advocated sensible volunteerism and avoid clogging up roads and delaying rescue teams. Gao Jianguo, a researcher at the Institute of Geology of China Earthquake Administration, told the Global Times that the habit of constructing safe buildings by following stringent codes has been strengthened. "But problems are still there," Gao said. "Even though the codes have been set up, chances are that during construction they are not well followed." Figures released Saturday by the Sichuan Provincial Bureau of Statistics show that the economic growth of 39 hardest-hit counties in the Wenchuan earthquake increased at an annual average of

15 percent from 2009 to 2012, exceeding Sichuan's average growth by 0.7 percentage points. Outside this good news, reconstruction in the affected areas has been frustrating due to charges of corruption. An audit report assessing the reconstruction work in affected zones by the National Audit Office in 2012 showed that 1.4 billion Yuan ($228 million) of the funds had been embezzled or illegally transferred. Zhu Lijia, a public management professor at the Chinese Academy of Governance, told the Global Times that lessons should be learned by first standardizing all procedures during the reconstruction, including design and hiring contractors, as the work in zones following the Lushan earthquake has just kicked off. "The whole process should be made public and more transparent, since it involves charity funds," he said. "Authorities should accept supervision by people from the affected areas, answer inquiries from the media and publicize figures in a timely manner."


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Pupils mourn for victims who died in a massive earthquake five years ago in the old county seat of Beichuan, southwest China's Sichuan Province, May 12, 2013. A memorial event was held in Beichuan on Sunday to mark the fifth anniversary of the deadly earthquake which havocked Sichuan on May 12, 2008. (Xinhua)

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Society

Mao’s portrait grabs $55,300 at Beijing auction CED Monitoring BEIJING-A photo of Mao Zedong relaxing in a wicker chair against a scenic backdrop of Lushan Mountain has fetched 340,000 Yuan ($55,300) at auction, 10 times the pre-sale estimate. The photo, titled "Chairman Mao, the Brightest Sun in the Heart of World's People" was taken in 1961 by "Li Jin", a pen name used by his wife Jiang Qing for photos she took during the "cultural revolution" (1966-76). There was a sudden rise in tension when the photo entered the salesroom at Huachen Auctions in Beijing on Friday, with an estimate between 30,000 and 50,000 Yuan. Bidding started at 22,000 Yuan, the price of 100,000 Yuan was soon passed, and then a white-hot race between two telephone bidders ensued. Agents acting on behalf of the buyers spoke aloud to the auction06

eer as the bidding intensified, when normally bidding cards are raised. "The result came as a surprise," said Li Xin, the manager of Huachen's photography department. "Photos taken by Jiang Qing rarely come onto the market, and this one is sizable, measuring 45.5 by 37 centimeters. "The photo was highly soughtafter, mainly because its photographer was such a unique figure. It clearly aroused huge interest. "It also shows that 'red-classic' photos like this are becoming well recognized by the market. I saw many new faces in the salesroom," she said. The auction house had offered a special "red classic" photography section to commemorate the 120th birthday of Mao, putting dozens of photos up for sale, including some by famous photographers including Wu Yinxian, Hou

Bo and Qi Guanshan. Most of the photos showed the late leader inspecting the countryside, meeting foreigners and attending Party conferences. Mao was worshipped as a symbol of national power during the period between the founding of New China in 1949 and the end of "cultural revolution" (1966-76). He appeared center stage in many artworks and photos, and many of the images were taken by the best photographers, using the very latest technologies of the time. Friday's $55,300 photo by Jiang was taken in black and white and later hand-colored, because color film was not widely used then. It also highlighted Jiang's favoring of backlighting, a significant influence on Chinese photography during the period. The past five years have witnessed a boom in demand for


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photography, especially "red classic" photos that recorded New China's rise, development and reform. "Our first photo auction in 2006 achieved sales of 3 million to 5 million yuan. "Last year, two photo auctions exceeded 13 million yuan in sales, a 20 percent rise on the previous year," Li said. She added there is huge interest from Chinese collectors, both at home and from overseas, as soon as old photos about China appear on the market. There has been growth too in bidding from public museums and libraries hoping to enrich their collections.

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Finance

The fund will be used for the management of major geological disasters in Yunnan, including the monitoring and assessment of disasters, relocation efforts and the construction of an emergency response system, according to the Ministry. Starting from this year, the ministry will allocate 1 billion Yuan each year for eight consecutive years to fund the construction of a comprehensive system for managing geological disasters. 08


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Fund for

SW China disaster management approved

The Ministry of Finance has said that it has allocated 1 billion Yuan (about 161 million U.S.dollars) for geological disaster management in southwest China's Yunnan Province.

The province has complicated geological conditions and is frequently hit by geological disasters, such as earthquakes, landslides and mudslides. In 2009, the central government set up a special fund for disaster prevention and management and had since granted a total of 745 million Yuan to Yunnan by the end of 2012. 09


