JULY 2013 VOL. 24, NO. 7 | www.chinaeconomicreview.com
༆৻ັྕাӞ ᇎେಎූ వᅙվѕऍ
China connected Focus: BUSINESS EDUCATION
EDITOR’S NOTE | ёᆈ֭ߍ
JULY 2013 VOL. 24, NO. 7 | www.chinaeconomicreview.com
ౕξ䃎ツȠ๔ᢛহ⼨ߕο㖁⮱ᬣА㗹ᮜ̸喑͚ప⮱⼨ߕο㖁 㑾Ƞ⩢ၽੳߎহο㖁㑾䛾㲺ₐࣾ⩌Ɑ㖇अȡ̶ጕ#"5喍⮫ᏓȠ䭬䛹 ጡጡহ㚫䃜喎๔ͫ䔈ߕ⼨ۈο㖁㑾喑ౕ๔ᢛ⮱䊲㏔Ꭰझ̷㘪॓㐚ۆ ⺋䄊喤 ᰫ܍҂ᬣ喑➖㖁㑾ѩͻ䔅⍧̺जࣷȡ㔹Ϸ喑Ąℾ⩌➖㖁㑾ąጟ♣ ᰆٶͺ⣝喑➖㖁㑾ϔ͇ᐭₒڒ๔㻱Ꮑ⩕䭣⃢喑ᮧᚔࡧȠᮧ㘪უ
China connected Focus: BUSINESS EDUCATION
ᅲȠ䔉⼸ࡨ⫄Ƞ丌৮䔪⏜Ƞᮧ㘪ϑ䕇Ƞ䒓㖁㑾Ƞ⼨ߕᩜЅććₐౕ㲺ڒ ϧЙᬒ፥⮱㶐丌Ѽ㵹͚ȡ ➖㖁㑾⮱ᴴ۳ჇͶ喑ࢠ䕇䓴Ԏᖜэᙌ䃫ิ喑䃖Ш҂➖৮̻ο㖁㑾
Executive Editor ᓍܠ Deputy Executive Editor ঃᓍܠ Editor-at-large ཽ߲ۈ Associate Editors ܠ
Liu Chen Philip Liu Graham Earnshaw Brenda Yang, Deng Dan
China Economic Review, English Editor ܠJake Spring Staff Writer ᓟষཽ Don Weinland Interns ᓐಯ Jessica Lee Ethan Robertson
䔋㐀喑䔈㵹Ԏᖜϑᢏহ䕇䃜喑⣝ᮧ㘪ࡃ䃳ݘȠჇѺȠ䌌䍗Ƞ⯾ᣔহノ ⤳ȡ➖➖Ⱕ㖁ጟ䲋႓Ꭸᘠȡ♣㔹喑अ᱙ߍࢶ䔪㉏হᣔݣ䏘ใ➖喑ᅞ 㘪Ҭ㏼≻чजᠮ㐚ࣾᆂ喑䔈ϧㆨ⮱⺼͵喤
he so-called “internet of things” may sound like an odd contrivance, but for those that hate jargon, it’s refreshing
that something actually is exactly what it purports to be: the connection of physical objects with the internet. Certainly, in
Art Editors ගၣ ܠJason Wong Sales Director ሾ၉ᔐପ Pierre Zolghadri Account Managers ሾ၉ளಯ Allen Xu, Ralph Wang, Lolita Bian, Riikka Koponen Distribution Manager खቲளಯ Seana Liu Publisher ߲ۈ૦৩ China Economic Review Publishing Address ᒍ The Plaza Building, 102 Lee High Road London, SE13 5PT, England
some respects, the internet of things is a long way off for China compared to places such as Northern Europe, where phones have long been linked to various household functions. The biggest advancement to date in China has been the advent of mobile wallets, giving Chinese the ability to pay speedily and seamlessly on the internet and in person. Other uses appear to be further off, but investment dollars are already being poured into it. We’ll likely know soon enough whether the internet of things becomes the next big thing.
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JULY 2013 VOL. 25, NO. 7
COMMENTARY GLOBAL BUSINESS EDUCATION MUST SERVE A WIDER RANGE OF INTERESTS IN THE FUTURE
BUSINESS EDUCATION ၄ࢥც
ಱލಮҊ֬ၣಱލ٢൜ࠏࣂಎҎࠏҎْٻႎ ࠏሏᄣЯॄೀhႽೀԪำѡћປĭर ແЯॄҘёಮჼຣӶhᅫᇗ֦֭ࠒуԪำ ѡປरᆿಮ૾уh ALL RIGHTS RESERVED. THE CONTENT OF THIS PUBLICATION CANNOT BE REPRODUCED IN PART OR IN WHOLE BY ANY PERSON IN ANY JURISDICTION WITHOUT WRITTEN APPROVAL FROM THE COPYRIGHT HOLDER.
The dragon MBA Ӹੋవྣ MBA programs in greater China compete internationally վᇗ߇౽4)(ལପം်ࡅݛฃ
The House View
8 Behind the curtain
Month in Review 12 Newsbriefs
14㜗⩞䔶᠖ 20๔䊸߬ 21ᰭສ⮱ᬣА 24̺Ꭰぶ⮱АФ
17 Cybersecurity goes mobile 19 Paul French’s diary
22 Reading into ofﬁcial corruption
26 Easing off the gas
38 Don’t get too comfortable
43 Connect the plots
45 This little piggy in the US market
Cover story China connected The “internet of things” is connecting your pocketbook with the world. Connecting your car to your washing machine. Connecting your phone to your microwave.
46 47 Westward ho! 52 Drafted into service
59⳨ݺ๔अᅭ 54 The tariff bump
Cover story 32 China connected
56 The danger in our bellies
Looking at China 65 Spring and autumn
ညĄᔇᇝᎊ Travel journal 66ϧ̮ڡᬧ
68 The land of children
ܽৠօ ξᬣА⮱ノ⤳ܳٲ䓽⩕γ็ڡឭᱜ ᪴]䅏⺒
ₐᐼ䔈ڒγऻ⣝АͨͶ⮱ᬣА喑䔆႓ᱜ ⮱⊗⒛ڤᰶࣺ䓾⣝Аᒏऑ⮱ڥȠड़㧆⮱ э㐌႓ᱜ㠰ᐼ喑ຯᅩ䛴ܧĄ̷ፊጟ㏼₨ ώą喑ᣒⱭࣵᰶ႓㔲ܧĄ㞧ᱜጟ㏼₨ ώąȡऻ⣝АͨͶౕਟ႓Ƞч႓Ƞ᪴႓ ឦ䃱Ƞ㞧ᱜ႓Ƞᩬ⇨႓ぶ็͗䶳ഌܧγ 㜗ጞ⮱Ҁ㈨䃧䔝喑ѳ᭜ౕノ⤳႓䶳ഌ喑ࢠ ҬΌᰶᄾ⮱႓㔲ܧ⣝Аノ⤳⮱㏵㐀喑 ѳ๔็ϧᎣ⇎ᰶᘼ䃳ݝ⣝Аノ⤳ऺႅ ώ喑ः㔹А⮱᭜ऻノ⤳ᬣА⮱ݝᲒȡ Й⣝ౕ䄵ࣷ⮱ノ⤳⤳䃧喑̭㝙᭜ ᠴ㺬ノ⤳⤳䃧ȡ҉ͧ̓⩹̷ᰭڤᰶ᪴ᬻ
ă–žŕ´Ö€â‹ŤÓŠá?ŽË–Ń†âźă“żŕśŃťŕľ Ö€â‹ŤÓŠá?Žáą&#x;ŕ¨&#x;ŕ¨“ŕ¨&#x;Ň€â€ŤŢœâ€Źŕ¨¨7KH&RFD &ROD&RPSDQ\ ÇƒÇ‰ŇĄŃ†ÖŁÓŞÇŠ*RQH ZLWKWKH:LQG â˛´ŕ¨ â“€ŕľ ËˆŇ?áą&#x;ä‚Šŕżś áŻ&#x;ĐŹá?łáľ‡-DPHV%URZQ Çƒĺ‚œĐąĐŹä?&#x;á—§ĐŹä 0DUWLQ/XWKHU.LQJ-U â˛´áľŇ‘Ëˆŕ¨ź á°Śá¤•á´šŃ†âźá´°ŕ˝—â˛´â‰¤áŻżäžśÇ„Ö€â‹ŤÓŠá?ŽŇ?ŕ´? Ń†âźĐ°â?ąâ˛´â˘™â?ąŕ¸Şâš°ä‡ŽáŻÇƒâ‘™ŕŞźâ˛´â‰„â€ŤŮ‰â€ŹÇƒ ă–žŃâ˛´áŻľâ‘¨ăœŒŕľ ÇƒŕĄ™ŕśâ§&#x;ŕşłŕŞźÓŞáĄ˝â?žâ?žă˜ź ä°Ťŕ¨˝Ç„Ö€â‹ŤÓŠá?Žă“żŕśáĄ€áľœŐžÇƒâ?â?ŤŕŤąä?˜ ĺ„ˆËˆâ…’ä—žŃ?ŕ´â€ŤŢœâ€Źŕ¨¨ŕĄ˝áś•áŁ…ä?´Ç„
Ö€â‹ŤÓŠá?Žá¤•á´šá˘°ăœá ¤â&#x;?Çƒăżąŕ˝Šä‡śá’Żâ˛´ŕŞˆ á?•Ç„ŢŚŕŁŁŕŁ˜á?˛ŕľŞá’¤ä–ŤÇƒâ?Ó—ŕŁ‹ĺ„ˆÇƒáĄ€äŽŻä—ľ ä™?ËˆĐ°ŕĽşÔ•Đşâ˛´ŕŁŁŕŁ˜ŕŁ‹á’¤ĺ–´ÓťŇž áŠąŃťä°¤Ç„Ö€â‹ŤÓŠá?Žŕ˝—á†–ÖƒăŒŤáą&#x;ă–žŕ´á´°á“Žŕ˝— â˛´â€ŤăƒťŢœâ€Źŕ˝—á†–ÖƒăŒŤŃťĐ°Ëˆâ€ŤŢĄâ€Źŕ¤ľŕŠ›áĄ°â€ŤăƒťŢœâ€Ź ä˛’áš‘Ç„Ö€â‹ŤÓŠá?Žâ‡żŃšá†–â?ŕ¨šăžąĺ„ˆŃ?âˆ…ŃŠáĄ€ ă”™ĺ„ˆŇžá’Łŕľˇŕ śËˆŕŚŁá´šä?´ášŹă§§á—‡+23(ŕž† á†–ä Ëˆäˆ•ŕž†á†–ä áą&#x;ŕ´á‡Śä‡”ŕ¨&#x;â˛´ä‡‘ŕĄ‚ËˆŃŞ äˆ•á?Žâ˛´ÔŤÖ…á†–ä˛’Çƒŕ˝—á†–áĄ†á˘°áľ&#x;á†–áš‘á¨€â€Ť×‹â€Ź á†–ä?Šá¨¤ŕŁ™Ç„ ŕ¨źá°ŚÖ€â‹ŤÓŠá?ŽŇ?á”°áŠ…Ňśäşˇŕ¨‡ŕžä‡´â˛´ÔąŃŠá˜› ä™?ŕŠ&#x;ŕŁ˜ä‡‘ŕĄ‚Ëˆä˜‰áą&#x;ŕľ˜â€ŤŢ˜â€Źŕ´á§‚ŕ¨˝ă…œĐ°â˛´ÓŞáĄ˝
ŕ¸ŠŢŤä‡‘ŕĄ‚Ç„äˆ•ä‡‘ŕĄ‚ŃŞáŻ â€ŤŢœŢ¤â€Źŕ¨¨ŕŞźŕźžŕ˝—Ń?â˛´ â€ŤŢœâ€Źŕ¨¨á¨€â€ŤÝ˝×‹â€Źä?Šâ˛´ă”Źŕ¨¸ÓŞáĄ˝ä€“ßŁáŻŠáš¸Ç„ äˆ•á?Žŕľ˜ă”—ă”?ŕ¨ áŠ…â˛´ŕ¨źá°ŚËˆŇ?ă”¤á¤ąâľ°äłľă ¤â˛´ â?â?ŤáŻŠá”żÇƒă–žŃâ˛´ă šâ?Śâ§&#x;ŕşłŕŞźä‡˘ă‚Śâ˛´â?â?Ť ŕŞźá?•ÖŒâ‰‹ŕ´¤Ç„Ö€â‹ŤÓŠá?ŽŕĄ™Ňžă“żŕśâ˛´á˜ąŕŁŻÇƒ á†źŕŽ´â˛´â˘™â?ąŕŞźä™Šä‡&#x;ŕ¸Şâš°ä‡ŽáŻËˆÔ•ŕ§şä˜˛á“–â˛´ â?â?ŤŕŞźă“żŕśáĄ€áľœËˆÖŻŃťáĄ€ŃŞâ€ŤŢœâ€Źŕ¨¨Çƒĺ„ˆă‡‘ŕŞź ŕŞˆá?•áĄ€äŽŻâ˛´â¨śáœŁâ§&#x;ŕşłÇ„ Ä€áĄ Ôœá¤•á´šŕ˝Šáš§â˛´ŕľ â¨śâ§&#x;ŕşłËˆŃ á‡źâ˛´ă šâ?Ś ä?´â“€Ô•ŕ§şâ‘™ŕŞźá‡ŒÓŞâ˛´â‰„â€ŤŮ‰â€ŹÇ„áĄ ÔœŢ§ŕźˇá´šŕŁ™ Ňžâ€ŤŢœâ€Źŕ¨¨áĄ€ŕŁ?â˛´á´°ÖŁŕśŃŠâ§&#x;ŕşłËˆá´šŕĄ™â˛´â´ ă‡‘ ŕŞźă€žáŚă”ƒáś´Ô•ŕ§şáŻá“ŒÇƒÔąŃŠŕŞźá†–áľ&#x;âźâ˛´á•Ş ŕ˝—ăš„ŕ¨¸Ç„áĄ Ôœá¤•á´šŃ†âźĐşá´°ă‘ąá˜‰Çƒá´°ĺ„ˆá¸ â˛´áľŞŕľŞËˆÔ•ŕ§şâ€ŤŢ˜â€Źă–žŕ´ŕ¨ áŠ…á´°ä—ľä™?â˛´â‘&#x;ŕ¨“Ëˆ ä˜‰Ó‹äœá´šŕŁ™ŇžŕŠ¨á•…ŕ´äąľÔąŃŠÇ„áĄ Ôœâ˛´â€ŤŢ˜â€Ź â¨łá–ĄŕŤ˝ŕŁ‹â‡żŕ˝™äœŕľ˜á˘™ŕ˝—Ä á?ŽäŽŻ1DWKDQ 'HDOăş˜â˝ŞÇ„ â…˘Ňśä€“ă–žŕ´Ö€â‹ŤÓŠá?Žâ˛´á´¤ŕ˝ŠŘ‘áš&#x;Ëˆäˆ§ŕ¨ âĽ ä›žă Łsjacobs@georgia.orgăš„ăŒŤÖ€â‹ŤÓŠ á?Žĺ‚Ťäś‚á‹‹áŁ…ä?´Ô“ăş˜6HWK-DFREVËˆáĄ†ä‡Żä°ž Georgia.orgÇ„
Georgia, USA: Where the World Does Business Georgia is home and birthplace to the likes of the Coca Cola Company, Gone with the Wind, James Brown, the worldâ€™s largest aquarium and Martin Luther King, Jr. Georgia is also known for having a world-class logistics infrastructure, moderate climate, exciting tourism destinations, probusiness environment and talented workforce. With its low cost of doing business and attractive quality of life, Georgia welcomes investment from Chinese companies. Located at the heart of the southeastern United States, one of the fastest growing and most populous regions of the country, companies can reach 80 percent of the U.S. via a two-day drive or a two-hour flight. In Georgia, the worldâ€™s busiest, most efficient passenger airport, as well as the fastest-growing port in the U.S., offers global access. Delta Air Lines has multiple one-connection daily flights from Atlanta to Beijing and Shanghai, and the Georgia Ports Authority (GPA) has an established relationship with nine port cities in China. Chinese companies will find Georgiaâ€™s business climate thriving and its global community vibrant. More than 75 percent of the Fortune 500 companies
have operations in the capital city of Atlanta and the state is home to 16 Fortune 500 headquarters, the third largest concentration in the U.S. More than 70 international governments have a presence in Georgia, and 3,000 facilities from 60 countries, including China, operate throughout the state. Businesses in Georgia are fueled by skilled and knowledgeable employees. Georgiaâ€™s workforce is young, productive and growing rapidly, more than half the population is between ages 20-54. One of the largest public university systems in the U.S., the University System of Georgia, encompasses a total of 31 public colleges and universities. Every student in Georgia who graduates from high school with above average marks is eligible for a HOPE scholarship, a nationally recognized program which provides tuition assistance to any college, university or technical school in the state. Georgia is also home to the acclaimed Georgia Quick Start program, ranked first in the nation for workforce training. Quick Start provides free, comprehensive workforce solutions for new and expanding companies.
