BRIEFS

GENERAL

Highest growth since 1995

China posted growth rates unseen in a decade. Official government figures put China's growth rate for 2006 at 10.7 percent, toppling the 10.4 percent record of 2005 and the highest growth since 1995, when the economy expanded by 10.9 percent. The country's total economic output hit US$2.6 trillion (?1.9 trillion), going by mid-year exchange rates. At this rate of growth, China could overtake Germany to become the world's third-largest economy sometime in 2008. Officials expect economic growth to slow down this year.

May deadline for brokerages

Securities brokerages in China must publish their annual results by May, the China Securities Regulatory Commission said. Brokerages must publish their audited reports on the China Securities Association website by May 31. Previously, only top brokerages had to report their results. The move towards greater transparency among China's brokerages is part of a push towards international accounting standards on the mainland. Last December, the regulator set a January 1 deadline for brokerages and fund management firms to abide by international accounting standards.

Mutual fund ban lifted

New futures regulations were approved in principle by the State Council in early February, preparing the ground for the return of financial futures products. However, no date was given for the launch of stock index futures trading,. The delay has in part been due to Beijing's fears of a repeat performance of the treasury bond futures crisis of 1995, which led to financial futures being abandoned.

China may raise interest rates

China's central bank will likely raise interest rates within the next six months. A state media survey of 12 economists concluded that the People's Bank of China will raise its benchmark lending rate from 6.12 percent. A rate hike is likely because China needs to cool inflation and investment. Gross domestic product grew by 10.7 percent last year, the highest rate recorded since 1995. The central bank raised interest rates twice and reserve requirement ratios three times last year, with another ratio increase on January 15.Economists forecast a rate hike.

Trade surplus with EU jumps

China's trade surplus with the European Union soared 31 percent in 2006, state media reported, quoting government figures. The country's trade surplus was US$91.7 billion (?69.9 billion), a significant jump from the US$70.1 billion surplus recorded in 2005. Europe was still China's largest trading partner throughout last year and accounted for 15.5 percent of total outgoing trade, with exports hitting US$182 billion. The total trade figure represented a jump of 26.6 percent from 2005. China's imports of EU goods also jumped 22.7 percent year-on-year to US$90.3 billion.

SSE warns of trading glitches

The Shanghai Stock Exchange (SSE) warned record trading volumes may threaten its electronic trading system. Turnover for trading in 2006 reached US$6 trillion, with benchmark indices rising more than 130 percent last year. Although outdated technology may contribute to possible glitches in trading, SSE officials said they are working on possible upgrades to the system. "We must pay close attention to risks in the market, most importantly whether the technology system and trading platform will be able to handle such large trading volumes," said the governor of the exchange, Geng Liang, in a released statement.

Sino-Zambian free trade zone

Chinese President Hu Jintao said a special economic and trade zone would be set up in Zambia. The zone, to be built between now and 2010, would give companies tax breaks and other incentives. Hu also announced more than US$800 million (?609 million) in investment and debt waivers to develop Zambia's copper mines, writing off almost US$8 million in debt and offering US$150,000 in humanitarian aid. Hu, who was in Zambia on an eight-nation African tour, had to reschedule his day because of protests from Zambian workers who claimed Chinese firms exploited them. China is the third-largest foreign investor in Zambia. Bilateral trade between the countries stood at US$316 million last year.

Launch of financial futures delayed

The launch of China's first financial futures products will be delayed until at least the second quarter of 2007 due to insufficient regulations and fears of their impact on domestic stock markets. Simulated transactions on the Shanghai-based China Financial Futures Exchange have been taking place in preparation for trading. But a source close to the securities regulator told the South China Morning Post that there wasn't yet a timetable for the launch. It is said that senior government officials have not approved the regulations as they fear a repeat performance of the treasury bond futures crisis of 1995, which led to financial futures being abandoned. There are also concerns that the surging domestic stock markets could stumble as, through futures, investors could make money from falling prices.