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Finance

Chinese airlines to get first 787 Dreamliners this month

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Finance

CED Monitoring BEIJING-Several Boeing 787 Dreamliners will arrive at Chinese airlines before June, as Boeing resumes deliveries of the jetliners, Boeing China's President has said. "The delivery of 787s is on track, and several Dream liners will be delivered to China this quarter," Marc Allen said. The process of the Dreamliner's airworthiness certification in China is in its phase-out period now, he added. China Southern Airlines Co Ltd and Hainan Airlines Co Ltd will be the first Chinese customers to get 787 Dreamliners, he said. China Southern Airlines said that its first 787 Dreamliner will arrive by the end of May and the carrier will get eight of its 10 orders this year, Yangcheng Evening News, a Guangzhou local newspaper, reported. Boeing refused to comment on the report, but Allen said he is confident that the first batch of Dreamliners will be delivered to China before June. Four Chinese airlines ordered 41 Dreamliners by the end of 2012, and 58 customers globally are currently waiting for more than 800 Dreamliners. Boeing plans to improve its production rate from the current seven a month to 10 by the end of2013. Meanwhile, Boeing has delivered a Dreamliner to All Nippon Airways Co Ltd, the first delivery since the aircraft's problems with its lithium-ion batteries were resolved. All 50 flying Dreamliners were grounded in January after two incidents on Japanese jetliners in which a battery overheated. A Japan Airlines Dreamliner caught fire while 12

parked at Boston’s Logan International Airport on Jan 7. About a week later, an All Nippon Airways jetliner flying over Japan had to make an emergency landing after smoke was detected in an electrical system. Two airlines are already flying their Dreamliners again now that the US jetliner maker has fixed the problem. Other airlines using Dreamliners already have the aircraft scheduled to fly again, Allen said. United Airlines Inc, which uses six Dreamliners, plans to fly the aircraft again on Monday and will use the Dreamliner on its Shanghai-Los Angeles route beginning on Aug 3. "Our customers in the Shanghai market have demanded Boeing 787 Dreamliners, which provide a more comfortable flying experience," said James Mueller, the United Airlines' Atlantic and Pacific sales vice-president. The Dreamliner, with a small cabin but long range, is more suitable for point-to-point routes, he said, as airlines are looking for more business opportunities in China's smaller cities. Meanwhile, Chinese airlines also want to expand their international market share with the Dreamliner, which has a maximum range of 16,000 km. Hainan Airlines, which ordered 10 Dreamliners, plans to use the aircraft on its new China-US route. "The Dreamliner will be used in our Beijing-to-Chicago route, which will be launched in September," said Wang Yingming, president of Hainan Airlines Co Ltd. Wang said the carrier also plans to use the new aircraft on its other two routes between Beijing and North America.

The airlines' demands on international expansion make Boeing focus on selling the aircraft with250 to 350 seats in China, including Boeing 787 and 777 aircraft. "We expect in the next 20 years, there will be 700 aircraft sold in that category in China," Allen said. Airbus SAS, Boeing's main rival, is working on its A350 XWB jetliners, which are meant to compete with Dreamliner. The European airplane builder also forecast that China will have more than 1,000 aircraft with250 to 350 seats in the next 20 years, said Fabrice Bregier, president and CEO of Airbus. The A350 XWB, which has 630 confirmed orders worldwide, including 10 orders from Air ChinaCo Ltd, will make its first flight in June or July, he added. Meanwhile, Chinese airlines are not affected so far as more countries have announced to temporarily ground Boeing 787 Dreamliners for investigations into battery-related problems. Boeing 787s purchased by Chinese airlines have not yet been delivered and these orders willnot be affected, the US plane maker and two Chinese air companies media. Four Chinese airlines have ordered a total of 41 Boeing 787s, including 15 for Air China, the country’s flagship carrier, and all of them are awaiting delivery, said an official in charge of press relations at Boeing (China) Co Ltd. China Southern Airlines and Hainan Airlines each booked 10 Dreamliners, while the government has not yet approved the six Dreamliners ordered by Xiamen Airlines, the official


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said, declining to be identified. A press official at Air China said he has not been informed of any changes in the company's Boeing 787 orders, which are expected to be delivered in 2014. Xiamen Airlines, which also

expect deliveries in 2014, has not seen its orders affected by the incidents so far, the company's press official told Xinhua. Hainan Airlines "always considers it a top priority to ensure operation safety" and will

follow the US authorities' safety appraisal on the Boeing 787s, according to emailed comments sent by the company. It did not specify whether orders will be adjusted.

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IT

Nokia Siemens Networks opens

global delivery hub in China

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CED Monitoring SHANGHAI-Nokia Siemens Networks have inaugurated a Global Delivery Center (GDC) hub in Zhengzhou, province of Henan. The new facility will provide tools, processes and skilled resources to remotely manage mobile broadband networks for operators in China and around the world. Pooling together existing competences and assets, it will also deliver full life-cycle services for TDLTE*, reinforcing Nokia Siemens Networks leadership and contribution to a thriving TD-LTE ecosystem. The new GDC hub is an addition to Nokia Siemens Networks’ pioneering global service delivery model, designed to help operators bring services to market faster and improve the speed, quality and efficiency in network operations. It will complement the strengths of the company’s world class global delivery centers in India and Portugal, and six other global delivery hubs operating across the globe. With enhanced capabilities, Nokia Siemens Networks GDC hub will provide an increasing range of services, including technical consulting, network design, planning and optimization, systems integration, maintenance and managed services. It will also serve as a center of competence for TD-LTE. China is the ideal location for the new facility, as Nokia Siemens Networks can use the existing TD-LTE insight and experience to continue driving innovations and commercial deployments across the globe. “We are very excited to launch our new global delivery hub in China. This represents yet another step in ensuring

that customers in China and worldwide benefit by leveraging global level of competence and best practices, especially for TD-LTE, without any language or location barrier” says Joseluis Garcia, head of global service delivery at Nokia Siemens Networks. Through the company’s planned centralized, consolidated, global service delivery model, the GDC hub will de-

liver economies of scale and drive network efficiency through remote service delivery, using standardized and automated IT tools and processes. It is expected to help operators achieve industrialized efficiency across all phases of the network life-cycle, from deployment through operation, maintenance, upgrade, optimization and increasingly service management. 15


