ADB projects 10 percent growth for 2008

The Asian Development Bank said in a report that it expects China's economy to grow by 10 percent in 2008 and 9.8 percent in 2009, down from the 11.4 percent growth reached in 2007. The bank said that tighter monetary policy and slowing imports would put pressure on growth and highlight the inflationary risk of rising food prices. The bank also outlined a worst-case scenario that would see growth decline to as low as 7 percent this year in the event of continuing global economic weakness, tightening of credit and a major downturn in China's property and stock markets. The report predicted inflation would rise to 5.5 percent this year from 4.8 percent in 2007, and that exports would slow by 19 percent from last year.

NDRC will continue to set energy prices

Energy prices in China will continue to be set by the National Development and Reform Commission (NDRC), despite the creation of a new National Energy Bureau under it during the recent National People's Congress (NPC). Zhang Guobao, the National Energy Bureau's chief, said at an economic forum in Beijing that the new office "should not seek to participate in the pricing of energy," though it should make proposals on price adjustments. Zhang said it should also consult with the NDRC's price bureau if it wished to adjust energy prices. He added that details on how power will be shared by the agencies are still under discussion. A much-talked about energy "super-ministry" that would oversee all aspects of energy pricing and policy failed to materialise during the NPC in March.

‘Concrete steps' for anti-piracy campaign

Beijing has defended China's anti-piracy campaigns, noting that more than 4,000 people were convicted of product piracy in 2007. A spokesman for the State Intellectual Property Office said at a news conference that "the Chinese government has taken concrete steps and its success is there for all to see." Authorities said they seized 76 million pirated movies, software discs and goods last year and shut down 13,170 businesses involved in piracy. A total of 4,322 people were convicted by courts of product piracy. Approximately 93 percent of DVD movies sold in China are pirated, according to the Motion Picture Association.

BUSINESS

New bank acquisition rules announced

China's banking regulator announced a draft of new rules for acquisitions by commercial banks of domestic and overseas financial companies. The announcement by the China Regulatory Banking Commission (CBRC) did not contain details of when the regulations, which are expected to make it easier for banks to expand into industries such as insurance, would take effect. Under existing rules, banks are not allowed to invest in non-bank financial institutions unless permitted by the state. The new rules would allow banks to purchase overseas companies with approval only from the CBRC. The likes of China Construction Bank, Bank of China, and Industrial and Commercial Bank of China have expressed interest in setting up insurance ventures.

Urban salary increases hits six-year high

The average salary of employees working in China's urban areas rose by 18.7 percent to US$3,561 (€2,259) in 2007, the largest percentage gain in six years. A statement by the National Bureau of Statistics pointed to sound corporate performance and rising low-level salaries as reasons for the overall increase. However, the statement highlighted ongoing salary gaps between industries, noting that prevailing corporate governance and personnel management practices had crippled the market's ability to smooth out these gaps.

China Life, CIC bought into Visa IPO

Domestic insurer China Life said it invested US$300 million (€190 million) in Visa's initial public offering on the New York Stock Exchange in March. This was the first overseas investment for China's largest insurer, which is planning more deals in the US and Europe to diversify its portfolio. China Investment Corp also invested US$100 million in the Visa IPO. The sovereign wealth fund said it is not looking for any strategic ties with Visa at the moment, and that the investment was mainly a financial decision. Visa had raised more than US$19 billion from its March 19 debut, making it the largest ever in the US and the second-largest globally, behind Industrial and Commercial Bank of China's US$22 billion IPO in 2006.

BOC: Profits up, sub-prime exposure down

Bank of China (BOC) said it had halved its investments in US sub-prime assets by the end of 2007 as it announced an annual net profit of US$7.99 billion (€5.07 billion), up 31 percent on the previous year. Despite a high exposure to sub-prime securities compared to most Asian financial institutions, BOC managed to reduce its sub-prime holdings to US$4.99 billion from US$10 billion at the end of 2006. The bank has also set aside US$1.3 billion to cover potential losses. It is still unclear exactly how much BOC has lost on its sub-prime investments, and the bank is under no legal requirement to explain how it valued these assets.

ENVIRONMENT

Algae pollution returns to Lake Tai

A new algae bloom has hit Lake Tai, China's third-largest lake. The presence of the 27-metre-wide algae bloom was reported on the website of the Ministry of Environmental Protection. Lake Tai supplies water to 30 million people, and last May, a similar algae bloom caused a disruption in tap water supplies to 2 million people in nearby Wuxi city. The official at the China Research Academy of Environmental Sciences who reported the algae bloom on the ministry website said rising temperatures could facilitate the growth of a large algae bloom this summer. The official also said water quality in the lake is level five, the worst quality. Water of that quality is only fit for agricultural use. In October, it was announced that US$14.4 billion (€9.03 billion) will be spent over five years to clean up the lake.