The state continues to grow while sustaining a gracious style of living, a beautiful natural setting and a cultured atmosphere for living and working. Georgia is recognized for its business-friendly attitude, logistics and communications infrastructure, and modest costs of living and doing business â€“ the ideal environment for companies, their executives, and their employees to thrive. â€œWe are a diverse state geographically and are blessed with an abundance of natural resources and a temperate climate. We have the right business environment to help make companies successful, favorable regulations and tax structure, and a great consortium of government, business and academic communities. We have the worldâ€™s busiest and most efficient airport and the fastest growing port in the U.S., which have helped us attract international businesses. Our global reach is expanding every day,â€? said Governor Nathan Deal. To learn more about Georgia, USA, contact Seth Jacobs, Georgiaâ€™s investment representative based in Qingdao, at firstname.lastname@example.org or visit Georgia.org.
Ö€â‹ŤÓŠá?ŽŐ˝Ňžă–žŕ´ŃŒŕŚ‡äœ˜Ń?á—łŕľ á‘–Ëˆáą&#x;â€ŤŢ˜â€Ź ŕ´ŕ¨ áŠ…á´°ä—ľä™?ÇƒÓŞŕ¨“á‡śá“–á´°ĺ„ˆâ˛´ŕľ ŕĽŞŃť Đ°Ëˆä˜‰ä&#x;źâ˛´â€ŤŢœâ€Źŕ¨¨ä™Šä—ˇŃ”ŕ˝™ä––ă€ťáĄ†Ń”áˆżá°ŚăĄš ă€ťá‰Ąŕ¨&#x;áŁĽä—Žă–žŕ´â˛´ŕľ áŻŠÇ„Ö€â‹ŤÓŠá?Ž á¤•á´šŃ†âźĐşá´°ă‘ąá˜‰Çƒá´°ĺ„ˆá¸â˛´á‡’ä˜€áľŞŕľŞËˆ Ô•ŕ§şă–žŕ´ŕ¨ áŠ…á´°ä—ľä™?â˛´â‘&#x;ŕ¨“Ëˆä˜Žá§•â€Ťâ¨łŢ˜â€Źŕ¨´ ŕľ Ç„ä—Žă–žăĄšă‚Ş'HOWD$LU/LQHV á´šŕ˝Š áś‘ÓžÓŠâ˘Šâ€ŤŢ â€Źŕ˝—ă ŁŕĽ‡ÓœŕŞźĐşâŽ§â˛´â‡żá°•ăĄšă“ŻËˆ á’ŚŃ„Ö€â‹ŤÓŠá?Žâ‘&#x;ŕŁ‘á‰°*HRUJLD3RUWV $XWKRULW\*3$ á?˘ă“żĐžŃ?ŕ´â˛´Ň?Ńšâ‘&#x;ŕ¨“ ŕˇžá?˛á”Şăƒťâ€ŤŢŁâ€ŹăŒŤÇ„
Ń?ŕ´â€ŤŢœâ€Źŕ¨¨ŐŠŕ¨ â§ Ö€â‹ŤÓŠá?Žâ˛´ŕśŃŠâ§&#x;ŕşłâ…“â…“ ŕŠ ăŚ“Ëˆŕ´äąľŕ˝Šâ€ŤŕĽ†Ýłâ€Źá?˛ŕľŞâ€Ťâ”‘Ýľâ€Źâ?ŤŕŁ‹Ç„á‡Ś Ń†âźÓ„â˛Žá•ŞÔąŃŠä˜šá¤™áˆśá™Ťäœ˜ä‡Žŕľ˜Ö€â‹ŤÓŠ á?ŽËˆÖŻäˆ•á?ŽáĄ€ŃŞŃ†âźÓ„â˛Žá•ŞÔąŃŠŕľ˜ă–žŕ´â˛´ ă…œĐšŕ˝—äłśŃ?ŕľ Ç„á’ŚŃ„äŽľä—ˇâ˛´Ó„â˛Žá•ŞÔą ŃŠŕľ˜äż†á“ŒÓŠâ˘Šâ€ŤŢ â€Źŕ˝—ä‡Žá´šä˜€ăŠ•â›ŠÇ„ŕ¨–ŕ˝†ËˆäŽľ ä—ˇŃšŕ´äąľáŻá“ŒáľŞáś´ŕľ˜Ö€â‹ŤÓŠá?Žä‡Žá´šĺ‚Ť ŕľ Ëˆŕ¤ľá¤œŃ?ŕ´ŕľ˜Ţľâ˛´Ńšŕ´á‡Śâ˛´ á‡ŚÔąŃŠŕľ˜â€ŤŢ˜â€Źá?Žä˜€ăŠ•Ç„
THE HOUSE VIE W
Behind the curtain China’s crackdown on hot inﬂows led to cold exports. Get used to it
conomists and I-bankers have been complaining for months that the China’s export figures have been inflated. But, pulling back the curtain to get a truer picture of exports, they might not like what they see. That’s if trade data released in early June is any indication. Export grew at the slowest pace in a nearly a year in May, rising at shockingly low 1% year-on-year. That’s down from 14.7% growth in April. Slowing growth itself isn’t that surprising. A slowdown had been widely expected, with a consensus economist prediction of only 7.3%, according to Reuters data. Markets were also expecting lackluster trade data as well, contributing to a decline of 3.9% in the Shanghai Composite Index the week leading up to the data announcement. Qinwei Wang, a London-based China economist for Capital Economics, wrote in a note the day before figures were released that exports had been unusually strong in May of 2012, which makes for a tough year-on-year comparison this year. But even looking month-to-month, the numbers also weakened with exports falling to roughly US$183 billion in May from US$187 billion in April. The main reason for the dim expectations was a crackdown in early May on false trade statements. Companies have widely been suspected of inflat-
ing the value of their exports in order to sneak more money into the country. The State Administration of Foreign Exchange (SAFE) stated on May 5 that it would warn companies if their stated exports were larger than the value of the actual transaction and blacklist them if they could not adequately explain the discrepancy. The crackdown appears to have worked but with the side effect of dragging headline export figures way down. Much of the hot money flowing in was thought to be through Hong Kong, and data specifically on flows between the mainland and the financial center indicate the rules have indeed curbed that illicit activity. Exports to Hong Kong grew only 7.7% in May, compared to 57% in April, as Reuters astutely points out. The fact that the purchasing managers’ index (PMI), an indicator of manufacturing activity, did not presage this drop in exports is also a sign that the fall has more to do with the crackdown on illicit inflows than an actual slowdown in production. In the official data release on June 1, the PMI subindex for new export orders rose to 49.3 in May from 48.4 the year prior. A number below 50 indicates a contracting growth rate, but the rise in the export sub-index nevertheless clashes with the huge slowdown in export growth.
Traders may cringe in the shortterm, but a more accurate reading of trade data is important if it helps economists and policymakers understand the true nature of the slowdown. “Export growth in May confirms our estimates that China’s ‘true’ export growth so far this year could just be [in the] lower single digits,” said Bank of America Merrill Lynch economists in a note today immediately following the data release. In an earlier note, the economists had suggested that the real growth in exports for the first four months of the year was actually 5%, instead of a official 17.3%. Regulators may have been clever in cracking down on the hot inflows when they did. The dates on which economic figures are released are generally announced far in advance. It’s possible Beijing could have foreseen that May figures would be released on a Saturday when the mainland is headed into a five-day holiday for the Dragon Boat Festival. The Shanghai Composite Index dropped by 2.8% when the market reopened, a significant but fairly measured drop compared to the severe export figures. Traders should recognize that more accurate data is a positive sign for the long-term sustainability of the economy, and thus stocks. In other words, traders and investors should brace themselves for more data releases like this in the future.
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λ Ꭱ喑 Ꭱ䊲䓴̭喍喎
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MONTH IN RE VIE W
China’s factory activity continues to drop
China to consider entering US-led trade group
China’s factory activity hit a nine-month low due to faltering demand, endangering China’s economic growth target of 7.5% and further pressuring policy makers to ease lending, Reuters reported, citing a preliminary survey. The flash HSBC Purchasing Managers’ Index dropped to 48.3 in June from May’s 49.2, reaching further below 50, the level marking the line between expansion and contraction. The survey’s indications add to the pressure on the People’s Bank of China to loosen monetary policy, which started mounting after the recent cash squeeze.
China’s Ministry of Commerce said that the country will study potentially joining the Trans-Pacific Partnership (TPP), a trade bloc of Pacific Rim nations lead by the US, Reuters reported. Beijing has been collecting opinions on the TPP from various industries and government organs. “We will analyze the pros and cons as well as the possibility of joining the TPP, based on careful research and according to principles of equality and mutual benefit,” a ministry spokesman said through a statement on its website. Japan is in the process of joining the 11-nation body.
CNPC joins in Tajikistan oil and gas deal
China to double mainland highway network
China oil giant China National Petroleum Corporation (CNPC) joined France’s Total and Tethys Petroleum in signing a Tajikistan oil and gas development deal, The Wall Street Journal reported. Tethys has said that the Bokhtar project in Tajikistan is expected to yield 3.22 trillion cubic meters of gas and 8.5 billion barrels of oil. The estimated costs of the first phase of exploration range from US$80100 million. China reportedly plans to increase the role of natural gas in its energy supply to 10% by 2020 to reduce dependency on coal, which currently fuels 70% of the country’s energy needs.
China transportation officials announced a plan worth US$766.8 billion (RMB4.7 trillion) to expand the mainland’s highway network, more than doubling its current size, South China Morning Post reported. The chief planner in the Ministry of Transport’s general planning department said at a press conference June 20 that the expansion will add 227,000 km of roads to the current network of 173,000 km for a total of 400,000 km by 2030. The new highways are to include two north-south major passageways in China’s west, connecting many of the 900 counties that presently do not have direct access to national trunk ways.
China blocks Mastercard’s yuan transactions
Report: Rural environment deteriorated in 2012
The People’s Bank of China (PBoC) has halted MasterCard transactions in yuan, signaling an unwillingness to open the credit card industry to foreign companies, Financial Times reported. The PBoC said no payment institution was allowed to cooperate with foreign companies on cross-border yuan transactions, stopping the Chinese online payment platform EPayLinks from processing such transactions on cards the company jointly issued with MasterCard. The WTO last year said that China has allowed its homegrown UnionPay to monopolize yuan-denominated transaction by discriminating against foreign card companies. China is expected to have the world’s largest card market by 2020.
Chinese environment officials reported that pollution throughout rural parts of China worsened considerably in 2012 due to expansion in industry, mining and animal husbandry, Reuters reported. The Ministry of Environmental Protection also stated in its annual report that China’s farms have overtaken cities as the major source of pollution. The ministry called environmental conditions in the countryside “grim” but wrote that the country’s overall environmental condition did not worsen in 2012. The report said that the overall air quality in cities was “generally stable” and that improvements had been made in water quality in 2012, although the pollution problems facing China remain severe.
China to boost its solar industry
Mao sedan resurfaces to compete with Audi
China will bolster its solar industry by boosting domestic demand for solar-generated electricity and providing easier financing to manufacturers, Bloomberg reported, citing a statement on the State Council’s website. Officials said that grid companies should build solar-friendly networks and give priority access to solar-generated power. The statement also emphasized the need for lenders to help solar manufacturers raise capital and assured encouragement of mergers and acquisitions among solar companies. The state’s solar push comes amid concerns over Chinese solar companies defaulting on loans and the impact of the EU’s recent tariffs on solar panels from China.
Red Flag sedans, once a symbol China’s communist elite, were set to go on sale on May 30 in an attempt to give Volkswagen’s Audi a run for its money, Bloomberg reported. China FAW Group will launch the Hongqi – or Red Flag – sedans for retail after a US$300 million overhaul of the version that was first built in 1958 for former Chinese leader Mao Zedong. The Chinese brand will go head to head with Audi, BMW and Daimler’s Mercedes-Benz for private sales. FAW has supplied 500 Red Flag sedans to Communist Party leadership in a nod to President Xi Jinping’s comments in December that officials shouldn’t be continually spotted riding in foreign vehicles.
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Cybersecurity goes mobile Notable security breaches in China illustrate the case for beeďŹ ng up safeguards for mobile apps, write Kenny Hui and Billy Graham of PwC
hina boasts a population of more than 400 million mobile internet users, a number set to grow with ever-rising demand for smartphones. To capitalize on this trend, many Chinese businesses are developing mobile applications in order to better engage their customers. For example, in 2012, several commercial Chinese banks partnered with telecom operators and third-party payment service providers to develop mobile phone payment apps, often called â€œmobile wallets,â€? to more easily allow their customers to make purchases using their phones. But while these apps offer Chinese businesses a great way to engage their customers and employees, this
high level of access and interactivity comes at a price. When Chinese customers use mobile apps, they often share personally identifiable information, which could include their identity card number, name, home address, mobile phone number or bank account details. Employees, on the other hand, sometimes use their personal mobile devices to access corporate data and intellectual property inside and outside their traditional corporate workspace. According to a recent PwC survey, 88% of consumers globally use their mobile device for both personal and work purposes. As a result, mobile apps have become a prime target for hackers looking for valuable infor-
mation that they can exploit. While Chinese companies understand the benefits of mobile apps, many are still not adequately prepared for the evolving threat of mobile hacking and should be ,FOOZ)VJ doing more to protect themselves. Although China does have some data privacy regulations that govern the collection and use of personal information, the threats to mobile apps evolve quickly, so complying with regulations may not #JMMZ(SBIBN be fully adequate. Businesses in China and abroad have started to realize that mobile app security, and information security more broadly, are global concerns, regardless of where customers or employees are based. As Chinese apps gain popularity and attract users from around the globe, the need for information security becomes more important and also more challenging. As such, when determining the level of security needed for a mobile app, businesses in China must consider the sensitivity of the data that they are trying to protect and appropriately invest in mobile app security. Based on the mobile security-related work PwC does globally, the
three key security considerations that Chinese businesses must address when developing an app are identifying the user, protecting data and recognizing an app’s vulnerability to reverse engineering.
