China News - Autumn 2011

Information on some resources of countries of the world in comparison with China. (Source: The World Bank and the UN Food and Agricultural Organisation via Newsweek 20/6/11)

Arable land of selected countries and China (2008)

10United States0.56
World average0.21

Water (internal freshwater resources of selected countries and China) 2008

RatingCountryCu metre/person
1French Guiana609,091
5Rep of Congo230,152
6Papua New Guinea121,788
59United States9,847
World average6,383

Water (internal renewable freshwater resources cu km per year) 2008

RatingCountryCu km/year
3United States3,069
World average360

Genome-mapping in China

The world's largest genome-mapping facility is in Shenzhen's Yantian district. There are 128 top-of-the-line genome-sequencing machines here, which make it possible for the Beijing Genomics Institute (BGI) to churn out more high quality DNA-sequence data than all US academic facilities put together. A poster on a wall of the facility says, 'Genes build the future'. This year Forbes magazine estimated that the genomics market will reach $100 billion over the next decade. Scientists will analyse vast quantities of data to offer new ways to fight disease, feed the world and harness microbes for industrial purposes. George Church, a Harvard geneticist, who advises BGI and a number of American genomics companies, believes that the situation in genomics resembles the early days of the internet. Microsoft, Google, IBM and Intel have already invested in genomics which they see as an extension of their own business.

BGI grew from modest beginnings but a $1.5 billion loan from the Chinese Development Bank catapulted it into a different league. It's sequencing power and advanced DNA data-management solutions for the pharmaceutical industry are drawing international attention. Last year, it announced plans for a joint project with Merck, the pharmaceutical giant. Shenzhen scientists are scanning thousands of microbes for genes that might serve useful industrial purposes. Human stem cells are being developed for clinical applications. The genomes of everything from cucumbers to 40 different strains of silk worms to the giant panda have been mapped. The genes of tens of thousands of bacteria living in the human gut have also been catalogued.

According to a report from the Monitoring Group, a Boston management consulting firm, China is poised to become the global leader in life-science discovery and innovation within the next decade. By next year, the Chinese government will have spent $124 billion, since 2009, building hospitals and health-care centres. These strategic investments have lured back to China, so far, at least 80,000 Western-trained PhDs - the vast majority within the last five years. (From Newsweek 2/5/11)

From the British Press

Asian labour/wages productivity growth rates over the period 2000 to 2010

The source of the information below is the Asian Development Bank. The figures have been estimated from a chart in The Economist (27/8/11). Note that in the more developed countries of Japan, South Korea and Singapore, productivity rate growth has been modest but wages have grown significantly more than productivity. Labour productivity in China has grown substantially and this has been matched by a substantial increase in wages.

CountryLabour productivity % increaseWages % increase
Viet Nam5.59.5
South Korea3.56.5

Chinese concerns about UK may hit trade

Britain risks losing trade with China because of its tough visa policy and a complacent approach to complaints adopted by ministers, a Commons committee said in a report out today. The Business, Innovation and Skills committee criticises ministers for failing to recognise the depth of Chinese concern on the issue.

During a visit to China, the MPs were told that businesses and universities faced severe difficulties obtaining visas for their employees and students. The MPs said that Ministers appear to be unaware of the seriousness of the situation, believing it to be a temporary phenomenon. The MPs advise that the government should set out in detail how it will ease the problem to change Chinese perceptions. Although the improvement in trading relations with China has improved, Britain lagged well behind Germany and exported more to Ireland than to the emerging economies of Brazil, Russia, India and China put together. During the recent visit of the Chinese premier, Wen Jiabao, Britain gained only £1.4 billion of additional trade compared to the £5.5 billion offered to Germany in the short term and a commitment to raise bilateral trade to $284 billion by 2015. The amount offered to Britain over the same period is only $100 billion.

