China News - Winter 2006

From the British Press

In our time-the Needham Question

The Radio 4 series on 19 October 2007, featured a discussion led by Melvyn Bragg which also involved Chris Cullen, Director of the Needham Institute, Cambridge, Tim Barrett, Professor of East Asian History at SOAS and Frances Wood, Head of Chinese Collections at the British Library. They discussed reasons why China's science, which was so advanced compared to Europe until around 1700, did not progress further. At about this time, modern science began to develop in Europe, progressed and then surpassed that of China. Why did the early technological brilliance in China not lead to the development of modern science in China? After all, three of the most important discoveries, the magnetic compass, printing and gunpowder were all Chinese.

Following detailed discussion, various factors were suggested, including the development in the West of maths based sciences, especially Euclidean geometry, the Renaissance and the concept of proving things. Probably one key reason was because a large number of separate countries evolved in Europe, which all competed with each other. China was one large self-sufficient entity on its own which did not compete or need to compete with any other state and it became complacent. Hume, the philosopher maintained that all things happen better and faster under competitive international conditions, which was the case amongst the separate individual states in Europe. This factor was lacking in China's development.

SOAS appointing specialist in Chinese politics

The School of Oriental and African Studies department of Politics and International Studies is seeking a lecturer/senior lecturer, reader or professor specialist in China's international relations and/or political economy since 1978. Closing date for applications is the 12 December 2006. (From The Guardian 14/11/06)

Migrants' remittances home

Recorded remittances by migrants to their home countries should reach $268 billion this year (2006), according to the World Bank. The countries at the top of the list were the following. The amounts in billions of $ are only approximate-being ready off a chart. The figure in brackets refers to the sum as a % of that country's 2005 GDP.

Mexico$25 billion (3.3%)
India$23 billion (3.0%)
China$22.5 billion (1.0%)
Philippines$15 billion (15.2%)
Lebanon$6 billion (25.8%)
Morocco$5.05 billion (10.1%)
Bangladesh$5 billion (8.0%)
Pakistan$4.45 billion (4.2%)
Russia$4 billion (0.5%)
Poland$3.5 billion (1.2%)

(From The Economist 25/11/06)

Note. Remittances back to China were exceedingly important for China's economy in the past, especially in the latter half of the 19th century, the first half of the 20th century and during the Great Leap Forward. (Reference 'Silent Invasion' by G Alexander, Macdonald Publishers, London 1973, p50)

Traditional Chinese medicine cancer cure

Merck the German pharmaceutical giant is asking the help of Chi-Med, a Hutchinson Whampoa company which trades in traditional Chinese medicine, to research oncology. Chi-Med will search through centuries of Chinese medical know-how for a cancer fighting drug. The financial details are not disclosed but it may be worth tens of millions of pounds if a drug suitable for trials emerges.

Chi-Med raised £40 million from listing on AIM in May. It is based in Shanghai and is controlled by the Hong Kong billionaire, Li Ka-shing. Chi-Med has a library of 10,000 natural substances, many of which have been used for centuries.

Western pharmaceutical companies are increasingly outsourcing their drug research work and many are looking to the East for solutions to problems that Western medicine cannot solve. Chi-Med has already brought two drugs into US phase II clinical studies in the oncology and auto-immune areas. One is a drug to enhance radiotherapy for cancer and the other is an oral treatment traditionally used for respiratory infections and modified to treat Crohn's disease and ulcerative colitis.

Proctor and Gamble recently struck a deal with Chi-Med to screen the Chinese company's collection of plant extracts for possible beauty care applications. Chi-Med is already involved in skincare products and has its own chain of shops in China. The Chinese company already has some shops in London. (From The Independent 20/11/06)

Chinese English lessons

Pupils from China make up two fifths of foreign children in private British schools-but now schools are moving to the students. Dulwich College and Harrow lead the way and already have schools in China. However these schools are for expatriates of all nationalities-including Hong Kong, but not from Mainland China.