Protecting your vitals How does the app verify the identity of the person using it? If identification happens at the app (not the device) level, is it centrally managed? These questions should be top of mind when considering how users will be identified and allowed to access apps. Traditional approaches such as username and password do not always fit well into a mobile context. Therefore, in some cases where the enterprise requires more than a device passcode, new and innovative techniques can be employed in order to balance the ease of use and protection of sensitive information. These new approaches should still rely on three foundational concepts to identify a user: namely something you are, something you have or something you know. This may include biometrics, a physical or virtual token, or a password. Data protection considerations generally fall into two categories – data in storage and data in transit. Sensitive data in storage is normally encrypted. Encrypted data is generally safe, as it can only be accessed with a “key.” However, the risk here is that the encryption key is stored or saved in an easily accessible location (on the mobile device). In one recent instance, hackers were able to find and exploit a vulnerability within an app developed by
a major Chinese enterprise. The app stored customer passwords in plain text on the mobile device. The hackers were able to exploit this vulnerability and use the passwords to sign into the app and gain access to the protected personal information stored within. As a result, these hackers were able to make transactions using the identity and account details of these customers. Data in transit refers to protecting data as it moves between the mobile app and company servers. When implemented correctly, encryption is effective for protecting data in transit from being intercepted. Very sensitive or critical data should also be protected in memory.
Avenue of attack Hackers often attack apps through reverse engineering, which entails taking an app downloaded to a mobile device and decoding it to view its contents. Attackers often use this to derive assembly code, which they analyze to determine the app’s behavior, and in some cases, change the app’s behavior to do things that were never intended. One notable instance of this happening in China was in the form of a Trojan, malware that appears on the surface to be innocuous. The Trojan was embedded in several reputable apps that users would install on their mobile devices, after which the Trojan would use their account details to make a series of transactions, including downloading paid apps and activating other paid-for, on-demand services. A company must keep in mind that an attacker with access to an app can eventually circumvent its security controls and safeguards with enough
time. Whenever a firm is considering launching an app, it must weigh the sensitivity of the data involved if it were leaked against the cost of defensive coding implementation. To better improve the security of their mobile apps, businesses in China should focus on a few key areas. First, companies should think through motivations and arguments for developing the app from a business perspective and then clearly articulate the case for security controls and safeguards. Second, if companies are planning to develop more than one mobile application, they should examine the controls and safeguards needed across each of their apps to identify security patterns. These two steps will make it easier to identify common patterns and build robust and flexible security solutions for an array of use cases. Last, companies can develop a roadmap to address current security gaps to help keep security aligned to the business and allow security to evolve as technologies and business initiatives evolve. Mobile apps have the potential to help usher in new ways of doing business, but security cannot be taken lightly. As companies begin to push the boundaries of what can be done on mobile apps, security organizations will need to keep up. The time to get ahead of the curve on security is now.
Kenny Hui is a partner in the risk and controls assurance practice at PwC China. Billy Graham is a mobile security specialist with the firm
Paul French’s diary Urbanization, aging and a Chinese relaxation crisis
ew subjects in China today are more interesting or all encompassing than urbanization, particularly as we enter a fascinating demographic shift that will reduce the rate of urbanization. China is simply running out of bodies in the countryside to transport to the cities. This is forcing change – however much Beijing may resist it. That includes change to urban planning, change to how service and manufacturing sector economics work and change to – or even better the scrapping of – the hukou system, hopefully sooner rather than later. In my travels, it’s nice to come across Chinese cities that are a bit more relaxed and pleasant than the frenetic megalopolises. I recently spent a few days in Yichang, over in Hubei province, at the gateway to the Three Gorges. Yichang is what the Chinese call a small city at a mere 4.6 million people, but it doesn’t feel crowded. Its roads aren’t grid-locked, its air seems clean, industry is kept on the outskirts and people seem happy and relaxed. It’s a medical center for its area, but its many hospitals and clinics don’t seem to be suffering from the overcrowding and chaos bigger city hospitals invariably face. Yichang appears to me to have a nice mix of green and industry as well as old and new. Perhaps it’s not a perfect case study or about to get into Monocle’s infamous list of
the world’s “most liveable” cities just yet, but it seems to be getting something right. I pondered this question of livability with some Chinese bankers while in Yichang. One of them raised the interesting idea that a big problem in Chinese cities is a lack of relaxation-related facilities for most people. He bemoaned that while leisure giants like Disney were actively courted by Chinese cities, every- 1BVM'SFODI day leisure facilities providers – private sports centers, smaller scale attractions, etc – could never get funding from the banking system as it is presently structured. Consequently they either don’t happen, or they get built and are underfunded, disappointing and go broke pretty fast. Another Yichang contact believed that the problem lay more with people not being sure what to do with leisure time, outside of going on full-blown holidays. There simply aren’t enough outlets to let people develop hobbies. This does seem to be a problem. A friend who works for a major photography equipment brand tried to start up a camera club a while ago – to encourage people to take pictures, join communities of camera enthusiasts, take better pictures and buy more expensive kits. But trying to get such a club started proved impossible legally, and in the end he dropped the idea. China has legions of amateur photographers, desperate to enjoy their hobby and sometimes coming together online or in small informal groups, but rarely in organized clubs. All of these problems are going to become more acute. China’s aging population is a big theme now with China pontificators. In Yichang, the range of new providers of services for the old, from care homes to at-home help, was astonishing. They’ll be needed as China foresees fully 97% of its elder care needs in the future being met by either home-based healthcare or community-based initiatives. All of these can’t be either run by or solely funded by Beijing – China will need better financing systems and more volunteerism and informal organization to meet this challenge.
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ㆠᅁ䶬eᑄ䛹ᓤᰩ .JMUPO'SJFENBO ᪆
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Reading into official corruption Chinese media plays to a public cynical about corruption and wannabe ofﬁcials ready to embrace it, writes media scholar Ying Zhu
raft, gluttony and the efforts to curb both have been Chinese news h ffixtures for two decades. Back in the 1990s, thenB Premier Zhu Rongji P llaunched a series of anti:JOH;IV c corruption campaigns tthat led to a number of high-ranking officials being ousted. The Communist Party today continues to revere Zhu for his resolve against corruption. A recent article in the official communist publication Liaoning Correspondence Party School magazine commemorated Zhu for his tough stand. President Xi Jinping now seeks to take up Zhu’s mantle. Late last year, after taking the top post in the party, Xi launched an austerity campaign to rein in lavish taxpayer-financed spending by officials and state-owned companies. While the crackdown targets conspicuous displays of wealth among China’s elite, it does not root out concentrations of money and power, those that reward people with the right family pedigree and connection. The public, therefore, has remained skeptical of the anti-corruption campaign. There is no shortage of online jokes mocking the renewed moderation campaign. “Eat quietly, take gently and play secretly” has become the unofficial catchphrase of the corrupt. As references to corruption and
efforts to combat it permeate all of mainland society, Chinese television has been quick to cash in by producing TV dramas that offer up some version of righteous leaders who lead the fight against corruption. Many of these dramas were adaptations of anti-corruption novels that first came into vogue in the mid-1990s. The novels frequently featured heroic party officials, professing the uplifting message that corruption should and can be eradicated.
The loss of innocence Several early anti-corruption dramas were modeled on former Chongqing police chief Wang Lijun, the righthand man of the city’s ousted party chief Bo Xilai, who was hailed as an anti-graft hero before the scandal that landed him in prison. Then, in 2007, the TV series “The Great Ming Dynasty 1566” (“Daming Wangchao 1566”) hit the airwaves and gave a more candid consideration of official corruption. The show gave a new treatment to official corruption, treating it as inevitable and unstoppable. “1566” offered an intriguing look at the bureaucratic functioning of the Jiajing Emperor’s court in which thenruler Zhu Houcong relinquished dayto-day governance to subordinates. The Ming court was corrupt at all levels, which contributed to social unrest during the Jiajing period, a period not dissimilar from the situation in today’s China. “1556” exposed the
massive and systemic dysfunction of the Ming court and the extreme hardship ordinary people endured during that period. In “1566,” the shame associated with corruption is replaced by an eagerness to partake, to be part of the privileged few with means to be corrupt. It is Chinese television’s first drama that takes politics as is, showcasing the nuts and bolts of political “craftsmanship” without moralizing. The arrival of “1566” was informed by the revival of fiction on officialdom as a genre in the second half of the 2000s. In a new twist for the genre, several ex- or current officials tried their hands at writing novels that injected their real-life experiences into fictitious plots set in the circles of power. Wang Xiaofang, the former secretary to the executed Shenyang deputy mayor wrote “The Mayor’s Secretary” (2005) based on his experience serving in the city of Shenyang. Wang’s “The Chief of the Beijing Liaison Office” (2007) portrays the Shenyang liaison office in Beijing as a breeding hub of corruption. “The Civil Servant’s Notebook” (2009) reflects on the unspoken rules governing Chinese society, lamenting the trapped lives of civil servants.
Elite readership Such novels have become bestsellers, serving, in a perverse way, as manuals for China’s new generation of civil
servants – they apparently make up the largest segment of readership for officialdom novels. The popularity of these novels implies a fascination with party politics and arguably a desire to become part of the power elite. Wealth is increasingly concentrated in the hands of the politically powerful and is then handed down within a few established family dynasties, so success has become increasingly inherited. Not surprisingly, the exclusivity of power has only further propelled recent college students in China to reach out to the party in hopes of joining the elite. Research shows that the most rapidly growing members within the CCP are now college students. They seek to join the party because they believe that party membership will lead to job security and social prosperity. In this fashion, as some have commented, the party has transformed itself from the Orwellian Big Brother to a Big Brother fraternity. The new officialdom novels deal
with the culture of Chinese officialdom, both the trivialities of government offices and the heart-wrenching struggles of their main characters. The works focus on the protagonist’s compulsive abuse of power, the complexity of human relationships involved and the struggle of those with a conscience. Here the corrupted officials are portrayed not as villains but as major players in a larger system. So epidemic, endemic, systemic and routine is corruption in China, the moral indignation and the will to rectify it reflected in the anti-corruption novels and dramas a decade ago have vanished. While the anti-corruption genre tackled the issues of China’s political culture, attempting to uncover a deeprooted political psychology, the officialdom novels take as a start point the inevitability of corruption and are lavish in their detailed descriptions of crooked dealings. The TV drama “1566” debuted
against this larger social background. From anti-corruption to officialdom, the evolution of Chinese primetime TV dramas registers the shifting mood of a Chinese society from moral indignation to complacence and resignation, and above all, cynicism. It remains to be seen if the party’s new round of austerity measure would actually amount to something that is effective enough to swing the public mood.
Ying Zhu is a professor in and chair of the Department of Media Culture at the City University of New York, the College of Staten Island. A leading scholar on Chinese cinema and media studies, she is the author or editor of eight books, most recently of “Two Billion Eyes: The Story of China Central Television.” She is currently working on a project concerning Sino-Hollywood courtship.
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हᵤΌ㺮ᑧ䄰喑ᒀౕ䉐Ą䨣㵹 უąᬣ喑䓴ܳキࡃγȡ䃑䃳⮱䛾 㲺⩹ϧธ͚喑ᰶᒵ็᭜䊋ह⮱๔䘕ܳ㻯
Easing off the gas Are Chinese policymakers ﬁnally getting serious about curbing credit?
hinese firms are either out of cash or unwilling to part with what they have on hand. Agricultural Bank of China stoked worries over a tightening cash supply in mid-June when the country’s thirdbiggest lender failed to sell more than 40% of the bonds it put on the market. Those fears were validated that same week when a Ministry of Finance bond sale fell short of its target by some US$5.5 billion. The ministry sold off only 63% of the bonds it brought to auction, a clear sign that even the cen-
tral government is struggling to raise funds. This tighter market leaves much less room for highly leveraged local governments and companies to get financing. That could lead to a dire situation if they need to rollover mounting bad debt, which many observers predict the companies hide by merely raising more money to pay off old debt. Perhaps one the clearest signs that China is tightening its cash supply came with the total social financing (TSF) data China’s central bank
released during the weekend before the bond sales. Growth in TSF, the country’s widest measure of credit, fell by about one-third between April and May. Analysts dug out several explanations for lower-than-expected TSF figures. New regulatory measure that sought to clamp down on flow of hot money – funds illegally funneled into the country – may have stemmed some credit growth, according to a note from Bank of America Merrill Lynch last week.
More encouraging was the possibility that new rules from China’s banking regulator to limit banks from issuing wealth management products – investment vehicles that push funds into highly risky and lightly regulated lending areas such as real estate and pawn shops – had curbed credit growth. Debt in the shadow banking sector, where the funds from many wealth management products were channeled, are thought to account for half of the growth in TSF. A third possibility that Standard Chartered noted relates to the fact that the central bank bought an average of US$2 billion in US dollars per day during the first quarter of the year. The purchases maintained liquidity and held up the price of the yuan. Those purchases have slowed, somewhat unexpectedly, Standard Chartered said. The People’s Bank of China was even selling US dollars in late May and early June, leading to a tightening supply of cash.
A delicate balance Most likely, all three possibilities are contributing to slowing credit growth. Together, they represent the tight balance between growth and default that China finds itself walking. China’s ever-increasing liquidity throughout its decades of growth has led to rising fears that the government would throttle credit spending. The trend has only accelerated, with debt as a percent of GDP jumping from 148% to 205% between 2008 and 2012. At the same time, this debt is being used in an increasingly inefficient manner, with returns on debt falling in that period.
The government faces on one hand rising credit and falling returns increasing the chance of widespread defaults destabilizing the financial system. On the other hand, many firms and investors fear that tightening credit could lead to a hard landing at a time when China’s growth is already decelerating. A tighter money market, and accompanying credit slowdown, does appear to be in line with new government leaders’ promises to curb rampant spending and a greater accumulation of debt. Such pledges in the past have been welcomed by economists but often ended with huge boosts in public spending. This time, regulators may be backing up their words with action. During the next few months, policymakers are likely only to loosen monetary policy unless the country’s employment situation deteriorates. Manufacturing employment is flat but not in a dangerous state, Standard Chartered noted, so regulators seem likely to stay the course. Onlookers who are nervous about a hard landing would do well to remember: China’s economic troubles only amount to a falling, but still rapid, pace of growth. The trend this year is still far from marking an outright contraction in credit. While month-to-month TSF growth appeared slow, that measure of credit in the first five months of the year actually increased by 52% compared to 2012. That is hardly a slowdown – it’s a country barely taking its foot off the gas pedal. What has yet to be seen is how far the country can ease off the throttle without falling into a tailspin.
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China connected The â€œinternet of thingsâ€? is connecting your pocketbook with the world. Connecting your car to your washing machine. Connecting your phone to your microwave
pending money in Shanghai just got a whole lot easier. In April, Shanghai Mobile, a subsidiary of China Mobile, added itself to the country’s growing list of “mobile wallet” service provider. The payment method allows consumers to run their cellphones across a scanner to settle accounts instead of swiping a card or producing a wad of cash from a physical wallet. Shanghai, the country’s financial hub, has been something of a testing ground for new payment methods. China’s earliest version of the mobile wallet popped up last year in the city, and there are now reportedly more than 160,000 terminals that savvy Shanghai shoppers can use to drain their bank accounts. This new way of spending is part of a bigger trend that is aiming to put wallets, watches, TV sets and products and items of all sorts on a network that is constantly exchanging and updating information. This new level of computer and phone connectivity with devices and objects traditionally untied to information networks is known as the “internet of things.” Or at least that’s what the computer scientists are calling it. The concept is founded on the idea that many physical objects will transmit information, forming a complex network of global and instantly updated data. Portable music devices could soon be alerted if toast is burning in the oven, for example. But the uses are almost endless, and not all ridiculous. If a phone is monitoring its owner’s body, for instance, paramedics can be alerted of a health emergency without anyone placing a call.