The MPs believe that this is deeply worrying, especially as this is in a period when the UK should have an economic advantage. In China's latest five-year plan, there is a 'window of opportunity' as China shifts its economic priorities to professional services, finance, information technology and design. If the UK does not react quickly to these opportunities, China will look elsewhere. (From The Daily Telegraph 26/7/11)

Li Na wins French Open Tennis

Initial estimates showed that more than 100 million Chinese viewers saw her beat Francesca Schiavone as four state television networks screened the Paris final. The chief executive of the Women's Tennis Association (WTA) believes that this win will inspire an entire generation of young girls to play tennis and propel the sport to new levels of global popularity and growth. China already has 30,000 tennis courts and since the sport returned to the Olympic Games in 1988, China has seen the number of registered players rise from 1 million to 14 million. Estimates are already being made that another zero could be added to that figure!

The head of marketing of the WTA believes that there will be a domino effect and Li Na's win will also attract investment from Chinese brands as well as multinational brands. Today Mercedes-Benz will announce a sponsorship deal with Li Na believed to be worth $1.5 million (£920,000 (annually for three years. In all she is likely to make about $10 million in endorsement money this year - which puts her only behind Maria Sharapova who makes about $25 million a year. Li Na opted out of the state-run tennis programme and will only have to return about 12% of her earnings, rather than the usual 65%. Her agent says that she has an identity that many concerns will want to buy into and that marketing in China is the most vibrant business in the world. (From The Sunday Times 19/6/11)

San Francisco's new Chinese bridge

Next month four huge steel segments, the last of 12, will be shipped 6,500 miles from Shanghai to San Francisco to be assembled on site. They have been made by Shanghai Zhenhua Heavy Industries for the bridge, which will connect San Francisco to Oakland. This development is an indication of how China has moved on from building roads and ports in the developing world and is now aggressively bidding for, and winning, major construction and engineering projects in America and Europe.

Chinese construction companies are flush with cash and confidence having built forests of skyscrapers in China, the Bird's Nest stadium, the Guangzhou Opera House and a high-speed rail network which is the envy of the world. This week, Wen Jiabao, the Chinese prime minister lobbied David Cameron to give the contract for Britain's high-speed rail link to a Chinese company. According to Engineering News Record, five of the world's top 10 contractors, in terms of revenue, are Chinese companies. They have overtaken American giants such as Bechtel. The China State Construction and Engineering Group has already built seven schools in America, apartment blocks in Washington and New York and is in the middle of building a 4,000-room casino in Atlantic City. In addition it has a contract to renovate the subway in New York and build a new metro platform near to Yankee Stadium. It will also refurbish the Alexander Hamilton Bridge over the Harlem River.

In Europe, Chinese companies will build a bridge over the Danube in Serbia with a connecting road to Belgrade. (From The Daily Telegraph 29/6/11)

New special economic zone in Xinjiang

Kashgar in north-west Xinjiang is to become a special economic zone modelled on Shenzhen. It will become a trading hub and manufacturing centre that will tap markets in south and central Asia and even Europe using a web of new roads and railways. New industries from petrochemicals, cars and halal food will be produced. The official slogan is, 'In the east is Shenzhen, in the west is Kashgar'. The Xinjiang Economic Daily newspaper reports that Kashgar's new economic zone could create as many as 600,000 jobs, a staggering figure as the population of Kashgar's core urban area is only 460,000.

Thousands of Uighur peasants will be trained to help them transfer to factory work. The newspaper also suggests that Kashgar's only college be upgraded to a university and provide subsidised places to students from coastal regions and that more developed cities and provinces should send some of their skilled migrant workers to the city. Uighur employment could be boosted by attracting handicraft industries to the new Kashgar zone - southern Xinjiang is famous for its carpets. In addition, it is hoped that a new rail link between Kashgar and Khotan will promote tourism. (From The Economist 30/7/11)

Five ways to cash in on Chinese trade jackpot

Ali Hussain wrote in the Sunday Times that investors should put their money on businesses that already have links with China. James Laing at Aberdeen Asset Management commented that some companies have built up an all-encompassing relationship over recent years and are well placed to adapt to China's rapidly changing demands. Wen Jiabao's three-day trip included stops in Britain (deals worth £1.4 billion) and Germany (deals worth £9.4 billion). Five companies are listed in the Hussain's article; BG, Diageo, Rolls-Royce, Volkswagen and Siemens.