Wal-Mart to launch environmental drive

Wal-Mart said it will meet with hundreds of its Chinese suppliers as it rolls out a worldwide environmental sustainability drive that has so far been limited to its US operations. Around 1,000 Chinese suppliers are expected to attend the meeting in October, where they will hear the Wal-Mart's goals for reducing the environmental impact of its supply chain. Lee Scott, the company's CEO, has previously expressed his willingness to help address Chinese concerns about the cost of the country's rapid industrialisation. In January, Scott said Wal-Mart would set up a monitoring system "to make sure suppliers comply with Chinese environmental laws and regulations".

Report: China passed US as top carbon polluter

China has surpassed the US to become the world's largest emitter of carbon dioxide, according to a study by researchers at the University of California. The report, which compiled information on fossil-fuel usage in China, projected an 11 percent increase in carbon dioxide emissions between 2004 to 2010, far above earlier estimates of a 2.5 percent rise. "Our best forecast has China's CO2 emissions correctly surpassing the United States in 2006 rather than 2020 as previously anticipated," the report said. The study will be published in May in the Journal of Environmental Economics and Management.

Huaneng to build China's biggest wind farm

The Huaneng Group will start building China's largest wind farm, with a 300-megawatt capacity, in June. The project will use 200 wind turbines in a 100-square-kilometre area in Fuxin, Liaoning province. It is scheduled to start generating electricity before year's end. The wind farm will reduce carbon dioxide emissions by 750,000 tonnes and sulphur dioxide by 4,000 tonnes a year. The farm will produce 600 million kilowatt-hours of electricity and generate US$57 million (€36 million) in revenues per year. China recently doubled its target for installed wind power capacity to 10 gigawatts by 2010. In 2007, China had about 4 gigawatts of wind power capacity, accounting for less than 0.6 percent of national power generation capacity.

EU-CHINA

EU product recalls from China rise

After a chain of toy recalls, EU consumer confidence in products manufactured in China has suffered a steep drop. The number of product recalls in Europe increased by 53 percent last year; more than 50 percent of the cases involved products made in China. Among the goods removed from shop shelves, more than a third were child-related items, and many fell in the motor vehicles, electronic goods or cosmetics categories. In the past year the EU has worked in collaboration with China on product safety, starting a quarterly reporting system to detail the efforts by China to enforce product safety laws and track down the source of dangerous goods. Consumer organisations applauded the efforts to improve market vigilance but stated it was "also essential to reinforce European legislation" on toy and cosmetics safety.

MEMBER NEWS

TNT Airways links Southeast Asia with Europe and China

TNT Airways, an air express service provider, is connecting Singapore with two of its busiest air cargo centres, in Shanghai and Liege, Belgium. TNT will invest US$159 million (€100 million) over the next five years in an effort to improve its infrastructure, connectivity and network coverage in Southeast Asia. Singapore serves as TNT's first point in Southeast Asia linking the two major air cargo hubs of Asia and Europe. TNT plans to be the leader in air express service by capitalising on the growing need for fast freight service between China, Southeast Asia and Europe.

CEIBS to set up campus in Ghana

China Europe International Business School (CEIBS) has gained official approval from Ghana's Ministry of Education to offer business management courses at its campus to be opened in Accra, the country's capital. This expansion is part of an initiative by the Ghanaian government to encourage overseas schools to set up programmes in the country in an effort to improve education. CEIBS will offer executive short courses and its executive MBA programme.

Fortis seeks new Asian partners

After selling half of its asset-management business to Ping An Insurance earlier this year, Fortis Bank announced plans to form more joint ventures in an effort to double its profit contribution from Asia by next year's end. Fortis aims to expand its asset-management division from 10 percent of the company's net profit to a third within three years. Currently, Fortis has three joint ventures in China and one each in India, Thailand and Malaysia.

Ericsson signs deals with China Mobile, China Unicom

Swedish telecom equipment producer Ericsson has signed deals worth a total of US$1.44 billion (€904 million) with China's two largest mobile phone operators. The US$1.3 billion deal with China Mobile will see Ericsson supply core radio and network equipment, support and power-saving features, while under the US$140 million agreement with China Unicom Ericsson will focus purely on multimedia solutions for WAP services. Both agreements are aimed at expanding the companies' GSM networks. The deals are seen as strengthening Ericsson's position in China's mobile market as foreign telecom companies vie for contracts for China's TD-SCDMA technology.

DHL division opens three new China branches

DHL Global Forwarding, the freight forwarding division of DHL, opened three new branches in inland China: Changsha in Hunan province, Hefei in Anhui province and Changchun in Jilin province. The new branches will offer international freight forwarding services in addition to domestic airfreight. Additional Chinese branches will be opened this year in line with DHL's international and domestic network plan of China.