The buzz At present, the term internet of things encompasses such a wide range of disciplines that even researchers who are working within the field had trouble defining the exact implications. “The internet of things is a buzz word and many things can be [included] in that concept,” said Jin Beihong, a research professor at the Chinese Academy of Sciences’ Institute of Software.
Jin develops chips that he believes will one day be found in cars across China. The chips communicate with networks that give them real time information about the conditions around them. Vehicles equipped with these chips, often called the “connected car,” already exist in some countries. They can connect with a driver’s smartphone or computer at home to send notifications on maintenance, among many other things. “I don’t know when [the chips] will actually be used,” Jin said of her project in China. The specifics of her project were unclear, and she hinted that the real application of the technology could be years away for Chinese drivers. But vagueness and a far-off timeframe haven’t dissuaded investment in areas that might be counted in the broad stroke of the internet of things.
If anything, companies are ramping up their investments, hoping to catch at least some part of its early development. The internet of things is projected to be a more than US$122 billion industry in China by 2015, the state-backed Global Times newspaper reported in June. That’s a 105% increase on the 2012 value of the market. Much of the early investment in the industry in China will go into logistics and online consumption. But, theoretically, the internet of things should literally connect a wide range sectors. “I think the internet of things will continue to roar in the future because the market has witnessed increasing demand for big data storage from enterprises,” said Li Jing, a manager at Chinesemid, a Shenzhen-based internet technology company that makes data storage products.
“In terms of the cloud storage segment, the industry is in the mid-stage of advancement in China. The market was in its infancy over the last two years, but now is entering new era as the market has seen fast-growing demand. But as for intelligent technology solutions, such as intelligent home solutions, the industry is still in its infancy.” Cloud computing is an essential aspect of the internet of things. As more devices and everyday objects become connected to networks, the information they produce will need to be stored in a centrally accessible place. That’s where the cloud comes in. The cloud, another notorious buzzword, is essentially memory storage external to devices, often based in large collections of remote servers. It reduces the need for internal storage while
also quickening internet connection speeds.
Hitting wallets first The internet of things will likely be taken up slowly in everyday life in China. The foundation for the industry, however, could be increasingly evident in payment services, such as Shanghai’s mobile wallet. As internet speeds ramp up in China, the use of smartphones with 3G internet coverage has grown exponentially. The increasing role of smartphones in the Chinese economy has shown that Chinese consumers are moving away from computers for conducting financial transactions and buying things. The value of mobile commerce in
China has soared during the past few years. In 2012, Chinese bought US$7.7 billion in goods from their phones, a more than 200% increase on the year before, according to research group iiMedia. Global research firm McKinsey said that figure could climb to US$15 billion this year Data on the value of mobile wallet purchases are still unavailable in the Shanghai market. The number of terminals already installed bodes well for the service. So do the number of banks that have backed the project. Shanghai Pudong Development Bank and China Merchants Bank, among others, have supported the development of cashless, card-less spending. These kind of transactions via con-
nected mobile devices present one of the biggest challenges to the internet of things in China. Chinese people still lack trust in mobile transactions and many will be reluctant to upload personal information to a network that will eventually connect their bank to their washing machine. But, if the rise of e-commerce giants such as Taobao, followed by mobile commerce, is any indication of how trust can grow, the internet of things may have a bright future in China. “I think its status is similar to that of Taobao few years ago when people dare not shop online by using creditcard,” Li at Chinesemid said of mobile wallets. “So it takes time for this industry to be accepted by consumers.”
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ຯ᱗Გϑ䕇ノ⤳᭜ᐧ⿸ౕ㏼≻হ⣜ධᴴ ۳̷喑ຯⷠহᄼ䷄ㆿ⮱ᢿᩫ喑䗐͵ο㖁 ϑ䕇ᄳߖ倅ϑ䕇ധ䃫⮱Ҭ⩕ȡ
Don’t get too comfortable Chinese ﬁrms may feel comfortable listing in the US again, but are American investors comfortable with China?
ith dismal prospects for listing close to home, Chinese firms are no doubt celebrating the revival of the US market for mainland IPOs. But for investors in US-listed Chinese firms, little has changed. The near freeze on Chinese IPOs in the US has lifted astonishingly fast. Several Chinese companies are now eyeing IPOs in New York, anonymous sources have told The Wall Street Journal. The apparent cause: a May 31 deal between the two countries giving US regulators limited access to financial documents at Chinese companies. Regardless of whether the sources are correct or not on any individu-
al IPO, the chatter does indicate that Chinese firms are at least thinking about listings in the US again after the deal. While the US was never officially closed to Chinese companies, the ongoing spat between regulators over access had threatened a mass delisting of Chinese firms from US exchanges and ground new offers to a halt. Only two companies, social media network YY and Vipshop Holdings, braved the market last year in spite of this systemic risk. The question now is whether investors will embrace Chinese offers and, perhaps more importantly, should they embrace them.
For Chinese companies, the US market is no doubt more attractive than options closer to home. The US benchmark S&P 500 index has risen roughly 17% this year, while the Hang Seng has continued its lackluster performance by falling nearly 2%. IPOs in Hong Kong have been mixed, thanks largely to this recent track record of the exchange. Meanwhile, both the valuation and the stock price out of the gate could be lifted by the bull-market sentiment in the US. (Even if China’s securities regulator hadn’t halted approvals of IPOs, the market has also performed poorly year to date.) The prospects for investors aren’t nearly as enticing, however. Certain-
ly, US-listed Chinese companies are a slightly safer bet now that there is no risk of mass delisting. But investors may be no more protected from the fraudulent activities at Chinese companies that lead to the conflict with American regulators in the first place. US auditors can only request documents from Chinese firms if they have a reason for their inquiry. That means they’ll likely only be able to investigate companies after fraud allegations have come to light, by which time investors may already have been burned. The responsibility remains on the investors to look into the companies themselves to ensure what they’re buying has sound fundamentals. The responsibility itself is not a
problem – it’s how markets are meant to function. Stock punters should avoid companies that merely play on overall China growth and should focus instead on companies with proven track records that can be trusted. For example, Chinese e-commerce company Alibaba Group is widely expected to be pursuing an IPO. The Wall Street Journal reports it’s one of the firms considering a US offering. With Alibaba’s dominant position in Chinese e-commerce, the exchange it chooses shouldn’t be the deciding factor for investors. The risk of fraud dragging down such a widely recognized company is also smaller. The internet firm is likely to succeed no matter what exchange it lists on.
Lesser-known firms such as LightInTheBox, which plans to list in the US this month kicking off the potential Chinese return to US exchanges, deserve more skepticism. Perhaps the company is worthy of investment. YY and Vipshop have proven to be massive gainers, having delivered significant increases on their issue price. Such results may tempt investors to pile into subsequent Chinese IPOs. They’ll certainly have more opportunities to do so, given Chinese firms’ renewed interest in American listings. But if sentiment gets ahead of sound judgment, it will only take one Chinese stock imploding on fraud charges to remind investors how little has changed.
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Connect the plots China’s lack of data on property owners has let the wolves move in on the market
y next June, China should know a bit more about who owns what property, how much of it, as well as how much it’s worth. Because right now, officials on the central level hardly have a clue. The system that China uses to register real estate ownership is highly fragmented. In some cities, Chinese record a property transaction in a digitized system. In small counties, they might jot the information down on paper before it’s permanently filed away. Drawing connections between localities – essentially figuring out who owns what nationwide – is almost impossible. Officials need to connect the dots. The looseness of the system has allowed wealthy Chinese, sometimes government or party cadres, to buy up large quantities of property undetected in different places around the country, a trend that has, among other things, driven housing prices sky high. By figuring out who owns what, the government can stop people from exceeding the limit on property purchases, which differ between cities. The Ministry of Land and Resources said in late May that it will streamline a national real estate registration system by this time next year. A comprehensive system has been in the works for several years and calls from China’s top leadership during the National People’s Congress in March expedited the process.
In theory, a unified system will let bureaucrats see what real estate an individual citizen owns across the country, whether their properties be in the distant Qinghai province or in Shanghai. It could also be a stepping stone to implementing a national housing tax. Instituting such a system will be far more difficult in practice. The problems with the current system goes beyond the digital divide, and a full revamp of the way records are kept will require cooperation between ministries, as well as consolidation on laws, a tall order in China. There are several different laws that specify how to register land. For anyone who owns a patch of forestland, they will have to look to Forest Law for direction. In the countryside, they might need to check Rural Land Con-
tract Law. Finding the correct place to register can also be difficult as more than 10 different government departments have registration offices. Urban housing, urban land for construction and several other classifications of property all need to be registered in different offices. Some 40 cities have online information systems, but the county level and below has hardly any online record-keeping. “It’s going to be a big job and not something that can be implemented in the short term,” said James Macdonald, head of research at property management firm Savills China. That’s why it’s unlikely a national system will be rolled out in its entirety by next June. It will probably be put in place in some cities, then those cities will be
connected and the system will grow, he said. The piecemeal nature of the rollout will not have a strong impact on the market, Macdonald said. If a comprehensive system was to suddenly go online, that could shock the housing market. It’s thought that much of the country’s demand is from investors or speculators, not first-time home buyers. As much as the government would like to preserve the market for newlyweds or those looking to move from the countryside to the city, it also doesn’t want a sharp drop in sales, which would have a devastating effect on a number of sectors that are tied to construction. In the long run, controlling the market is the main objective of the registration system, but it will also help combat corruption. A report released in early June by Study Times, a weekly newspaper published by the Communist Party School, said national registration would stop corrupt officials from hiding excessive
land purchases and even curb money laundering that is done through the real estate industry. Several reports in the last year have shed light on assets of party officials, with some having amassed shocking real estate hordes. One case in January drew online public outrage when it was revealed that the head of a rural bank in Shaanxi province owned 41 properties in Beijing worth about US$161 million. The incident demonstrated average Chinese people’s dissatisfaction with how powerful officials have horded property on the public dime, all the while driving up housing prices. However, it’s unclear if national registration would really have helped prevent the case. The banker, Gong Ai’ai, had used several aliases to keep under the radar, something the system isn’t designed to catch. Aside from busting corrupt officials, the system could help the government roll out a long-awaited – although seriously contested – housing tax. At present, limited housing taxes
exist only in Shanghai and Chongqing. For more than a year, the government has hinted that it will widen the breadth of the tax, but those efforts have run into strong opposition, likely from officials who own large amounts of property. Little progress has been made. Drawing connections between property ownership across the country will be essential to pushing through the tax, according to party mouthpiece People’s Daily. Taxes would be based on the accumulated value of properties owned. There are few other ways to derive these values other than recording them together. In pursuing a nationwide registration system, as well as a housing tax, Beijing is taking steps in the right direction. The short-term cooling measures that China has enacted since 2009 have had little effect in curbing prices. They are also erratic and further convolute what real demand for housing looks like. As daunting as the task may be, China’s new leaders should continue pushing for greater access to information on the market. It’s a step the country will have to take, better sooner than later. The housing market is yet another sector that grew up before China could bridle it. Only during the past few years have officials looked back and quivered at the challenge of meaningfully regulating it. A thorough registration system is part of the foundation on which China can build a healthy real estate sector. Or at least it would be a support beam that the government could raise to brace an increasingly unstable industry.
This little piggy in the market A culture clash is imminent in the Shuanghui-Smithﬁeld deal. Can the Chinese porker handle America’s giant spare rib?
t was a deal that took more than four years of brutal negotiation. In the end, Shuanghui’s buyout of Smithfield Foods forced the Chinese firm to take out financing for US$3 billion of the US$4.7 billion acquisition while also taking on the US$2.4 billion in debt that Smithfield has on its balance sheets. It also paid a 30% premium to Smithfield shareholders. But brokering the deal – the largestever Chinese buyout of a US firm – was the easy part. Once the papers are signed, Shuanghui (branded as Shineway in English) will actually have to manage and operate the world’s biggest producer of pork, a task that will not prove easy on a number of levels. Only time will tell if the Henan province-based company is up to the task, but experts said company culture is bound to be an obstacle to integrating in the US. The US media has shown some skepticism over the deal, but the most intense criticism has come from China. The state-backed news site Economic Information even likened the acquisition to a “snake swallowing an elephant,” referring to smaller Shuanghui taking over Smithfield. Others have questioned whether or not the deal will give Shuanghui indigestion. On the production side, the two companies look relatively similar. Both produce about six billion pounds of pork a year and are the leaders in their respective markets. Although Smithfield was founded in the 1930 and has
a deeper cultural resonance with US consumers than the Chinese firm does at home, Shuanghui’s operations date back to the late 1950s – a considerable heritage for a mainland company. Shuanghui, which is backed by investors such as Goldman Sachs and Singaporean sovereign wealth fund Temasek, employs more than 60,000 people, compared to Smithfield’s 46,000 some. Both companies have had foodquality problems, namely concerning the use of hormones. There are, however, ungainly differences between the meat packers, particularly in the size of the firms. Shuanghui’s assets total at about US$326 million, a fraction of Smithfield’s US$7.4 billion. The US company took in US$1.31 billion in revenue in 2012 while Shuanghui saw US$815
million the year before. Unlike Smithfield, Shuanghui isn’t listed so access to reliable financial data is limited. Another disparity is in the technologies the two companies wield. Smithfield has some of the world’s most advanced meat processing equipment, while Shuanghui is far behind in the industry relative to its size. Of course, these valuable assets are why the Chinese firm wanted to buy Smithfield in the first place. But a rift will no doubt remain between the quality and efficiency of production on the two sides of the Pacific – an operation that could soon be bringing to market 12 billion pounds of pig. These challenges could be short lived as technology should eventually diffuse from West to East. For Shuanghui, and any Chinese firm buying up Western-raised operations for that
matter, the thornier problems will be an enduring cultural disconnect. According to one report, cultural misgivings are why about 70% of Chinese cross-border buyouts fail. Take Geely Automotive as an example. The Zhejiang-based car maker bought Volvo from the US’s Ford for US$1.5 billion in 2010. Since then, integration has been strained and has nearly broken down at certain times. In April, Geely chairman Li Shufu told the Swedish press that Volvo interiors were “too Scandinavian,” much to the abhorrence of customers in the brand’s home market. Swedish representatives tried to downplay the comment, but Li’s attitude represents a divide between the bluntness of China and the couth of European speak. The bigger the scale of the buyout, and the more layers of management involved, the more acute cultural problem will manifest, according to
Gao Yang, a Shenzhen-based management consultant and an adjunct professor at Guangxi University. In the case of Shuanghui and Smithfield, cultural fallout could be severe. Gao said that he’s skeptical of the ability to resolve cultural differences between the two companies. Shuanghui’s headquarters is far removed from the country’s globally savvy coastline. “It’s based in central China, Henan province,” Gao said. “That’s the home of Yellow River culture. Chinese culture here runs strong. Their exposure to the West isn’t comparable with companies on the coast.” While business practices on the coast still differ from international norms, businesspeople there have far more exposure to the way business is done across the Pacific. The clash of cultures is a real threat, and the two companies must focus of communicating effectively. Some of
the other accusations surrounding the deal are probably overblown, however. Soon after news of a near-completed buyout was leaked to the press, rumors also circulated that US regulators would approve the deal. One US senator shot back that the deal was a threat to the country’s pork supply and therefore an issue of national security. The notion has gotten much attention. Chinese may have their eyes on US pork, but that exposure will be a boon to the economy and its eastward exports. The real concern lies in Shuanghui’s ability to manage and integrate with a US company of this magnitude. The real danger is if the Chinese from Henan province fail to engage US staff and customers on a familiar level and the merger breaks up, leaving Smithfield in a weakened state. China’s top porker will need to learn to cook American-style spare ribs, lest it leave this US titan of industry in disarray.