The BG Group last week signed an agreement with the Bank of China giving it access to $1.5 billion (£930 million) to support growth plans - this is on top of an existing loan of $200 million for exploration of China's Pacific coast. This is indicative of good long term prospects. BG has been developing in China since 2006 and owns three gas fields south of Hong Kong, although they have not yet begun producing. BG stock is up 31% over a year.

Diageo already has a big presence in China but believes Western brands are popular with the growing Chinese middle class and see expansion. In addition the company is looking to increase its ownership of local brands. Diageo stock is up 19.4% over a year (see also below). Rolls-Royce has seen the demand for aero engines and marine equipment develop quickly and China is Rolls-Royce's third largest individual country market. China is expected to order more than 2,000 aircraft over the next five years and a number of Chinese airlines use Rolls-Royce engines. Last month China Southern Airlines ordered engines for 30 Airbus A320 planes and the contract includes a long-term engine maintenance agreement valued at £156 million.

Volkswagen signed contracts with China last week for two car factories including a $1.4 billion assembly plant in eastern China which will be capable of making 300,000 cars a year. Daimler announced a $2 billion investment in a new engine plant and increased production of compact cars in China. Angela Merkel, the German chancellor, wants to increase annual bilateral trade with China to $200 billion by 2015 - one of the biggest areas will be in autos.

Siemens, the German engineering giant, signed a memorandum of understanding last week with China's National Development and Reform Commission for working on green technologies. James Thomson of the Rathbone Global Opportunities Fund said that in the first half of 2011, orders for Siemen's' China operations are up more than 30% and revenues have grown almost 20% a year on average since 2005. (From The Sunday Times, Money 3/7/11)

Hong Kong fine wine centre

Since Hong Kong slashed duty on wine from 40% to zero in February 2008, Hong Kong sells more wine than London and New York put together. Hong Kong is the biggest auction market for top labels such as Chateau Lafite Rothschild and Domaine Romanee-Conti. The expansion, like much of the luxury market, is being driven by money from mainland China. (From The Independent 23/8/11)

Dearth of understanding of China

A survey has shown that there is a dearth of Western talent that understands Chinese culture and can operate effectively in China. There is also a shortage of bilingual indigenous Chinese who can fit into the demands of Western multinationals. UK companies face a scramble to hire talented executives with China experience. There is in fact only one FTSE 100 non-executive director from the Chinese mainland - there are six from Hong Kong/Singapore. UK exports to China have doubled from £3.4 billion in 2006 to £7.64 billion in 2010 and it is hoped that this will double again by 2015. It is believed that loyalty, face, consistency and persistence are the key to success in China. From The Financial Times 23/8/11)

Swan Lake by Chinese acrobats

The UK tour of the Guangdong Acrobatic Troupe opened at the London Coliseum this week. This extraordinary novelty act, part circus, part acrobatics, part silly comedy and part classical ballet is a multi-coloured extravaganza like no other. The narrative has been given a Chinese spin. A European prince dreams of a Far Eastern princess and decides to rescue her from the clutches of the evil black eagle who has transformed her into a swan.

Our hero travels the world (sometimes on a camel, sometimes on an elephant) to find her. Along the way, there are dazzling displays of acrobatic prowess and circus wizardry, juggling, trapeze artistry, tightrope walking, and pole balancing. The prince manages to vanquish the evil-doer and in a spectacular finale, the lovers are united in matrimony in the Forbidden City. The tour continues at the Wales Millennium Centre, Cardiff and the Birmingham Hippodrome later in August. (From The Times 12/8/11)

British ownership of Chinese companies

Diageo (which owns Johnnie Walker/Smirnoff labels) is poised to take a controlling stake in Sichuan Chengdu Quanxing Group, of one of China's largest spirits groups and gain access to a share of the £42 billion Chinese drinks market. The latter company is behind ShuJingFang, one of China's best-known brands of baijiu spirit.