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IT

China's Internet giants in acquisition spree BEIJING - China's Internet giants have gone on a new acquisition spree in recent months as they ramp up efforts to diversify businesses amid the industry's constantly changing dynamics. Alibaba, China's leading e-commerce firm, announced last week that it will pay $294 million for a 28-percent stake in digital mapping company AutoNavi Holdings Ltd. BEIJING-The move, following Alibaba's previous deal to take an 18percent share in Sina Corp's microblogging service Weibo, is the giant's latest attempt to map out a strategy in the key mobile Internet market, in which major companies have been vying for presence. Li Zhi, an analyst with Internet service provider Analysys, noted that rather than developing new prod16

ucts on their own, the Internet giants have preferred to make up for their weak areas through mergers and acquisitions (M&A) to consolidate their positions. Earlier this month, China's online search leader Baidu Inc. announced its plan to buy the online video business of PPS, to rival industry leader Youku Tudou, which was created last year through the merger of the country's two major video giants, Youku and Tudou. The purchase is Baidu's latest step to diversify beyond its core search sector. The string of M&A deals has highlighted the heated competition among Internet giants to secure dominance of the mobile Internet market as an increasing number of Chinese are going online through mobile devices. Currently, Tencent,

which has so far attracted 300 million users to its popular voice messaging platform Wechat, is widely regarded as having secured a dominant seat in the mobile Internet market. But Ma Huateng, Tencent's chairman and CEO, took a cautious view about the company's position. "No matter how wellplaced we are now in the mobile market, a slight oversight may cause a shipwreck," he said at an Internet conference earlier this month. According to data from the China Internet Networks Information Center, China had 420 million mobile Internet users as of the end of 2012. With the market potential yet to be tapped, the Internet giants' M&A activity will likely to go on for a while, according to Li.(XINHUA)


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Industry

Shanghai to establish free trade zone

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CED Monitoring SHANGHAI-Despite rapid development in the past few years, many die-hard traditionalists in Shanghai still believe in the old adage that a bed in Puxi is preferred to a house in Pudong. But this "wilderness" has now become the focus of the city's future. And this isn't just related to Disneyland, which, when it is completed in 2015, will be part of Pudong New Area's attractiveness. The major driving force is a 10-year plan for Pudong, or the eastern part of Shanghai, that is grander and bolder than anything that has ever been conceived even by overly ambitious Shanghai officials. The plan encompasses an area of 28 square kilometers, including Waigaoqiao Free Trade Zone, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone. The area is almost the same size as Macao, and its trade volume topped $100 billion last year, the highest on the mainland. In this area, a new economic order will be established with its own set of rules for commerce and finance. Indeed, the Shanghai free trade zone, as it is temporarily called, is set to have even more of an impact than other such entities in Shenzhen or Tianjin. The project, mapped out at the beginning of this year and approved this week, is the first of its kind in China. Ready for submission to the State Council later this month for the official seal of approval, the project is expected to start operation in phases in the second half of this year at the earliest.

"It is a new national strategy that everything should be secured before the plan really gets started," said Wan Zengwei, director of the Pudong Academy of Reform and Development in Shanghai. The free trade zone plan is one of Shanghai municipal government's major tasks for 2013, according to a government work report delivered by Yang Xiong, acting mayor of Shanghai, at the first session of the 14th municipal people's congress. Benefiting from the news about the free trade zone, prices of related stocks rallied while the Shanghai Composite Index dropped 1.11 percent on Tuesday. Shanghai Pudong Road & Bridge Construction Co Ltd was up 4.59 percent, while Pudongbased real estate developer Golden Bridge rose 4.22 percent. Zhang Qi, a senior analyst at Haitong Securities Co Ltd in Shanghai, said the performance of stocks related to the free trade zone has remained good since Spring Festival despite an ongoing decline in the Shanghai Composite Index. "The plan is in accordance with the city's goal of building it into a regional shipping, commercial and trading hub. It will also help promote the city's transit, export and offshore trade," he said. Wan from the Pudong Academy of Reform and Development in Shanghai said the rapid implementation of the free trade zone plan is closely related to the current economic situation as Premier Li Keqiang reiterated at an economic conference in March in Shanghai "we should use opening up to boost domestic demand and provide a push for

reform". As Shanghai Disneyland is set to open in 2015 and a high-end duty-free center opens around the same time in Waigaoqiao Free Trade Zone, Wan concluded that the free trade zone is "in line with the local government's call for a transformation of economic development, which will focus more on boosting domestic consumption". "The free trade zone will also help Chinese companies going overseas by helping increase exports," he said. "The new free trade zone should not simply replicate any other already existing examples either in form or in function," he added. Much concern has been expressed that the establishment of the Shanghai free trade zone will pose a threat to Hong Kong. But Wan said Shanghai will not challenge Hong Kong's status as a major global free port, as the latter promises and provides more open policies. Hong Kong Trade Development Council has been closely monitoring the development of the free trade zone plan. But Jacky Chung, the council's regional director for eastern and central China, said it is probably not yet time to predict the impact of the plan. Zheng Weimin, a researcher with the Chinese Academy of Social Sciences, said that Shanghai and Hong Kong play different roles in the Chinese economy and their functions are complementary. Hong Kong's advantages lie in its sound legal system and market openness. Their relationship is more cooperative than competitive. 19