Westward ho! Migrant workers aren’t as thrilled about taking up a life in China’s eastern manufacturing centers
actory owners didn’t cough up much last year in terms of salary increases. Bosses in China’s myriad of manufacturing plants raised wages only about half as much in 2012 as the year before. Salaries for China’s 163 million migrant workers grew by 11.8% in 2012, down from 21.2% in 2011, according to a report released in late May by the National Bureau of Statistics (NBS). The stats might have led to some discontent on the production floor or in China’s growing service sector. But 20% annual increases in wages was a hard trend to maintain. The rate is returning to a more reasonable – albeit slightly lower – rate of salary growth closer to that of the past decade. Migrant workers took an average of about 13% more in wages every year between 2000 and 2007, before the rate fell to 5.7% at the onset of global financial crisis. The government’s 2009 stimulus in reaction to the crisis likely trickled down to workers gradually, explaining the higher increases in 2010 and 2011. An across-the-board look at wages will help take the pulse of China’s manufacturing sector. But this data is often skewed by migration itself. When workers in the countryside make the one-time jump to the city, so do their wages. This often substantial increase may have more to do with how much wages increase than any conscious decisions by factory bosses.
Perhaps more revealing were figures on migration patterns and the average age of the workers. Here, the NBS report, which focused on migrant workers, is pointing to longer-term phenomena that will define the shape of China’s workforce in the not-so-distant future. Businesses looking for workers on China’s coast should expect to see fewer migrants from central and western China. Although wages are still higher in the east, they increased slower than in both central and western provinces last year. Migrants can also save more money by staying out of the coastal provinces where the cost of living has climbed far faster than the rest of the country. A worker from the west – which includes everywhere from the plateaus and deserts of Tibet and Xinjiang to the jungles of Yunnan province – would save close to US$40 a month by staying in the west as opposed to moving eastward, a significant amount on a modest migrant’s salary. In fact, workers in central provinces such as Anhui and Hunan might consider heading west instead of settling in manufacturing centers such as the Pearl or Yangtze river deltas. Workers from central China will save about US$21 more by heading west. It’s no surprise that the total number of migrants living in traditional production hubs fell last year while the number of workers who stayed in their home province
climbed. If eastern provinces want to compete with growing inland manufacturing hubs such as the cities of Chongqing and Chengdu, they might have pay out a bit more than they did last year. Money won’t buy manufacturers everything, however. Although not widely reported, the NBS data also pointed to China’s aging work force, which is perhaps growing older than many had expected. Between 2008 and 2012, the percentage of Chinese migrant workers over the age of 40 jumped from 30% to 41%. This increasingly old body of workers is yet another source of pressure on the government. Losing ablebodied workers is one factor forcing Beijing to find new growth engines that don’t rely on cheap manufacturing and export. It’s also a sign that skills and efficiency among younger laborers must be improved. The smaller China’s work force gets, the more efficient it will need to be. The past 30 years of rapid economic growth were pulled along by China’s massive labor pool. The products were simple – often of poor quality – but China pushed out more than anyone. When population growth starts to decline around 2025, China can no longer rely on quantity. By this time the quality of its labor, exports and growth will say far more about the country’s prosperity.
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㖁ߕх߬喊 ͚ప䨣㖁喊 䉏Ѕ䕇喊
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͚పጯ౧̷䊷Გ䊷็⮱ࢯੳຯᔘ䧞Ƞ៶ ៶ȠͽݤȠ⯿ၽᩜЅぶⰥ㐔ᣕܧγᱧ䴠 䶾ݤகᩜЅϔ৮ȡ
䄡ᬻ喟В̷ᢛᵦᢛࢯੳ䃬䄵Ƞᭀ㻯㜗ᰶ⯾≸ᢛহᭀ㻯ⵁ⾣ಸѝツ㣤ᓄ喑ᭀ㻯чᵦᢛᰭγ㼐 ⮱ᢛᄦࢳटᢛ䔈㵹ᓛ䄰喑⼨ߕᩜЅᠴ⩕ᝤ䕇䓴⼨ߕ㏵〜喍̭㝙ͧᱧ喎ࣾܧႄࡃᠴБͧ⊵ڣ 䉦⮱ੳ৮ᝃߎ䔈㵹䉱䛾ᩜЅȠ䒙䉓ぶ䉱䛾≮䒙≨ߕȡ
ᭀ㻯ⵁ⾣䃑ͧ喑͚పᱧ䴠䶾ݤக ϔ৮⮱㨙߰ࣾᆂͨ㺮ധλВ̸喟͚ప 䨣㵹ᮛࣷ⼸Ꮣ䒰๔喑䨣㵹ࣾ㵹̻ऄ⤳ ጯ౧⮱ࣾᆂҬᓄ⩕ᝤᒏγ䒰⌞⮱ᄦ䨣㵹
Source: EnfoDesk©Analysys International
Ѕ䰭Ⅿ⮱⼨ߕᩜЅϔ৮䒰ᄾȡ䔆ψ㉍ͧᱧ䴠䶾ݤகϔ৮⮱ ࣾᆂӈγ㻯ݺȡ 䕇䓴ᄦⰛݺᱧݤகϔ৮䔈㵹ᄦ℁ⵁ⾣ࣾ⣝喑4RVBSF⮱ ᵥᓰᐼౕλВߎੳᝤͧ◦ࣾܧ喑⩞ₑᒏγ̭ຄ㺳Ⰳੳᝤᩣ Ƞੳ৮ノ⤳ȠѺ㒛ߎぶߌ㘪ౕ̭⮱ڲ㈨݄㼐۠ᵵ喑㔹̺ϲ ϲ᭜ݤகϔ৮᱙䏘ȡ̻㒻పTRVBSF̺ह喑Ⱋ͚ݺపጯ౧⮱ᱧ 䴠䶾ݤகࢯੳ๔็ϲ։⪆ౕݤகϔ৮᱙䏘喑㔹䊝ा㼐۠ᵵ ⮱ᅵᠴजȡຯВⰛᴴጯ౧⮱㻿Ꮣ喑పݤڲகࢯੳͨ㺮ܳͧ ͑ㆨಸ喟 す̭ㆨಸ喑В៶Ƞ⯿ၽᩜЅͧА㶕⮱ᩜЅЮ͇ᐭࣾ⮱ ϔ৮ͨ㺮㐆͗ϧ⩕ᝤҬ⩕喑㼐۠͗ϧ⩕ᝤ⮱䔉⼸Ѕ䰭Ⅿ喑͗ϧ ⩕ᝤ̸䒪"11ऻ䙺वᱧݤக喑जВ⣝Ⅱ⩢⚑ぶڞڙθ͇㑡 䉦ȠԎ⩕䔅Ƞ㑾䉚ЅВࣷ䒙䉓ぶߌ㘪喠 すιㆨಸ喑ᔘ䧞҉͚ͧపᰭᬖ̭უᅊ䄂ᱧݤக⮱ᩜЅ ࢯੳ喑͇ߎჇѺ̻ڣЃᱧݤகᩜЅࢯੳ̺ह喑ჇѺλͧЮ͇ ᝤᩣᩜЅߌ㘪ȡ ᢛᖶ喑ᔘ䧞⮱ᱧݤகጟ㏼ౕԊ䮖ȠⰡ䨭ぶ㵹͇ᐭੳ⩕ ᣕᎬ喑㔹́䔅ౕᐭࣾิڤхᘍݥノ⤳Ƞ䃏ᣕ䔮Ƞ䃏वᎣᩜЅ ぶߌ㘪⮱ᱧ䧞࠲喑Ꭳڣₐౕा᪡Ҁ㵹͇㼐۠ᵵ⮱䌜ᒱᐣѥȡ ϻᔘ䧞⮱䔆ψϔ৮ጰᅭ喑ᭀ㻯䃑ౕͧ⼨ߕᩜЅ䶳ഌ喑ᔘ䧞Ϻ♣⇬ 㷚̭ڣ䉜䊝㵹͇ࣾᆂ⮱䌜㏬喑䕇䓴ᱧݤகぶ⼨ߕᩜЅϔ৮̻ ڣЃο㖁㑾ᩜЅȠQPTᩣぶᰶᩜЅϔ৮ౕ㵹͇᠀ᆂহЮ͇ ߎ䓴⼸͚ᒏ㞜ສ⮱ह҉⩕ȡ➦ݘ᭜ڣₐౕᐭࣾ⮱⼨ߕᩜЅϔ ৮喑䘪᭜Вੳᝤ⮱䰭Ⅿͧᵥᓰ喑䔆̭◦̻TRVBSF⮱ᐼহ䌜ᒱ ΌᲮͧⰥ䓾ȡᄦ℁㒻పTRVBSF喑ݤகग᭜̭͚ڣϔ৮喑㔹 ́ᰭ๔⮱Ꮑ⩕ౕੳᝤ⮱ᩣȡധλₑ喑TRVBSF䔽⌽ᐭࣾ⮱ܧ 㺳Ⰳੳ৮ノ⤳⮱TRVBSF SFHJTUFS喑ВࣷิڤѺ㒛ߎߌ㘪⮱QBZ XJUI TRVBSF ᝤ〜喑ᒏγ̭ຄ䦵ᄦ䰣ਜ਼㵹͇⮱⼨ߕᩜЅ㼐۠ ᵵ喑ڣᵥᓰФթౕλڣ㐩व⼨ߕᩣ䨣झ⮱ߌ㘪ȡВ喑ϻᔘ䧞 ౕ⼨ߕᩜЅጯ౧⮱ጰᅭⰸ喑ᭀ㻯䶱䃎ᔘ䧞ᰶ᱈⢴ٵក䕍ⱌܧₐ⮱ ͚పTRVBSFȡ ᭀ㻯ᮧᏀᐧ䃛喑㮪♣䦵ᄦ͚ᄼੳᝤᐭࣾ⮱ڤᰶᩣߌ㘪⼨ߕ ݤகϔ৮ጯ౧ࣾᆂݺᮜᎬ䭁喑ѳ᭜⩞λ͚㒻͑పౕጯ౧⣜ධȠ Ԏ⩕Ҁ㈨ᐧ䃫হ∂ᒸ∂㻱ぶ䲏ႅౕ䄥็ጛᐯ喑͚ప⮱ᩜЅЮ͇ ౕ䔈㵹䦵ᄦੳᝤҬ⩕⮱ᱧݤᩜЅϔ৮ⵁࣾ䓴⼸͚喑̺㘪Ⴙڕ ⚔ᥙTRVBSFᐼ喑㺮䦵ᄦ͚పጯ౧⮱䭲ᗲۢࣾᆂ喑➦ݘ㺮ևສ ᩜЅႶڕᐧ䃫ȡ
ၕᆮڹ൯ӎࠪᇗ؏ۢ ᭀ㻯ᮧᏀᰭᢛ᭫喑Ꭱす̭႐Ꮣ͚పす̶⼨ߕ ᩜЅጯ౧⮱ϑᭀ㻱䓫ݝϬ喑ߕ⼨͚ڣο㖁㑾ᩜЅϑᭀ䪬 䓲䕌喑䓫ݝϬ喑ⴚԎᩜЅౕ⼨ߕᩜЅጯ౧⮱℁̸䭺䊸߬ᬻ ᭫ȡ ᭀ㻯ⵁ⾣ࣾ⣝喑ᒀݺ㮪♣⼨ߕᩜЅጯ౧ࣾᆂ䒰ᔘѳϺั
λጯ౧ࣾᆂ⮱݊喑ϑᭀ㻱⮱䪬̭ 䲏̻ᩜЅࢯੳ⮱๔߈ᣕ䔈ᰶ䛺㺮ڠ㈨喑 ओ̭䲏ऄᒀߕ⼨ݺᩜЅᏁ⩕ጯ౧⮱अࡃ ᒞ৺䒰๔喑Вᒀ͚ݺప⼨ߕᩜЅጯ౧⮱ ጯ౧ᵩᅭॵ⣝͑ᲮࡃȠ䉱⎽ፓߕᕔহߕᔮ ࡃぶ➦ᒮȡ ϻᎡす̭႐Ꮣ᪡͗す̶ᩜЅ ጯ౧⼨ߕᩜЅ͇ߎϑᭀ䷊ᗲۢⰸ喑ᩜЅ Ƞ㖁ߕх߬Ƞ䨣㖁ᢛጯ౧ϑᭀ㻱⮱ ̶ݺѺ喑ᩜЅܚՌౕο㖁㑾ᩜЅጯ౧⼜ ㉜⮱Ꮛ๔⩕ᝤВࣷᬍ㏬⌅ፓᲒ⮱͇ߎ 䛼⼨ߕᩜЅϑᭀ㻱䪬䓲䕌喑㖁ߕх߬ ܚՌ͚⼨ߕহ͚ప䨣㖁⮱䉱⎽喑ౕⴚԎᩜ Ѕ͇ߎ䲏Ϻ♣ᢛ䒰๔⮱ጯ౧Ъ䷊喑 В̺䯫ࣾ⣝喑ጯ౧Ъ䷊ݺუ⮱ࢯੳ䘪᭜䉱 ⎽ಸ⮱ᩜЅЮ͇ȡहᬣ喑ᭀ㻯ᮧᏀⵁ⾣ࣾ ⣝喑៶៶Ƞ䧞㶸ぶ݈ᩜЅࢯੳ⩞λ ౕ⼨ߕᩜЅ䶳ഌ䔈㵹๔䛼⮱䉱⎽ែڒ喑 Вϑᭀ㻱䪬䓲䕌ȡ ㏢㻯᪡͚͗ప⼨ߕᩜЅጯ౧⮱ࣾᆂࢳ
ᩜЅহ䉏Ѕ䕇㮪♣ౕ㐩वᩣ͇ߎ͚℁Ϻ♣䒰๔喑ѳͨ 㺮В㏬̷͇ߎͧͨ喑㮪♣䓾͑Ꭱᐭጰᅭ⼨ߕᩜЅጯ౧喑ο㖁㑾 ᩜЅϑᭀϺ♣ᢛͨҀѺȡౕ͇ߎࣾᆂ䓴⼸͚喑Ꮛ๔⮱͗ϧ⩕ ᝤ㻱ͧߎ͇ڣх߬হࣾᆂ䛺◦ȡ ᔘ䧞ȠⅴЅ๖̸Ƞ䕇㖁ᩜЅȠᭀᩜЅহ⣜䓲ᩜЅぶᩜЅЮ ͇喑䓾܍Ꭱ䔽⌽ᬻγВЮ͇ᝤͧͨ㺮Ⱋᴴᝤ喑䊝㵹͇ࡃࣾ ᆂ䌜㏬⮱ᝅ⪒ȡ͚ڣᔘ䧞হⅴЅ๖̸᭜䓾܍Ꭱࣾᆂ㐩वᩜЅ⮱ڥ ಸА㶕喑ౕο㖁㑾ᩜЅᔘ䕌ࣾᆂ⮱हᬣ喑104ᩣ͇ߎ䪬ᬻ ᭫ȡѳι㔲⮱ࣾᆂᕊ䌜ᰶ̺ह喑ᔘ䧞䕇䓴Ꭼ∈⮱㵹͇ጰᅭ喑䕇 䓴㵹͇㏢⌞ࣾᣅ喑డ㐂Ю͇⮱䰭Ⅿᐭ̭ࣾᤪၽ⮱㐩वᩜЅ㼐۠ ᵵ喑䕇䓴䔆ᐼፓߕऱㆨᩜЅ͇ߎ⮱ࣾᆂȡ㔹ⅴЅ๖̸ౕ104 ᩣጯ౧ͨ㺮䕇䓴ߎੳใ࠲ᐼ䔈㵹ጯ౧᠀ᆂ喑䔆ᐼ㘪์ ፓᲒⴚڲϑᭀ㻱⮱ᔘ䕌䪬喑ⅴЅ๖̸Ꭱᐭ๔㻱ࣾ ᆂ104ᩣ͇ߎ喑ϑᭀ㻱䪬䓲䕌喠䕇㖁ᩜЅౕڕపᐧ⿸ܳᩜ ᱧᲱ喑๔߈᠀ᆂ104ᩣጯ౧⮱हᬣ喑Όౕߍᔘο㖁㑾ᩜЅ⮱͇ ߎ⮱ࣾᆂ喑䊝㵹͇㐩वᩜЅ㼐۠ᵵ⮱䌜㏬ȡ Ąす̶ᩜЅڙथⰡᣒߎ⩕ᝤ喑Ҭ䨣㵹䔽⌽䊝ाऻझȡᩜ Ѕڙथᐭ⩕ݖᏋ๔⮱⩕ᝤহੳᝤϑᭀԎᖜ喑ӈᢵԎぶ䛾㲺 ߎ喑䔈̭ₒा䨣㵹͇ߎ⍄䔼ȡ⼨ߕᩜЅͧऱუЮ͇ጰᅭ䛺◦ȡ 䮼ⱭԎ⩕ᩜЅ⮱ࣾᆂ喑ᩜЅڙथᐭ⍄䔼ݝԎ⩕হ⊵䉦Ԏ䉤䶳 ഌ喑Ꮛ๔⮱͗ϧ⩕ᝤ㻱݈ࣷ⮱Ԏ⩕Ҁ㈨喑ᄦ᱗Გ䨣㵹͇ࣾᆂ ᒏ༮㗮ȡąᑍ㤹ܳᲽ䖀ȡ
Drafted into service Chinese regulators seek to increase the public’s role in rooting out IPO fraud
hina likes to keep its business to itself, often going so far as to label some corporate finances as state secrets. Few places have been more secretive than the securities market, where the China Securities Regulatory Commission (CSRC) passes opaque judgments on which firms get to IPO, and when. After years of poor performance of mainland exchanges, where companies are frequently found to be ridden with fraud, China’s top securities regulator has finally deigned to give the public a glimpse of the companies they could buy into. The CSRC has also been getting tougher on brokerages that help fraud-tainted companies to IPO on the mainland – at least when those companies are subject to public scrutiny. In May, the CSRC slapped Minsheng Securities with a US$326,000 fine for failing to uncover fraud at Shanxi Tianneng Technology, which the firm planned to help IPO. The regulator issued Nanjing Securities a warning for a similar failing with Guangdong Xindadi Biotechnology. Surprisingly, the CSRC didn’t punish the securities firms after discovering fraud in its own review of the two IPO applications. In fact, the CSRC had already approved the IPOs, at which point it released the companies’ financials to the public. The media then went to work uncovering the fraud in both cases by scrutinizing those documents.