This deal is one of the first cases of a foreign company taking control of a listed Chinese company and is the first in the spirits industry. In 2007, the French kitchen equipment maker SEB took a majority stake in Zhejiang Supor Cookware Co and Goldman Sachs secured control of the food-processing firm Henan Shuanghui Investment & Development Co.

Diageo still needs approval from the China Securities Regulatory Commission, but this is regarded as a formality. Diageo is hoping to use its enhanced distribution to push up sales of its Johnnie Walker and Windsor Scotch, Gordon's Gin, Smirnoff vodka and Baileys liqueur but a spokesman for Diageo said that the main reason for the move was an opportunity to develop the 'super-premium' ShuJingFang brand both in China and internationally. The company would be investing £193 million to develop the business. (From The Times 28/6/11)

From the Chinese press

China-ASEAN trade

Trade between China and the Association of Southeast Asian Nations is expected to top $300 billion this year due to the China-ASEAN Free Trade Area (FTA) said Xu Ningning, Executive Secretary General of the China-ASEAN Business Council, on 6 June. The FTA, which opened last year, has boosted trade between China and the other nations. Customs data showed that in the first four months of 2011, the trade value rose 26.5% year on year to $110.2 million. Under the FTA agreement, the average tariff on goods from ASEAN countries was cut to 0.1% from 9.8%. Six ASEAN members, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand, have slashed the average tariff on Chinese goods from 12.8% to 0.6%. (From Beijing Review 16/6/11)

Beijing-Shanghai High-Speed Railway

This rail link is due to open in June and will be the fastest in the world. It is expected to run at an average speed of 300 km per hour (186.4 mph). During trials a top speed of 486.1 km per hour (302.0 mph) was reached. The new service will cut travel time between Shanghai and Beijing from 10 hours to about five hours. The total length of the track is 1,318 km and cost 220.9 billion yuan ($34.09 billion). The service will use new trains of the CRH380A series manufactured by China South Locomotive and Rolling Stock Corp Ltd and CRH380B series produced by China CNR Corp Ltd. They have top speeds of 350 km per hour (217.5 mph) and 380 km per hour (236.1 mph) respectively and both were independently designed in China.

The railway links two of China's most vibrant and promising economic centres: the Bohai Sea Economic Rim and the Yangtze River delta. Researchers believe that economic growth will be propelled and employment will be boosted in these areas and those along the line. Amongst these is Jining (Shandong province), near the Qufu Station which is near the hometown of Confucius. The shortened train journey time will allow more people from Beijing and Shanghai to visit the Jining area at weekends and public holidays. (From Beijing Review 16/5/11)

Deadly train crash near Wenzhou

This train accident has raised serious concerns about the safety of China's high-speed trains. Design flaws in railway signal equipment have been blamed for the 23 July train collision in Zhejiang Province. The signal equipment was designed by a Beijing-based research and development institute and put into use in September 2009. It was struck by lightning and failed to turn the green light to red causing a rear-end collision by a following train. The first four coaches fell off a viaduct onto the ground below, whilst a further two coaches were derailed but did not fall off the bridge. At least 30 people were killed and a further 192 injured.

The names of the dead have been released; amongst them are an Italian national and two Chinese Americans. Wen Jiabao visited the site of the crash on 28 July and promised an open, transparent, publically supervised independent inquiry would be set up to look into the causes of the accident. The premier said that those who are responsible for the accident as well as those who hold responsibilities of leadership will be severely punished in accordance with the law. The Chinese Ministry of Railways (MOR) has promised to pay the families of those killed, 500,000 yuan ($77,640) each in compensation.