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Industry

Figures show continued struggle for steel industry

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CED Monitoring SHANGHAI-China's steel industry continued to suffer from weak demand and thin profits during the first quarter, and the situation could continue for the rest of the year as prices keep falling. The latest data from the China Iron and Steel Association show that the profit margin across the domestic steel industry dropped to 0.9 percent, delivering collective industry profits of 2.5 billion Yuan ($406 million) for the quarter. Xue Heping, an expert with the association, said the profit level was too small for an industry with total assets worth 4.3 trillion Yuan. Thirty of the country's 86 large and medium-scale steel companies reported losses in the first quarter, five fewer than the same period last year, the association's figures showed. The loss-making companies reported a total loss of 6.1 billion Yuan during the period, against losses of 9.4 billion Yuan at the same stage in 2012. Although the number of steel companies in the red is less than during the same period last year, Xue said that it did not mean the industry was likely to improve in

months to come. "Although the industry performed better than in the same period last year, it is still questionable whether they can even maintain these low profit levels." During the quarter, the inventories of the 86 large and medium-scale steel companies reached 583.1 billion Yuan, 10.2 billion Yuan higher than the same period last year, which puts increased pressure on their sales and marketing operations to clear the growing stockpiles. "There is still a lot of future uncertainty for steel companies," said Xue, as the industry enters what he called a highrisk period, saddled with high levels of debt. According to the association, the total debts of 86 major steel companies had reached 2.98 trillion Yuan by the end of March, 188.9 billion Yuan more than at the same period last year. The debt-to-asset ratio of the industry has reached about 70 percent, a difficult situation for the industry. "Meanwhile, management, financial and marketing costs have also risen as the market continues to worsen," said Xue. He predicted losses are likely to continue in April and May as the price of steel

keeps on falling to its lowest level in five years, with some major producers having to adjust their product prices to maintain or boost market share. On Monday, Wuhan Iron and Steel Group, one of the country's major steel producers, cut the price of its hotrolled steel by 180 Yuan a ton and cold-rolled steel by 100 Yuan a ton. In major steel trading cities, the current price of hot-rolled steel is 3,600 Yuan per ton. "The steel price adjustments being made by major producers reflect an ongoing weak market," said Lu Huaying, a steel industry analyst with price monitoring service Lange Steel Information Research Center. Over the past year, China's major steel companies - which account for 80 percent of the country's total output – é˜ż have recorded overall profits of 1.58 billion Yuan, a 98.22 percent yearon-year drop, according to the association. Up to 23 of its major member companies reported annual losses last year, 15 more than the previous year, totaling 28.9 billion Yuan, around seven times higher than in 2011.

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Automobile

Ferrari plans rapid push in China sales

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Automobile

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y b t a h dt e he t d d d a n a He a e n t i u h b i C r t , 2017 l both con il US w cent of ru c r e 30 pe er, from th r v fo turno percent cent 8 r 2 e t p n 0 e r d2 n a a Chin US. er v e o h n t r for , tu e l i h he t w d n n a a e Me p o r u ed E l l i m tw fro s a E ent r r e l u d c e h Mi d t rm e o p r f 0 cline cent to 4 r 52 pe 5 a w a . cent mpany s s in le co a s e a h n i n T i h ly, fall C a t t r I n e , t t e r p e rc rea rke a a G F m e e e th m "Th s o u l h p on its et c k e r r . l l r i a o a n w m e g i y t last ion ot n g n e e n r c a r t ic c pe m e o Eas 2 w n e o o t tribu er to Fer "S robust ec na, hi ov e e n h C v r i t f u n t i t more in the nex US potential help drive ill in the w rari s e s l h i c e i h in r- w h w s e , u p s r b n0 a o s 1 ' i M r ye e t a d ai a Ferr era s c n u " , e L e g id tur a u will s f " , e s t th ore o, i l o. m l o t o m n m e e c . teze ez t n n a o m r di M chai 25


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In 2012, Ferrari sold 7,318 sports cars worldwide, a 4.5 percent increase from 2011. It sold 784 cars in its Greater China market, a 4 percent rise, reinforcing the market as its second largest after the US. "I'm satisfied with our market performance in China. In the coming years we will put more effort into China, the world's largest vehicle market, including training customers into making the Prancing Horse more favored by growing new rich," said Montezemolo. Ferrari has 27 dealerships in the Greater China region, he said, and the company plans to have 30 dealers by the end of 2013, with three being added on the mainland. However, Montezemolo said the company's sales this year are likely to be similar to those in 2012, both globally and in China, where the premium-car market has slowed along with the overall car market. Moreover, Montezemolo said that Ferrari will invest 250 million Euros ($329 million) in emission reduction technology over the next five years, half of the company's budget on research and development. The move is in line with Chinese government's requirement on energy conservation and emission reduction for the automobile industry. Matthias Mueller, chairman of German luxury vehicle and sports carmaker Porsche AG, also said recently that its sales are likely to be flat this year, after rising 28 percent year-onyear in 2012. Andrew Thomson, head of automotive, Asia Pacific & China, at KPMG, said: "The new government's commitment to addressing corruption and increasing transparency in respect of, for example, government agency and SOE spending, may lead to some challenges for the ultrapremium vehicle segment in China this year. "The feedback we are receiving from clients and the market are telling us that ostentatious displays of wealth will become less prevalent." "People may be less likely to want to draw attention to themselves by buying ultra-premium vehicles, and the relevant automakers may need to adjust their development plans accordingly."

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Construction

Sansha’s city planning survey done

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SANSHA -- To advance the construction of China's newest city, an official delegation completed a field survey of the islands and waters within the jurisdiction of Sansha City, according to the provincial authorities of Hainan. It was the first comprehensive survey organized by the Hainan provincial authorities since the official establishment of Sansha City in July. From May 6 to 14, a delegation of relevant officials at both the provincial and city levels traveled 2,270 nautical

miles on board the Yuzheng310, a fishery administration patrol vessel. They surveyed the Zengmu Reef, as well as the Yongshu, Meiji and Zhubi reefs. The delegation held discussions with local garrison and fishery enterprises and extended their regards to the enterprises and local fishermen. Sources with the Hainan provincial government said the survey was conducted in preparation for the formulation of Sansha's regional development plans.