The CSRC now looks set to make it even easier for the media to uncover such scandals. Draft regulations released on June 7 said that companies would be required to pre-disclose their financial documents to the public or the media one month before their IPOs will be approved. Previously those documents had only been released after the CSRC approved the issue. The pre-disclosure requirement was only one part of the latest draft regulations, which didn’t cause much of a stir when released. “This draft is mostly based on previous drafts,” said Winnie Deng, a senior associate who tracks markets at consultancy Z-Ben Advisors. “If you have the time to take a look, you can notice there’s nothing really new or stands out as its own issue.” Pre-disclosure to the public is one of the few new points. But, she said, one month remains a short period of time for investors and the media to scrutinize the potential listing, so it’s unclear how much affect the regulation would actually have. The other new point, according to Deng, is that the draft regulations introduced a two-year lockup period during which time major stakeholders cannot sell their shares. Currently, lockup periods are negotiated with cornerstone investors in each new issue on an individual basis. Even after the lockup period, which could be extended based on share performance, major shareholders would not be allowed to sell their shares at below the IPO price. The main goal is to prevent management from unloading their shares if the company fares poorly. Presumably,
by forcing management to keep some skin in the game, they’ll be more motivated to make sure the share price stays above water. These regulations will join a host of others already drafted. “Most of these drafts are in order to boost investor confidence… Some of these regulations are quite strict,” Deng said. Among them is a rule that would prevent the CSRC from approving further IPOs from brokerages that sponsor companies which later report a 50% drop in profit or a net loss. With the CSRC already going through several drafts, and few changes being made from draft to draft, Deng predicts these reforms are highly likely to be enacted. The rules stand to benefit the little guy, Chinese retail investor, at the expense of the big institution such as brokerages, major investors and the company itself. By locking institutions in for a set period of time and essen-
tially penalizing them further for falling stock prices, the CSRC is increasing the incentive that institutions have to do everything they can to support share value. Retail investors, who make up the majority of those playing mainland stocks, will therefore be less likely to buy into a dud. The rules – aside from increased public scrutiny – appear to be the government intervening in its exchanges when over time it should be taking an increasingly hands off approach, as is the case in most mature markets. But if anything, the rules are likely to only grow stricter until the CSRC stamps out widespread fraud, Deng said. Only then can regulation be more market-driven. China simply isn’t a developed market yet. “You don’t really see a lot of instances where financial results are fake in developed markets, but it’s quite common here.”
The tariff bump Surprise! Launch of EU tariffs boosts solar companies
ow’s this for counterintuitive: The EU launched a 11.8% tariff on Chinese solar products on Tuesday, and Trina Solar’s (TSL.NYSE, TR3.FRA) share price climbs 2.2%. Others also remained relatively unscathed. Yingli Green Energy (YGE.NYSE, YG11. FRA) saw a similar rise but Suntech Power Holdings (STP.NYSE, S9H. FRA) fell 1.9% that day. Perhaps the reaction was muted because the duties were softened from the original threat of up to 67% tariffs. Now they’re set to gradually ramp up to only 46% within two month if no further deals are struck between China and the EU. Given the level of exposure to the European market, the three-fold jump
in the tariff by August will certainly hurt Chinese companies. This is bad news for an industry already in the doldrums, tariffs or no tariffs. There are signs, however, that the market is starting to recover from a glut that brought prices crashing down last year, said Lu Yeung, an analyst at UBS Investment Research. Solar makers in other countries are slowing production of solar cells, and China has been shutting down capacity, early indications that the worst of the oversupply in the industry may be over, he said. Lu said he couldn’t comment on which companies might recover first. Investors should watch for progress in the EU. Experts have told China Economic Review that
opposition from EU member states will hold back more severe measures. If all stays calm on the political front, now could be the time to buy these companies on the cheap.
On the internet, it must be true Sohu.com (SOHU.NASDAQ, XOU. FRA), ever the subject of speculation, has found its shares again subject to traders’ guesswork. The stock rose nearly 25% in May with the expectation that it would buy another video streaming site. The logic is clear: Baidu.com (BIDU.NASDAQ, B1C. FRA) surpassed Sohu’s share of the video streaming market overnight when it bought PPStream’s video unit. Sohu simply has to buy a second-tier
video site “otherwise it will be hard for them to survive” in the streaming business, said Mike Chen, an analyst at China Merchants Securities in Shenzhen. But since May 31, shares have sank 3.6% as a deal has yet to materialize, and some wondered whether the speculation was excessive. Even if it does acquire another online video company, Sohu will have an uphill battle to fight as the company would likely still remain in third place, said Chen, who has a neutral rating on the firm. Unfortunately for investors, the other two leading video sites aren’t much more appealing. Baidu is losing market share in internet search to Qihoo, and video leader Youku Tudou (YOKU.NYSE) lost market share after the Baidu-PPStream deal. As the firms battle for market share, this is one fight investors may wish to sit out.
Paper pushers Exporters like toy and shoemakers haven’t been the only companies
caught off guard in the throes of China’s rebalancing process. As global demand wanes, the paper makers who produce the boxes that hold China’s exports when they’re shipped are also facing a slowdown, as well as pressure to reorient domestically. Nine Dragons Paper Holding (2689.HKG) and Lee & Man Paper (2314.HKG), China’s two biggest producers of paper packaging, have faced falling demand since 2011. “There’s definitely been a structural change in the economy, and that’s taken time to work through,” said Zac Gill, an analyst at CLSA Asia-Pacific who covers China’s paper industry. “It used to be that these paper companies were selling directly to exporters, or indirectly to manufacturers who were shipping things abroad.” Paper firms now must rely on domestic demand more for growth, he said. The outlook for the companies should improve as long as China’s GDP growth matches expectations this year, according to a report from Citi Research. Several
other factors will play into market performance too. Gill noted that the companies have reduced the weight of paper boxes, which cuts shipping costs. But this can appear as if they are selling less. The companies will also have more difficulty hawking their wares as they grow more expensive with the appreciation of the renminbi, as well as higher costs to buy used paper from overseas for recycling, Citi said. CLSA is bullish on Lee & Man but sees Nine Dragons underperforming the market. Citi downgraded its outlook on both companies but said conditions could improve this year.
IPO watch Three IPOs in Hong Kong have fallen out of the gate, and companies looking to list may once again start getting cold feet. Mando China Holdings, an auto parts maker, halted its listing that was scheduled to hit the market May 31. Wuzhou International Holdings (1369. HKG), a company based in Jiangsu province’s Wuxi that builds and manages malls, could have some legs as most of its projects are in lower-tier cities where there’s the most room for growth. China Harmony Auto (3836. HKG), an auto dealership group in Henan province, looks less promising as the company deals in foreign luxury cars, which may suffer under Xi Jinping’s crackdown. The company also appears overvalued. With Wuzhou raising up to US$220 million and China Harmony pulling in up to US$309 million, these IPOs are large enough to be a good barometer of sentiment.
The danger in our bellies China’s media is distracting the government from the real food-safety problem, one of the country’s top nutrition researchers says
ew issues attract the Chinese media spotlight like food-safety – or the apparent lack thereof. And it’s not just China’s newspapers and TV stations running horror stories on hormone-imbued chicken or rice with a side of cadmium. The international press was quick to pounce on the more than 20,000 pigs that floated down a Shanghai waterway starting in March. The coverage went on for weeks, spawning a host of jokes on the “free pork rib soup” that flowed from the taps of China’s biggest city. The stories get reads because they pose a question consumers must face every day in China: Can they trust what they put in their bodies? However, a huge number of these reports are missing the most pressing aspects of food safety, says Chen Junshi, a medical doctor and a senior researcher at the Beijing-based National Institute of Nutrition and Food Safety. While the Chinese government is routinely accused of controlling the press, it’s actually the media that has led government sentiment on foodsafety scandals, Chen said. News reports focus heavily on the illegal usage of additives in food but neglect far more serious cases of food-borne illness. The result is a stalemate in which officials are pressured by the media to deal with mild cases while problems with E. coli and salmonella rage on. This is the first half of China Economic Review’s interview with Chen
Junshi on food safety in China. Go to www.ChinaEconomicReview.com for further discusssion of cadmium-tainted rice, gutter oil and China’s food safety regulators.
I’m emphasizing risk communication. I think this is the most important issue in the whole of food safety control in China.
What is risk communication? What are you working on right now? I’m working on talking, like this, with people like you, and the government.
It’s the exchange of information on the knowledge of food safety among all the stakeholders: Academia, government, consumer, media, food business.
Are there specific issues that you are looking at right now?
What’s the state of risk communication in China right now?
Very brief: Negative, misleading, unscientific information. All over China, all the media and social media.
Do you have some specific examples of misleading information? Too many. Have you heard about the colored steamed bread? That’s the typical misleading case.
What’s misleading about this case? One major media [outlet] in China reported that the colored steamed bread is a major food-safety event. But actually, this is just one manufacturer in Shanghai. They add citric yellow, a food coloring, into flour to make
steamed bread. And they claim it’s corn bread. So this is a fake product. The nature of the case is very clear. But in the media, this is a food safety event. Citric yellow is a permitted food color in the Chinese food safety standard. But the problem is the scope of its use does not include steamed bread. It can be legally added into beverages, biscuits, but not steamed bread. So this is the illegal use of food additives. But as for safety, it’s okay to use in beverages, it’s also okay to use in steamed bread. It’s a very safe food additive. There is no possibility of over-use. With food coloring, if you add too much, you don’t get the color you want. But it has nothing to do with health. But when you talk about food safety, and the media says this is a food safety issue, the government has no way to make it clear that this is food fraud [not food safety]. They will take immediate action, and you will not see this product in the market anymore. As far as I know, in this case, the Food Safety Office of the Shanghai Municipal Government met every evening for three weeks to discuss this very simple event, a so-called foodsafety event. In this case, the credibility of the Shanghai government goes down.
So it sounds like there is miscommunication in the Shanghai government. Yes, because they don’t understand the real best practice of communication, and they are afraid of that. As a consequence, six Shanghai government officials got punished.
With this specific case in mind,
what is the best way to deal with this problem? That’s easy. The government should have organized experts and government officials to have a media conference to tell them the truth. And published articles to tell them: What is the nature of this case? What is the food additive citric yellow? The government has to take very strong, quick action so you don’t have to worry if you bought this product and you consumed it. It’s safe. But nobody did that.
This is a good example of how people are misinformed. Are there many cases where consumers are under-informed and could be eating dangerous products? The government quite often publishes inspection results in the paper. They always publish something like, which brand of sweetener has saccharine that exceeds the national level, or preservatives, etc. But that’s not enough. The consumer needs much more information.
So then what is the No. 1 foodsafety concern in China? It’s not the food additives. The media makes people believe this is a major food-safety issue in China. It’s foodborne illness. Internationally it is. In the US, if you talk to the USDA, and ask what is their No. 1 priority, it’s food-borne illness. Because this causes disease and death, huge medical costs. Which big cases have been caused by additives? None. Melamine is not a food additive.
If you’re talking about food additives, would this include the
So what are the main challenges in tackling these problems? Is it enforcement on the local level that’s difficult? No government agency believes this is important because there is much less pressure on this issue. They put their priority based on pressure, media pressure, social pressure. So the colored steamed bread is a source of pressure on them, and it becomes their priority. Another example is the 45-day chicken. This became a food-safety issue. It’s normal [for a chicken to mature] in 45 days, not only in China. But the news reports that it is negative. It grew too fast. They must have used hormones. So the government is following the media and missing the bigger picture. The government is very angry with the Chinese media. Everyone says China is not a democratic country. Then why can’t you control the media?
recent case where hormones were added to chicken?
of food-borne illness, if they were sold illegally and if not cooked well.
No. That’s not an additive. That’s a veterinary drug, illegal use of veterinary drugs.
What are some simple examples of food-borne illness?
What are some examples of big food-borne illness cases? Was the recent case of pigs in the river in Shanghai a case of foodborne illness? There was no evidence that there was food-borne illness. If there were that many pigs, that would cause outbreaks.
I was told that if the pigs were diseased, it was a good thing that the pigs were thrown in the river instead of being sold. Do you agree? Yes, that would definitely be a source
It happens all the time. If there are spoiled meat products you get salmonella, E. coli. In the US, the pathogenic E. coli is sometimes in salad and the strawberries [and causes stomach problems]. But in China, if you have some diarrhea, that’s normal. That’s not food safety. Even the government officials say this is disease, not food safety.
Is that point of view incorrect? Of course it’s incorrect. The No. 1 food-safety issue in China is caused by pathogenic bacteria and parasites like this.