Now the first Anglo-Chinese school teaching Mainland Chinese children (but not expatriates) is about to be set up. The Girls' Day School Trust (GDST) a network of 28 independent schools is to expand eastward. It will open a school in Shanghai with a Chinese partner in 2008. This school will be twinned with and bear the name of Oxford High School. Dulwich College and also Nord Anglia (an educational business already having two schools in Shanghai) will follow suit.

Fluency in English and internationally recognised qualifications are keenly sought in China as the country opens up to the world. Chinese families see the attractions of an English education and this is the reason for these business opportunities. Most of the private schools operating abroad license their brand names to a local partner. The GDST deal is different in that the charitable trust will jointly own the school with its Chinese partner.

Schools with overseas operations are reticent to discuss profitability, but one staff member says that it runs into six figures and another has said its overseas operation, offers, 'healthy returns'. (From The Economist 28/10/06)

Black cabs to be made in China

Manganese Bronze, the maker of the London black taxi, has signed a joint venture (jv) with Zhejiang Geely to produce 20,000 taxis per year in Shanghai, beginning in 2008. The taxis will be sold in Asia by a subsidiary of Zhejiang Geely and in the rest of the world by Manganese Bronze. Total investment in the jv is forecast to be eventually £53 million.

Manganese Bronze had been seeking a Chinese partner to gain access to China's growing vehicle market and selected Zhejiang Geely following extensive talks. Zhejiang Geely started making cars in 1996 and has become the key brand for low-cost vehicles in China. It has an annual capacity of 250,000 vehicles, 200,000 engines and 150,000 gearboxes from four separate plants. (From China-Britain Business Review November 2006)

Britain's favourite take-away food

A poll of 3,000 people has voted Chinese food as their favourite food. The main reason for ordering a take-away was 'not being bothered to cook', followed closely by 'loving the taste'. One person in ten said it was 'to keep the kids happy'. The 'Survey of 3,000 people by 72 Point for Windsettlers' listed 44% for Chinese/Thai, 24% for Indian, 14% for fish and chips, 13% for pizza, 3% for burgers and 2% for kebabs. (From The Times 21/10/06)

China's reserves to exceed $1 trillion

China's booming export trade is about to push its foreign exchange reserves, the world's largest, over the $1 trillion mark before the end of the year. Quarterly figures from the People's Bank of China, China's central bank, reported that its foreign exchange stockpile reached $987 billion at the end of last month. The reserves could reach the trillion mark within a month. The currency reserves have piled up because of China's buoyant trading performance and because of its persistent intervention on foreign exchanges to restrain the value of the yuan. Purchase of dollars have curbed any rise in the value of the yuan, and US Treasury bonds make up an estimated three quarters of the reserves. The reserves have also been swollen by inflows of speculative capital into China. (From The Times 14/10/06)

$350 million windfall expected from Chinese bank's flotation

Investment banks including Credit Suisse and Merrill Lynch are poised to make about $350 million in underwriting fees from advertising on the floatation of the Industrial and Commercial Bank of China (ICBC)-expected to be the world's largest initial public offering (IPO). The banks are working alongside Deutsche Bank, China International Capital and ICBC's own investment unit. Institutional investors have requested about $100 billion of shares in ICBC-more than five times the value of its IPO.

This is the latest in a series of deals encouraged by the Chinese government which believes that floatations will help to clean up the country's banking sector. Last year, the government injected $15 billion to cover bad loans at ICBC. In the past 18 years, the government has spent nearly $283 billion to clear bad loans at state-owned banks. (From The Times 14/10/06)

China in Africa

Trade between Africa and China has increased from $3 billion in 1995 to over $32 billion last year. This sounds huge, but in context, it represents only 2.3% of China's total. However, trade between Africa and China is expected to double by 2010. Africa has found in China, a buyer for its commodities and a new source of aid and investment. According to China's statistics, it invested $900 million in Africa in 2004 out of the total $15 billion received.