To facilitate local resource development and environmental protection efforts, the survey focused on the marine resources and environment of Sansha. The delegation conducted in-depth discussions over these issues in several workshops during the surveying process, they said. With its government office based on Yongxing Island in the South China Sea, Sansha City administers three island groups -- Xisha, Zhongsha and Nansha -- and their surrounding waters.(XINHUA)

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Construction

ChinaMyanmar pipeline start-up delay likely CED Monitoring BEIJING-Security concerns will likely delay the first shipments of gas and oil from the Myanmar coast to China through a new pipeline running across territory controlled by ethnic militia groups, a Myanmar energy official said. Construction of the 793km pipeline will be completed by the end of May, according to Li Zilin, vice chairman of South East Asia Gas Pipeline Company, a conglomerate of Chinese and Myanmar companies. "Technically the gas pipeline is ready, but I'm not just sure when the situation along its route will allow it to operate," said a senior Energy Ministry official who 30

asked not to be named because he was not authorized to speak to the media. The official said operations were likely to be delayed due to recent clashes between government forces and ethnic militia fighters in Shan state, as well as "fierce fighting" with the Kachin Independence Army in Kachin, a northern state that borders China. The pipeline will be a conduit for gas from the Shwe fields off the coast of Rakhine, a western state bordering Bangladesh, to China's Yunnan province. It will also transport oil from the Middle East and Africa overland across Myanmar, allowing China to avoid using the Straits of Malacca

between Malaysia and Indonesia, one of the world's busiest shipping lanes. The project has also sparked protests in Manday Island where the pipeline begins and residents say land has been confiscated to make way for a deep sea port. "We are waiting to have transparent talks about our grievances with the authority and the Chinese companies," Tun Kyi, chairman of Maday Island Development Association, told Reuters. About 400 villages on Manday Island staged a protest last week. Demands included adequate compensation for land seizures, improved roads and creation of jobs.


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Real Estate

Grade A office rents under pressure CED Monitoring BEIJING-China's grade A office rent is under pressure this year because of its already high base, weakening demand and rising supply in some cities, industry analysts said. Beijing grade A office rents edged downward for the first time in three years, as demand slowed. The decline follows 32

rises for more than three years, according to a report by Jones Lang LaSalle (JLL). Rents in the overall market edged down 2 percent quarteron-quarter in the first quarter to 337 Yuan ($54) per square meter per month, the first decline since the third quarter of 2009, the report showed. The downtick was more

pronounced in the central business district (down 3.7 percent quarter-on-quarter), where resistance to high rents was more acute, although mild rental growth remained in place in submarkets where upcoming lease expiries are less of a concern. "While business interest in Beijing remains strong, some


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tenants are reviewing their office space requirements given the huge rental growth witnessed in recent years," said Eric Hirsch, head of markets at JLL in Beijing. "Many landlords are recognizing this and are being more prudent as a result. We expect leasing demand will remain thin and the chances of seeing further rental compression in the next one to two quarters are high," Hirsch added. According to international real estate advisory company Savills, although the city-wide vacancy rate is expected to level out at 3 percent by the end of 2013, the lowest level in the past 15 years, rents could fall by roughly 2 to 3 percent, as tenants continue to relocate to non-prime locations or are forced to squeeze their office space in prime locations because of deteriorating affordability, making it hard for landlords to apply rental increments.

Grade A office rents in Beijing reached 318.8 Yuan per sq m per month by the end of the fist quarter, with quarter-onquarter growth constrained to just 0.4 percent, as landlords offered more incentives to attract tenants in the face of slowing demand, the report from Savills showed. Overall rents in Shanghai's grade A office market remained flat at 8.9 Yuan per sq m per day this quarter. And Pudong's grade A office rents exceeded Puxi rents for the first time since the third quarter of 2010, according to JLL. Rents continued to grow steadily in Pudong this quarter, rising by 1.3 percent quarteron-quarter. Meanwhile, in Puxi, rents declined slightly by 0.3 percent as the majority of landlords held rents flat in spite of weak demand and new supply which reached the market this quarter, the report showed. Seasonality combined with slowly improving sentiment

about the broader Chinese economy contributed to an increase in the number of new inquiries in the office market following the Chinese New Year holiday. Multinational companies in Puxi appear to be more optimistic about the market, although at present leasing volume remains persistently low as it takes time for inquiries to become deals. Retailers and pharmaceutical tenants remain the two sectors that have maintained the strongest level of demand. In Pudong, financial services remained active, although available expansion space in the core central business district was limited. As a result, some tenants have looked to non-core areas to satisfy space requirements. Pan Shiyi, chairman of property developer SOHO China, said there is no bubble in the commercial property market in Beijing and Shanghai 33


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Real Estate

yet. However, there are rising risks in second-tier cities with high vacancy rates, such as Chongqing and Xi'an. He added more efforts should be made to improve the internal quality of grade A office buildings, such as strength-

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ening internal air treatment, given the air pollution. According to research by commercial real estate services firm CBRE, construction of 40.8 million square meters of office space will be completed in the next four years across

China's 14 major cities, fueling worries about oversupply in some second-tier cities. Between 2013 and 2016, the total stock of quality office space in the 14 major cities will increase 80 percent, or 40.8 million sq m, the CBRE report


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showed. Although future supply might be less than expected because the projects usually suffer delays during the construction stage, a number of second-tier cities, such as Tianjin, Shenyang and Chongqing, are likely to see supply signifi-

cantly outpace demand, said Chen Zhongwei, head of research at CBRE China. A number of second-tier cities will experience peak office completion and delivery of projects in the next few quarters, a development expected

to continue to push up vacancy rates. As a result, rent performance will be under pressure and some projects may push back their delivery dates.