BNP quits China securities JV

French bank BNP Paribas has left its Chinese securities joint venture with Changjiang Securities following disagreements over strategy. BNP has sold its 33 percent stake to Changjiang for an undisclosed sum, with the two parties saying in a joint statement that they had reached an "amicable consensus". However, one banker familiar with the situation said disagreements had been present ever since the joint venture was founded in 2003. It was one of the first partnerships between a foreign investment bank and a local securities house, although its remit was limited to underwriting bond and equity issues. Only Goldman Sachs, Morgan Stanley and UBS have also managed to enter such agreements.

China's wealth gap widens

China's wealth gap is widening, creating an "alarming" situation, according to a report by the National Development and Reform Commission. Urban Chinese earned 3.2 times more than their rural counterparts. The gap is much wider at the top. Among urbanites, the wealthiest 10 percent had an income 9.2 times greater than the bottom 10 percent in 2005, an increase, compared to 8.9 times in 2004. Among farmers, the top 10 percent earned 7.3 times more than the bottom 10 percent in 2005, compared to 6.9 in 2004. Salaries increased across the board for most, but migrant worker salaries remained low, at an average of US$100 a month. The director of the wage research centre linked to the Ministry of Labour and Social Security, Su Hainan, said state-owned monopoly businesses added to the gap.

INSURANCE

Marsh gets broking licence

Marsh & McLennan has announced that its insurance broking unit has become the first insurer to be awarded a licence to run a wholly foreign-owned enterprise in China. "It means we can operate our business in the same way we do in the United States or Europe or anywhere else in the world," said Paul Wilkins, Marsh CEO for Greater China. According to the US company, it will be able to receive commission for providing insurance services to large foreign and domestic business clients in China. As a broker, it would not underwrite insurance but would find the best coverage for those it represents. Insurance broking represents just 2 percent of the country's US$16 billion (?12.2 billion) insurance market, excluding life insurance.

Chinese insurers win on stocks

Chinese insurance companies made US$1.14 billion (?868 million) from domestic stock market investments last year. Their rate of return on stocks was 27.1 percent, more than four times their overall investment returns of 5.8 percent. Insurers were allowed to invest in stocks in February 2005, but their investments are limited to a maximum of 5 percent of their total assets. State media reported that the China Insurance Regulatory Commission may raise the investment ceiling to 10 percent. Shanghai's A-share index gained 130.57 percent last year, making it the world's best performer.

National reinsurer gets cash injection

China Reinsurance Group has received a US$4 billion (?3.05 billion) injection from the country's foreign exchange reserves. The injection was made last year by Central Huijin Investment, the state investment agency responsible for recapitalizing China's financial sector, according to a statement on the insurance regulator's website. The move is likely to put the country's biggest domestic reinsurer on track to bring in strategic investors and make an initial public offering this year. It is also a sign that Beijing is willing to use its US$1 trillion-plus forex reserves for purposes other than stabilizing the banking and securities sectors.

HUMAN RESOURCES

Labour Contract Law approval postponed

A proposed Labour Contract Law will not be approved at the annual National People's Congress in March, although it will likely be passed this year. A law professor at Shanghai Normal University, Liu Cheng, who helped draft the law, said it will be reviewed in April or June, adding that it would "definitely" be approved in 2007. The proposed law has already been read twice; most bills are given three readings before approval. Companies have criticised the planned law because it is expected to reduce their hiring flexibility, although labour activists say it promotes workers' basic legal rights.

MNCs in Guangdong told to unionise

The central government wants multinational companies in Guangdong to set up labour unions by year's end. Eighty percent of companies with foreign investment would be unionised, contributing to the more than 1 million new members expected to join Guangdong's official union organisation this year. Some see the move as an attempt to retain control on workers in the private sector. The provincial government has already made Wal-mart and Foxconn Electronics unionise their workers. Chairman of the All-China Federation of Trade Unions, Tang Weiying, said unionizing helps both workers and their foreign employers. "The purpose [of setting up unions] is to promote corporate development by protecting the basic rights of workers, who will then have greater motivation to work for their companies," he said.