China has cancelled several billion dollars of African debt, which has helped to build roads, railways, stadiums and houses in many countries. In Nigeria, China promises to invest about $4 billion in refineries, power plants and agriculture in return for oil rights. In Angola a $4 billion line of low-interest credit enables Chinese companies to help rebuild the bridges, roads, etc that were destroyed in decades of war. The debt is repaid in oil.

China's straightforward approach is an attractive alternative to the pernicketiness of the IMF and the Paris Club of creditors that have been quibbling for years. Many African counties are tired of the intrusiveness of Europeans and Americans fussing about corruption or torture and clamouring about accountability. China's activities have reduced the pressure from the West. The Angolan economist Jose Cerqueira welcomes China presence because it eschews what he sees as the IMF's ideological and condescending attitude. 'For them' he says, 'we should have ears but no mouth'. Others are pleased because China is ready to pass on its technology. For example it is helping Nigeria launch a second satellite into space. Some officials, disillusioned with the Western development model say that China gives them hope that poor countries can find their own path to development.

However some analysts do not approve of the situation. Some believe that China's appetite for commodities may stifle producers' efforts to diversify their economies. China is bringing irresistible-some say-unfair competition to Africa. Cheap Chinese products are on sale all over Africa including electronics, plastic goods and clothes. Some say China's involvement in Africa will erode efforts to promote openness and reduce corruption. China stepped into Sudan when American and Canadian companies left and invested more than $150 million during 2004. (From The Economist 28/10/06)

China's stock market boom

This year, the Shanghai stock market is up 54% but it has in the past failed to live up to its promise despite China's growth. Last year, the Shanghai stock market actually dropped 8% compared to a gain of 17% for Britain's FTSE index and 32% for emerging markets in general. This year, the tide seems to have turned as reforms by the Chinese government have led to a dramatic rise in share values. In the past, the state owned about 70% of Chinese companies but they are now being listed on the markets. Chinese have seized on this opportunity to take a stake in the country's growth and last week hundreds of investors queued for shares in the Industrial and Commercial Bank of China (ICBC). This was ahead of its floatation on the Hong Kong and Shanghai indexes. ICBCs listing on Friday is expected to be the world's biggest and is believed to be 20 times oversubscribed.

The domestic stock market has also been opened up to foreigners for the first time. At the end of January, Shanghai's A-share market consisting of 1,300 firms and which was created for local investors, was opened to foreign investment and overseas traders plied in. Many fund mangers believe investors who stick with China for the long term will be richly rewarded-even if there is some short-term volatility. China has now one of the fastest growing middle classes in the world that is causing a surge in consumer spending. The standard of living in China has increased more than 10 times and experts say it has even further to go.

Jupiter has just launched a dedicated China fund, but some analysts question whether a dedicated fund is the best procedure, because there are already companies listed on the London stock exchange, which are already benefiting from China's growth. (From The Sunday Times 22/10/06)

Brussels seeks better trade links with China

The EU has identified China as the single most important challenge for trade policy and presented a wide-ranging strategy to develop political and commercial ties with Beijing. The EU Trade Commissioner, Peter Mandelson said that China is a globalisation success story meaning cheaper goods in European shops, cheaper inputs for business, more competitive European companies, growing markets for European exporters and lower interest rates. He mentioned that access to European markets had helped lift 180 million Chinese out of poverty since 1990 and had enabled the country to sustain a high level of economic growth.

But in exchange for the ease of access to Europe, Beijing should reciprocate by strengthening its commitment to similar economic openness and market reform to ensure that European companies can operate in China under fair trading conditions. The EU intends to impress on Beijing its obligation as a World Trade Organisation member and make it easier for foreign companies to access its goods, services, investment and public procurement. In particular the EU is looking to the abolition of forced technology transfers imposed on certain European investors and is also seeking tougher protection for legal and intellectual property. In addition it wants an end to the Chinese practice of giving unfair subsidies or protection to strategic industries. This new trade partnership forms part of a wider co-operation agreement that the EU and China agreed to launch six weeks ago at their bilateral summit in Helsinki. (From The Times 25/10/06)