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Real Estate

TAIWANINvESTED FIRM LARGEST TAXPAYER IN PINGTAN CED Monitoring BEIJING-To date, a Taiwan-invested real estate developer has handed in the most taxes in the Pingtan Comprehensive Pilot Zone, Fujian, this year, according to taxation authorities, Pingtan Times has reported. Haixia Ruyi City Construction & Development Co has paid 52.84 million Yuan ($8.6 million) in taxes in the first four months, accounting for 10.47 percent of the total amount in Pingtan, making it the largest taxpayer, said the local taxation bureau. The company has sold 1,314 units of commercial houses in its real estate project near the Jinjing Bay area. Total taxes of 77.18 million Yuan have been paid from sales amounting to 1.09 billion Yuan. As of April 8, a total of 101 Taiwan-invested enterprises 36

have settled in Pingtan, the first pilot zone opening up to Taiwan on the Chinese mainland. The aggregate investment by the 101 enterprises amounts to $318 million, a 27.5-fold increase from four years ago. The flourishing investment environment can be attributed to preferential policies by the State Administration for Industry and Commerce, which include simplified registration procedures, protection of enterprise rights and a better mechanism for industrial and commercial management. Construction of high-end boarding houses, which are expected to accommodate 5,000 employees at an industrial park in the Pingtan Comprehensive Pilot Zone, Fujian, broke ground on Tuesday, May 9. The housing project, Xieli Jingxiu City, is part of an investment by Xieli Technology In-

dustrial Park launched by Xieli Group Ltd, a comprehensive enterprise that operates in architectural ceramics, artware, microelectronics and real estate. With an investment of 5.7 billion yuan ($926 million), the industrial park will focus on electronic circuit packaging, research and production of 6inch and 8-inch wafers. The boarding houses will be able to accommodate more than 200 mid-level executives of Xieli (Pingtan) Technology Ltd Co this year. After its completion in 2014, they will house roughly 5,000 employees in the park. "The groundbreaking of the (boarding houses) project symbolizes the acceleration of our overall plan. It will make our employees more comfortable working and living here," said Li Mingfu, general manager of


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Xieli Group. The improvement of infrastructure will help lure more talent, according to Li. "The construction of high-

end boarding houses creates better conditions for talent recruitment. With more preferential policies from the Pingtan administrative committee to

support development of hightech industries, it will play a bigger role in the growth of the park and all of Pingtan," he added. 37


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Agriculture

BAMBOO: CHINA’S POWER PLANT CED Monitoring SHANGHAI-Bamboo may technically be a member of the grass family, but its potential is not so lowly. Growers in China are using it to create building materials and fabrics, revitalize forests, and rejuvenate rural economies, Erik Nilsson reports in Anji county, Zhejiang. Bamboo's alchemic ability to be manufactured into nearly anything - from car speakers to calculators, and buildings to beer - is conjuring a gold mine in China. The country produces about 80 percent of the world's fastest-growing plant, hailed by many as "the next super-material" and the "timber of the 21st century". There are more than 1,500 uses for the "great grass". The World Bamboo Organization estimates the industry generates about $10 billion a year, which could double by 2018. Bamboo's magic is enhanced by its organic production, rapid harvest cycles and ability to grow on mountainsides. "Chinese culture is bamboo culture," says Xuan Taotao, an expert with Tianhuangping town's agricultural department in Zhejiang province's Anji County. "Bamboo can make farm38

ers rich and our environment healthy, so we must preserve bamboo forests and industries." Anji creates 20 percent of China's bamboo products, generating about 12.5 billion Yuan ($2.03 billion) annually, though it contains fewer than 2 percent of the country's bamboo forests. The county is covered by about 66,667 hectares of bamboo, about 57,333 hectares of which is moso bamboo, Xuan says. Anji has been producing the plant since its founding 60 years ago. It traded bamboo for rice with Shanghai, where the timber was used to build homes. By the 1950s, the local trees had been logged off, so only bamboo was left. When people started using concrete to build houses in the 1980s, the government introduced processing plants to make low-end products, such as chopsticks and toothpicks, from bamboo. The industry evolved to include flooring and other higher-end goods and supported 90 percent of local GDP. It's currently about 30 percent, since more locals migrate to other cities. "The bamboo price is rising, because young people want to

work in urban areas rather than cut bamboo," Xuan explains. "The industry could disappear here." About 50 species produce more than 3,000 products in Anji. There are more than 3,000 bamboo-processing factories in the county of 250,000 residents. "Nearly everyone is involved in bamboo," Xuan says. "But because it requires virtually no care and is harvested every two or six years, the farmers don't have to work hard." Yuan Guochang works only 10 days annually on his 1.33 hectares of bamboo, which brings in 36,000 Yuan every two years. "I hire other farmers to do the cutting, and the buyers come to me," Yuan says. "It's easy money. I hope I can get higher yields to earn more money," Yuan says. "Bamboo is the spirit of Anji and of China." Anji Cheng Feng Bamboo Products Co Ltd's founder Hu Gongnian demonstrates bamboo's impact on poor farmers. Hu never went to school but became rich and successful from bamboo. His company produced the