Gide advises Areva T&D on expansion in China

International law firm Gide Loyrette Nouel advised Areva's Transmission and Distribution Division (Areva T&D) on the creation of three joint venture companies in China as part of a US$20.4 million (€12.8 million) investment plan for increasing infrastructure. The joint venture agreements between Areva T&D and Beijing Yuli Lian Ou High-Voltage Electric Equipment, Guangzhou Leekeen Group and Wuxi Hengchi Electrical Apparatus are expected to help increase market share in the electricity industry. The team was led by partner David Boitout in Shanghai.

Morley signs China JV fund management deal

Morley, the fund management arm of UK-based insurer Aviva, has signed a deal with two Chinese firms to start a joint-venture fund management company in China. Though no financial details of the agreement were disclosed, the joint venture between Morley, China National Oils, Foodstuffs and Cereals Corp (Cofco) and Dongguan Trust and Investment Co will be located in Shanghai, with 40 percent equity owned by Morley and the remaining 60 percent split evenly between the Chinese partners. Morley is currently applying for a license to buy Chinese stocks under the Qualified Foreign Institutional Investor scheme, and the joint venture is expected to begin operations in the second half of this year.

Central bank hints at monetary moves

People's Bank of China (PBOC) Governor Zhou Xiaochuan pledged to keep a tight rein on monetary policy despite rising inflation and global macroeconomic uncertainty. Speaking at an IMF meeting in Washington, Zhou also resisted calls for China to allow its currency to appreciate more rapidly in order to rectify trade imbalances and ease inflationary pressure. "Over-exaggeration of [the exchange rate's] function is not only impractical, but will also misguide the course of such an adjustment," he said. The PBOC has yet to raise interest rates so far this year - arguably because this only increases the flow of overseas money into China - though it raised the reserve requirement ratio for commercial banks by 50 basis points to 16 percent. In 2007, the bank raised rates six times, taking the key one-year lending rate to 7.47 percent. However, other officials hinted at the possibility of a looser monetary policy. PBOC Vice-Governor Yi Gang said the central bank would "pay attention" and adjust policy according to domestic and international situations.

Momentum builds for cross-strait flights

A breakthrough on direct flights between the mainland and Taiwan may be imminent, according to Beijing's Taiwan affairs authority. Li Weiyi, spokesman for the State Council's Taiwan Affairs Office, said that "conditions are ripe" for a breakthrough on direct cross-strait flights and increased tourism. Li did not comment on whether regular direct weekend flights would commence by July, as the Republic of China's (ROC) ruling Kuomintang has hoped. The purported breakthrough follows a historic meeting between ROC Vice President-elect Vincent Siew Wan-chang and PRC President Hu Jintao at the Boao Forum in Hainan province. Siew called for the establishment of a direct cross-strait air service, starting with charter flights on weekends, and for mainland tourists to be allowed to visit Taiwan. Hu told state media that Beijing will push forward in the normalisation of economic and trading ties with Taiwan. ROC President-elect Ma Ying-jeou, who has advocated economic integration between the mainland and Taiwan, will take office on May 20.

Ferrero wins IPR Supreme Court case in China

Ferrero, an Italian confectioner, announced a Supreme Court victory in China against Montresor Food, a domestic Chinese competitor, for closely emulating its signature gold-wrapped Rocher chocolates. Montresor, owned by the Liangheng food group, argued that it had designed its packaging in 1990, three years prior to seeing a Ferrero Rocher for the first time in 1993. This decision comes after several setbacks. In early 2005 a local court ruled that Tresor Dore, the brand of chocolate at the centre of the legal battle, was more reputable than the Rocher chocolates produced by Montresor. The Supreme Court in Beijing took more than a year to decide in favour of overturning the decision and fined Montresor Food US$71,400 (€45,400). Montresor was also ordered to change its packaging. However, enforcing such a decision has proved hard in the past. The judgment fits a growing pattern as China realises the value of intellectual property protection. Ferrero emphasised the importance of the "victory for the whole Italian industry, since copies of ‘made in Italy' products are unfortunately a widespread phenomenon." It stated that further investment in China was possible in the future.

SAFE invests in Total, BP

China's State Administration of Foreign Exchange (SAFE), responsible primarily for managing China's estimated US$1.68 trillion (€1.04 trillion) in foreign exchange reserves, has purchased a 1.6 percent stake worth about US$2.8 billion in French oil firm Total. According to a person close to Total, which is the world's fourth-largest oil group, SAFE began building its stake in the company several months ago with the French company's full knowledge. A Hong Kong branch of SAFE has also acquired just under 1 percent of UK-based oil company BP, estimated at more than US$2 billion in value. Most of the investments SAFE makes are in low-yield securities such as US Treasury bonds but the purchase of a stake in Total suggests a more aggressive new strategy. There is some speculation that it could be acquiring stakes in oil companies as a hedge against rising oil prices, and that the government is allowing state funds to pursue higher-risk investments than in the past in hope of yielding greater returns. This could heighten tensions between SAFE and China Investment Corp, the country's sovereign wealth fund. Earlier this year a SAFE subsidiary was linked to investments in three Australian banks.