It is expected that the results of the enquiry will be made public in mid-September. The MOR has ordered a two-month safety check on railway operations. The safety campaign will focus on implementing maintenance standards and reinforcing checks on power connections. Despite the Wenzhou accident, a MOR spokesman claimed that China's high-speed rail technology was advanced and up to international standards. However, his words have not reassured public confidence. An online survey indicated that of the 251,000 people polled, 54% said they would not take high-speed trains at least in the short term. Only 15% said they believed the service was safe. The accident could also undermine China's plans to export high-speed rail technology. Agreements have been signed with more than 30 countries since 2003, including the US, Russia, Brazil, Turkey, India, Poland and Saudi Arabia.

Going beyond the railways, the State Council has decided to launch a nationwide work safety programme which will focus on transportation, coal mining, construction and the hazardous chemical industry. (From Beijing Review 4/8/11)

Yangtze River critical to regional economy According to a report by the Ministry of Transport, more than 1.5 billion tons of cargo was transported along the river last year - the largest amount of any river in the world. It was more than three times that of the Mississippi and five times that of the Rhine. Navigation on the river contributes 120 billion rmb to the regional economy and overall may reach two trillion rmb. The river shipping sector employs two million people and businesses built around it create over 10 million more jobs. At present the river transports 80% of the iron ore and 83% of the coal used in power plants along its course. (From China Today August 2011)

Unemployment rate in China

China's urban unemployment rate stood at 4.1% at the end of July, with 9.08 million registered as jobless, the Ministry of Human Resources and Social Security reported on 25 July. The rate had not changed since the first quarter. In the first six months of the year, 6.55 million jobs had been created and 2.9 million workers who had previously been laid off had been reabsorbed into the job market, a spokesman said at a press conference. The government wants to keep the urban unemployment rate below 4.6% and hopes to create more than 9 million jobs in 2011by introducing favourable tax policies and providing financial support. (From Beijing Review 4/8/11)

Call for greater transparency

In an unprecedented move, China's 98 central government departments and institutions in July began disclosing their expenditure for overseas trips, official car use and receptions. The disclosures included their actual 2010 spending and 2011 budget as required by the State Council. But old practices die hard and the goal of administered transparency will not be achieved within a few months. The disclosures are not as detailed as the public expected. Nevertheless, the fact that the Central Government is promoting budget transparency shows China's determination to push forward political reform, said Zhu Lijia, professor of public administration at the Chinese Academy of Governance.

This is the first step because for many years government departments have kept their spending from the public. Zhu wrote an article in 2006, pointing out the corrupt doings of civil servants who use cars purchased by public funds and spending public funds wining, dining and travelling abroad. This stirs up public resentment and provides an opportunity for corrupt practices such as squandering and waste, embezzlement and fraud. (From Beijing Review 4/8/ 2011)

Supreme Court's figures on corruption

The 2010 work report by the Chinese Supreme Court reveals that courts of all levels dealt with 23,441 cases of corruption and bribery last year and sentenced 24,406 criminals. The rates are up by 6.83% and 9.41% respectively on the previous year. One of the cases actually involved a former vice-president of the Supreme Court, Huang Songyu, who was sentenced to life imprisonment on corruption and bribery charges. (From China Today July 2011)

National Deep-sea base to begin construction

The construction of China's national deep-sea base is expected to begin this year in eastern Shandong province. It will be near the city of Qingdao and will cost 495 million yuan for the first phase. The base will be a multi-functional institution devoted to exploration of the ocean. Detailed plans have been drawn up and construction will start after the State Ocean Administration has approved them. Scientists believe that the area's seabed holds rich deposits of rare metals and methane hydrate, a solidified form of natural gas that may serve as a new source of energy. (From China Today July 2011)

Tourism booming in China

A report by the Boston Consulting Group (BCG) predicts that China will become the world's second largest tourist market by 2013. But despite the strong growth, the Chinese travel industry is still in its infancy. By 2020 the number of China's outward bound tourists will be close to that of the US and the value of domestic tourism will reach 3.9 trillion yuan ($590 billion). Travel within China, which accounts for the lion's share of Chinese tourism by both volume and spending is projected to grow by 16% per year and be worth 3.9 trillion yuan by 2020.