TECHNOLOGY

China launches first 4G phone

China introduced the world's first fourth-generation mobile phone in Shanghai, to provide faster wireless data transmission. Although 3G has yet to be launched in China, authorities are already promising that 4G will deliver data speeds of up to 100 megabytes per second, ten times 3G capacity. The new technology, which will allow TV broadcasting to be shown on moblie phones, among other possibilities, will not be commercially available until at least 2010. Developed by 10 "leading domestic institutions" and known as the "FuTURE Project", 4G is estimated to have a rollout cost of US$19.3 million.

Made in China: bullet trains

China's locally assembled bullet trains, which use Japanese technology, began service on routes around Shanghai at the end of January. The Ministry of Railways is claiming this as a triumph in "digesting" foreign technology. "China Railways has the autonomous intellectual property rights for such trains," the ministry said in a statement. The trains, modified versions of Japanese E2-1000 Shinkansen trains, have been named CRH Model 2s. Nanche Sifang Locomotive bought the train technology rights from a Shinkansen consortium in 2004. Nanche's usage rights are restricted to the current contract for 60 train sets.

US, China top e-rubbish sources

Almost two-thirds of spam, viruses and other computer security threats delivered around the world in 2006 originated either in the US or China. Computer security firm Sophos said 34.2 percent of 'malware' originated in the US while 31 percent came from China. Russia was in third place as the originator of 9.5 percent. The company identified some 207,684 threats, from spam to viruses, trojans (which download programs that infect computers) and ransomware (which kidnap data by encrypting it and providing a password after a ransom is paid). The vast majority of spam, 90 percent, is relayed from zombie computers. The US and China were also the top two sources of spam, with the US accounting for 22 percent and China 15.9 percent.

Pirated Windows Vista on sale

Even as Microsoft's long anticipated operating system, Windows Vista, was launched for home users around the world on January 30, Chinese software pirates were hawking copies on the streets. Counterfeit copies were being sold for RMB10 (?0.99) each, complete with Microsoft Office and anti-virus software, on the same day of the launch. The pirated Vista was labelled "the official version of the new generation operating system" and came with an identification code to download the software. Sellers said pirated copies of Vista had been available for several weeks before the launch.

LOGISTICS

DP World wins Qingdao terminal

Dubai Ports World announced it will construct a container terminal valued at US$448 million (?293 million) in Qing-dao. The company is keen to get involved in China's growing ports sector. It will spend US$157 million of its own funds to build and operate four shipping berths and related facilities in the northern China port, and will borrow the rest. DP World, the world's fourth-biggest container port operator by acquisitions, is looking to consolidate its position in the global ports business. It acquired the port assets of Jacksonville, Florida's CSX in 2004, followed by those of Britain's Peninsular & Oriental Steam Navigation in a US$6.8 billion deal last February.

Shanghai port may pass Hong Kong

Analysts expect Shanghai to overtake Hong Kong as the second-busiest container port in the world by the end of 2007. Hong Kong lost the top spot in 2006 to Singapore's port, largely due to increased competition from China ports that charge lower handling fees. In the 1990s, Hong Kong handled more than 90 percent of all cargo from the Pearl River Delta, but that has fallen to about 50 percent. However, container traffic through the Hong Kong port rose 2.8 percent in 2006 to 23.23 million twenty-foot equivalent units (teu). The growth rate did not change from 2005 but is down from a 7.2 percent average in the three preceding years. Meanwhile, throughput through Shanghai, the world's third-busiest port, rose 20.1 percent in 2006 to 21.72 million teu.

CONSUMER

Higher prices likely in 2007

China's Ministry of Commerce predicts the consumer price index, a key gauge of inflation, will rise by 2.5 percent this year. The rise will be caused by high oil and grain prices. Last year, the consumer price index rose by 1.5 percent. However, the central bank said it does not expect the index to rise beyond 3 percent this year. The ministry expects retail sales this year to grow by 13 percent to US$1.1 billion (?838 million). Sales grew by 14 percent last year.