So how to better control foodborne illness? First, we have to know how many cases there are every year. Every year the Ministry of Health receives 10,000 to 20,000 cases from all over China. This is less than the tip of the iceberg. The US [Center for Disease Control] announced in 2011, there were 48 million cases every year in the US. In theory, China should have more cases because of the overall hygienic situation. And if you extrapolate according to the number of Chinese people, that’s a huge number. But the Ministry of Health only knows that there are 10,000 to 20,000. That’s the gap, less than the tip of the iceberg. Again, this is why this is China’s No. 1 food-safety issue.
ౕ⼨ߕο㖁⮱ᝅ⪒ݣ倅◦ȡ㚫䃜ិᓛԎ҉ ͧᝅ⪒倅Ꮣ⮱ጯ౧喑̭䲏ጹ᱈䕇䓴ᓛԎ ក䕇⩕ᝤ⮱䏘Ъᢛ喑ओ̭䲏ጹ᱈䕇䓴 ᓛԎںᏓᣏ䃕㘪์ͧЮ͇ӈਗψߎ喑 㔹ݺ㚫䃜ᰫ̻᠈ੳ䨣㵹व҉䓴ȡ ̶უЮ͇䘪ౕևᱧႶڕノ⤳ȡᱧ Ⴖڕчᚏᚏ⑁अᄦ⩕ᝤ͗ϧԎᖜ⮱㐩व ノ⤳喑㘪์ឬ䒪ᰡ็⩕ᝤᢛ喑䔆᭜ᱧ Ⴖڕ᱗Გ̭๔䊸߬ȡ #"5ᅑڣ᭜䭬䛹হ⮫Ꮣᰡ็чࣨև ఫᎠझ⮱ጰᅭȡౕⱌₐ⮱⼨ߕο㖁ᬣА喑 ఫᎠझ̻э㐌ఫ᭜ᰶᒵ็ࡧ⮱ݘȡ℁ ຯ⣝ౕजВ䔈㵹ᬣ۳⮱ჇѺ喑䔈㵹̭ 〆ᐼ⩌≨ߎ喑ѳ᭜Вݺധ᱙᭜䔈㵹̭ψ Ԏᖜ᥉㉏喑㔹́ᬣᕔ℁䒰ጛȡౕ᱗Გ⼨ ߕο㖁ᬣАߌ⮱ੳ͇ᐼ͚喑ఫᎠझ ᭜̺ღᔪ㻳⮱ڒऐȡ
፥䛺㺮ȡᅞ᭜ܳጒ䊷Გ䊷Ⴙ喑Ό䊷Გ䊷 ㏳ȡడ㐂Ɑ⩢ၽੳߎ喑ᰶ̀䬕ϻθчঅノ ⤳⮱Ю͇喑ϻθᎬॷ㥒䨭ᣕᎬ⮱Ю͇喑
ތරજ݃ھ ͧϭ͵Ⴘ倅Ⴥ⌲㔹़অ䉗ྗ ᪴]ᱻᐭক㏼≻⩌≨ट҉უ
वᩫౕ̭䊤℁䒰喑ѳ᭜Ϸ๖ռ㺮℁䒰̭ ̸喑ռ㺮䃖ᄼ䄡䛹⮱Ⴘ䌌ࢳट̷⮱थ侙 ٶ̭ჹ喑℁℁ЃЙԖ䄮ᰡᰶ䧞ȡ 仃̺ٵ໕℁ٵႸহथ侙⮱ٶუ̓ȡ Йⴒ䖀喑Ⴘ㮪♣Ⴙ⃮ᦔڕγ䮸 ᬣ䔅₸⪆⮱䬕䬭ݣᏓ喑㮪♣͒ᵩᠶ⚔ͫ 㔰䄂Გ䔶᠁Ⴥ़喑ѳ᭜⩞λᖖ㢘ݣᏓ⮱Ԋ ⪆喑⩞λͫ㡽ݣᏓ⮱ႅౕ喑⩞λܧ䏘ธ๔ ๘უᏚ⮱㔰⩌ౕ᪆㗟⣜ධহ㔰㏼侹̷䔉 䔉хλᎠℾၽႆ喑Ⴥঅ⮱ऻАϺ♣℁Ꭰℾ ⮱ऻАᰡღᭀևჅȡ̺ⲿᗕ䄡喑⣝Аϧ⛌ ⴒ⮱䗐ψႸჅঅ喑ڣ๔䘕ܳ䘪᭜ĄჅ ιАąȡ 䌌Ⴘ๔䘕ܳჅঅ̭ᵤ喑थ侙ٶΌ᭜ ̺͗ៅ̺ថ⮱ჅιАÿ❣ڣथ侙ౕ⇠
♣ȡὗⰶۤᄦ๘ᠴ喑Ԝ仃⩅ͧ⢸ژ㯸ȡ 㻶ᓄ䔆ψ⣝А❵䉗Ⴥ⮱㘷㗹̷᭜ ⱌₐᏁ䄒䪬⫛⮱ȡ
ߌ֭Զӽ ͚పᓲ䶨㐡ᠮᎣߍᑧࢳटэឬ⮱㏪ፓ ᪴]᭼ᵩ᪴ (SBIBN&BSOTIBX
ЃౕΓ͚ۆ䖀喟Ą❞ສ᭒喑ѳ᭜᭒ ๗ᴁဖ喠❞ສ喑ѳ๗㢐ȡ᭜ ᰭ❞ສ喑ͧ⮱णၽፓ̭ψ叱㞟喑䄰 ၽᵩใᴁহ喑㞟ᒖᵩใ⊀䗮喑Ⴐࣵᴀ̷̭ ψᔔ䗮⮱⺋䛴হ₨⮱䶱ȡႰ⮱䛾叱⮱⊀ 䗮喑̺᭜㶕⣝᭒⮱◯喑̺᭜㶕⣝⮱Ⰸ ߈喑㔹᭜㶕⣝䕩䓾㔮䓵⮱ళ⛌̻ᙵহ⮱ᮧ ᚔȡႰⴒ䖀ϧ⩌⮱ᰶ䭽喑ᩲⴒ䋠㔹ͽ๖ȡ ϻₑĂϧ⩌ᰶ䭽ă⮱ⴒ䃳̻͝ჹ⮱㏼侹喑 ܧ⣝̭㞟ᒖ⮱ϑ৺ᰟ喑℁̭ܴ䘪͝ჹ喑 Ⴐ⮱䱿㶕⣝⩌প̻߈喑Ⴐ⮱ᾅ叱㶕⣝䛾⢶ ⮱ڲღ喑㉘㶕⣝⊵Ხ̻₨ώȡą䔆⃢䄊ٲ ࣺܳܧ᳄ͧ҉⩌ٵ᪴ࡃϧڤᰶ⮱䒰倅 ධ⩹ȡ ౕⰸᲒ喑ϧㆨ㑁䕍⤰ڕ᪴ࡃহ ч⮱㙇ₒጟᬒ⯷ߍᔘ喑㔹͚ప㘪ౕ͚ڣល ⑁䛺㺮㻿㞟喑䔆ͨ㺮ᑿߌλ͚పᗍͲ⮱ࢳ ट喑Вࣷ⣝А͚పϧϻ⺃䒵ั㐔ឬ⮱᪴ࡃ 喍࠲᠙ਟ႓হ᪴႓喎䖄ϔȡ ♣㔹喑͚ప㠒ᘠⱌₐౕ͚ࣾڣᡒ҉ ⩕喑݆ᓲ䶨㐡ᠮᎣߍᑧ䔆̭ࢳटэឬ⮱㏪ ፓȡ
LOOKING AT CHINA
Spring and autumn China has a unique perspective on many aspects of life, given its long cultural continuity. The challenge is to preserve that continuity in the midst of 21st century education and media. By Graham Earnshaw
was talking to a friend in Xi’an recently about the education of his son, now seven years old. Every weekend, the boy’s time is taken up with extra lessons in English and the violin. It made me start to think about the transmission of culture from one generation to the next and about perspective on life. My hero, the great writer Lin Yutang, addressed this topic in his book “My Country and My People.” In the epilogue to the book, written in the 1930s and before the many changes that have taken place in China in the intervening decades, he described
China as being old and richly comfortable in its age. By old, he meant rich in experience. From this perspective, he said, the favorite season of Chinese people is autumn. “I like spring, but it is too young. I like summer, but it is too proud. So I like best of all autumn, because its leaves are a little yellow, its tone mellower, its colors richer, and it is tinged a little with sorrow and a premonition of death. Its golden richness speaks not of the innocence of spring, nor of the power of summer, but of the mellowness and kindly wisdom of approaching age. It knows the limitations of life and is content,” Lin wrote, reflecting a wider cultural stance. I sense that we are moving increasingly quickly towards the creation of a global culture and society. I believe China has much to contribute to such a culture, and much of what it can contribute relates to the manifestations of age, the rich depths of culture, philosophy and literature to which Chinese people today are the heirs. But to make that contribution, the links to that richness must be nurtured. I asked my friend how much value there was in subjecting his son to hours of learning English badly, in a context where the child has no interest or motivation to learn properly. I also questioned whether it would be better for children at that age to spend more time on extending their understanding of their own base culture, that
is learning more about Chinese, perhaps through calligraphy or guqin. We have seen in places like Singapore and Hong Kong the impact of an education system that forces children away from their own culture. You risk ending up with people who have no depth of understanding on any culture at all. But Lin was looking at a world where China was changing and integrating with the globe from a perspective that included still an unbroken continuity with the past. “We are an old nation,” he wrote. “The eyes of an old people see in its past and in this changing modern life much that is superficial and much that is of true meaning to our lives. We are a little cynical about progress, and we are a little bit indolent, as are all old people. We do not want to race about in a field for a ball; we prefer to saunter along willow banks to listen to the bird’s song and the children’s laughter.” So much has changed since he wrote that. But on the other hand, I still sense strongly the echoes of his point of view in the Chinese people around me. Chinese society today includes what might be the vitality and exuberance of youth. But beneath it, I sense a clearer awareness of the realities of life than is true in many other societies around the world. Self-awareness is the goal. Perspective is the key to self-awareness. Cultural continuity provides perspective.
ಮྞרຳ ᭼ᵩ᪴喍(SBIBN &BSOTIBX喎⩌λ㠞ప喑⣝ᅲ̷⊤ȡЃВ̷̭⁎㥪㙇◦ͧ䊤◦喑㵹⼸ϻ̷⊤̭䌜 ा㺬喑ὗ䉜͚పȡ᱙ᰵ喑Ѓጟ㵹㜠㞯࣬ȡ ᪴]᭼ᵩ᪴ (SBIBN&BSOTIBX
䓽⚑䒓喑ႰЙ̺᭜␎䒪侣ा䪬̸͚⍥ ࡧ喑ᅞ᭜⾧䒓䔁ఋ⌞ᆞȡ̭䌜̷⮱ᄼ䩴 ◦◦喑߰߰⅁⩌ޜ̭♣ڕȠ͝亣ჹᏣ⮱ ᮜ䆎ȡ
Ąͧϭ͵̺⮱ݘᲒᡐᰡ็䧞এ喤ą Ąᒀڢ᭜̭䩨◩喑जВൾ䕍Ѓ⮱ ᕔᵩȡą㶕ȡλ᭜ࣵ䄏䬛ڣ侨 ౕ喑ᓄ⮱ݝఋめ᭜⺼ᐧⰮȡ ᘠा⮱ᄼ٬ၽγ㼐ℂ͇ऻ⮱ក ツ喑Ѓ⮱ϟࢡᰬڣևܧγఋめȡ ĄЃᎣ̺᭜ᒵч䄨Γ喑В࣯ۈᄦЃ 㔹㼭Όツ᭜ᰭສ⮱ܧ䌜γȡą ౕह̭๖⮱ᮇψᬣՆ喑ࣵ䕴㻮γ̭ ᄦၽ喑٬ၽܳ֒䄵喑ౕᓛ䚶⮱⟣ᔮ̸ 䔅㘪ᐭ䒓ȡЃϷᎡᆮܧ喑ᰫ㏼Όౕ 䘕䭌ᒦ䓴ᎡȡᄦₑЃϟ䃱Ф䖀喟Ą㜠 ᄾЃౕۈ䭌႓чγᐭ䒓ȡą Ѓᄳ䒓։䲍ౕ̭䓦喑̻ϟݝᄦ ̭⌲Ⅱϻ䏘䓦⋹䓴
ᄼᛖ⮱ȡᄼᏄ⮱⩌ᗲۢ䒰ጛ喑ԿΌ̻ ক䓦⮱⣜ධܳⰥ⼝ȡĄᝃ䃥जВᐭ䒓 ݝ㠞ప喑♣ऻౕ䗐䛹ጒ҉ȡąЃ〾Ɑᄦ 䄡ȡ ፚ䬡丽ᵹ⮱ओ̭͗⩤ϧ䬛䊤ݝ ͚ప⮱ᬣ䬡䪬ⴚ喑Ꭳ̻ᣏ䃕γ㜗̓㏗ ᎡАВᲒ͚పч⮱अࡃȡĄ䓴 ࣨ喑Й⩇㜠䔋华㯸䘪̺㘪䮼Ӭܧਜ਼喑ग 㘪㐆పუȡѳڣЃθᗲᎣ᱗ⱌₐࣾ⩌䒙 अȡąࣾ⣝ຯϷ䔆ㆨѩ᭜㔹䲋⮱䃧䄰ѩ ͻᘵࣾ፥㻮γȡ ᆞ䌜㱬㰿ा̸喑Ⱑ䓫䅤Ꮒ⮱⇠䖀ȡᒀ ㏼䓴䌜⮱䒓⼝䛺〆ᬣ喑։γ̸Გ喑 亣ᰶڡ㜡〆̷ⷲ⼑ȡĄڙȡą〆 ̭⮱ڲѺጒ҉ϧঅॷ䃶Ҁ䛺㐀ȡ䔆͗ ႄധ᱙۳ȡϻЃऐ͚䔅ᓄⴒ喑䓴䌜 ⮱䒓ᬍ䃧䊲䒪̻॓䘪ч㷘ᩫ㵹喑㔹䊲䒪 㔲ϲ䰭㑡㏠ٰ⮱㒇䛾ȡθ̷喑䕁㏼䔆 ̭〆◦⮱䒓䒳ͻ܍䘪᭜ϻ⌞ᆞ̸Გ⮱䓽⚑ 䒓喑๔䘕ܳ䘪ႅౕ䊲䒪⣝䆎ȡ
⮱ȡą㶕ȡ Ꭳ̺䊋႖ၽ̻ϟܳᐭ⮱և∂ȡ 䔆͗Ꭱ咱⮱႖〒ᅞᏁ䄒হ㜗ጞ⮱ϟ⩌≨ ౕ̭䊤ȡ
T R AV E L J O U R N A L
;OLSHUKVMJOPSKYLU Graham Earnshaw was born in England and has been walking west from Shanghai across China since 2004, always starting each trip from exactly the last place he stopped. This month, we ﬁnd him east of 'FOHKJFDPVOUZOFBS$IPOHRJOH By Graham Earnshaw
he valley heading westwards down toward Fengjie town was busy with trucks filled with coal heading for the Yangtze River, with empty trucks heading back into the mountains. Along the way, I passed through a number of small towns, all lively and prosperous in feel. The countryside, meanwhile, was in a pretty tortured state. The new freeway being built along the valley’s length was largely responsible for the mutilation, along with coal mines, gravel pits and some housing construction. I found a growing awareness amongst the farmers of the damage being done to the land. I asked one middle-aged man I met on the road what he did, and he replied: “I look after the planet.” It was his cute way of saying “I am a farmer”. One of the towns I passed through was called Stone Horse and in a little market where farmers were selling fruits, I asked about where the horse was. “It died,” replied one of the fruit sellers, and laughed at his own joke. The valley flattened out, and I came upon a body of water, an outcrop of the great Yangtze Reservoir. The houses above the water line were mostly recently constructed, but my impression was that most of the displaced farmers had been moved to the new and expanded county seat of Fengjie.