World's wealthiest self-made woman

Cheung Yan aged 49 has become the wealthiest person in China and the world's most wealthy self-made woman. Her fortune of £1.8 billion is based on recycling American scrap paper and she has jumped from 36th place to number one on China's rich list compiled by the Huran Report. This is due to her company, Nine Dragons Paper, being publicly listed on the Hong Kong stock exchange. Her personal fortune includes 72% of the company. Last year it was believed to be worth $375 million and she now overtakes the (now second) richest person, Huang Guangyu, the founder of Gome Electronics who is worth £1.35 billion. There are five other billionaires listed in China. They include two property developers and Shi Zhengrong, a solar panel manufacturer who is number five and is worth £1.05 billion.

Ms Cheung is the eldest of eight children born to a military family in Heilongjiang province. She said that in her early life, the family only ate meat on holidays and she wore patched clothing. Her parents encouraged their children to solve problems independently, which laid a good foundation for her career. She started in 1985 with less than $4,000, by setting up a waste paper trading company in Hong Kong. It was a success and in the early 1990s, she and her Taiwanese husband, Lai Ming-chung moved to Los Angeles and created America Chung Nam, now the leading exporter of scrap paper in the USA. She identified an opportunity in packaging the countless products made in China and set up a factory in the booming Pearl River delta. She was a pioneer and became the market leader. Now the company is China's largest manufacturer of container board. Profits have quadrupled and its shares have soared 120%. Last month, plans were announced to more than double capacity by the end of 2008.

This year, 35 women in China are on the 500 richest list. The others include, metals trader, Chen Ningning and her mother in 20th place with $800 million and the TV presenter turned business woman Yang Lan of Sunmedia Investments with $500 million. Ms Cheung advises a would-be woman entrepreneur to know what she is suited to, and not force herself. She must be open-minded, able to withstand pressure and be in good health. Plus achieving a balance between career and family is crucial. (From The Times 12/10/06)

From the Chinese Press

In pursuit of social harmony

Definition of Social Harmony; 'A democratic society under the rule of law, based on equality, honesty, compassion and justice. A stable, vigorous and orderly society in which humans live in harmony with nature.'

The message Hu Jintao sent out to the leaders of the Communist Party of China is to put the construction of a socialist harmonious society 'in a more prominent position,' whilst sticking to economic development as the central task. The occasion was the annual meeting of 195 Communist Party central committee members and 152 alternative members.

In 2005 the aggregate disposable income of the richest 10% of Chinese families was more than eight times higher than the poorest 10%. The per-capita income ratio between urban citizens and rural residents in 2005 was 3.22 to 1. The same Xinhua report records that the per-capita gross domestic product (GDP) of the wealthiest province was over 10 times greater than the poorest province.

Other challenges include unemployment, an inadequate social security system, unsustainable economic growth combined with environmental pollution, backwardness in science, education, culture, medical care and sports. At the end of 2005, over 300 million people had no access to safe drinking water, including one third of China's rural population. The recent reforms in health and education have widely been considered failures because they have caused soaring prices beyond the reach of medium and lower income groups.

Ding Yuanzhu of the Chinese Academy of Macroeconomic Research says that, the excessive wealth gap is one of the principal destabilising factors and to build a more harmonious socialist society more attention must be paid to low-income citizens and poor populations.