AB expands China supply chain

US brewer Anheuser-Busch will increase distribution of its Harbin 1900 and Harbin Ice beer to 12 additional Chinese markets this year. The beverage, which was introduced last year in 30 markets in China, increased Anheuser's sales volume and operating profit in the country by 20 percent in 2006. The company is making the move to compete against SABMiller, which is the largest company in the national beer market by volume and produces the Snow brand. Anheuser, which owns a 27 percent stake in Tsingtao Brewery, introduced premium beer in 2000 to the Chinese market, only to be ousted by low-cost local Chinese brands.

Staffing issues to strain tourism

China is expected to move from being the world's fourth-largest to second-largest tourist destination within 10 years but the tourism sector will come under pressure due to a lack of qualified staff. Jean-Claude Baumgarten, president of the World Travel & Tourism Council (WTTC) told the Financial Times that he expected tourism in China to generate more than US$384 billion (?299 billion) this year, up from US$353.7 billion in 2006. But, growing at an average of 8.7 percent a year, the country's tourism sector will struggle to recruit, and then retain, quality workers. Immature service-oriented businesses, with many workers insufficiently trained or lacking professionalism, is frequently cited as one of China's weaknesses. A WTTC report suggested improving staff retention by introducing measures such as paid holidays.

ENERGY

ExxonMobil-Sinopec plant OK'd

China has approved a long-awaited plan by ExxonMobil, Chinese and Saudi Arabian oil companies to build an oil-refining and petrochemical plant. The National Development and Reform Commission announced the approval on its website. The US$485 million (?368 million) plant is part of a US$3.5 billion joint venture involving ExxonMobil, Saudi Arabian Oil and Sinopec. The three companies agreed to improve a Sinopec refinery in Fujian in 2004, and have now begun work on it. Sinopec holds a 50 percent stake and the other two parties a 25 percent stake each.

China starts first oil reserve

China, the world's second-biggest oil consumer after the United States, has begun operation on its first strategic oil reserves, according to state media reports. The base, located in Ningbo, Zhejiang province, is the first of four such facilities to be constructed in the country. The other three reserves will be located in Daishan, Zhejiang; Huangdao, Shandong province; and Dalian, Liaoning province. Progress reports on the completion of the bases have not yet been released. China imported 145.18 million tonnes of crude oil last year, making it the world's third-largest oil importer after the US and Japan. The nation's coal reserve was 144 million tonnes by the end of last year.

MEDIA

CCTV bans pig ads

China Central Television banned all images and spoken references to pigs on its stations to avoid offending Muslims. Advertisers like N¨¦stl¨¦ and Coca-Cola have been forced to make last-minute changes to campaigns designed with pig motifs. The pig-themed ads had been made to welcome the new lunar year, the Year of the Pig, which began on February 18. "China is a multi-ethnic country. To show respect to Islam and upon guidance from higher levels of the government, CCTV will keep any 'pig' images off the TV screen," the network announced. Pigs are popular animals in China and are seen as symbols of prosperity. China's 20 million Muslims make up less than 2 percent of the country's population.

Environment suffers industrialisation's effects

A new report by China's top scientific institutions says the country's environmental protection has failed to match its economic growth. China's Modernisation Report 2007, developed by the country's top scientific institutions, ranked China 100th out of 118 countries for "ecological protection", state media reported. It had the same ranking three years ago. The report projected that China would become an industrialised economy, on par with developed countries in the 1960s, by 2015. The Sydney Morning Herald reported that Pan Yue, deputy of the State Environmental Protection Administration, blamed business groups and local officials for the country's high levels of pollution.

In an effort to clean up China's pollution problems, the United States Commerce Department will send a clean-energy technologies trade mission to China and India in April in order to promote renewable energy. Environmentally conscious US companies will introduce products that offer energy efficiency and clean coal to the world's two most populous countries. China is now responsible for 12.7 percent of global energy-related carbon dioxide emissions, second only to the US. The mission, led by US Commerce Assistant Secretary David Bohgian, is targeting a reduction in carbon dioxide and other greenhouse gas emissions as part of President George W. Bush's Asia Pacific Partnership on Clean Development and Climate.