“The majority of people who were moved ended up poorer than they were before,” one man said. I passed the temple of Baidicheng on a hill, which has been one of the main attractions of the Yangtze Gorges for centuries. It has become an island. I had passed it nearly 10 years previously, before the waters rose. People said it had been completely rebuilt and was not interesting anymore, so I walked past the entrance bridge without going in. Just passed that bridge, however, was a very famous view – the view west into the entrance of the Kuimen Gorge on the Yangtze River, possibly the most beautiful of all the Gorges’ vistas. The bluish 10 RMB note, the most
ubiquitous of all China bank notes, features an image of the view, with the Baidicheng hill on the left, the perpendicular walls of the Gorge on the right, and a hook-like mountain in the background. It is magnificent, although of course not as deep and sheer as it once was. I spent some time talking to a lady and her younger son, age 14. The elder son was currently off on a threeyear stint with the army. I asked how much the son made as a soldier and the answer was: “Not much, maybe 500 rmb a month.” So why do it when there are ways to earn more money? “It disciplines them, builds character,” she replied. I asked where he was stationed and she said Fujian province.
“Protecting China from Taiwan businessmen?” I asked. I asked son number two what he would do when he left school, and the mother answered for him. “He is not very good at his studies, so I think the army would be best for him too.” Later the same day, I met another mother and son, the son being a talkative and slightly drunk truck driver in his early 30s who had also previously spent three years in the army. “Well, at least he learned how to drive,” said his mother. His truck was parked opposite the little shop where they were eating lunch, with me resting on the side sipping water. It was beat-up and filthy and fit perfectly into the scene. “Maybe I could drive it to England and work there,” he said with a laugh. Another man at the lunch table asked me about how long I had been in China, and we talked about the many changes that had occurred since the 1970s. “In the old days, we could not even sell an egg to anyone but the state,” he said. “But other things have not really changed at all.” I found such comments came up spontaneously much more frequently than in the past. The road wound down out of the mountains, and after several switchbacks reached a stream at the valley floor. I passed a government truck weighing post. I stood on the scale and asked the guy in the hut to tell me how much I weighed. “Sixty kilos,” he said. That was about right. He said they let all the trucks through whether they were overloaded or not but took a 30 RMB fine from every truck that was overweight. That was just about every truck
coming down out of the mountains, mostly loaded with coal. As I walked toward Fengjie town, the Yangtze River was once again visible. I kept touching it at the river towns, then being turned back into the mountains to get to the next river town. My walk was like a very slow rollercoaster ride. I sat for a while with a restaurant owner and his wife, ate some beancurd, and drank a little beer as we talked. The wife had a cute threeyear-old daughter on her knee. “Can I come to Shanghai to work in your company?” she asked. “I will do anything. I’ll be the cleaner. There is no work here at all.” What about your daughter? “She will be living in school, no problem,” she replied. I hated this approach of mother-child separation. Kids at this age should be together with their mothers. My dominant impression of Fengjie and its environs was children. Huge numbers of babies and very young children. There was a population boom in progress here for sure. Every family had at last two children, and sometimes even four. I had never seen anything like it anywhere in China. “The birth control policies are not strictly enforced here,” said one man, who happened to be a Communist Party member in his spare time. I sat at a street stall restaurant in Fengjie and watched the coal trucks passing by, and also a few foreign tourists. Some of the Yangtze tour boats stopped at Fengjie overnight to let the tourists see the temple of Baidicheng. Other people joined us, a couple who ran a knickknack store down the street, an orange trader who offered me a farm girl at a cheap price, and an
unemployed 50-years-old man who was smart but bitter at the way life had treated him. He wanted to talk about Chinese medicine and Marxism, but mostly to bemoan his fate. He had no pension, he said, because he had been laid off at too young an age. His kids gave him some help, but basically he said he survived by spending almost no money. I found the town of Fengjie to be a dispersed mess of a place straggling along around 10 km of river bank, including several bits of the old town that were above the new water line. It was much bigger than Wushan. A girl stopped to talk to me in a restaurant and asked, “Why would you come to a crap place like this?” I protested that it didn’t seem so crap to me. The center of the new Fengjie town was lively, and there appeared to be money around. People said the local economy was supported by three dragons – the white dragon of tourism, the yellow dragon of oranges and the black dragon of coal. But most of the money came from coal because Fengjie is the heart of the Gorges coal industry, sending barge after loaded barge down the river to Wuhan and beyond. Like Wushan, there was a slightly wild feeling about Fengjie. I asked a taxi driver about the law and order situation and he said: “Not so good.” In what way? “There are a lot of fights.” I discussed investment in the coal industry with a couple of people. But the uncertainties and risks of the business were also significant. The coal seams can run out suddenly, officials can turn hostile and mine shafts can collapse. “It’s been quite bad this year for accidents,” said one woman.
CO-SPONSORED INTER VIE W
Hotel Reservation Service new Beijing office starts operation HRS further endorses the concept of “travel cost management” in Northern China
otel Reservation Service (HRS) - one of the world’s largest hotel booking companies is expanding operations in China to provide companies with more ways to cut costs on travel arrangements. HRS opened a new Beijing office recently in the belief that China is on the way to becoming the world’s largest business travel market in 2015 and that the Northern China region has great market potential. Hotel Reservation Service (HRS) operates a global electronic hotel reservation platform, connecting business and leisure travelers with 250,000 hotels in over 180 countries. Headquartered in Germany, HRS provides online travel solutions to 35,000 corporate clients worldwide while also offering a new concept in distribution channel to hoteliers. Corporate customers get access to HRS’s tailor-made hotel reservation system with its business travel spending analysis. Available in 32 languages, the HRS system enables direct bookings to be made free of charge, with instant confirmation. HRS Beijing new office received positive feedback from the market. Several clients have continually expanded hotel spending through HRS on-line hotel bookings and travel cost management tool. The Beijing office team has also put great effort into the hotel network expansion, resulting in an increase of new signed hotels, such as Four Sea-
sons, Conrad and The Imperial Mansion. “Business travel expenditure surged by more than 20 percent in 2012 and will rise even more quickly this year,” Tobias Ragge, CEO of Hotel Reservation Service said. “We are committed to the further growth of the Chinese business travel market.” “We can cut costs for companies in China that work with us by up to 30 percent,” said Kimi Jiang, Managing Director Corporate Solutions, HRS Greater China. “Corporate clients can gain competitive hotel pricing on more than 250,000 hotels through HRS. HRS also provides data-driven travel cost analysis to travel managers, who can gain more visibility on business spending and find ways to minimize costs.” Ms. Jiang said HRS had identified two key trends in its business – the online model of hotel spending man-
agement and the growth of China as a source of global hotel bookings. HRS China has launched its online HRS Intelligent Sourcing Program, which supports corporate clients to identify cost saving opportunities in the hotel procurement process, optimize their hotel portfolio, and control travel costs. “Our strong background in data-driven cost analysis and state-of-the-art technology in this business provides us with the ability to launch new products to meet market demand,” she said. China’s business travel expenditure totaled $62 billion in 2010 and is expected to reach $277 billion in 2020, according to the World Travel and Tourism Council. China is currently the world’s second largest business travel market and it is predicted that China will overtake the United States to become the largest business travel market in 2015.
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Suite 904, OOCL Plaza,
Shanghai, China, 200433
841 Yan An Zhong Road,
Tel: +86 21 5566 4788
500 Weihai Road, Shanghai
Fax: +86 21 6565 4103
No. 5, 4th Block, Anzhenxili
Tel: +86 21 6256 8888
Chaoyang, Beijing 100029
Fax: +86 21 6256 5678
Tel: +86 21 6289 8813
Fax:+86 21 6289 8816
Tel: +86 10 6444 8900
Fax: +86 10 6445 3870
Grand Mercure Hongqiao
Room 2302, E-Tower, No.12
Manchester Business School
Guanghua Road, Chaoyang,
Part-time Global MBA
369 Xian Xia Road, Chang Ning
Tel: +86 10 6591 8087
Starts July 2013, Shanghai
Tel: +86 21 5153 3300
Fax: +86 10 8599 9882
Suite 628, 6/F Shanghai Centre,
Fax: +86 21 5153 3555
1376 Nanjing Road West,
Saint Paul American School
Room D-E, 11/F, Yueyun
Tel: +86 21 6279 8660
18 Guan Ao Yuan, Longgang
3 Zhongshan 2nd Road
Tongji University SIMBA
Road Qinghe, Haidian, Beijing
A309 Sino-French Center, Tongji
Tel: +86 20 8762 0508
University, 1239 Siping Road
Beijing Deco Personal Services
Fax: +86 20 3762 0543
Tel: +86 137 1881 0084
Tel: +86 21 6598 0610
Hong Kong Office
Fax: +86 21 6598 3540
D 9/F Tower II China Central
7/F, Hong Kong Trade Centre
China Europe Int’l Business
Livingston American School
Place, 79 Jianguo Road,
161-167 Des Voeux Road Central
Hong Kong, PRC
580 Ganxi Road
Tel: +86 010 5920 4320
Tel: +852 2541 6632
Tel: +86 21 6238 3511
Fax: +86 010 5920 4322
Fax: +852 2541 9339
Tel: +86 21 2890 5555
Fax:+86 21 5218 0390
Fax: +86 21 2890 5200
International School (Pudong
Levin Human Resources
Development (Guangzhou) Ltd.
Management AEMBA Program
Lufthansa German Airlines
800 Xiuyan Road, Kangqiao,
V15 4/F Goldlion Digital Network
Center, 138 Tiyu Road East,
LISTING Tianhe, Guangzhou, Guangdong
Tel: +86 21 6353 2288
2290 Zuchongzhi Rd, Zhangjiang
Tel: +86 020 2886 0665
Fax: +86 21 6353 2276
Hi-Tech Park, Shanghai 201303
Fax: +86 020 3878 1801
Tel: +86 21 6075 2555
A6, Chaoyangmenwai Avenue
Tel: +86 10 5907 0055
Fax: +86 10 5907 0188
30/F Golden Bell Plaza, 98
Huaihai Road Central
Belvedere Service Apartments
Dongling, Shenyang City,
Liaoning Province, 110167
Tel: +86 021 2326 7999
9/F Huali Building, 58 Jinbao
Belvedere Service Apartments
Tel: +86 24 8378 0500
Fax: +86 021 2326 7998
833 Changning Road, Shanghai
Fax: +86 24 8378 0528
Tel: +86 10 8520 6000
Fax: +86 10 8520 6060
Tel: +86 21 6213 2222
International Plaza, 288 Jiujiang
Fax: +86 21 6251 0000
(Shanghai) Co., Ltd. 2302-2303, 2201-2206 Hongyi
Real Estate/ Serviced Apartments
email@example.com Lanson Place Central Park
Tel: +86 21 2321 7888
Tower 23, Central Park No. 6 Chaoyangmenwai Avenue
Chaoyang, Beijing 100020
Shanghai Jiatinghui Property
Tel: +86 10 8588 9588
Development Co., Ltd
Fax: +86 10 8588 9599
Life Hub @ Anting No 1033
Savills Residence Century Park
Lanson Place Jin Qiao Serviced
Moyu Rd S, Anting, Shanghai
Tel: +86 21 6950 2255
No. 1703, Lane 1883, Huamu
Fax: +86 21 6950 2833
Road Pudong, Shanghai 201303,
No. 27 & 28, Lane 399 Zao
Zhuang Road, Pudong, Shanghai
Tel: +86 21 5197 6688
Tel: +86 21 5013 3888
No.555 West Nanjing Road,
Fax: +86 21 5013 3666
Room 1207 12th Floor, Plaza
Real Estate/ Business Park
555 Shanghai, PRC Course Inquiry: 400 618 6685 Office Tel: +86 21 6209 1063 Office Tel: +86 21 6209 8671
www.qcintegra.com Park View Apartment
Jervois Street, Sheung Wang,
Ketchum Newscan Public
Block 1-4, No. 888
Tel: +852 3008 5805
Tel: +86 21 5241 8028
HuaYuan World Square, North
218 Tianmu Road West
Zhongshan Road, Putuo District,
BEIJING (12 LOCATIONS)
15/F One Corporate Avenue
Tel: +86 21 6071 0550/0551
Regus China World Tower 3
222 Hubin Road
15/F China World Tower 3,
1 Jianguomenwai Avenue
Regus Jin Mao Tower
31/F Jin Mao Tower
CHENDU (3 LOCATIONS)
88 Shiji Avenue
Regus Yanlord Landmark
Apollo Business Center
36/F, Yanlord Landmark Office
Regus One Prime
Apollo Huaihai Center [New]
25 F, One Prime
4/F, Fuxing Commercial Building
No.1, Section 2, Renmin South
No. 360, Wu Jin Road,
139 Ruijin Road (No.1)
SHENZHEN (5 LOCATIONS)
Vantone Commercial Center
Regus Futian NEO
Regus Yangtze River
44/F, NEO Tower A
Apollo Flagship Center
Level 26 & 27, Tower D, Vantone
6011 Shennan Avenue
Center, No 6 Chaowai Ave
33/F Yangtze River International
1440 Yan’an Road (M)
Regus New World Centre
Tel: +86 10 5905 5905
22 Nanbin Road
The Executive Centre
23/F, New World Center,
No. 6009, Yitian Road,
Apollo Tomson Center
International Finance Centre
Regus Dalian World Trade
22/F, Tomson Commercial
Level 8, International Finance
Center, 8 Century Avenue
12/F, 25 Tongxing Street
Regus Suzhou JinHope plaza
710 Dongfang Road
GUANGZHOU (5 LOCATIONS)
11/F, Tower2, Jin Hope Plaza
Level 35, CITIC Square, 1168
Regus G.T. Land Plaza (NEW)
88 Hua Chi Street, SIP
Nanjing West Road
12/F, Tower A, Phase 1
TIANJIN (2 LOCATIONS)
Apollo Xuhui Center
G.T. Land Plaza, No. 85
Regus Tianjin Centre
16/F, Feidiao International Building
8/F Tianjin Centre
1065 Zhaojiabang Road
Level 5, Xintiandi, 159 Madang
Tian He District
No.219 Nanjing Road
HANGZHOU (4 LOCATIONS)
Regus Euro American Centre
Level 20,The Centre, 989
4/F Euro America Center
Regus Wuhan Tiandi –
Apollo Hongqiao Center
Changle Road, Xuhui
18 Jiaogong Road,
Corporate Centre 5
26/F, New Town Center Building
Chong Hing Finance Centre
8F, Wuhan Tiandi – Corporate
83 Loushanguan Road
Level 12, Chonghing Finance
Center 5, No. 1628 Zhong Shan
Centre, 288 Nanjing West Road,
Regus Jinling Hotel Asia Pacific
Tower (COMING SOON)
Tel: +86 21 6062 7183
8 F, Jinling Hotel Asia Pacific
Tower, No. 2, Hanzhong Road,
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SHANGHAI (21 LOCATIONS)
Regus Plaza 66
15/F, Tower 2, Plaza 66,
જTel: +86 21 53859061
No.1266, West Nanjing Road,
2205, Shanghai Plaza, No.138 Huaihaizhong Rd, Shanghai, China, 200021
Regus One Corporate Avenue
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