The Plenary session set a number of objectives and tasks to be achieved by 2020, which include, improvement of the legal system, administering the country according to law and ensure it is implemented in an all round way. Ensuring that; people's rights and interests enjoy concrete respect and guarantees, the gap between urban and rural development and development between different regions is gradually reversed, universal increase in wealth, a high employment rate, a social security system for both urban and rural residents, improvement of moral qualities, scientific and cultural qualities and health qualities of the whole nation are improved, creativity is enhanced to create an innovation-based country, further progress in fostering a sound moral atmosphere and harmonious interpersonal relationships. The overall objectives are to build a moderately prosperous society and to provide for the needs of all Chinese. (From Beijing Review 19/10/06)

Wen Jiabao's business trip to Europe

The Chinese Prime Minister's trip to Europe was accompanied by announcements of trade deals worth billions of dollars. Air China agreed to buy $800 million worth of British Trent (Rolls Royce) engines for 15 Boeing 787 jets. British Gas signed contracts with China National Offshore Oil Corp for exploration in the South China Sea, and Arup the UK engineering firm won an agreement to design the Yunnan, Kunming International Airport. For Finland, a series of deals were signed between Nokia and Chinese customers worth more than 2 billion euros ($2.5 billion). Deals were also struck in Germany, which remains China's largest European trade partner for more than three decades. (From Beijing Review 28/9/06)

Golf classes-elitism?

A Chinese university has been accused of 'vulgar' elitism for making golf classes compulsory for students in Management, law and economics, state media reported on Tuesday. The president of Xiamen University was quoted by China Daily as saying, 'a most beautiful driving range' will be open on campus in two months and that golf would be compulsory for some students. All first-year students would be able to take classes, but those majoring in management, law, economic and software engineering 'will be required' to take a course. The president, Zhu Chongshi was quoted as saying, 'The highest embodiment of the education system is to produce socially elite people with the best education'. A university spokeswoman confirmed the completion of a golf driving range but said that all students were required to take sports classes, not just golf. In Asia, golf is a game for the society's rich and powerful, with business often conducted on the golf course as well as boardrooms. Zhu's remarks drew criticism from others who accused him of promoting elitism. They said that to make golf compulsory in a college is rather vulgar because with a per-capita income of about 1,700 yuan, China can ill afford courses in golf. (From Agence France-Presse in Beijing 17/10/06)

Safe water for the countryside

The Minister of Water Resources has said that 160 million people in China's rural areas will get clean and safe drinking water in the next five years and that by 2015 all rural residents will have access to safe, potable water. Currently 312 million Chinese villagers do not have sufficient water or the water is contaminated by chemicals or industrial pollutants. About 40 billion yuan is to be invested in water supply projects over the next 10 years.

N.B. For the foreseeable future water supplies for cities will also be a daily concern because of urbanisation and industrialisation. The number of city dwellers is expected to increase every year by 13-15 million people (about the population of New York). Eighty percent of rainfall is in the flood season and falls less in the north than the south of China.

China will make more efforts to improve its legal system on water resources protection and raise the public awareness of water conservation. China also needs advanced technologies and novel innovations. For the next five years, the Chinese Government has earmarked over one trillion yuan for spending on water supply, water recycling, pollution prevention and the south-to-north water diversion project. (From Beijing Review 14/9/06)

Closing down unsafe coal mines

China will close down 4,861 unsafe coalmines by the end of 2007. The head of China's State Administration of Coal Mine Safety, Zhao Tiechui announced that 2,652 mines will be shut by the end of this year and the others will follow in 2007. China still has 17,000 small coal mines even after mass closures in recent years. Small mines account for one third of China's coal production-but cause two thirds of all deaths in the industry. (From Beijing Review 14/9/06)

Government officials to pledge anticorruption oaths

Making a pledge under oath has been used throughout history to affirm allegiance to a cause or to a code of conduct. The practice is being used in China to combat the rampant corruption sweeping the country. Officials are being asked to take part in anti-corruption swearing ceremonies across China. Five hundred young civil servants in customs and tax departments in Guangzhou attended a collective oath taking ceremony promising that they will never become corrupt officials. Corruption has become a focus of attention in recent years and both the Communist Party of China and the Chinese Government have stepped up anti-corruption efforts and have also punishes corrupt officials. It is hoped that taking an oath will strengthen a civil servants sense of mission, responsibility and honour so that they will act in accordance with the law and discipline. (From Beijing Review 28/09/06)

Sino File is compiled by Walter Fung with some input for From the Chinese Press by Teresa Ray.

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