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Agriculture

pillars for the German pavilion at the World Expo 2010 in Shanghai. Hu's career development mirrors that of Anji's bamboo industry. "I've loved bamboo since I was a child," he says. He apprenticed under a bamboo carpenter at age 17 and became a middleman at 20. He started making chopsticks and toothpicks in 1995. Ten years later, he began producing flooring and shifted into furniture in 2007. Cheng Feng earns about 20 million Yuan a year, employs 70 workers and its factories cover about 1.33 hectares. "Bamboo is harder and more elastic than wood, but it is cheaper," he says. "It has made Anji rich. The global market is growing. It benefits the farmers most. And my business is getting bigger." Anji was not only the first place in China to industrialize bamboo but also has developed its most extensive tourism industry around the grass. Bamboo lures more than 500,000 tourists to the area a year, generating 500 million Yuan for the county. They come to hike the forests, eat bamboo in rural restaurants and buy bamboo handicrafts, Tianhuanping's deputy mayor Ye Yan says. Many visitors come to see the filming sites of such blockbusters as Crouching Tiger, Hidden Dragon, The Banquet and The Matrimony. There's even a small museum dedicated to films shot in Anji's bamboo forests. And the bamboo industry poses little risk to the en-

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vironment that supports its plantations, Xuan says. Manufacturing products with it requires few chemicals. "Bamboo flooring doesn't use the toxic substances other flooring does," Zhejiang Bamboo Industry Technology Co Ltd general manager Xu Guowen says. Xu says the factory workers earn more per square meter - about $20 - than the factory, which keeps about $5-10 of the $60 sale price after dealing with wholesalers and shipping costs. Xu's enterprise's parent company Yoyu Bamboo exports mostly to the United States and Europe. "The flooring is cheaper than wood, 100 percent stronger than oak and much denser," office manager Tong Wangjing says. The company also produces traditional Chinese furniture using red bamboo and contemporary furniture for offices, homes and hotels. It employs more than 1,000 people in its five factories. "Many people are surprised by what we make with bamboo, which would usually be made of plastic," Tong says. Tong's career has also advanced with Anji's bamboo industry. She earned 15,000 Yuan a year at the company a decade ago, and now earns more than 100,000. "I was a teacher but saw the bamboo industry taking off, so I switched jobs," she says. "Here, I can learn about bamboo and move forward with its development." She says local people have used bamboo since

before she was born. "When I was a kid, farmers made everything of bamboo - chopsticks, pot covers, furniture, baskets, farm implements, toys, floors - you name it." Xuan recalls that even rich people had bamboo roofs because it was a matter of life and death. "We'd get flash floods," he recalls. "People would grab their bamboo roofs and float away, like they were rafts. If your house had shingles, you'd drown." Anji resident Chen Yunchang was among the first Chinese to make bambooprocessing machines. "Everything was done by hand before we industrialized in the early '90s," he says. He still builds machines but now for his own factory, which produces blinds, mats and rugs. Xue Qiang Products, which he founded in 2000, exports to the US, Europe, Japan and South Korea, bringing in roughly $120,000 a month. "More people are buying bamboo products as people are thinking greener," he says. The 400 workers in his 10.67 hectares plant earn an average of 2,400 yuan a month. Manager Chen Yanfeng says this means he can stay in his hometown. "We don't have to become migrant workers," says the 33-year-old, who has worked at the plant for 14 years. He earns about 10,000 Yuan a month and has innovated upon several machines.


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His colleague, 28-yearold manager Guo Qin, agrees. "Without the industry, I'd have to work the fields like my parents," says Guo, who earns 10,000-20,000 Yuan a month. "I can study bamboo machinery here." Anji is not only China's main bamboo production base but also the largest producer of bamboo manufacturing machines. Anji Jitai Machinery Co Ltd manager Liu Zhanming says his company grew 20 percent annually from its 2003 founding until 2008. Its 38 workers produce dozens of types of machines in its 1.2-hectare factory. Many are exported to Africa, South America and Southeast Asia. "We are a small enterprise, but we have a big impact on the world," he says. "About 2.5 billion people live in bamboo forests, and the market will grow. As it does, the machines will become greener." Another up-and-comer in the bamboo sector is the textile industry. Tan Zhuzhuang is Anji's main bamboo textile brand. "Bamboo is almost as soft as silk," manager Du Dongliang explains. "It breathes better than other materials and kills bacteria. So, it's cooler in summer and doesn't stink if you sweat. It's also three to six times more absorbent than cotton." That said, bamboo cloth is about 20 percent more expensive than cotton. But it's a long commodity chain. It takes 17 steps and 100 days to turn a bamboo

pole into yarn. Chen Yanfeng, the Xue Qiang Products manager improving on machines, believes Anji's and China's future bamboo alchemy shines. "I think our situation will only get better as processing technology advances," he says.

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Agriculture

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'AGRITAINMENT' BOOSTS XI'AN FARMERS' INCOME CED Monitoring Xi’an- A farmer who runs socalled "agritainment" restaurants in the mountainous area of Xi'an can earn 200,000 Yuan ($31,408) a year, more than the average annual income of urban residents, said Kang Lifeng, deputy director of the Xi'an tourism administration. Agritainment refers to any farm-based tourism operation that provides agriculturethemed entertainment, such as real farming experiences and homemade meals made from food grown on the farm. Currently, there are altogether more than 5,000 such restaurants in Xi'an, Kang said. A village called Donghan, known for paintings by farmers, attracted some 30,000 foreign visitors, mainly US residents, last year. It hosts parties at which a farmer addresses visitors in Chinese and English. Foreign guests can learn to draw folk-style pictures as well as make dumplings and buns. A better life for the farmers is made possible by local efforts