The BCG study indicates that by 2020 one fourth of international travellers arriving in Japan and South Korea will come from China. In addition, the number of Chinese tourists to Europe will quadruple and this will make Chinese visitors, the largest source of growth for this continent's travel market. In North America, the number of Chinese tourists will rank third after the UK and Japan. (From China Today July 2011)

China releases map of the Moon A full map of the Moon based on data obtained by the Chinese lunar probe Chang'e 1 has just been completed. The probe orbited the Moon 5,514 times before being crashed onto the Moon's surface on 1 March 2009. The probe was launched on 24 October 2007 and successfully achieved all its scientific objectives.

The camera on board the probe was a high-performance stereo camera developed by the Xi'an Institute of Optics and Precision Mechanics of the Chinese Academy of Science. It photographs every object from the top and from two sides, enabling a three-dimensional image. In addition, a laser altimeter measures the height of each lunar feature and the total information received, allows an accurate three-dimensional map to be produced. This information will be invaluable for the planned soft landing programme. The Moon map is being printed and will soon be available for sale. It is believed to be the most comprehensive, most accurate and clearest map ever published. (From Beijing Review 12/8/11)

National Intangible Cultural Heritage List reaches 1,219

China now considers 1,219 cultural practices nationwide to be 'intangible' national treasures after adding 191 items to a new list published by the State Council. Folk literature, traditional music, dancing, opera, arts and crafts, folk customs, acrobatic performances and the traditional medicine of ethnic minority groups have made the list. Several festivals of minority ethnic groups are prominent amongst the new entries, including the Tibetan New Year Festival. The State Council published its first list of 518 items in 2006. This list included the Spring Festival, Peking Opera, Shaolin Kungfu and the Legend of the White Snake. The second batch of 510 items was published in 2008. (From China Today August 2011)

Redressing wrongs of history

On 26 May 2011, US House of Representatives members, Judy Chu from California and Judy Biggert from Illinois introduced a bipartisan resolution calling on the US Congress to formally acknowledge and express its regret over the laws that violated the fundamental civil rights of Chinese settlers. In 1882, the US Congress passed the Chinese Exclusion Act to restrict Chinese immigration into the US for 10 years. Subsequent bills in 1892 and 1902 extended the ban, which was not lifted until 1943. Progress is being made in obtaining support for the resolution, but it is not clear how long it will take for Congress to eventually approve it.

While activists campaign for the adoption of the resolution, some Chinese living in the US, say an official statement of apology is not enough to address modern racial issues. Some Chinese and other Asian Americans believe they still experience racial discrimination both in academic circles and the workplace. There is the stereotype of Asian Americans being intelligent and hardworking but not being able to integrate into mainstream society. Despite some progress, a 'glass' or 'bamboo' ceiling is still widespread in corporate America. An official statement about the discriminatory laws should also bring racial issues under the spotlight. (From Beijing Review 23/6/11)

Football in China

Wang Jianlin of Dalian Wanda Group has signed a contract with the Chinese Football Association promising sponsorship of at least 500 million yuan ($76 million) in three years to revitalise China's football industry. This is the biggest sponsorship in football history in China. The money will mainly be used to recruit new young talent. In 1993 the Wanda Group established a professional team called Dalian Wanda Football Club which became the most successful team in China. However, it withdrew in 2000 because of its disappointment at the lack of development of Chinese football. Wang, 57 is 16th richest man in China on Forbes' 2010 China Rich List. He is a well-known philanthropist and in November 2010 he paid for the restoration of the Dabaoen Temple in Nanjing, which cost 1 billion yuan ($152 million) - this is the largest donation ever given by an individual on the Chinese mainland. (From Beijing Review 14/7/11)

Sino File is compiled by Walter Fung.

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