to tap into the area's rich tourism resources, such as geographic advantages of the Qinling Mountain range, which forms a natural picturesque landscape and folk culture. Yet, some farmers live in areas that also house historical relics and should figure out other ways to make life better. In order to renovate the relics, some farmers were resettled to other places, but some remained at their former residences. In the past, living conditions in the historical area have not been that good, due to a lack of basic facilities, such as modern pipelines. People used to live by farming traditional agricultural products, so incomes were limited, said Hui Xilu, director of the Xi'an urban planning bureau. However, the municipal planning department discovered that the historic places are more suitable for growing economic agricultural products, including peach trees. The so-called "10,000-mu (666hectare) peach farm" in a northern suburb is a popular tourist attraction. Locals are en-

couraged to get involved with the leisure agriculture business. Xi'an was selected as one of the happiest cities in the nation in 2009. It stands out among the 10 cities that pay the most attention to the livelihood of citizens, Xi'an Mayor Dong Jun said. According to statistics provided by the local development and reform commission, in the past five years, the municipal government has invested more than 70 percent of its total expenditures on boosting living standards. The fiscal budget reached 107.88 billion Yuan. In 2011, urban residents' income per capita was 25,981 yuan and farmers' income per capita was 9,788 yuan, both of which were more than double 2006 levels. Growth rates were the biggest among 15 subprovincial capital cities. "So that people can eat high-quality food, the city ensures that safe breakfasts, oils, buns, bean products and vegetables are for sale in local communities," Dong said. The city implemented measures to ease traffic jams and build more public 43


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Agriculture

toilets, he noted. "Besides happiness, officials that were interviewed all agree that Xi'an's people are born with a pride in their native city since they were raised in such a historic atmosphere," the mayor stressed. In the downtown area, the city wall that used to guard the imperial palace of the Tang Dynasty (AD 618-917) has been standing there for more than 600 years and is still open to the public. Residents were frequently told the tale of love between a Tang emperor and renowned beauty Yang Guifei, his beloved imperial concubine. There is a kind of historic responsibility that could not easily be found in other Chinese cities, Dong said. "I sometimes get a little tired of the city its noodles, the city wall and the Shaanxi dialect. But once I leave the city for a new place and live there for a certain period, I miss Xi'an its noodles, the city wall and the folk culture that appear in my dreams, until I finally go home, where my pride is rooted," Kang said. "We will stick to the notion that 'development for the people' and insist on implementing more policies to benefit the livelihoods of people to solve their problems," said the mayor. "We will do more practical things for people to make their lives better. We will help each citizen lead a more dignified and happier life," Dong noted.

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Science and technology

RAM WITH ARTIFICIAL HEART SETS SURvIvAL RECORD CED Monitoring TIANJIN - A sheep implanted with a new type of artificial heart developed by Chinese scientists using cutting-edge aerospace technology has lived for 62 days thus far, the heart's developers have announced. The development of the heart was jointly conducted by scientists from the China Academy of Launch Vehicle Technology and TEDA International Cardiovascular Hospital in north China's Tianjin Mu46

nicipality. The sheep, nicknamed "Tianjiu," is in sound condition after receiving the blood pump on March 14, said Liu Xiaocheng, president of the hospital. He said researchers used magnetic suspension and hydrodynamic bearings -- both examples of aerospace technology -- to design and produce an implantable third-generation ventricular assist device (VAD), a mechanical pump used to support heart function and blood flow in people with

weakened hearts. The device is the first of its kind to be fitted with a battery and controller. The sheep experiment is similar to a clinical implantation, the scientists said. Once the device is marketed, it may end suffering for the 16 million people in China with failing hearts, as many patients are waiting for heart transplants. China began research on VAD in the early 1980s. Clinical use of commercialized VADs had yet to take place until now.


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Science and technology

vIETNAM TO LAUNCH 2ND REMOTE SENSING SATELLITE CED Monitoring BEIJING-Vietnam plans to launch the second remote sensing satellite, VNREDSat-1B, into orbit by 2017, after successfully launching the first of this kind on May 7, online VNExpress has reported. The report quoted a notice released on Thursday by the Embassy of Belgium in Vietnam as saying that Vietnam and Belgium had reached an agreement upon which Belgian companies under the auspices of Spacebel will manufacture the VNREDSat 1B, which will help monitor the natural resources, natural disasters, and improve management of the territory and main natural resources sources. The VNREDSat-1B will be originated from a group of

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PROBA (Project for On-Board Autonomy) satellites of the European Space Agency (ESA). It will cost a total of over 60 million Euros (78.2 million U.S. dollars) from Belgium's official development assistance (ODA) and the Vietnamese government's corresponding fund. The satellite has a weight of about 130 kg. Vietnam's first remote sensing satellite VNREDSat-1 was launched into orbit, together with two other satellites -- a 140kg Proba-V satellite of the European Space Agency (ESA) to map vegetation cover, and a 1.3kg Estonian micro-satellite, ESTCube-1 to test an electric solar sail -- by Arianespace from the Guiana Space Center, French Guiana at 9:06 a.m. on May 7 (Hanoi time). According to the Vietnam

Academy of Science and Technology, the satellite successfully sent its first photos of Vietnam to the ground receiving station on May 9. The ground stations can connect with the satellite from two to four times per day through the satellite signal receiving and transmitting station located in Hanoi-based Hoa Lac Hi-Tech Park. Vietnam becomes the fifth ASEAN nation to own a remote sensing satellite after Thailand, Indonesia, Malaysia and Singapore. In 2008 and 2012, the country launched two telecommunication satellites, Vinasat-1 and Vinasat-2, both of which are operating on a geostationary orbit at an altitude of about 35,800 km.

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